TODAY’S STUDY: Resource Diversity And Grid Reliability
PJM’s Evolving Resource Mix and System Reliability
March 30, 2017 (PJM Interconnection)
Executive Summary: Introduction
Recent growth in the amount of natural gas-fired and renewable generation has raised questions about “fuel diversity” on the PJM Interconnection system. Considering the retirement of coal-fired generation and to a lesser extent the threat of nuclear generation retirement, stakeholders have questioned whether the system is losing too many resources which historically have been referred to as “base load”4 generation capability and whether the system is – or could become – so dependent on natural gas or renewable resources that operational reliability is adversely impacted. In response to those concerns, PJM conducted this analysis to evaluate fuel diversity through the lens of reliability and to identify a range of resource mixes that effectively manage reliability risk.
This paper does not analyze market or economic impacts of fuel diversity, nor does it address public policy issues, such as environmental or job impacts of different resource mixes. The paper’s focus is on the reliability aspects of fuel mix diversity, including fuel security. The paper offers insight, from a grid operator’s perspective, for policymakers to consider when assessing the impacts of a changing resource mix and poses questions about new impacts to evaluate.
Executive Summary: Approach and Risk Analysis
In light of the increasing contribution of natural gas-fired generation and retirement of coal-fired generation, PJM has undertaken several natural gas analyses to assess potential system reliability implications. All the studies generally concluded that the existing and planned natural gas pipeline infrastructure would be adequate for current and future anticipated electric system needs.5
Today’s resource profile in PJM is both reliable6 and diverse – with a combination of natural gas, coal, nuclear, renewables, demand response and other resource types. Historical events discussed in this paper highlight that a more diverse system is more likely to have increased flexibility and adaptability to (1) mitigate the risk associated with equipment design issues or common modes of failure7 in similar resource types, (2) address fuel price volatility and fuel supply disruptions and (3) reliably mitigate risk caused by weather and other unforeseen system shocks. In this way, resource diversity can be considered a system-wide hedging tool that helps ensure a steady, reliable supply of electricity.
PJM’s assessment of the reliability services provided by different resource types builds upon work initiated by the North American Electric Reliability Corporation (NERC) and the power industry to define “essential reliability services,” which comprise a subset of generator reliability attributes. Key generator reliability attributes defined and analyzed as part of this paper include frequency response, voltage control, ramp, fuel assurance, flexibility, black start, environmental restrictions and equivalent availability factor.
PJM analyzed each resource type’s ability to provide generator reliability attributes based on the resource type’s physical capabilities and PJM’s operational experience. For the expected near-term resource portfolio9 and future portfolios,10 PJM calculated the capability of each resource type to provide reliability services as well as the total amount of each reliability attribute available in different resource portfolios. Each potential future portfolio was assessed based on its ability to provide two components of reliability: resource adequacy and operational reliability.
Resource adequacy addresses the amount of capacity needed to serve a forecasted peak load while meeting the required Loss of Load Expectation11 (LOLE) criterion.12 To ensure resource adequacy, each potential portfolio was tested against the LOLE criterion. The portfolios were subjected to a second LOLE test to account for intermittent output from wind and solar resources and currently limited storage capabilities. This second test ensured that portfolios with large unforced capacity shares of intermittent resource were able to serve load during hours that their outputs would be significantly lower than their capacity obligations. Portfolios that failed the second LOLE test were considered “infeasible.”
Operational reliability addresses the grid’s day-to-day operational needs and is measured by a portfolio’s capability to provide the defined key generator reliability attributes. To assess operational reliability, PJM created a “composite reliability index” using the calculated capability of each resource type to provide the generator reliability attributes.
The analysis used the index 1) to identify portfolios at risk of failing to provide adequate levels of the key generator reliability attributes and 2) to quantify and assess the reliability of a given potential resource portfolio across four operational states (i.e., normal peak conditions, light load, extremely hot weather and extremely cold weather).
Portfolios with the lowest composite reliability indices were deemed “at risk” for underperformance in terms of providing the defined key generator reliability attributes. These portfolios do not exhibit, or only partially exhibit, numerous generator reliability attributes in one or more of the studied operational states.
The paper does not identify all possible feasible resource mixes, nor does it define an optimal mix. Rather, the analysis used this risk assessment to evaluate a range of potential resource portfolios based on their abilities to provide generator reliability attributes benchmarked against the generator reliability attribute capability of the expected near-term portfolio.
Executive Summary: Summary of Analysis Results
Among the key findings of the analysis:
• The expected near-term resource portfolio is among the highest-performing portfolios and is well equipped13 to provide the generator reliability attributes.
• As the potential future resource mix moves in the direction of less coal and nuclear generation, generator reliability attributes of frequency response, reactive capability and fuel assurance decrease, but flexibility and ramping attributes increase.
• A marked decrease in operational reliability was observed for portfolios with significantly increased amounts of wind and solar capacity (compared to the expected near-term resource portfolio), suggesting de facto performance-based upper bounds on the percent of system capacity from these resource types. Additionally, most portfolios with solar unforced capacity14 shares of 20 percent or greater were classified infeasible because they resulted in LOLE criterion violations at night. Nevertheless, PJM could maintain reliability with unprecedented levels of wind and solar resources, assuming a portfolio of other resources that provides a sufficient amount of reliability services.
• Portfolios composed of up to 86 percent natural gas-fired resources maintained operational reliability.15 Thus, this analysis did not identify an upper bound for natural gas. However, additional risks, such as gas deliverability during polar vortex-type conditions and uncertainties associated with economics and public policy, were not fully captured in this analysis. Risks with respect to natural gas may lie not in capability to provide the generator reliability attributes but rather in these other uncertainties.
• More diverse portfolios are not necessarily more reliable; rather, there are resource blends between the most diverse and least diverse portfolios which provide the most generator reliability attributes.
Executive Summary: Fuel Security and Resilience
The analysis discussed in this paper was initiated by questions about “fuel diversity” on the PJM system and whether the system could become so dependent on natural gas or renewable resources that operational reliability would be adversely impacted. Fuel diversity itself does not ensure reliability. According to the results of PJM’s analysis reported in this paper, the composition of a resource portfolio could negatively impact that portfolio’s ability to provide an appropriate level of generator reliability attributes.
The adequate level of fuel diversity allows increased flexibility and adaptability. Nevertheless, the analysis shows that many of the potential future resource portfolios are likely to be reliable because they are likely to provide adequate amounts of the defined key generator reliability attributes. This observation holds true even for potential resource mixes that are heavily reliant on natural gas-fired generation and thus lack fuel diversity.
For the purpose of this paper, the terms fuel security and energy security can be used interchangeably. (In addition, as mentioned previously, this paper does not focus on the economic impact of fuel security.)
“Heavy” reliance on one resource type, such as a resource portfolio composed of 86 percent natural gas-fired resources, however, raises questions about electric system resilience, which are beyond the reliability questions this paper sought to address. Resilience is the capability of an energy system to tolerate disturbance and to continue to deliver energy services to consumers. Relying too heavily on any one fuel type may negatively impact resilience because resources do not provide generator reliability attributes equally. External drivers have impacted and could continue to impact the resource mix.
Executive Summary: Moving Forward
The capability of resource types to provide various generator reliability attributes may change in the future because of changes in technology or regulations. Therefore, operations, market compensation and regulatory structures may need to shift to ensure that adequate levels of generator reliability attributes are maintained in future resource mixes. PJM will need to assess diversity and security going forward and work through either existing processes and market enhancements or develop new solutions to ensure that sufficient generator reliability attributes will be available.
PJM and its stakeholders should continue to examine resilience-related low-probability and high-impact events which can cause significant reliability impacts. PJM will continue to identify the highest risks to reliability from the anticipated resource mix changes to determine potential techniques to identify and mitigate natural gas infrastructure vulnerabilities – given the current and expected rapid growth in natural gas generation.
Although each resource type carries with it sizable exposure to low-probability high-impact events, the ever-growing increase of natural gas as a fuel source makes continued examination of dependence on natural gas particularly appropriate. PJM also will continue to identify means to mitigate the exposure to “realistic” interruption events, which are not extreme but part of the daily physical or political landscape.
However, unlike the reliability services used in this analysis, criteria for resilience are not explicitly defined or quantified today. Some questions PJM and its stakeholders should consider include:
• Does PJM’s current set of business practices ensure that PJM’s evolving resource mix will result in continued reliable operations?
o Are there reliability attributes that are missing from this analysis, and what, if any, generator reliability attributes are important but currently being undervalued in PJM?
o During high-dependency / high-risk periods, should PJM schedule the system differently to consider fuel security concerns?
o How can distributed energy resources and renewable resources provide additional reliability or resilience services through, for example, advances in inverter and storage technologies?
• How could PJM’s business practices include resilience?
o Should PJM plan for and operate to a set of extreme contingencies that maintain an adequate operating margin under normal operations? Extraordinary situations?
o Should PJM and the natural gas pipelines coordinate, study and operate to joint electric and natural gas contingencies?17
o Could black-start requirements and restoration strategy better consider resilience, for example, in how PJM defines black-start resources, critical load and requirements for cranking paths?
PJM’s established planning, operations and markets functions have resulted in a PJM resource mix that is reliable. The current resource mix is also diverse.18 PJM recognizes that the benefits of fuel mix diversity include the ability to withstand equipment design issues or common modes of failure in similar resource types, fuel price volatility, fuel supply disruptions and other unforeseen system shocks. PJM will continue to leverage the proven approach of the well-developed stakeholder process both to ensure future resource mixes support continued reliable operations and to further define criteria for resilience.