Europe is facing an existential crisis – having sufficient affordable heat and electricity this winter for its populations. People are not only suffering ahead of winter’s arrival, but the likelihood of people dying because of this crisis is growing.

A similar challenge is being faced in many U.S. power markets. Can the worst of the potential outcomes be avoided, or are we on a path that will only worsen for our residents?

Warnings…

In May of this year, Federal Energy Regulatory Commission (FERC) commissioner Mark Christie said the country was “headed for a reliability crisis.” That claim was supported by a report from the North American Electric Reliability Corporation declaring that the central and upper Midwest (MIZO), Texas (ERCOT), and California (CASIO) power markets were staring down the barrel of blackouts.

While they are yet to materialize broadly, the challenges facing regional power grids remain serious issues for the foreseeable future. Managing the “clean energy transition” while keeping the lights on requires the skills of a juggler. Balancing the many demands, often coming at the same time, when there is room to address only one is a talent that comes from years of practice and trial-and-error.

In this case, mistakes can be life-threatening. In late 2021, Gordon van Welie, president and CEO of Independent System Operator – New England (ISO-NE) warned of potential blackouts throughout New England if the upcoming winter was colder than forecast. He told reporters they were cautiously watching “[three] variables that could put the region in a more precarious position than past winters and force the ISO to take emergency actions, up to and including controlled power outages.”

Van Welie cited the following variables he and his operations team were watching closely. First was “how much natural gas will be available for gas generators during cold weather.” This was an acknowledgment that getting adequate natural gas supplies into New England was challenging because of pipeline constraints imposed by neighboring New York and New Jersey that have blocked capacity expansions.

The second variable was low storage levels of heating oil and liquefied natural gas (LNG) supplies. The final variable, “the hardest to predict,” was the weather.

Even though a mild winter was predicted by the National Oceanic and Atmospheric Administration (NOAA), van Welie said, “even a mild winter forecast does not preclude extended cold snaps. Such prolonged cold snaps would heighten the probability that emergency measures would have to be taken to keep the system from collapsing.”

Fortunately, a crisis was avoided, but the issues surrounding these three variables have not been erased. They may be intensifying due to the Russia/Ukraine war and the Biden administration’s policies toward the domestic oil and gas industry.

Recently, U.S. Secretary of Energy Jennifer Granholm wrote to Massachusetts Governor Charlie Baker. “I urge you to consider what additional steps you can take in the coming weeks to improve preparedness, including using any legislative or executive tools at your disposal, working with responsible state agencies to require increased storage levels, and encouraging industry to voluntarily prioritize increasing gasoline and distillate inventories at this pivotal period of heightened risk,” she wrote.

East Coast gasoline inventories are at their lowest point in nearly a decade, while diesel supply is roughly 64% below the five-year average storage level. Given an extended winter storm impacting the East Coast and New England regions, home heating oil supply chains could be disrupted. Oil is a key fuel source for ISO-NE in managing the region’s power grid and for home heating during the winter.

While the issue of avoiding blackouts for ISO-NE is receiving greater attention, the paths the various states have elected to travel in decarbonizing their economies increase the risk of blackouts. In late July, van Welie was the keynote speaker at the summer WIRES conference. His talk was titled “The Four Pillars Needed for a Successful Clean Energy Transition, and the Critical Role of Transmission Infrastructure.” The pillars are:

• “Significant amounts of clean energy to power the economy with a greener grid”
• Balancing resources that keep electricity supply and demand in equilibrium
• Energy adequacy—a dependable energy supply chain and/or a robust energy reserve to manage through extended periods of severe weather or energy supply constraints
• Robust transmission to integrate renewable resources and move clean electricity to consumers across New England

Peculiarly, van Welie made no mention of affordability. Securing his pillars depends on reasonable cost. However, as we are seeing in Europe, the number of people involuntarily forced into “energy poverty” by skyrocketing electricity and natural gas (heating) prices is growing exponentially.

UK/EU Confronts Energy Poverty

According to the European Union, “‘Energy poverty’ is a widespread problem across Europe, as between 50 and 125 million people are unable to afford proper indoor thermal comfort.” In the U.K., it is estimated that nearly one-third of British households will face poverty this winter after paying energy bills.

The End Fuel Poverty Coalition (EFPC) estimates that about 10.5 million U.K. households will be in energy poverty during the first three months of 2023. After paying for energy, these families’ incomes will fall below the poverty line defined as a household income of less than 60% of the U.K. median, which was £31,000 ($37,500) in 2021.

The estimate is based on energy cost estimates from research firm Cornwall Insight. It sees average household energy bills hitting £3,582 ($4,335) a year by October, and rising to £4,266 ($5,163) from January, roughly equal to about £355 ($430) a month.

New England‘s Concerning Resource Shift

Although many may think the New England region is immune to an energy crisis past summer, winter peak demand is the issue. It can cripple the region when and if temperatures drop very low. Add in a winter storm – a Nor’easter or a blizzard – and you have a recipe for a human disaster.

As van Welie began sounding the alarm about power adequacy in the New England region last winter, there had been periodic less dire warnings ahead of prior winters. The warnings became more urgent last week with the release of a “Draft ISO/EDC/LDC Problem Statement and Call to Action on LNG and Energy Adequacy” ahead of the upcoming FERC New England Winter Gas-Electric Forum. (More on this later.)

In his WIRES talk, van Welie highlighted how the ISO-NE grid fuel mix had changed over time. Between 2000 and 2021, oil use fell from 22% to 0.2% of electrical energy production for the grid, while coal use went from 18% to 0.5%. Nuclear fell slightly from 31% to 22%, largely due to plant retirements, and renewables increased by 50% from 8% to 12% of the total. The biggest change was for natural gas, which went from supplying 15% to 53%–a huge shift.

The problem for the region is that dispatchable generating capacity has shrunk. Since 2013, 7,000 megawatts (MW) of generation have retired or announced plans to retire. Most of that capacity has been coal, oil, and nuclear. Van Welie estimates that 5,000 MW of oil generation is  at risk of retirement. He pointed out that retirements occur on schedule while new generating resources are often delayed, putting pressure on the grid. Additional grid pressure comes from its heavy dependence on imported LNG and oil that provides peaking energy supplies in the winter. These supply chains become uncertain during extreme weather conditions that create reliability risks for the grid. It is important to understand how quickly generating capacity is changing on ISO-NE.

In a slide for his talk, van Welie showed how the future fuel capacity mix is projected to change. In 2017, the grid’s projected fuel mix called for natural gas to provide 48%, wind 44%, and solar 6% of the estimated 13,250 MW. But a recent forecast update sees natural gas at only 3 percent with wind at 59% of the 28,704 MW of nameplate capacity to be added, and battery storage 25% and solar 13%. The huge wind component relies on new offshore projects, primarily off Massachusetts.

Substantially less dispatchable energy in the future ISO-NE grid raises serious questions about energy adequacy.

The future for the grid will be interesting given the following two slides about projected electricity demand and how peak demand switches from summer to winter. Van Welie’s opening slide (July presentation) shows ISO-NE’s forecast of energy demand from 2022 to 2031 based on the prediction of additional EVs and electric heating in New England. At present, according to the U.S. Department of Energy’s Alternative Fuels Data Center, there were 101,400 electric vehicles (battery electric and plug-in hybrid electric) in the six New England states in 2021. The ISO-NE forecast calls for over 1.5 million electric vehicles in the region that will need to be charged, thus the dramatic increase in transportation electricity demand.

The implications of the green energy trends highlighted in the above chart, if carried through to 2050 are that the peak electricity demand in New England shifts from summer to winter as shown in the next chart. Moreover, the growth in the winter peak is dramatic, especially by 2050, compared to summer demand. The winter demand peak represents a doubling of the current gross generating capacity. That increase comes from heating electrification, which is a load that cannot be compromised because of its potential for creating a human disaster.

Van Welie concluded his WIRES presentation with the following points:

• ISO-NE needs to plan to ensure energy adequacy to fully support the region’s transition to clean energy resources and the electrification of transportation and heating sectors.
• New England has vast renewable energy potential, primarily from wind, that the states want to tap for their decarbonization efforts. (He also cited the potential of tapping additional hydropower from Quebec, but that adds to the grid’s risk from both greater imports of power and the need to transport it from Canada to New England power markets.)
• ISO-NE will ultimately require massive transmission investments to facilitate the clean energy transition. Estimates are that the grid must invest billions annually in new transmission capacity.
• There are issues with siting and cost allocation that needs to be overcome for the clean energy transition to be successful in New England. The projects necessary to add the required generating capacity and transmission lines to move the power around the region are complicated, costly, and have extended construction times.

As mentioned earlier, the ISO-NE has issued a draft problem statement about LNG and energy adequacy in advance of a major regional and federal energy planning meeting. The two issues highlight the risk of early closure of the Everett LNG terminal, as currently planned. The following statement from the ISO-NE paper describes the issue.

In the meantime, the region needs to secure and stabilize the imported LNG supply chain to supply customers of natural gas. Most immediately, the region must ensure the continued operation of the Everett LNG Facility to maintain reliable electric and natural gas service for New England consumers.

The need for the Everett LNG Facility will extend for a finite period beyond June 2024, when ISO New England’s retention of the related Mystic Generating Station expires, and until the required infrastructure investments are made to reliably enable the envisioned clean
energy future. (emphasis in the original)

We have no idea how long ISO-NE anticipates keeping the Everett LNG Facility operating, but we suspect it will be many years. ISO-NE continues working on finding solutions to manage energy adequacy while facilitating the region’s clean energy transition. Its efforts have been done through the Future Grid Reliability Study, which involved collaboration between ISO-NE, the energy offices of the various New England states, and NEPOOL. Since 2005, NEPOOL has served as New England’s independent, FERC-approved stakeholder advisory group on all matters relating to the competitive wholesale market rules and transmission tariff design.

Involving NEPOOL is a recognition of the challenge of managing state environmental and power offices and plans with ISO-NE’s needs and responsibilities along with FERC rules in developing energy solutions. As part of the planning, the study showed that approximately 73-90 gigawatts (GW) of wind, solar, and battery storage will be needed by 2040 to ensure the reliability of the energy systems depending on the amount of available dispatchable resources.

Conclusion

In summarizing its draft position paper to help focus the discussion at the FERC session in early September, ISO-NE wrote the following.

In sum, we believe that, for the clean energy transition to be successful, the region must continue to have reliable supplies of gas for home heating and electricity. Without adequate gas, the region may not be able to meet the demand for home heating and electricity – and, when reliability suffers, the clean energy transition suffers.

We have seen that story play out in Europe, Australia and, closer to home, in California and Texas. In sum, it is critical to the region’s decarbonization goals that the lights and heat stay on in New England – and, for the foreseeable future, that requires gas.

New Englanders are largely unaware that the light at the end of the clean energy transition tunnel is not a train, it’s a blackout. Those who are reading the newspapers and financial press about sharply higher electricity and natural gas prices in Europe, increased energy poverty, and the potential for social unrest should be alarmed. Those risks lie in the background of U.S. energy policy if we continue to follow in lockstep Europe’s policy moves.

Reposted, with permission, from Master Resource.