Perspectives on the Future of the US Power Grid

By Susan F. Tierney, Senior Advisor

Senior Advisor Susan F. Tierney

Electric system reliability has been in the news lately, not only in policy reports and regulatory filings, but also in the vivid headlines describing the destruction of Puerto Rico’s electric grid in the aftermath of Hurricane Maria. The latter is a sober reminder of how important a resilient and strong grid is to the functioning of modern economies and the provision of critical social services.

Policy interest in the reliability of the nation’s electric system accelerated in April 2017 with Energy Secretary Rick Perry’s directive to Department of Energy (DOE) staff to produce a study on the relationship between wholesale electricity markets and the resilience and reliability of the grid. That long-awaited study, Staff Report to the Secretary on Electricity Markets and Reliability, was released in August 2017, and examined the complex transitions underway in the US electric industry. It was intended to answer some critical questions for the future of the US grid: What is driving change in the mix of technologies we use to generate power? Are these changes making the US power supply any more or less reliable?  

The DOE staff’s final report contains quite a few intriguing findings, including:

• Natural gas is the key driver of financial pressure on power plants, and plays a much bigger role than flat electricity demand and the entry of renewable energy resources.
• Many observed power plant retirements were consistent with markets as they are currently functioning, and not every power plant retirement is cause for alarm.
• The nation’s electric system is now more diverse than in the past.
• States value things like jobs and clean energy and adopt policies to support them, which creates tensions with federally regulated organized wholesale electric markets.
• Today’s and tomorrow’s power systems require more flexible resources to maintain reliability, but the introduction of “variable” renewable power projects does not necessarily undermine reliability.
• More coordination is needed between the nation’s gas and electric industries.

In addition, although avoiding the term “climate change,” the report did acknowledge the increasing challenges being posed for grid operations by extreme weather events – challenges that were brought home forcefully with the reports of the devastation from this fall’s hurricanes, particularly in Texas, Puerto Rico, and the US Virgin Islands. Texas wind farms were able to bounce back into operation relatively quickly. 

On the central question of reliability, the DOE study found that a diverse portfolio of generation resources can provide the complex set of functions needed for reliable and resilient grid operations. No single type of generating technology provides all of the essential reliability services, and all technologies provide some of them. For instance, wind generators, solar systems with inverters, gas-fired power plants, and even “demand-response” systems provide many of the “essential reliability services” required to keep the grid balanced. Large conventional nuclear and coal plants provide reactive power.  

The important attribute of a reliable and resilient system is the diverse portfolio of assets on the system. This viewpoint is not reflected in the tone or substance of the proposal Secretary Perry sent on September 28, 2017, to the Federal Energy Regulatory Commission (FERC) to adopt policies to prevent retirements of merchant coal and nuclear units in organized wholesale markets. The importance of diversity, however, does align with the findings in Analysis Group’s July 2017 study, Electricity Markets, Reliability and the Evolving US Power System, a report I coauthored with Paul Hibbard and Katie Franklin. We maintain that the concept of “baseload” generators (as applied to coal-fired and nuclear plants that run on a near-continuous basis around the clock) is outdated. Economical gas-fired power plants are running more, and combined with more flexible resources – such as wind and solar –they are capable of providing power efficiently, economically, and reliably. 

That said, despite technical problems in Secretary Perry’s proposal (which I described in a “Grid Geeks” podcast in October 2017 and which many commenters pointed out in recent submissions to FERC in Docket RM18-1-000), there are nonetheless critically important grid-resiliency issues that FERC, DOE, the states, and the industry should address. Many of these are set forth in the July 2017 report of the National Academies of Sciences’ Committee on Enhancing the Resilience of the Nation’s Electric Power Transmission and Distribution System, on which I served.

FERC, for example, could constructively act in the very near term to address price formation problems in organized wholesale markets to assure proper compensation to suppliers of electric energy; in the longer term, FERC should investigate other mechanisms to assure that the set of products cover the attributes needed for a resilient portfolio of resources and for low-carbon power supply. DOE could assist in further developing metrics for what it means to have a resilient grid. And national policy makers could take important steps to address market failures associated with carbon emissions from power plants – something that would provide appropriate compensation for zero-carbon electric resources like solar, wind, water, and nuclear energy.

Overall, our electric system in the United States has become cheaper, cleaner, and more reliable, driven principally by market forces. To continue our forward momentum, however, energy markets will need to properly value new technologies; transmission lines and better planning and coordination will need to be added to make our grid more resilient; and additional research can yield findings that allow us to further lower the cost of energy storage, more smoothly integrate renewables, and maintain an efficient and reliable power grid.

For amplification on these points, please see my interview with former Energy Secretary Ernie Moniz at the July 2017 Aspen Ideas Festival; testimony I submitted to the House Energy Subcommittee as part of its “Powering America” hearings series; and my remarks on WBUR’s October 26 broadcast of the “On Point” show on restoration of the grid in Puerto Rico. ■