House Panel Hears From FERC, DOE and NERC on DOE Staff Grid Study

Leaders from FERC, the Department of Energy (DOE), and the North American Electric Reliability Corp. (NERC) on September 14, sought to assure a House of Representatives subcommittee that the federal government and power industry are taking steps to address power grid reliability and resiliency in line with some of the recommendations from a DOE staff report on baseload generation changes.

The changes taking place in the generation sector, with retirement of coal and nuclear resources and growth in renewable and distributed energy resources, pose operating challenges but also opportunities for enhanced cooperation, officials said. While generation resource decisions are made under the purview of state regulators, FERC has authority to oversee grid reliability and it can make determinations in collaboration with state colleagues and the private sector, FERC Chairman Neil Chatterjee told the subcommittee.

The House Energy and Commerce subcommittee on energy held the hearing to address power grid issues in light of the recent DOE staff report that included several recommendations and policy suggestions. Besides hearing testimony from Chatterjee, the subcommittee heard from Gerry Cauley, president and CEO of NERC, and Patricia Hoffman, acting secretary for science and acting assistant secretary for the office of electricity delivery and energy reliability at DOE.

The “Powering America” series of hearings will include a subsequent hearing to receive input from various energy sector trade groups, noted Rep. Pete Olson (R-Texas), who presided at the hearing and kept statements brief. The hearing did not last long and members of the subcommittee and full committee were in and out as votes took place elsewhere in the House of Representatives.

Similar to a September 7 Senate hearing on Trump administration nominees for FERC, the House hearing had members from states with coal resources ask about the DOE staff report and how FERC may address grid reliability as coal-fired generation is retired. Reps. Kevin Cramer (R-N.D.) and Morgan Griffith (R-Va.) questioned what steps FERC can take to ensure adequate compensation for coal-fired power plants and how much of a priority it will be for the Commission given the backlog of cases FERC is dealing with following an extended period without a quorum.

Chatterjee said the issue would be a high priority and mentioned his upbringing in Kentucky, where he saw the importance of coal-fired generation not just for affordability but for reliability.

“FERC is fuel-neutral” and it does not have authority to site generation, but in terms of having wholesale markets compensate generation resources it can evaluate different attributes of those resources to examine what values they provide, Chatterjee said. If there is a demonstration of essential reliability services being provided, those values can be compensated. “We can build a record and make careful determinations,” he said.

The DOE staff report concluded that the biggest contributor to coal and nuclear plant retirements has been the cost advantage of natural gas-fired generation that has pushed coal and nuclear plants out of the market in some regions with independent system operators (ISOs). State policies that support renewable resources also are a factor, as is the market design in ISOs where power plants with low operating costs are dispatched first, placing economic pressure on baseload generation assets that have traditionally run continuously and provided essential reliability services, DOE staff said in the report.

The report and many of the comments made at the hearing stressed the need to have a more resilient grid that can withstand disruptions beyond the traditional view of reliability based on the amount of generation available to meet electricity demand.

Chatterjee referred to the comments of White House nominee for FERC Richard Glick, who told Senators who asked similar questions that FERC will closely monitor wholesale market design and generation resource decisions to see if the changes taking place threaten grid reliability. “I echo that” sentiment, Chatterjee told Cramer.

The FERC Chairman highlighted some of FERC’s work on compensation for resources that provide essential reliability services, including Order 828 that requires new small generators to stay connected to the grid during abnormal frequency and voltage events and not disconnect when the grid is stressed. “In addition, FERC is considering requiring all resources newly interconnecting to the grid to install and enable primary frequency response capability as a condition of interconnection. While this proposal is still under review, in one of the first orders issued upon restoration of a quorum, my colleagues and I issued a notice seeking further information from industry and interested stakeholders on primary frequency response capability,” Chatterjee said in his testimony.

FERC also is considering changes related to the pricing of fast-start resources, uplift cost allocation and transparency of reporting practices in certain ISO markets, he added.

In her testimony and in response to questions, Hoffman said DOE is addressing the issues posed by the changing generation make-up. “I think the fundamental challenge now is to understand this process and manage it, so that our Nation’s electric infrastructure remains reliable, affordable, and resilient,” she said in her opening statement.

DOE has explored the issues and reached out to policymakers to provide a central focus for government and industry stakeholders, Hoffman said. Three issues that will be of particular interest in the future will be the extent to which federal policy and the changing generation mix affect grid reliability, whether wholesale energy and capacity markets are adequately compensating resources for attributes such as on-site fuel supplies and other factors that provide grid resilience and the extent to which regulations and legislation affect early retirement of baseload power plants.

“While reliability is important, recent disruptive events such as the Polar Vortex, Superstorm Sandy, and other major disruptions that have cascading impacts on other sectors demonstrate the critical need for improved system resilience,” Hoffman said. Power markets are beginning to recognize and compensate resilience-enhancing resource attributes, such as fuel assurance, but more work is needed in the area, she said.

The large increase in gas-fired generation raises the issue of fuel delivery and dependence, and to address goals for a more diverse resource mix, the industry and regulators must understand and plan for the implications associated with the evolving generation picture, said Cauley. Regulators and policymakers should evaluate whether the natural gas regulatory structure for transportation priority is compatible with the changing requirements of the bulk power system, Cauley told the subcommittee in his testimony.

The additions of renewable resources, storage systems and demand response are changing the operational characteristics of the grid as baseload generation is retired, and grid reliability depends on the operating characteristics of the different resources, Cauley said.

Rep. Joe Barton (R-Texas) addressed state preferences for more renewable resources, noting that some states are adopting fairly lofty goals of using 50% or more of those resources such as solar and wind power. He questioned Cauley if it is possible to meet NERC reliability standards if a state uses predominantly renewable resources, which are intermittent.

“It is technically feasible, but there are challenges,” Cauley responded. He mentioned an event in August of 2016, when wildfires in California caused a frequency change on transmission lines. While conventional generation was unaffected, more than 1,000 MW of utility-scale renewables, mainly solar projects, tripped offline due to the frequency change. It marked the first known major loss of renewable resources due to a transmission system disturbance, and it prompted NERC to make recommendations to the industry about having solar inverters “ride through” transmission disturbances and stay connected to the grid, Cauley said.

In comments akin to Chatterjee’s remarks about essential reliability services, Cauley said all new resources connecting with the grid should have the capability to respond to voltage and frequency changes, since market mechanisms may not provide enough financial incentive or clarity for resource owners.

FERC, the power industry and NERC have dedicated plenty of attention and effort to improving grid resilience, Cauley and Chatterjee told House members. Chatterjee mentioned FERC’s approval of services provided by Grid Assurance, a company created by a collection of utilities to provide timely access to spare transmission equipment such as transformers that take months or longer to put in place following damage or a grid disturbance.

“Working with our federal partners, state colleagues, industry and other stakeholders, FERC will continue to seek ways to ensure the reliability and resiliency of the electric grid,” including interagency and public-private coordination, Chatterjee said.

The industry showed a level of coordination the same day as the hearing, with a group of 14 trade associations sending a letter to key House members on areas of agreement regarding the DOE staff report.

Competitive power market rules should promote a diverse generation portfolio that includes traditional, renewable and emerging resources through fuel-neutral policies that recognize the role that all generation resources can play in boosting grid reliability and resiliency, the groups said. Markets also should accommodate different business models – such as municipal utilities, cooperatives and investor-owned utilities – that have different planning and procurement decisions, they said.

The letter was signed by leaders of the Edison Electric Institute, American Public Power Association, National Rural Electric Cooperative Association, Nuclear Energy Institute, Electric Power Supply Association, National Mining Association, American Coalition for Clean Coal Electricity, National Hydropower Association, U.S. Chamber of Commerce’s Global Energy Institute, American Wind Energy Association, American Gas Association, American Petroleum Institute, Natural Gas Supply Association and Interstate Natural Gas Association of America.

The DOE staff report encouraged FERC to address price formation in wholesale power markets and address the valuation of essential reliability services, and the letter said price formation efforts also must provide benefits and protections for energy consumers. The trade groups said they look forward to working with FERC, regional transmission operators, and ISOs on those issues and other market concerns.

The groups said they agree with the DOE staff report’s recommendation that DOE and other federal agencies “accelerate the process and reduce the costs for licensing, relicensing, certificating, and permitting all types of generation and related infrastructure needed to ensure electric reliability.”

The House in July passed legislation (H.R. 3050) calling for federal financial assistance for states to implement energy assurance plans in the case of extreme weather events, and Olson asked Hoffman about DOE’s view of the measure. Weather events affect states in different ways and the legislation, which has not been passed in the Senate, could help DOE and state authorities build up grid resilience to protect their resources from hurricanes or other storms, Hoffman said.

Several subcommittee members from Florida and Texas commented on the importance of a reliable power grid being demonstrated amid the effects of Hurricanes Harvey and Irma in their states. Rep. Kathy Castor (D-Fla.) said storm recovery efforts are expensive and it is time for investments to make the power grid more resilient, with new technologies and more distributed energy resources.

Castor empathized with Hoffman as DOE is facing budget cuts from the Trump administration while it is being asked to do more in research and development to provide new technologies for the benefit of the energy sector.

Rep. Bobby Rush (D-Ill.), ranking member of the subcommittee, asked the witnesses if they believe climate change is having an effect on storms and their impact on the power grid, referencing Superstorm Sandy in the Northeast and other weather events.

Chatterjee did not address the climate change element, but said FERC is taking steps to improve grid reliability and speed the transition to a more resilient grid that can bounce back from extreme weather events.

“Understanding climate change is outside of my expertise,” Cauley told Rush. He added, however, that in his eight years as CEO at NERC, the organization is seeing bigger impacts from weather events than it has historically.

Hoffman highlighted DOE’s storm response efforts and asserted that the power industry should be looking forward to anticipating steps to build a more resilient grid.

After Harvey wreaked havoc in Texas and Gulf Coast oil refinery operations, DOE authorized the release of oil from the Strategic Petroleum Reserve, deployed personnel to support state emergency operation centers, coordinated relief efforts and supported state and regional fuel waivers under the jurisdiction of the Environmental Protection Agency, she said.

Addressing questions from Olson and Rush on cybersecurity, all three witnesses touted industry and government efforts to stay vigilant on the latest cyber threats and efforts to penetrate utility control systems. There is a strong sense of urgency at DOE on the issue, Hoffman said, while Cauley noted that the Dragonfly 2.0 malware is a threat but to date has not infiltrated power grid operating systems.

Chatterjee highlighted FERC’s Office of Energy Infrastructure Security efforts to work with the industry and other state and federal agencies to assess vulnerabilities, with numerous briefings on best practices to be used as cyber threats change. Grid threat exercises and collaboration includes work with the Department of Homeland Security, DOE, the Director of National Intelligence, NERC, the Coast Guard and others, Chatterjee told the subcommittee.

“There’s no question that threats to our system of electricity generation, distribution, whether from hurricanes or from cyberattacks are of the utmost importance and concern to the commission and I will continue to work with you all and my colleagues to ensure the safety of our grid,” Chatterjee said.

By Tom Tiernan


This article appears as published in The Foster Report No. 3165, issued September 15, 2017

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Copyright © 2017 by Concentric Energy Publications, Inc.  All rights reserved.


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