by Justin Gundlach
As a spate of disasters in the past few months has made painfully clear to people in Texas, Florida, Louisiana, Puerto Rico, and northern California, designing the electric grid to be reliable at all times requires anticipating and preparing for destructive hazards that can interrupt its operation. That is, reliability requires resilience, the capacity to withstand or bounce back. This has long been true, but is becoming increasingly important to address as climate change amplifies coastal storms, downpours, and wildfires, all of which can disrupt the grid’s operation and thereby impede the functioning of critical infrastructure like communications systems and medical facilities when they are needed most.
I described in a September 13th blog post how utility commissions in California and New York have led the way in pressing retail utilities to assess electric grid vulnerabilities to climate-driven hazards. That post mentioned the term “resilience” but it did not describe the effort currently underway to specify how wholesale electricity markets should compensate investments that improve the grid’s resilience to diverse hazards, ranging from cyber attacks to coastal storms. Below the jump, this post discusses how the Trump Administration is putting that effort at risk and why it is so important for those steering “resilience” from concept to policy to keep the process as separate from the Administration’s imprudent deregulatory agenda as possible.
The federal government’s effort to define and encourage investment in grid resilience has included publication of the Department of Energy (DOE)’s Quadrennial Energy Review chapter on Resilience, Reliability, Safety, and Asset Security of [Transmission, Storage, and Distribution] Infrastructure in April 2015; the DOE national laboratories’ joint report, Resilience of the U.S. Electricity System: A Multi-Hazard Perspective in August 2016; and the National Academies of Sciences’ report, Enhancing the Resilience of the Nation’s Electricity System in April 2017. Among other things, this research has highlighted the predominant importance to resilience of grid components and operations, rather than generation, as well as identifying pressures and opportunities to achieve greater resilience by departing from historic approaches to grid management. It has also given due prominence to the need to plan for various impacts of climate change, such as sea level rise, heat waves, and droughts.
Conventionally, the next steps in the process of translating expert insights into rules for action would include conferences within and consultations among the North American Electricity Reliability Corporation and the Regional Transmission Organizations that manage regional wholesale markets. This might be followed by a Federal Energy Regulatory Commission technical conference, which would then be followed in turn by a Notice of Proposed Rulemaking reflecting some or all of that prior work. Taken together, these steps would require at least one year and possibly two or more to complete. But we are not living in conventional times.
Instead, on September 29th, Secretary of Energy Rick Perry instructed the Federal Energy Regulatory Commission (FERC) to consider and finalize a “Grid Resiliency Pricing Rule” in 60 days. Its background and particulars are somewhat complex, but its basic logic is straightforward: tell the coal-fired and nuclear power plants that have been struggling to compete in wholesale electricity markets to just keep a 90-day stock of fuel on site, dub the plants “reliability and resiliency resources” and pay their operating costs, calling those payments a “reliability and resilience rate.” Few proposals considered by FERC have ever received such a voluble and unified negative response from such a wide array of stakeholders: the American Petroleum Institute, environmental NGOs, and assorted academic, technical, and legal experts—basically anyone who does not have a direct financial stake in coal mines or coal-fired or nuclear power plants—have made clear that the proposal is a non-starter. Even two of FERC’s three serving commissioners have voiced sharply skeptical reactions. The Sabin Center joined this chorus by submitting comments critical of the proposal. In those comments we call on FERC—should it implement the proposal somehow—to first conduct a thorough assessment of its environmental impacts, as the National Environmental Policy Act requires.
Many have pointed out the dangers this proposal presents to the integrity of wholesale electricity markets. What bears further scrutiny, however, is the danger it presents to the specification of “resilience” in the context of those markets. Getting that specification right would mean rewarding investments that improve the grid’s capacity to withstand or bounce back from disruptive hazards, and thereby guiding the owners and operators of grid and generation facilities to prepare adequately for those hazards. Getting it wrong would mean not only failing to reward useful investments but also rewarding less useful ones—for instance, big piles of coal that can freeze or become saturated during storms, rendering them useless when electricity reliability is most valuable. Because changes to the climate and the grid make enormous investments in various forms of electricity infrastructure an urgent and contentious necessity, it is critical that investments intended to improve resilience actually do so.