United States: NERC Publishes 2016 Long-Term Reliability Assessment, Warns Of Shortages In MISO And ERCOT

In December, 2016, the North American Electric Reliability Corporation ("NERC") released its 2016 Long-Term Reliability Assessment ("LTRA"). Among its key findings, NERC projected that the capacity reserve margin—the primary metric used to measure resource adequacy—would fall below its target level in the Midcontinent Independent System Operator, Inc. ("MISO") region, and could also fall below its target level in the Electric Reliability Council of Texas ("ERCOT") region, depending on the outcome of certain pending regulatory proceedings. NERC also made a number of recommendations designed to address identified reliability issues.

In addition to developing and enforcing mandatory Reliability Standards, Section 215 of the Federal Power Act requires that NERC, as the Electric Reliability Organization certified by the Federal Energy Regulatory Commission, "conduct periodic assessments of the reliability and adequacy of the bulk-power system ["BPS"] in North America." Accordingly, each year NERC issues an LTRA, as well as assessments for the summer and winter operating seasons.

In the 2016 LTRA, NERC identified several reliability issues that "require consideration to reduce BPS reliability risks." Among these, NERC found that:

  • In 2022, the Anticipated Reserve Margin for MISO is projected to fall to 13.8 percent—below the target level identified by NERC (called the Reference Margin Level) of 15.2 percent. NERC noted that, due to the uncertain outcome of pending regulatory requirements, 3.3 GW of capacity in MISO could be categorized as "unconfirmed retirements," and, when applying these additional potential retirements, MISO's Anticipated Reserve Margin decreases to 14.9 percent in 2018.
  • Anticipated Reserve Margins for ERCOT are projected to be sufficient for all ten years of the assessment period. However, when factoring in an estimated 7 GW of "unconfirmed retirements" (and assuming no potential replacement capacity), ERCOT's Anticipated Reserve Margin decreases to 11.3 percent by 2021, which is below the Reference Margin Level of 13.75 percent in ERCOT.
  • By 2021, natural-gas fired generation is projected to comprise 52 percent of on-peak capacity in the ISO New England, Inc. region, and 68 percent in the California Independent System Operator Corporation ("CAISO") region.
  • "Ramping" issues requiring increased operational flexibility have occurred four years earlier than originally projected in California, due in large part to increased penetration of variable energy resources. Specifically, on May 15, 2016, actual net load in California dropped to 11,663 MW due to large generation output from variable energy resources—a level not anticipated under CAISO's projections until 2020 at the earliest.

In addition, NERC outlined a number of recommendations developed through its stakeholder process to address the potential reliability issues identified in the LTRA. These included recommendations that: (i) regulators and legislators evaluate the changes occurring on the BPS, irrespective of the outcome of litigation over pending regulations like the Clean Power Plan, when considering investments in transmission and natural gas infrastructure; (ii) policy makers closely monitor and evaluate the measures being taken to address the evolving resource adequacy trends in MISO and ERCOT; (iii) system planners and operators evaluate the potential effects of the increased reliance on natural gas on BPS reliability, and consider firm transportation and requirements to maintain dual-fuel capability in order to reduce the risk of common-mode failure and wider-spread reliability challenges; and (iv) regulators, legislators, Planning Coordinators, and Transmission Planners consider the consequences of failing to maintain Essential Reliability Services ("ERS") like ramping, and consider supplementing planning processes with additional measures that support maintaining sufficient ERS.

A copy of the 2016 LTRA may be found here.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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