Are Grid Reliability And Fuel Affordability At Odds With Climate Goals?

The electric grid is under attack. America just experienced a rifle assault on a substation in North Carolina that shut off power to 45,000 people. But now it is at risk of a winter strike — threats ranging from extreme cold to fuel shortages to infrastructure limitations.

With that, the North American Electric Reliability Corp. (NERC) provides a gloomy risk assessment, saying harsh weather conditions will test the system’s performance this winter. The “mid-continent” — from Minnesota down to Texas — could get hit the hardest, given that power plant retirements have eaten into reserve margins.

“There’s a rush to electrification,” says Jim Robb, chief executive of NERC, during a symposium hosted by the United States Energy Association. “Twenty percent of the end use is now in electricity, and the rest is primarily oil and natural gas. If you took it to the extreme, it would imply a five-times increase in electricity demand.” The grid must expand, he says, noting that there will be no tolerance for reliability issues and energy shortages.

“Investors are lining up to put money on transmission,” he continues during the symposium where this reporter was a guest. “But we must figure out a way to get projects sited.” He says that electricity is 7% of the U.S. economy, and without access to it, society shuts down.

Competing forces are at play: on the one hand, the nation’s infrastructure is inadequate, unable to handle a tidal wave of electric vehicles and wind and solar plants. Conversely, the Inflation Reduction Act is now the law and will kick in $369 billion for 21st Century energy and climate projects. The country is on track to cut its greenhouse gas emissions by 40% by 2030 from a 2005 baseline.

However, reliability remains a concern. About 4,200 nuclear and coal generation megawatts have retired in the nation’s midsection since last winter. There is also constrained natural gas pipeline capacity in the Northeast. Furthermore, NERC says prolonged cold temperatures threaten Texas’s electric generators and fuel supply infrastructure. Then add to that the 55,000 substations around the United States — soft targets for any nut job with a grievance.

“At the end of the day, we have an obligation to keep the system operational through all hazards,” says Scott Aaronson, vice president of security and preparedness for the Edison Electric Institute. In North Carolina, he says the standards worked, containing the outage caused by the physical assault. “We are thinking about all the hazards, and designing and investing in a system that can withstand these threats.”

What’s a nation to do?

The United States must reconcile its energy goals with its infrastructure limitations. That means allowing the most efficient coal-fired units to remain online during extreme weather events or natural gas shortages: just look at the European Union, where Denmark, Germany, Spain, and the United Kingdom are paying the highest prices in the world for energy. In comparison, the United States pays half of that, says Statista, all in March 2022.

But the country should not slow the deployment of clean fuels and distributed energy resources such as rooftop solar, battery storage, and localized microgrids. Aggregators can monitor and manage those assets through software programs, enabling the electricity to be bundled and sold at market rates, forming a “virtual power plant.”

It’s one strategy to allow utilities to remain operational if the electric grid gets knocked out during a hurricane, wildfire, or earthquake. In reality, climate change is omnipresent. Consider that 100-year floods routinely occur, wreaking havoc just recently in Germany and Pakistan. Ditto for wildfires, which have devastated Australia and the United States. Decarbonization is essential.

Moreover, the International Renewable Energy Agency says that electricity costs from onshore wind have fallen by 15% while offshore wind has dropped by 13%. Meantime, rooftop solar PV has declined by 13%, all since 2020. That’s why renewables have supplied 80% of the installed electric generation capacity in four years. It says renewable energy saves about $55 billion worldwide compared to the current price of fossil fuels. Renewable energy is on pace to overtake coal’s market share by 2025.

“I would electrify everything that makes sense,” says Robert Rowe, chief executive of NorthwesternNWE
Energy. “But in the nearer and intermediate term, focus on reliability and affordability” or risk losing the “social capital” to decarbonize.

Are the tensions coming to a head?

West Virginia may typify the reluctance of some states to move from the old economy into the new one. The state thrived during the industrial revolution, powering the nation with its coal plants. But the current century has given rise to shale gas and renewable energy, which have wiped out coal’s once-dominant market share.

And while much of the country has diversified its electric portfolio, West Virginia’s coal plants provide it with 91% of its power. As a result, the rate of increase in electricity prices between 2008 and 2020 is more than five times the national average. James Van Nostrand, author of the book, “The Coal Trap,” says that American ElectricAEP
AEP
Power’s customers paid about $62 a month in 2008 and now pay roughly $155. The power company proposes adding another $18 on top of that, resulting in a 279% rate hike over 14 years.

Meantime, coal’s actual costs are “externalized” and not reflected in the price of electricity. That is, taxpayers bear environmental and medical expenses.

The state’s public utility commission sides with the coal industry, arguing that its coal units are always available while wind and solar plants are subject to weather considerations. The commission maintains that it takes 3 megawatts of wind and 4 megawatts of solar to replace 1 megawatt of coal, which is not cost-effective. But Van Nostrand said such an analysis ignores that the state’s grid is interconnected with the regional wholesale market and thus has access to an array of available resources to firm up wind and solar plants.

West Virginia “will have to move off coal in some reasonable amount of time,” adds Philip Sharp, a former member of the U.S. House of Representatives from Indiana. Most of the country “is part of a much larger grid,” allowing states to import cleaner and cheaper fuels.

“It’s the tension we’ve seen,” says Anne George, vice president of external affairs for ISO New England, which manages the grid and calls up generation sources for six states. Those states cannot pick their preferred fuels in organized and competitive markets. Instead, the grid operator chooses the most economical ones. While a mix of resources is necessary, the region is moving to cleaner fuels — away from coal, used only on the coldest days of the year.

Decarbonization is happening, facilitated by consumer demand and public policies. But the trend toward clean electricity does not have to be at odds with reliability and affordability. Indeed, the lights can stay on while we address climate change. It’s a function of modernizing, expanding, and hardening the grid — central to the North American Electric Reliability Corp.’s recommendations.