As the US undergoes a transition to cleaner energy resources, likely accelerated by the Inflation Reduction Act of 2022, grid operators from coast to coast face the challenge of keeping the lights on during periods of substantial market volatility, intense storms and declining forward capacity prices.

Much like 2022, planned US capacity additions in 2023 are expected to be dominated by intermittent renewable resources, with more than 45 GW of intermittent solar generation alone planned to come online, according to an analysis of S&P Global Market Intelligence data.

The analysis also shows more than 12 GW of wind is planned to come online in 2023, along with more than 12 GW of energy storage and nearly 10 GW of natural gas generation, for an overall addition of nearly 81 GW.

Steve Piper, director of energy research for S&P Global Commodity Insights, said he expects capacity additions to trend a little higher than in 2022 but noted that projects will also be pushed into 2024.

"If everybody could have their druthers, we would see far higher aggregate capacity additions on wind and solar, on batteries. A lot of those projects are going to move forward, but I think there will also be delays," Piper said. "There is going to be a big market pull due to the Inflation Reduction Act ... and that is just going to kind of clog up the whole supply chain."

Backed up queues

Regional transmission organizations (RTOs), such as 13-state grid operator PJM Interconnection LLC, are already dealing with a logjam of intermittent resources in their interconnection queues. This adds to the supply chain and potential permitting challenges facing renewables, especially solar.

"We're definitely going to be in a situation where interest in projects is going to exceed the capacity to deliver them," Piper said. "At the same time, [solar] is a mature technology with scale, and you're still going to see a lot of capacity come in, just not at the pace that developers would want."

State and federal policies in place before the enactment of the Inflation Reduction Act created a "two-pronged situation where it made it harder to invest in conventional [generation] at the same time as it becomes easier to invest in renewables," Piper added. "The renewable investment story is just going to kind of grow and grow and grow even as there are hiccups in delivery."

In its most recent Regional Transmission Expansion Plan, PJM said solar made up 66% of the generation in its interconnection queue as of the end of 2022 at more than 57 GW of planned capacity. That amount equals a nameplate capacity exceeding 93 GW.

PJM's queue also has more than 14 GW of storage and over 6 GW of planned wind capacity.

10 GW of fossil fuel retirements

The analysis shows more than 6 GW of US coal capacity and about 4 GW of gas-fired generation will come offline in 2023.

"It is pretty clear that coal generation has surpassed the tipping point," Morningstar analyst Travis Miller told Commodity Insights earlier this year. "There is still some debate out there about the length of time it takes to get to a small amount of coal generation or even eliminate coal generation."

The debate continues, however, about the role gas generation will play in the grid of the future.

"It is not a question in my mind of will it be on the grid, but is it a growth market? Are we going to see more? I think the answer is no," Piper said. "There is a pretty good chance we're going to see less and less over time."

Miller and Piper, however, both maintained that the US will need some kind of technological breakthrough to eliminate fossil-fueled generation and the related CO₂ emissions from the grid.

Adding intermittency, storage

Breaking down anticipated capacity additions and retirements by independent system operators (ISOs), the analysis shows more than 11 GW of planned additions in PJM in 2023 offset by 2,345 MW of retirements, almost completely tied to the deactivation of coal-fired power plants.

The California ISO is forecast to add almost 9 GW of capacity, including nearly 5 GW of solar and more than 4 GW of energy storage. More than 2 GW of gas generation is slated for retirement.

The Electric Reliability Council of Texas Inc. has more than 19 GW of new resources slated to come online in 2023, including close to 10 GW of solar capacity, the analysis shows. Wind and energy storage resources make up the bulk of the remaining planned capacity additions. About 200 MW of Texas wind capacity is expected to be retired in 2023.

The Midcontinent ISO is expected to add about 11 GW of new resources in 2023, offset by 2 GW of fossil fuel retirements.

The ISO New England region is projected to add 1,241 MW, with 22 MW of oil-fired capacity to be retired. In the New York ISO region, 3,151 MW of capacity is to be added in 2023, while 541 MW of natural gas generation is set to be deactivated.

About 3 GW of primarily renewable capacity is forecast to be added in the regional grid operated by the Southwest Power Pool, with more than 1 GW of coal- and gas-fired capacity to be retired.

More than 22 GW of capacity additions and nearly 2 GW of retirements are forecast outside of an ISO or RTO, areas that include much of the Southeast and the West outside of California.

Keeping balance

As the ISOs and RTOs work to procure adequate capacity that can be called upon during extreme weather events and unplanned outages, they also face the need to build out transmission to support the ramp-up of intermittent resources.

"The West, in general, is just starting to look really tougher and tougher from the perspective of resource adequacy," Piper said.

While PJM appears "a bit long" compared to other RTOs when it comes to adequate capacity, Piper said, MISO could face a more immediate reliability issue with the possibility of baseload resources retiring faster than new generation is added.

"I kind of pin the tail on MISO as the entity of concern," he said.

S&P Global Commodity Insights produces content for distribution on S&P Capital IQ Pro.