Grid Transformation: NERC's CEO Concerned



Fortnightly Magazine - September 2022

Nearly a thousand gathered in San Diego for NARUC's Summer Policy Summit. Though a number of meetings and lots of networking had already taken place, the conference kicked off in earnest with the first general session. On arguably the top regulatory and policy issue of our time, "transforming the grid, embracing change while preserving reliability," an extraordinary panel was introduced by NARUC President Judy Jagdmann. PJM's CEO Manu Asthana, Edison International's Caroline Choi, Google's Briana Kobor, Itron's Don Reeves, and NERC's CEO Jim Robb, filed onto the stage of the large conference hall.

NARUC's Jagdmann moderated the discussion and dished out the tough questions. There were points agreed by all. But with each disagreement among the discussants, however modest, and respectfully voiced of course, the audience of regulatory and utility leaders and the like listened ever more closely. After the scrum, the PUF team enlisted one of the panelists — NERC's Robb — to take you through the agreements and disagreements, in the Q&A below.

PUF's Steve Mitnick: At the NARUC Summer Policy Summit, you had strong opinions about the diversity of the grid, and its ability to manage through the load day, especially during extreme conditions. Give an overview of how you see it.

Jim Robb: We've been doing these reliability assessments for fifty years. They used to be straightforward engineering studies and they weren't particularly exciting. Because everything was kind of working okay.

We do three major assessments a year. We do the two seasonal assessments, summer and winter. Then we do the long-term assessment, the ten-year outlook. 2018 was the first year we started to see material risk of load not being served.

At NARUC's Summer Policy Summit, Jim Robb is second from the left of this general session panel, moderator and NARUC President Judy Jagdmann of Virginia is left of him, and to his right is Google's Briana Kobor, Edison International's Carolina Choi, PJM's Manu Asthana, and Itron's Don Reeves.

Surprisingly, we said that in about 2020 in the west, in California, was going to be the tight spot. Then lo and behold in 2020 in August, we had that event where we had this heat wave across the west.

California ISO couldn't get the power needed to balance the solar ramp in the afternoon and interrupted some eight hundred twenty thousand customers.

We've been seeing the risk to the system and the risk of the system not being able to perform increasing. As I said, we started to see that in 2018. Then every year since, we've seen in our assessments, more areas experiencing these risks and the pace is quickening.

We've seen an acceleration of the severity of those risks. For example, risks we'd predict may occur in 2024, are predicted to occur a year earlier in the following year's assessment. That's the story at MISO with the risk of shortfalls we described this year.

That tells me the transformation of the grid is happening faster and in a more extreme way than what we saw four or five years ago. Couple that with changing weather conditions that the system needs to operate in, and it's very challenging.

We just published our annual State of Reliability, which is our look back on the previous year. That report tells me the industry performs very well under normal conditions.

But when we get out into these more extreme tail events, the resilience of the industry is challenged. The unfortunate thing is that the curve, if you will, is changing and we're seeing more extreme events happening more frequently.

We usually hear the word, extreme, and we think infrequent, and we've got to change the mindset. Extreme is hotter or colder than previously experienced or planned for, broader areas impacted and longer duration.

It's a big issue if you've got inventoried fuels. Or are relying on load conservation as a way to get through events. Important for the electric industry, as much broader areas of the continent are affected.

That starts to limit any one load-serving entity's ability to transfer power from another to balance their load. It's that dynamic of the weather, of longer, deeper, broader weather events, with a grid that's transforming and becoming much more dependent upon weather in its ability to serve load.

Those are the two things we see colliding, and that's what gave rise to the risks identified in our Summer Reliability Assessment this year. It's what we've seen growing in terms of number of areas impacted and the speed at which it's coming.

PUF: A lot of renewables are coming on. There is some battery storage, but it's small. It's a sliver relatively, right?

Jim Robb: It is. It's important to note though, that the batteries that are coming onto the system are playing important roles. They're making a difference in California with the steepness of the ramp.

We see batteries playing an important role in being helpful on frequency response. They do help with the variability of intermittent generation. So, with variable wind and solar generation, that stuff's all great.

What people need to remember is a battery is not a generating resource. A battery is a time machine. Sometimes we get confused and we think about batteries like they're a power plant and they're not. They need a source to feed into them.

The other aspect is what the industry has been able to do with battery deployments and we should be proud of that. Particularly in California, in Texas, there's a big project in New England, and those are going to make a real difference.

But they're at the megawatts and hundreds of megawatts levels, and eventually we need to get to gigawatts, and eventually a terawatt if we're going to have batteries perform the function that would enable the grid to be largely based on renewable resources.

We're a long way away from that vision but are making progress. It's important to recognize the good things that batteries do today while recognizing we still have a long way to go.

PUF: There was a genuine debate as to folks who wanted to be aggressive about betting on new technologies coming in at scale, as opposed to a more cautious side saying, We still need to rely upon some of our more traditional sources.

Jim Robb: It's the debate that's going on in a lot of policy rooms around the continent. I understand it. What people always need to realize though, is that our relationship with electricity is incredibly fundamental.

I'll go back to the quote I shared in San Diego. It's seven percent of the economy, but it's the first seven percent because without it, nothing else works. My view is that it's prudent to be cautious, while I understand the desire to be aggressive in the deployment of clean resources.

These clean resources are terrific in many ways, but they're not perfect. But we have a lot of single-issue advocates in the ecosystem, as we all know.

It's important to know there's no free lunch in any of this. The wind and solar resources are terrific in terms of the renewable nature of the fuel and the low-carbon footprint of the generation.

But they're intermittent. Something needs to be able to fill in the holes. Natural gas generation is terrific at being flexible, but it's got a carbon footprint that needs to be managed.

Nuclear is a terrific clean resource. But it's got waste and safety issues that not everybody is comfortable with. Coal generation is great at spitting out gobs of kilowatt hours, but with the real environmental impact. Demand response can play an important role as well but not likely at the scale that is needed.

There's always going to be a soup of these things that probably need to come together to create a reliable, resilient system until we have the other technologies available to do that.

Those other technologies could be long duration, high-capacity batteries, but that's a technology we don't have today other than pumped storage. Could it be a hydrogen system? Perhaps, but we're a long way from having something like that at the scale we would need.

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There could be small modular reactors, developed in such a way that they could operate flexibly. But again, that's ten years away before the first installation. The way I've always talked about this is we know we have a system we inherited from our grandparents that we don't like on the environmental front.

We're trying to create a system we're going to leave for our grandchildren, with a much better environmental footprint and we have to bridge from where we are to where we're going. The million-dollar question for policymakers is, how long is that bridge?

What resources do we need in the interim to keep the system knit together? Again, recognizing the essentiality of electricity.

PUF: You were concerned about the timing and how much to invest in the new zero-carbon emitting resources versus maintaining some of the existing legacy resources.

Jim Robb: The practical answer is we need to retain the existing resources as long as we don't have an alternative. That's the issue.

What's driving a lot of the issues this summer in the midwest area is the loss of generating capacity. It's kind of a twentieth century problem. They're just short on capacity.

It's a hard problem for state regulators who ultimately have to adjudicate the economic ratemaking to get these assets placed into service and then retain them as their used and usefulness status declines.

I don't want to be investing in an asset that I think is going to be stranded in fifteen or even thirty years. But you would think about it differently if you thought it was a ten-year problem versus a thirty-year.

I keep talking about what's important here is the pace at which we transition the grid and what we think the length of this bridge is. We'll think differently about the enabling investments if we thought we'd have batteries deployed at scale with adequate duration in five years, than if we think that's a twenty-year-off event. Policymakers need to be sober in their assessments of what that timing is.

I'm doing my best in trying to make friends in all corners. But we have to admit it is a difficult problem. As I said, until we have those alternatives available, we'll need to keep some old stuff around, even though they may not run very much.

As we add more wind and solar onto the system, it will naturally back out many of these other resources. We may see capacity factors decline significantly over time.

We won't have the emissions footprint as if they were running twenty-four hours a day in baseload mode, but they would be there when needed. They become a bit of, in case of an emergency break glass, type capacity. And our regulatory and market practices are challenged to value that kind of insurance.

PUF: That's also a debate point. Even if they're ten percent capacity factor, they're emitting. Whether there is cost support for some of that emergency break glass capacity seems to be tied in with that timing question.

Jim Robb: Absolutely. The way I think about it, when I bought my first electric vehicle, it was a Chevy Volt. I had it for twenty-five thousand miles. Twenty-two thousand five hundred of those miles were electric miles, twenty-five hundred were gasoline miles, and those are the most valuable miles in that car.

Because that's when I needed to get somewhere, and I didn't have enough battery capacity to do it in electric mode. I think when these plants would be running would also be when the value of those kilowatt hours could be high because it's probably on a really hot day or cold day.

We know from looking at what happened in Texas in Winter Storm Uri. When bad things happened to the generating fleet during bad weather conditions that is exactly when bad things happened to society. The value of the kilowatt hours would be extraordinary, even if there are much fewer ones being generated.

The ratemaking process for that is more than a little bit out of my expertise area, but that's how I think about that problem.

PUF: There are folks with such fervor who want to get to zero carbon, lower carbon, as soon as possible. They have a concern. If we keep these emitters around, that'll force a complacency, so the change won't move as rapidly.

Jim Robb: Yes, but that's just a discipline problem. Look at all the work we do on renewable development, which is terrific, and probably should be proceeding twice as fast if we could.

But we need to be asking if are we making the same investments in the core enabling technologies, whether that's transmission to be able to unlock some of those renewables and to build more inherent redundancy and resilience into the system? Do we have enough investment going into batteries? Do we have our foot on the gas on small modular reactors — SMR? Are we reinforcing the natural gas system as much as we should given its essentiality during the transition?

My sense is we don't have as much focus on those fronts as we do on the resource transition. Those investments are going to prove to be equally important.

PUF: You talked about, here's what we saw in 2018, then '20, and then currently. What should be our sense of urgency?

Jim Robb: The sense of urgency needs to be very high. I don't know what NOAA's going to forecast for next summer. I haven't seen NOAA's forecast for this winter yet, but the forecasts tend to be for continued extreme conditions.

The electric system needs to move at an appropriate pace to be able to deal with those systems. Our ability to invest in transmission — I'm going to throw gas transmission and storage into the mix too — is critical to making the gas on the bridge and then electric transmission at the end state incredibly valuable.

We haven't demonstrated the ability to build large-scale, multi-state transmission projects at near the rate they're going to need to be done. I'm encouraged by the joint task force that FERC and NARUC have put together to start to address those issues, but it's a thorny challenge.

Again, transmission investment's going to be important. It's getting lots of funding as are the laboratories on battery storage technologies and so forth.

Another important aspect that our summer assessment this year has kind of helped catalyze, is making sure that as the federal government pursues sound policies within a functional orientation, that the electric reliability consequences of policy direction will be considered along with the functional aspects.

Because again, electricity is so fundamental to everything we hold dear. It's the foundation of society in many ways now.

PUF: You're saying, there's a program, there's a whole set of initiatives for SMR, transmission, battery, hydrogen. But you're saying, it's not wholly considering where we are on reliability.

Jim Robb: I'll come at it in a slightly different way. All those need to move forward. I'm thinking more policies around fish and wildlife relative to water flows for hydropower. There's a put and take there.

I'm thinking about air quality permits and what we might be doing to restrict the ability of certain power plants to operate when their operation is essential to electric reliability. Or the ability to get permits from forest management agencies for vegetation management efforts. Protecting key transmission paths as a priority for wildfire management.

It's those kinds of interagency issues that are so important, like the rail system right now, and ensuring that while we are dependent on coal, which we're going to be for some period of time, that power plants are able to get coal to replenish the coal piles.

It's all of these issues because it's multifaceted. The electric industry has all the supply chain issues that every other industry is facing right now. We're dependent on foreign suppliers of things such as chips, relays, transformers, and solar panels.

We've got to be thoughtful about how we defend reliability because again, without the juice, the other ninety-three percent of the economy doesn't function. It's important we keep that concept of electric grid reliability having a seat at the table.

PUF: What advice would you give to companies, utilities, independent generators, transmission companies, and regulators? You've got a lot of constituencies. Stay short-term.

Jim Robb: There are two things we talk about a lot that I honestly believe. First, we believe this transition to a very clean electric system is imminently doable.

With enough time, money, and engineering talent, we can get there. Nothing we're doing should ever be interpreted as being against the transition.

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But the pace of the transition is important, and that pace is gated by the ability of other key integrating assets to be deployed at scale. My first bit of advice is to be cognizant of that and manage the pace of change.

The second bit of advice we give is don't underinvest in bridge fuel or the bridge issues to get us from where we are to where we want to go. We can all agree on where we want to go.

We need to have sober views of what the length of that bridge is. Are we talking a creek crossing? Are we talking the Verrazzano-Narrows? You could probably tell by my perspectives, I think it's longer rather than shorter, but I would love to be wrong.

It's making sure we're making all the right interim investments to reinforce the system, because ultimately that's what's going to enable the longer-term transition. I know not everybody likes that view, but it's important that we continue to reinforce the system we have while we're transitioning to the system we're going to leave our grandkids.