Reliability ‘catastrophe’ looms as dispatchable resources retire, FERC commissioner warns
Utility Integration

Reliability ‘catastrophe’ looms as dispatchable resources retire, FERC commissioner warns

The U.S. electric power system is headed for “potentially catastrophic consequences” as dispatchable generating resources are retiring “far too quickly” and in quantities that “threaten our ability to keep the lights on.”

That warning was delivered by FERC Commissioner Mark C. Christie in testimony June 12 to the House Subcommittee on Energy, Cimate and Grid Security.

The problem, he said, is “not the addition of intermittent resources such as wind and solar, but the far too rapid subtraction of dispatchable resources, especially coal and gas.”

He noted that PJM expects to lose 40 GW of generation capacity by 2030 through early retirements of generating units. Around 90% of this retiring capacity is dispatchable generation, primarily coal and gas. At the same time, PJM faces load growth of an additional 13 GW by 2030.The PJM interconnection queue, he said, largely consists of intermittent generation such as solar and wind.

“One nameplate megawatt of wind or solar is simply not equal to one nameplate megawatt of gas, coal or nuclear,” he said. As a result, even if every unit waiting in the PJM interconnection queue was interconnected, the reliability problem still would not be solved. “The numbers just do not balance,” he said.

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Christie was joined in his warning by Commissioner James P. Danly, who said that FERC has allowed the “distortion of price signals” and permitted market incentives to be “warped, interfering with price formation and jeopardizing resource adequacy.”

He said that most of these market-distorting forces originate with subsidies—both state and federal—and from public policies designed to promote the deployment of non-dispatchable wind and solar generators or to “drive fossil-fuel generators out of business as quickly as possible.”

Image by Peter Schmidt from Pixabay

Subsidies available to renewable generators are so lucrative that, when participating in procurement auctions, “they are able to offer at a price of zero instead of their actual cost.”  The market signal is that these new resources can be built for free, and thus the cost of power is also free. 

“This, of course, is untrue,” he said, “and the inevitable consequence is market-wide price suppression.” 

Danly said that price suppression deprives other market participants of revenue, leading to the premature retirement of the dispatchable generators which have to offer into the market at their true costs in order to remain economically viable. 

“FERC has seemingly done everything in its power to ensure that our markets will fail,” he said. 

In particular, FERC eliminated the markets’ economic guardrail—the minimum offer price rule—which had been established to ensure that generators offered their actual costs to prohibit price suppression.  

“We know that there is a looming resource adequacy crisis,” said, adding that market operators “have been explicitly telling us as much for years.”  

In early June, the New York ISO warned that an environmental rule focused on reducing emissions from gas-fired peaking plants has led to fossil fueled generation deactivating faster than new clean energy resources can connect to the grid, putting reliability margins at risk, especially in New York City. 

As of May, the so-called Peaker Rule had led to the closure of 950 MW of generation in environmental justice areas. Additional closures were expected by 2025. The closures could narrow reliability margins in the nation’s largest city to as little as 50 MW. Reliability risks likely would increase during period of prolonged heat waves.

The Subcommittee Chair, Jeff Duncan (R-SC), used the hearing as an opportunity to criticize the Biden administration for core statutes and environmental rule makings that “have severely weakened our energy security.”

Image by Jacqui from Pixabay

“Too many on the Left want the Commission to become an environmental regulator,” Duncan said. The FERC’s primary authority, he said, “is as an economic regulator.”

He said that rising risks to reliability are not happening solely because of extreme weather or a lack of sufficient interregional transmission capacity. Instead, he said “it is largely happening because too much dispatchable, firm generation has retired from the bulk power system.”

He said the retirements are caused by “unrealistic environmental policies” such as regulations from the Environmental Protection Agency, private sector Environmental, Social, and Governance goals, and market frameworks “that do not properly value firm generation.”

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