US resource capacity is very, very tight

The future of the United States’ bulk power system isn’t pretty. 

Both steep increases in future electricity peak demand and energy needs, and a rapidly growing interconnection queue, are looming over the next decade, the North American Electric Reliability Corporation said in its 2023 Reliability Assessment.

Over 83 gigawatts of fossil-fired and nuclear energy are expected to retire between now and 2033, the organization found. Another 30 GW have announced plans to retire in the next decade, but have yet to start the deactivation process with planning authorities.

Those retirements pose particular challenges for regions of the country that already have energy, capacity, and essential reliability service issues, the report said. And today, those regions make up most of the country.

The conditions that led to today’s very tight resource adequacy have emerged over the last decade, and include higher forecasted peak demand in summer (alongside capacity decreases) that isn’t being matched by resource growth. Summer peak demand is projected to increase by 10% between now and 2032, while resources will grow by only 4%.

Part of the challenge is rooted in policy: “Environmental regulations and energy policies that are overly rigid and lack provisions for electric grid reliability have the potential to influence generators to seek deactivation despite a projected resource adequacy or operating reliability risk,” the report said. “This can potentially jeopardize the orderly transition of the resource mix.”

NERC’s report outlined “risk categories” based on a region’s ability to meet its resource adequacy targets and demand and reserve requirements, and identified two “high risk areas” that are more likely to have insufficient supply even during normal weather conditions: in MISO the report projected a gap of 4.7 GW by 2028, and in SERC-Central it identified a potential shortfall in planned reserves between 2025 and 2027, during a period in-between generator retirements and new projects coming online.

Much of the rest of the country, including California, New York, and Texas, as well as in the Southwest Power Pool, fall into NERC’s “elevated risk” category. These markets may have sufficient capacity for normal conditions, but may not have enough availability and energy during “extreme and prolonged weather events and atmospheric conditions,” the report said.

In the U.S., only PJM and SERC are categorized as “normal risk” markets, which are unlikely to experience electricity shortfalls, even in instances of unusually high demand or abnormally low resource performance.

Expanding the reliability of the bulk power supply will require, among other things, adding new and more reliable resources and firming up existing ones, NERC recommended. An increase in inverter-based resources like wind and solar can make the grid less reliable, the report said. 

Accordingly, battery energy storage systems or hybrid solar PV and wind plants will become increasingly important. Natural gas-fired generators, meanwhile, are at present essential for meeting demand, but have been shown to be vulnerable during winter storms.

And, the report added, generator retirements over the next decade must be “carefully evaluated.”

“State and provincial resource adequacy stakeholders and policymakers need to ensure that resource plans account for growing electricity demand and load profiles as well as the future resource portfolio’s capabilities to provide essential grid reliability services,” it said.