The persistent low temperatures this winter, courtesy of the recurrent polar vortex events, serve as a wake-up call to energy regulators and market participants on the reliability of our combined gas and electric systems. Although there have been outages due to our antiquated transmission and distribution system, the power sector has so far managed to produce enough electricity to meet demand through fuel diversity. The trouble is, it may not manage for much longer.
Many Americans don't realize that during periods of intense cold, the use of natural gas for both home heating and electricity generation stretches the gas delivery infrastructure to its limits. As a result, gas prices skyrocketed this winter to unprecedented amounts in some northeast locations. The magnitude of the price spikes is comparable to stopping at the gas station and seeing the price at $85 a gallon.
Moving forward, a combination of low fair-weather natural gas prices and new environmental regulations will likely lead to the retirement and decommissioning of older coal and oil generation. Many of us in the power industry worry that there is not enough natural gas delivery capability to stand up to extreme weather after these coal and oil plants leave the market.
Powering up the utility infrastructure
To that end, NRG Energy is deploying large-scale renewable systems, distributed generation and demand response and is converting coal plants to gas. Despite these efforts, the U.S. still needs more gas delivery infrastructure and better gas-power coordination to keep the lights on during periods of severe cold.
Recently, a lot of attention has focused on the vulnerability of the power grid to both physical and cyber terrorist attacks. But the more pressing problem is the lack of coordination and market reforms required to seamlessly transition the country from coal and oil to gas and renewables.
To ensure long-term grid reliability during extreme weather events, which are becoming the norm rather than the exception, the following actions are necessary.
1. Build what the market needs
Uncertainty about gas availability adds one more challenge to building the new gas generation that will be needed to replace some of the old power plants that will be coming offline in the northeast. Regulated fuel supply infrastructure — gas pipelines and electric grids — must be coordinated with better competitive power market price signals to ensure the power sector can meet evolving, aggressive environmental rules.
2. Encourage private investment
In the private sector, we need regulators and system operators to support power market reforms that make competitive investment profitable. Doing so will also help to better integrate competitive generation into planning for both electric and gas delivery infrastructure.
3. Make realistic environmental progress
Those who make and enforce environmental regulations must have a better understanding of the reliability and financial constraints that the electric system faces. The limited "safety valves" recently proposed by electric system operators are examples in the right direction.
4. Get states off the bench
We need state decision-makers to actively support the replacement of aging plants with the competitive mix of supply side resources: gas and renewables, centralized and distributed.
Without better coordination and cooperation between the private sector, regulators and states, we subject our nation to increased reliance on a gas delivery system that is barely adequate for today's weather and demand. Before we make irreversible changes to our electric supply system, we should carefully consider what changes to make in market rules and gas infrastructure provisions that will allow the system to continue to meet the challenge of future weather events.
Chicago in polar vortex image by edward stojakovic via Flickr