US power system, PJM reliability storm clouds loom amid transition: exec

PJM Interconnection could be heading for power system reliability issues as coal-fired power generation continues to retire, little to no new natural gas-fired power plants are likely to be built, and most incremental capacity comes from intermittent renewables, Glen Thomas, president of the PJM Power Providers Group, said in a recent interview.

"The trend lines in PJM are pointing to power demand increases with the move to electrified vehicles and greater use of heat pumps replacing gas, which will make the demands on the electricity system go up," Thomas said in a July 28 video interview.

The increase in demand is a regional trend as well, with ISO New England expecting power demand to go from about 20 GW now to about 56 GW in 2050, which is not a lot of time to essentially triple the power generation system in New England, and PJM is looking at similar numbers, Thomas said.

PJM has been talking about peak power demand shifting from summer to winter, from afternoons to evenings and trending aggressively toward more electricity demand, he said.

Thomas is the former chairman of the Pennsylvania Utility Commission, where he oversaw the restructuring of Pennsylvania's electricity and natural gas markets. The PJM Power Providers Group, know as P3, is a non-profit trade organization that supports the development of properly designed and well-functioning markets in the PJM region.

P3's members include Calpine, Competitive Power Ventures, Eastern Generation, J-POWER USA Development, LS Power Development, NRG Energy, Starwood Energy, Talen Energy, Tenaska and Vistra Energy.

On the supply side in PJM, "we're seeing dramatic retirements" of coal-fired generation, with PJM retiring about 15 GW of coal in the next two years that it is not being replaced on a one-to-one basis, Thomas said.

The Midcontinent System Operator is experiencing a similar trend, with incremental generation resources being added that do not have the same reliability attributes as those being retired. "They are adding megawatts that are less valuable than the megawatts being retired, meaning they need to add significant multiples to replace what's being retired," he said.

In MISO, the accredited capacity being added goes down out to 2041, while the future load scenarios continue to go up.

'House of cards'

"This is kind of a fascinating trend, and arguably not a sustainable trend, because what all these other regions are counting on is importing power from other areas of the country to make up the difference and that's a house of cards waiting to fall," Thomas said.

PJM is not one of the areas identified by the North American Electricity Reliability Corporation, an international regulatory authority, as having reliability concerns, but "they're coming in a big way," he said.

The PJM interconnection queue of resources planning to connect to the grid is 95%, if not more, wind and solar power resources, which is where the economic signals are right now. Some new gas-fired resources cleared in the last PJM capacity auction but that was before a whole series of rule reforms took place at the Federal Energy regulatory Commission, he said.

"There is going to be very little to no new natural gas coming into the system and coal is going to continue to retire" with the nuclear power resources remaining because they are subsidized at the state and federal level, Thomas said.

A recent US power grid reliability study from the Electric Power Research Institute said the country needs to triple natural gas generation capacity to reach net-zero emissions by 2050, he said.

Right now, that gas is not in the PJM queue and the capacity market is not providing sufficient signals to build that new capacity "so there are storm clouds looming on the horizon as it relates to reliability in PJM and organizationally P3 is very concerned about this and we'll be pushing FERC and PJM to address it," he said.

"At the end of the day, we can't be in a spot where reliability is jeopardized everywhere in the country," Thomas said.

Resource deliverability

One of the core tenets of the PJM capacity market is that in order to have capacity it must be deliverable. A megawatt of power on the system only has value if it can be delivered at peak demand periods, Thomas said.

PJM has been giving capacity accreditation to intermittent resources above their approved capacity injection rights levels, so these resources were selling capacity that was not deliverable, and that is a problem, he said.

The problematic aspect is consumers have been paying for capacity that has no value at peak, and suppliers "are getting boxed out of the market by these undeliverable megawatts," Thomas said.

"We're hoping to see PJM address this soon with a [FERC] filing and P3 has identified this as a concern," he said. PJM has committed to addressing it, but part of the challenge is the way PJM has proposed to deal with it is to give these legacy resources that were inappropriately accredited available headroom on transmission system, he said.

That would solve the deliverability issue but create a "huge inequity problem" that effectively hurts everybody else in the queue who might have been counting on using that headroom, so "it's a very tricky spot to be in," he said.

And somebody will have to pay for it, whether it is consumers, developers, the people in the queue or suppliers, "it's tough," he said.

A proposed solution is being worked on in a special committee session, and it is unclear when that will move to an upper committee endorsement process.