Commentary by Todd Snitchler originally published by RealClearEnergy.org
In recent weeks, the power supply industry and grid operators have issued warnings that the American electric grid may be in for a difficult summer and customers across the country face the possibility of rolling blackouts or power rationing.
The situation is particularly worrisome in California, where CAISO, the regional market that coordinates power supply for the state, had blackouts during periods of high demand late in the summer of 2020. Leading utilities in the state say that they are likely to need to fall back on natural gas to meet generation needs this year.
Texas also faced blackouts last year as a result of Winter Storm Uri, which brought icy conditions and near-zero temperatures to the Lone Star State, knocking down powerlines and preventing the delivery of needed natural gas supplies.
But concerns about electric grid reliability are not limited to the West. According to the North American Electric Reliability Corporation, as generation has shifted to intermittent resources that are dependent upon weather conditions, America’s power generation has become “sensitive to extreme, widespread, and long duration temperatures as well as wind and solar droughts.” Reserve margins, or the amount of power available in excess of demand, have been shrinking across the country as retirements of existing resources accelerate, investments in traditionally reliable resources decline, and renewable installations increase.
NYISO, the organization charged with maintaining power system reliability for the State of New York, has warned that a sustained 98-degree heat wave could drive up energy demand enough to cause a shortfall for New York City as early as next year, likely forcing NYISO to call for rolling blackouts for the first time.
So, is America’s electric grid headed for imminent reliability challenges? The answer depends on how policymakers and regulators address these very real and urgent concerns.
For the past 20 years competitive power markets have proven that we are capable of supplying reliable, affordable, and increasingly clean power to millions of Americans. In fact, a recent study conducted by Drs. Josh Rhodes and Lynn Kiesling found that regions where competitive power markets operate have enjoyed significant cost savings and reduced emissions across their footprint – greater than in traditional, vertically integrated portions of the country.
PJM Interconnection, the nation’s largest competitive power market, boasts an annual savings for customers of up to $4 billion annually, and CO2 emissions dropped by more than a third from 2005 to 2020. How PJM is able to deliver reliable power at the least cost for consumers – while also driving down emissions – is no mystery. Competition among power providers has driven innovation and investment in highly efficient technologies.
While competition in these markets is key to reliable, affordable, and clean power, so too is the market-driven approach to the resources that fuel that power. As the Shale Revolution swept across the United States, lower natural gas prices drove many coal-fired generation facilities to retire. In this case, the market picked the winning fuel—investing in reliable, affordable, cleaner-burning natural gas, and the environment and economy benefited from those market signals.
As renewables and other zero emissions resources proliferate across the country with the installation of new wind farms, solar arrays, and battery storage, the price of renewable energy will continue to drop. And while renewables will help solve challenges associated with cost and emissions, their inherent intermittency leaves us vulnerable to reliability issues. In effect, the U.S. is moving toward two distinct systems: one that leverages zero emissions resources and is largely the result of state and federal policies, and another backup system that actually provides the reliability the grid needs through natural gas (and even coal). Policies that seek to advance intermittent zero emission resources are in effect requiring a duplicative set of systems to separately address emissions and reliability.
Until battery storage is available at sufficient scale to smooth over the natural ebbs and flows of intermittent generation, we will need natural gas to remain part of the vital fuel mix. The latest Energy Information Administration data show that not only is demand for natural gas not declining, it’s hitting new records. Thanks to extreme cold and the retirement of coal generation, natural gas consumption in the power sector averaged 31.6 billion cubic feet per day in January 2022. Natural gas generation is affordable to build and can be switched on quickly to cover increased demand (unlike firm baseload resources like coal or nuclear), then ramped down when renewable resources are once again able to handle demand. New builds could include carbon capture technology to further reduce emissions, and older facilities could be retrofitted.
But making that scenario possible tomorrow requires new investments today. On the production side, some gas producers are saying that without increased pipeline capacity, it may be difficult for them to increase natural gas supply, even as prices rise and they are incentivized to do so. Meanwhile, America’s electricity demand is only expected to increase. As appliances and cars increasingly switch to electricity, demand will continue its upward trajectory. Renewable power generation will increase, too, but likely not at the rate of demand and due to its intermittency, it takes numerous megawatts of renewable capacity to replace one megawatt of thermal capacity. Battery storage is one area of innovation that can address intermittency, but there again, storage levels are likely to fall short of what’s needed. And without the infrastructure to deliver natural gas from where it’s produced to where it’s needed, reliability could be in real jeopardy.
For energy consumers, reliability is key. In our day-to-day lives, it ensures the lights stay on and we remain connected to coworkers, friends, and family. In extreme weather events, it can mean the difference between life and death. So, as we look to a low-carbon future, it is important not to abandon investments in the resources that can deliver reliable power as the energy transition progresses. Regulators should look to policies that strengthen the grid and invest in reliability.
Todd Snitchler is the president and CEO of the Electric Power Supply Association, which represents competitive power suppliers.