Is It Time for a Reality Check on Electricity?
Over the summer, meetings involving energy regulators, policymakers, consumer advocates, and industry executives have seen a significant shift in the dialogue surrounding the reliability of the electric system. There is now a unanimous agreement that dispatchable generation is not only currently necessary, but will continue to be for many years.
Changing Perspectives on Dispatchable Resources
A noteworthy change in the conversation is the public acknowledgment that dispatchable resources, such as natural gas-fired generation, will be required as the energy expansion continues and load growth accelerates for the first time in decades.
For several years, discussions on the future of the electrical grid focused on how inexpensive it would become and how resources that were "out of political favor" would be replaced by politically favored ones without causing any disruptions or reliability challenges. However, this narrative has changed drastically.
Why the Change?
The change in narrative can be attributed to three factors. Firstly, a significant amount of load growth is expected in the short term. Secondly, the rate of dispatchable generation retirements without replacement generation with similar performance characteristics is concerning. Lastly, consistent and increasing warnings from reliability organizations and grid operators indicate a fast-approaching crisis if system planning does not improve.
Recognition of Reality
This shift in conversation represents a long-awaited recognition of the reality of grid operations and an acknowledgment that dispatchable resources, like natural gas, will need to be retained and operated for a longer time horizon than previously admitted. This recognition aligns with numerous credible studies, including those by McKinsey and EFI, which all indicate that dispatchable natural gas generation would be needed even in a high renewable resource penetration scenario.
Addressing the Problem
With the reality of load growth, supply chain issues, permitting, siting, and construction challenges impacting all types of resources, it's clear that the rhetoric was far ahead of reality. Recognizing the problem is the first step in solving it.
All resources, including dispatchable, intermittent, and storage resources, are now accountable for reliability. Therefore, acknowledging and adapting to grid realities is not optional – it’s mission critical. The retirement of significant amounts of dispatchable resources without adequate replacements has pushed us closer to a system with zero margin of error.
Policy Recommendations
To rectify this situation, policymakers and regulators should take steps to minimize the risk to customers. This includes addressing the timing gap between retirements and additions to the system, reforming the process for connecting new generation to the grid, and implementing permitting and siting reforms to facilitate the development of all types of energy projects.
Policymakers must also set goals that align with the reality of system needs and operational constraints. This could mean pausing policies that hinder the deployment of needed resources or including offramps in legislation to ensure grid reliability.
Lastly, grid operators must adjust markets more quickly to send the appropriate signals that will drive investment of the required resources. States must recognize the broader benefits of market participation and positive outcomes for their constituents, rather than merely demanding grid operators cater to their individual wants.
Bottom Line
In conclusion, this reality check does not mean abandoning the pursuit of policy goals. We can set goals, but they must be tethered to operational reality to ensure success and reliability are both achieved. What are your thoughts on this issue? Share this article with your friends and join the conversation. Don't forget to sign up for the Daily Briefing which is everyday at 6pm.
