Are Grid Resilience Challenges Tackled by ISOs or Policy Around the World?

Renewable power has grown at an exponential rate in recent years, prompting some legacy plants to retire or reinvent themselves as peakers. However, as more intermittent power supplies are added to the grid, it's critical that both grid resilience and reliability are maintained. Grid resilience means that in the case of a disruptive event, the grid recovers quickly. Reliability, on the other hand, means that power is delivered in a manner that's consistent with customer expectations.

In February, the US Federal Energy Regulatory Commission (FERC) recognized that "affordable and reliable electricity is vital to the country's economic and national security," and has since taken a proactive role in addressing emerging resilience challenges. However, much of the burden to resolve these challenges has fallen on independent system operators (ISOs) and regional transmission organizations (RTOs). Here's a look at what lies ahead for US grids as resiliency challenges come into focus, as well as what the US can learn from how Germany is tackling its own resiliency concerns.

Grid Resilience in the Spotlight

In a letter to the FERC, US Department of Energy Secretary Rick Perry made a proposal to "correct distorted price signals" that undervalue the reliability and resilience provided by baseload resources like coal and nuclear power. Secretary Perry proposed new regulations that would allow fuller cost recovery of these power supplies, which critics stated amounted to subsidizing these plants; the FERC unanimously rejected Secretary Perry's proposal.

The FERC acknowledged the importance of grid resilience, which it defined as the "ability to withstand and reduce the magnitude and/or duration of disruptive events, which includes the capability to anticipate, absorb, adapt to, and/or rapidly recover from such an event." As it rejected Secretary Perry's proposal, the FERC asked ISOs and RTOs for their input to improve the grid. According to the American Public Power Association, the FERC provided a list of topics for the ISOs to address, such as identifying potential threats, their impact, and their probability—as well as existing efforts to address these threats.

Mid-Atlantic grid operator PJM is the country's largest ISO, and it issued a response six weeks after the FERC request. PJM highlighted the following two principals as critical to ensuring reliability and resilience:

1. Ensuring that correct price signals are received
2. Compensating generation based upon the desired operational attributes

PJM provided a number of suggestions for improving the definition of resilience, highlighted the need for additional federal guidance in some instances, and identified systems that could affect resilience that are outside of the grid, such as natural gas pipelines. PJM noted that it's also exploring the impact of new technologies on the grid, such as energy storage and distributed energy resources.

In contrast, ISO New England's response identified its most significant resilience challenge as fuel security, particularly during winter. This is especially true because New England has no local fossil fuel production, and must therefore rely on fuel procurement, transportation, and storage. The response painted the challenge against the backdrop of the retirement of existing coal-fired and nuclear power plants and constrained fuel infrastructure. ISO New England also acknowledged that it has no long-term solution to this issue, but that it has made significant progress addressing other grid resilience issues, such as "cybersecurity, physical security, and geomagnetic disturbances."

Important Lessons From Germany

In addition to understanding the viewpoint and actions of these ISOs and RTOs, it's instructive to look outside of the US for guidance. Germany's Energiewende (energy transition) is a real-world example of a country integrating substantial renewable resources into the grid, while ramping down nuclear and coal-fired power production.

Germany has substantially reduced its coal consumption over the past 30 years. Following the 2011 Fukushima nuclear accident in Japan, the nation also decided to phase out its 17 nuclear power plants by 2022, according to Deutsche Welle. At the same time, Germany's use of wind and solar power has more than tripled in the past decade, reports BP. Thus, Germany is grappling with similar resiliency challenges as the US, albeit at a much higher renewable penetration level.

A 2017 study published in the European Economic Review on Germany's transition highlighted the large variation in the output of wind and solar power. Researchers found that over the course of an entire year, wind power only produced power equivalent to 16.3 percent of its installed capacity, while solar power was even lower at 9.9 percent. Further, since renewable output could fall to zero on relatively short notice, fast-acting backup power is needed.

The author of the study, Hans-Werner Sinn, identified pumped hydropower storage as a near-ideal storage option, but noted that Germany doesn't have enough suitable sites to meet all of the country's backup demands. Battery backup power was deemed too expensive, although prices continue to fall.

Mr. Sinn also discussed demand-side solutions. Peak-load pricing and smart grids help modulate peak electricity demand, reducing the need for storage.

Presently, Germany uses both of these strategies to ensure resilience, but it primarily relies on its existing fossil fuel plants to buffer mismatches in supply and demand. This energy is often imported in the form of nuclear power from France and natural gas from Russia, which is used to power Germany's gas-fired power plants.

Germany's transition has come at a cost. The nation now has the highest-priced electricity in the European Union, according to data compiled by Eurostat, and Germans have endured a doubling of electricity prices in the past two years, reports Handelsblatt Global.

Variety of Backup Sources is Critical

One of the lessons the US can take from Germany is the importance of having a variety of backup power sources. Germany can produce its own power, import nuclear power from France, or occasionally use pumped hydro storage from Norway.

Germany's approach may work regionally in the US. ISOs can work together to trade power to enhance resilience across the entire grid. This could involve ensuring that an ISO with a high level of renewable penetration has sufficient backup options—at least in the geographic vicinity. Such backup options should be identified and priced to reflect just how critical they are to grid resilience.

Because the US ISOs cover such a wide geographic area with diverse power options, different regions will face different challenges. In some cases, one region's most significant challenge may have already been solved by another region. With FERC coordinating the responses, it seems likely that the collective lessons can benefit each ISO.