Commissioner James Danly Statement
June 16, 2022
Docket No. RM22-10-000
I concur in today’s notice of proposed rulemaking directing the North American Electric Reliability Corporation (NERC) to submit modifications to Reliability Standard TPL-001-5.1 to address reliability concerns related to transmission system planning.[1] It will take over two years, at a minimum, from this notice of proposed rulemaking (NOPR) to the ultimate implementation of any such changes. Reliability Standard development is neither swift nor agile, and this NOPR will not, indeed cannot, timely address the projected risk of widespread blackouts this summer,[2] nor can they be in place quickly enough to address future summer and winter reliability challenges over the next couple of years. Yet, I agree it is an important (albeit small) step to establish mandatory and enforceable compliance obligations to promote proactive planning for weather-related events.
The NOPR makes use of, indeed bases our action upon, an ever-growing narrative: reliability challenges arise primarily from weather-related events.[3] But even if one were to grant that certain parts of the United States were experiencing statistically unusual weather when compared to historical baselines, that has absolutely nothing to do with whether the markets and regulated utilities are procuring sufficient generation of the correct type to ensure resource adequacy and system reliability. We cannot blame our problems on the weather. The problem is federal and state policies which, by mandate or subsidy, spur the development of weather dependent generation resources at the expense of the dispatchable resources needed for system stability and resource adequacy. This is seen in particularly stark terms in our markets in which subsidies, combined with failed market design, warp price signals. This destroys the incentives required to ensure the orderly entry, exit, and retention of the necessary quantities of the necessary types of generation. The thinner and thinner margins that result render the Bulk-Power System more and more susceptible to the caprices of weather. We have been warned by credible sources on the matter: NERC,[4] the RTOs,[5] and Commission staff.[6]
As more nuclear[7] and coal plants[8]—with their high capacity factors and onsite fuel—announce early retirements, the dispatchable resources that remain are predominantly natural gas generators. Backstopping weather-dependent resources with gas generators, largely dependent on just-in-time delivery of gas, raises its own set of reliability concerns, particularly in areas—like New England—with inadequate pipeline infrastructure. On top of this, the Commission has delayed the processing of pipeline certificates and cast a chill over the pipeline industry with its “draft policy statements”[9] and orders throwing the finality of fully litigated certificates into doubt.[10] Under pressure to reduce emissions at all costs, pipelines have moved to electrify compressor stations, furthering an unhealthy co-dependency between the gas and electric systems. And the efforts of politically motivated financial institutions to cut fossil fuel producers’ access to capital has added to the current supply crunch.[11] Yet, we are led to believe that extreme weather is supposed to be the culprit for the nation’s looming reliability woes. Not so.
The question of whether the weather is getting worse is a red herring. The much more relevant question is whether current system operations and tariff and market design are adequate to maintain reliability. The present high risk of reliability failures proves that they are not. That the policies of the Commission and other government bodies are undermining reliability is far more obvious than the question of whether, and how, the weather is getting worse and what specific effects that worsening weather might have on the stability of the electric system. That question of the weather’s effect on reliability is a subject that doubtless merits study and planning, but misguided government policies are the root cause of the alarming reliability issues facing the nation, not the weather.
For these reasons, I respectfully concur.
[1] Transmission Sys. Planning Performance Requirements for Extreme Weather, 179 FERC ¶ 61,195 (2022).
[2] Chairman Glick says that I am “prone to hyperbole” when I warn that blackouts are the likely outcome of the majority’s misguided policies to prop up renewables at the expense of competitive markets and existing fossil resources. Rich Heidorn Jr., Summer Forecasts Spark Warnings of ‘Reliability Crisis’ at FERC, RTO Insider (May 19, 2022), https://www.rtoinsider.com/articles/30170-summer-forecasts-spark-warnings-reliability-crisis-ferc. Chairman Glick appears to be confusing “hyperbole” with “reality.” California and Texas have already experienced blackouts. Over two-thirds of the nation faces “elevated [reliability] risk” this summer. Ethan Howland, FERC commissioners respond to elevated power outage risks across two-thirds of US, Utility Dive (May 20, 2022), https://www.utilitydive.com/news/ferc-nerc-power-outage-risks-summer-drought/624111/ (“At its monthly meeting Thursday, Federal Energy Regulatory Commission members dissected the North American Electric Reliability Corp.’s warning that roughly two-thirds of the United States faces [sic] heightened risks of power outages this summer.”).
[3] See Chairman Glick (@RichGlickFERC), Twitter (May 19, 2022, 11:13 AM), https://twitter.com/RichGlickFERC/status/1527306459263881223?s=20&t=3a4C-1cac3nmFkjZyvoUDA (“Extreme weather may be the single most important factor impacting #grid #reliability & the impacts of expected heat, drought, wildfires, hurricanes, & other events – all pose a big threat. Keeping eye on West, ERCOT, & parts of MISO this summer.”); Benjamin Mullin, Climate Change is Straining California’s Energy System, Officials Say, N.Y. Times (May 6, 2022), https://www.nytimes.com/ 2022/05/06/business/energy-environment/california-electricity-shortage.html.
[4] See generally North American Electric Reliability Corp., 2022 Summer Reliability Assessment (May 2022), https://www.nerc.com/pa/RAPA/ra/ Reliability%20Assessments %20DL/NERC_SRA_2022.pdf. In addition, NERC has warned that system operators in areas of significant amounts of solar photovoltaic (PV) resources should be aware of the potential for resource loss events during grid disturbances. Id. at 6. NERC has further warned that “[i]ndustry experience with unexpected tripping of [Bulk-Power System]-connected solar PV generation units can be traced back to the 2016 Blue Cut fire in California, and similar events have occurred as recently as Summer 2021. A common thread with these events is the lack of inverter-based resource (IBR) ride-through capability causing a minor system disturbance to become a major disturbance. The latest disturbance report reinforces that improvements to NERC Reliability Standards are needed to address systemic issues with IBRs.” Id. NERC also explains that “because the electrical output of variable energy resources (e.g., wind, solar) depends on weather conditions, on-peak capacity contributions are less than nameplate capacity.” Id. at 45.
[5] See, e.g., California Independent System Operator Corp., 2022 Summer Loads and Resources Assessment (May 18, 2022), http://www.caiso.com/Documents/2022-Summer-Loads-and-Resources-Assessment.pdf; Midcontinent Independent System Operator (MISO), Lack of Firm generation may necessitate increased reliance on imports and use of emergency procedures to maintain reliability (Apr. 28, 2022), https://www.misoenergy.org/about/media-center/miso-projects-risk-of-insufficient-firm-generation-resources-to-cover-peak-load-in-summer-months/; PJM Interconnection, L.L.C. (PJM), Energy Transition in PJM: Frameworks for Analysis (Dec. 15, 2021), https://pjm.com/-/media/committees-groups/committees/mrc/2021/20211215/20211215-item-09-energy-transition-in-pjm-whitepaper.ashx (addressing renewable integration).
[6] See Staff Presentation on 2022 Summer Energy Market and Reliability Assessment (AD06-3-000), FERC, at slide 9 (May 19, 2022), https://www.ferc.gov/news-events/news/presentation-report-2022-summer-energy-market-and-reliability-assessment (identifying the Western U.S., Texas, MISO and Southwest Power Pool as “[p]arts of North America are at elevated or high risk of energy shortfalls during peak summer conditions”) (emphasis in original); id. at slide 10 (In MISO, “[g]eneration capacity declined 2.3% since 2021 resulting in [a] lower reserve margin” and the “[n]orth and central areas [are] at risk of reserve shortfall in extreme temperatures, high generation outages, or low wind” with “[s]ome risk of insufficient operating reserves at normal peak demand.”).
[7] U.S. Energy Information Administration, U.S. nuclear electricity generation continues to decline as more reactors retire (Apr. 8, 2022), https://www.eia.gov/todayinenergy/detail.php?id=51978.
[8] Ethan Howland, Coal plant owners seek to shut 3.2 GW in PJM in face of economic, regulatory and market pressures, Utility Dive (Mar. 22, 2022), https://www.utilitydive.com/news/coal-plant-owners-seek-to-retire-power-in-pjm/620781/.
[9] See Certification of New Interstate Nat. Gas Facilities, 178 FERC ¶ 61,107 (2022) (Danly and Christie, Comm’rs, dissenting)); Consideration of Greenhouse Gas Emissions in Nat. Gas Infrastructure Project Revs., 178 FERC ¶ 61,108 (2022) (Danly and Christie, Comm’rs, dissenting); see also Certification of New Interstate Nat. Gas Facilities, 178 FERC ¶ 61,197, at P 2 (2022) (converting the two policy statements to “draft policy statements”). It is worth noting that PJM and MISO filed comments on the draft policy statements. PJM and MISO May 25, 2022 Limited Reply Comments, Docket Nos. PL18-1-001 and PL21-3-001, at 4 (“[A]ny future Commission pipeline policy should consider the importance of ensuring that needed pipeline infrastructure can be timely sited, and ensure that the need for infrastructure to meet electric system reliability is affirmatively considered and not lost in the debate over the scope of environmental reviews to be undertaken by the Commission.”).
[10] See, e.g., Algonquin Gas Transmission, LLC, 174 FERC ¶ 61,126 (2021) (Danly and Christie, Comm’rs, dissenting).
[11] Matt Egan, Energy crisis will set off social unrest, private-equity billionaire warns, CNN Business (Oct. 26, 2021), https://edition.cnn.com/2021/10/26/business/gas-prices-energy-crisis-schwarzman/index.html (“Part of the problem, [Blackstone CEO Stephen Schwarzman] said, is that it’s getting harder and harder for fossil fuel companies to borrow money to fund their expensive production activities, especially in the United States. And without new production, supply won’t keep up.”).