"The impending, but avoidable, reliability crisis"

On May 4, 2023, FERC Commissioners James Danly, Allison Clements, and Mark Christie and FERC Chairman Willie Phillips testified before the US Senate Energy and Natural Resources Full Committee Hearing to Conduct Oversight of FERC. The written testimony submitted by Commissioners Danly and Christie highlights their grave concerns about power system reliability and market issues. The statements from the Commissioners received almost no media attention, which is interesting given mainstream media's propensity for hyperbole, but not surprising as power system reliability is arcane and unlikely to elicit clicks and likes from the general public. However, as a power system professional, I found their statements to be both alarming and an accurate reflection of the issues I've been observing over the last decade. My intent with this article is draw attention to these concerns.

Written Testimony of Commissioner Danly

Commissioner Danly's statements were focused on market and reliability challenges. Here are the statements I found most interesting:

"...FERC has distorted price signals and warped incentives in the markets, interfering with price formation and jeopardizing resource adequacy. Most of these market-distorting forces originate with subsidies—both state and federal—and from public policies that are otherwise designed to promote the deployment of non-dispatchable wind and solar assets or to drive fossil-fuel generators out of business as quickly as possible."

"We know that there is a looming resource adequacy crisis. Our market operators have been explicitly telling us as much for years."

"As an engineering matter, there is no substitute for reliable, dispatchable generation. Intermittent renewable resources like wind and solar are simply incapable, by themselves, of ensuring the stability of the bulk electric system. As the wholesale markets’ prices are distorted by subsidies, the generation assets with the attributes required for system stability will retire and system stability will be imperiled. Given these market failures, there will be, in time, a catastrophic reliability event."

"I am a free marketeer who believes in the power of market forces, but these markets, hobbled as they are by subsidies and FERC’s interference, have been undermined to the point that they cannot be relied upon to ensure just and reasonable rates or provide resource adequacy. Our markets are in dire need of repair; FERC must act before there is a truly catastrophic reliability failure."

Written Testimony of Commissioner Christie

Commissioner Christie's statements focused on market design and the role of natural gas in power system reliability. Here are the statements I found most interesting:

"The United States is heading for a reliability crisis. I do not use the term “crisis” for melodrama, but because it is an accurate description of what we are facing. I think anyone would regard an increasing threat of system-wide, extensive power outages as a crisis."

"In summary, the core problem is this: Dispatchable generating resources are retiring far too quickly and in quantities that threaten our ability to keep the lights on. The problem generally is not the addition of intermittent resources, primarily wind and solar, but the far too rapid subtraction of dispatchable resources, especially coal and gas."

"What are the chief reasons? I will focus on two.

First, market design in the RTO markets. These markets – which are not really markets at all but administrative constructs with some market characteristics –were designed almost a quarter century ago for a different era with far different challenges than we face today. This is especially true of the capacity markets used in PJM and other eastern RTOs, as well as MISO.

Second, specifically with regard to natural gas, which has been growing rapidly as a source of dispatchable power generation, the national campaign of legal warfare being conducted against every single natural gas pipeline or related facility has prevented the construction of vitally needed natural gas transportation infrastructure."

"Since FERC regulates the RTO power markets and has reliability duties under the Federal Power Act, as well as the duty under the Natural Gas Act to permit needed natural gas infrastructure, I believe it is my duty as a member of FERC to call attention to the serious threat to reliability that is looming on the horizon."

Concluding Thoughts

As we head into 2024, the reliability of power systems across North America is fragile. Not because of technical or engineering failures. Not because of a lack of viable solutions. Reliability is at risk because of an accumulation of ideological policy decisions that have failed to recognize that power system reliability must be an explicit policy imperative and not simply an assumed outcome.

We are heading for one of two outcomes. Either policy makers quickly begin to include explicit reliability objectives and trade offs in electricity policies or there will be a major reliability failure that will force this to happen. We can either choose to be proactive or physics will intervene at some point and make the decision for us.