As gas and renewables grow, should there be concern?
HOUSTON — In a country where wind, solar and natural gas seemingly own the future of power generation, one question hung in the air here yesterday.
“Are we losing fuel diversity, and should we be concerned about that?”
Doug Giuffre, the moderator for an electric market panel at IHS CERAWeek, posed the query and added that regional transmission organizations and the Federal Energy Regulatory Commission largely are fuel-neutral. He wondered if there could be a place for markets to put a value on diversity.
It was an important question at an energy conference stuffed with speakers who debated what many see as an inevitable push toward electricity fueled by gas and renewables in a lower-carbon future. There was talk of what this would mean for reliability.
Cheryl LaFleur, a FERC commissioner, tried to offer context on the fuel diversity question. She said there was a time maybe 30 years ago when that meant coal and nuclear and some hydro. Now, natural gas is seeing a lot of attention in the power sector.
“What really matters is what it is we’re trying to get out of the generation,” she said. “If a lack of a certain kind of diversity affects reliability or affects cost stability or affects our ability to meet environmental requirements, that’s problematic.”
It’s possible, LaFleur said, to make sure there’s value of diversity in a market rather than with a regulated selection process. So if baseload or ramping capacity were needed, the market could look for that.
Andy Ott, the CEO of PJM Interconnection LLC, a major regional grid operator, explained a goal more of operational diversity than fuel diversity, meaning there’s appropriate infrastructure in place for resilience, security and reliability.
“But to actually value fuel diversity just for the sake of it” is “probably not likely” in a market structure, he said. Ott said that would be more of a policy decision by politicians. PJM did go through a significant change in its fuel mix, without major price spikes or reliability problems, he said.
John Bear, CEO of the Midcontinent Independent System Operator Inc. (MISO), cited a focus on operational diversity and reliability. He said MISO would let states make decisions about fuel diversity.
“To the extent that we have nine or 10 plants show up behind one gas pipeline, we might have a lot more performance concerns about it than we do if we have one or two behind each of six pipelines,” Bear said.
Pipeline opposition
A change from past fuel diversity discussions is a focus on reliability exposure, given the role of intermittent resources, as opposed to a focus on price exposure, according to Bill Magness, CEO of the Electric Reliability Council of Texas (ERCOT).
PJM’s Ott said gas infrastructure is going to be important for electric reliability. There will be a need at some point to say the lights will go out somewhere if a pipeline isn’t built within a period of time, he said.
“We on the electric side need to make sure we start articulating more and more, hey, this stuff matters” from a reliability perspective, he said.
LaFleur said there’s a “tremendous amount of opposition” to building pipelines, especially in the Northeast and Mid-Atlantic regions.
“So we’re having a little bit of a national debate about how much we want to rely on fossil fuels at the same time we’re closing a lot of the other resources that make us even more reliant on gas,” she said.
LaFleur said coal units are retiring in light of low gas prices, as well as new environmental regulations. Nuclear retirements are happening, she said, because carbon benefits aren’t factored into the market through a nationwide plan such as carbon trading or a carbon tax.
“Right now, we don’t have a market-friendly carbon regime, and so we’re getting potential market dislocations that are inconsistent with other carbon objectives that the country has,” she said. The stay of the Clean Power Plan, which aims to cut carbon dioxide emissions from power plants, could defer that further.
FERC Chairman Norman Bay, who also spoke here yesterday, outlined the extent of the nation’s changing fuel mix, as renewables and gas dominated new capacity installations last year.
