Week Ending March 12, 2021

Senate Hearing on Grid Reliability Addresses Gas Coordination, Texas and Weatherization

This Article Appears as Published in Foster Report No 3340
Senate Hearing on Grid Reliability Addresses Gas Coordination, Texas and Weatherization

At a Senate hearing on power grid reliability and lessons from the winter storm that wreaked havoc in Texas, lawmakers heard ideas about improved coordination with the natural gas industry, the increased importance of storage as renewable resources dominate generation additions and mandatory weatherization measures for power plant owners.

The last topic is likely to be part of legislation that will be passed in Texas as the state examines how to avoid a repeat of the mid-February events, said Pat Wood III. Responding to questions from Sen. Catherine Cortez Masto (D-Nev.), Wood said he expects weatherization rules for generators to be approved by lawmakers before the legislative session ends around Memorial Day. Weatherization rules will be compulsory, with penalties for not following them, he said.

A combination of incentives and penalties for generation owners has worked in PJM Interconnection following a polar vortex in 2014, when many power plants were unavailable due to lack of winterization, related Manu Asthana, president and CEO of PJM. The forced outage rate of generation units in the 2014 storm was 22%, and that dropped to below 10% in a recent winter storm. The penalties and incentives for generators have helped the grid operator withstand extreme weather events, Asthana told Cortez Masto during the March 11 hearing before the Senate Energy and Natural Resources Committee.

But it would not do much good if power plants are winterized and natural gas is not available as a fuel, added James Robb, president and CEO of the North American Electric Reliability Corp. (NERC). Natural gas industry oversight and regulations need to change because gas-fired generation is becoming so important to grid reliability, and Texas learned that the hard way, Robb said.

Improved coordination among the gas and power sectors was one of the many recommendations from the joint report by NERC and FERC following outages and gas production/delivery problems in February 2011, but most of those warnings were not heeded, said Sen. Mazie Hirono (D-Hawaii). The recommendations from the 2011 report were not subject to audit and compliance monitoring from NERC, and implementation of them is one of the things being examined in the joint NERC and FERC inquiry on events last month, Robb said.

NERC has developed standards on winterization that will be sent to the NERC board in June, and there is no doubt that they would have helped if they had been in place and adopted in Texas, Robb told Hirono. Among the elements being investigated in the joint inquiry with FERC is if the natural gas system would have been able to deliver fuel to gas-fired power plants if generation owners had taken more preparations for freezing temperatures, Robb said.

“There is no question” that the power and gas systems need to plan for more extreme weather, because such events are happening far too frequently, Robb said.

While the design of the Texas power market and the performance of the Electric Reliability Council of Texas (ERCOT) has been in the crosshairs of politicians and many others, a capacity market similar to other independent system operators may not have made much difference, witnesses told the Senate panel. ERCOT has plenty of generation capacity and a reserve margin above 40%, but it was not prepared for the duration and widespread reach of the winter storm, they said.

“Today’s hearing is not a referendum on Texas,” said Sen. Joe Manchin (D-W.Va.), chairman of the committee. He said there has been a lot of blame cast on Texas for avoiding wholesale power market oversight from FERC, and he asked Wood, who was chairman at FERC and the Texas Public Utility Commission (PUC), about the resistance to FERC oversight. Wood helped design the competitive market rules in Texas and he responded that one emphasis for him was having a single regulator over retail and wholesale market operations. The PUC in Texas has carried out that vision, which included planning and paying for transmission expansions without negotiating with other states.

Additional direct current transmission ties to the Eastern and Western Interconnections are contemplated in ERCOT, but the level of transfer capability would not have made much difference in February if they had been in place, Wood told Manchin.

ERCOT relies on scarcity pricing as an incentive for generators to be available, and for several days the price cap of $9,000/MWh was reached, resulting in utilities and others paying exorbitant prices for power to meet consumer needs. “It sounds like price gouging to me,” Manchin said.

The independent market monitor for ERCOT has recommended that the PUC adjust prices retroactively to correct a period when the price cap should not have been in place, which would shave about $16 billion in payments to ERCOT. While the PUC declined to make that move last week, it is being addressed again before the Legislature and Wood, CEO of Hunt Energy Network, indicated that he would side with the market monitor’s recommendation if he were at the PUC today.

Power plant siting and resource decisions for the power grid are in the hands of the states authorities, and with the growth of renewable resources to meet clean energy goals, gas-fired generation is becoming more important because of its ramping capabilities, witnesses said told the committee. PJM has about 145,000 MW of resources in its interconnection queue, and 92% of that is either wind power, solar power, hybrid or battery resources, Asthana said. Even with such generation trends, “gas is the fuel that keeps the lights on,” Robb said.  The interplay between the gas and power sectors “continues to be a large issue,” just as it was during the 2011 winter events, Wood said.

Power grid planning and modeling needs to be more creative because “the world is changing” and the backwards-looking analysis from past lessons that has guided the industry for so long is not sufficient, Wood said. Storage will be more important as intermittent resources are added, and Hunt is working on such projects, he noted.

Because the legislative session in Texas ends around Memorial Day, Wood expects lawmakers to approve some sort of measure before a thorough analysis of the events is completed by some of the parties examining the issues.

When asked by Cortez Masto if there is a role for Congress to play to address weatherization and compel investments to make the power grid more resilient, Robb said NERC has authority to address generation requirements, but that authority does not extend to the natural gas system. As he has in the past, Sen. Angus King (I-Maine) said he views the gas pipeline network to be an extension of the power grid and safety/cybersecurity concerns should be addressed by Congress.

Several Republican senators raised questions about President Joe Biden’s decarbonization goals for the power sector and the potential effect on reliability. An “all of the above” approach for generation resources is needed, which includes, coal, natural gas, hydropower, nuclear, renewables and all types of resources, said Sen. John Barrasso (R-Wyo.), ranking member on the committee.

Blackouts in California are unacceptable, but so is moving to a carbon-free power sector by 2035 when states have not planned for the changes needed to reach that goal, Barrasso said. Increased use of electric vehicles and pushing electrification for heating will drive up demand for electricity and expose consumers to grid reliability and cost risks, he said.

Sen. Steve Daines (R-Mont.) added that if the Biden administration moves blindly away from fossil fuels and baseload power generation it will affect grid reliability. “There’s really no substitute for baseload power,” Michael Shellenberger, founder and president of Environmental Progress, said in response to questions from Daines.

When storage, microgrids and an emphasis on transmission additions came up, Shellenberger said the added complexities can overwhelm regulators and pose a problem. Solutions to grid reliability challenges can be troubling “if you’re adding more complexity to the system,” he said.

Federal action to protect nuclear resources in restructured energy markets is needed, and more patience on the development of carbon capture, utilization and storage technologies, Shellenberger said.

Countering the views that coal-fired generation is such a strong baseload resource, Sen. Martin Heinrich (D-N.M.) said coal plants today are not used as much because they’re uneconomic compared with other resources. At a 36% capacity factor in PJM, “coal is no longer baseload on our system,” said Asthana.

Asthana agreed with others that more transmission will be needed, and diversity of resources is important for reliability purposes.

Before the hearing began, Heinrich asked why ERCOT did not have a witness among the panelists who testified. Manchin responded that is was not for a lack of invitations, as committee staff requested ERCOT to give its views. The state legislative hearings in Texas have ERCOT officials occupied Manchin said, though he noted that he received a response from ERCOT and entered the statement into the record.

By Tom Tiernan ttiernan@fosterreport.com

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