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address grid vulnerabilities, including those potentially posed by increased reliance on natural gas generation.

Electricity reliability

Amid low gas prices and renewables growth, combined with flat electricity demand, a period of “lower for longer” power prices might discourage new investments in a variety of generation capacity. In particular, coal and nuclear power – which have traditionally been reliable sources of baseload generation – are falling as a share of the fuel mix. Resource diversity is an important component of reliability. As continuous large retirements of coal and nuclear are expected over the coming decades, replacement with renewables will need to be further complemented with additional technologies, such as storage or gas peakers, in order to fully compensate for baseload retirements and address reliability concerns.

While recent (2016, 2017) reliability assessments of regional electric co-ordinators have identified sufficient capacity, a recent high-impact weather event (Bomb Cyclone of 2017) tested the limits of the resiliency of the integrated electric and gas energy system. The importance of the gas system to ensure reliable operation of the electricity grid highlighted a need for having a more holistic understanding of energy system vulnerability, including through modelling efforts such as the North American Energy Resilience Model (NAERM). The DOE Office of Electricity is currently undertaking a plan to develop the NAERM, which will provide planning and contingency analysis to identify threats and address vulnerabilities in the North American energy system.

Recommendations

The US government should:

Based on the completion of the FERC review of bulk power resilience, ensure that standards and market rules are upgraded in a timely fashion to respond to changes in the power system.

Initiate a FERC-governed generic policy statement proceeding to inform price formation rules that can ensure compatibility of state subsidies with competitive bulk electric market operations.

Prioritise ongoing efforts at the DOE to identify and inform respective energy utilities and utility market operators of vulnerabilities that pose reliability and resilience threats to the North American bulk power system, including Canada and Mexico.

Reassess the efficacy of existing regulatory structures for regional transmission planning in light of forthcoming requirements to upgrade the nation’s ageing infrastructure.

Promote regulatory innovation in the work of FERC to address emerging challenges with the introduction of new energy technologies and business models (energy efficiency, demand response, distributed generation, storage and others).

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