A3 - 2024 Summer Energy Market and Electric Reliability Assessment
I look forward to these summer and winter assessments each year, and I know you all worked hard on this report as did your colleagues. It gives us a chance to step back and ask how things are looking and where we need to go.
I want to point out something that I think is a little in the weeds, but that I also think it important. Among all the useful information in the report, I noted the good explanation of why probabilistic risk analyses are increasingly recognized and used by NERC as the preferred tool to assess regional resource adequacy.
I have spoken frequently about the importance of better transmission system planning in addressing reliability challenges, and I maintain that it is our first line of defense as some of the examples in staff’s report about summer demonstrate. But clearly market design is critical as well. Wholesale markets must identify evolving system operational needs and value the contributions of all resources in being able to provide them in different kinds of situations and in different hours.
One of my frustrations about the broader conversation on generation retirements and the energy transition is that it seems to skip over the requisite first step: A fulsome specification of the risk. Exactly when and how often do we risk falling short of the energy needed to meet demand, across the 8,760 hours of the year? That is the risk we are trying to address. But the answer of course looks very different if the risk is sharp evening ramps when solar drops off, or generation failures from extreme winter cold, or any of the other unique challenges different regions face at different times. Probabilistic risk analysis is beginning to help us here. As staff explained, it better accounts for the full range of uncertainties involved and informs as to when energy adequacy risks are most acute.
Not long ago we held two forums in New England prompted by concerns about the retirement of the Everett LNG facility. At the first forum I pushed for a better specification of the problem: What exactly were the electric system reliability risks and when would they occur?
When that analysis was done, it emerged that the electric system risk was lower than anticipated. It also provided for a more objective assessment of what to do next. In that case we got good news. The risk was less than we anticipated. But of course, sometimes the risk will be worse or just different than anticipated. So, probabilistic analysis guides better decision-making on this risk analysis.
I think FERC's job is to push our grid operators to use the best information available across the range of potential futures necessary to clarify the problem statement. Only then can we make smart, cost-effective decisions about how to mitigate energy adequacy risks to facilitate moving beyond traditional answers that may have worked in the past, but are not necessarily the easiest, cheapest, or most effective answers today.
This challenge is going to continue. It will obviously outlast my time on the Commission. But my hope is that we will commit to defining these problems, which as NERC is now demonstrating works better, and allow the results to inform future actions.