ERCOT may need to use Energy Emergency Alerts (EEAs) to provide “operational flexibility” and ensure it has sufficient resources to mitigate capacity shortages this summer, according to FERC’s 2020 Summer Energy Market and Reliability Assessment.

The report released Thursday found that aside from ERCOT, all NERC planning regions should have adequate generation available to exceed their reserve margins during June, July and August. FERC staff noted, however, that the projections were prepared before the COVID-19 outbreak began to impact the bulk power system and warned that system operators should prepare for deviations as the situation evolves.

ERCOT is predicting a reference reserve margin of 12.6% for the summer, according to its Summer 2020 Final Seasonal Assessment of Resource Adequacy, released May 13. (See ERCOT’s Summer Reserve Margin up to 12.6%.) This is higher than the initial projection of 10.7% used in NERC’s report, but still below NERC’s reference margin level of 13.75%. ERCOT said the elevated reserve margin in its latest assessment is due to a downward adjustment in peak load forecast to account for economic impacts from COVID-19.

In a podcast accompanying the summer assessment, members of FERC’s Office of Energy Policy and Innovation (OEPI) and Office of Electric Reliability (OER), which drafted the report, said the outlook for this summer is comparable to last year, when ERCOT reported a considerably lower reserve margin of 8.5%. (See Abundance of Summer Capacity — Except in Texas.) This led to what the grid operator characterized as a “difficult August,” though it was able to operate reliably throughout the summer months. (See ERCOT, SPP, CAISO Recount Summer Challenges.)

“While ERCOT faced some challenges last year, it maintained system reliability with no load curtailments even as it set several new peak loads, including its current standing all-time peak load of 74,820 MW on August 12, 2019,” said Louise Nutter, with OER.

But despite the lack of load curtailments, ERCOT was forced to declare an EEA several times last summer to activate emergency procedures such as demand response measures and increased generation imports from neighboring regions. Even with these measures in place, the operator still found itself short on reserves at times, experiencing real-time locational marginal prices of up to $9,000/MWh. Based on the experience of last year, ERCOT identified a “potential increased need to call an EEA” under some scenarios this summer.

Net Growth in Generation Capacity

One area where ERCOT leads other regions is in the growth of its generation capacity. The grid operator intends to add more than 3 GW of generation this summer, almost entirely comprised of wind and solar facilities.

Industry-wide, about 5.6 GW of capacity is scheduled to come online this summer. MISO has the largest expansion planned after ERCOT, with 1.21 GW of primarily natural gas-fired generators. Next is CAISO, with 680 MW of wind and solar. ISO-NE, NYISO and SPP plan to add 60 MW, 80 MW and 10 MW, respectively.

Planned retirements total 1.3 GW, mostly by PJM, which will shut down 900 MW of coal-fired plants and approximately 200 MW of natural gas facilities while adding around 300 MW of solar capacity. The report noted that these projections could change due to the COVID-19 pandemic, with the economic slowdown affecting construction on new units as load and price reductions accelerate planned retirements across the industry.

While renewables make up most of the projected growth, natural gas will “continue to play a pivotal role” in the generation mix this summer, thanks to both the installation of new gas generators and the retirement of facilities using other fuels. The share of gas generation is highest in NYISO, where it represents 55% of total net summer capacity, but it remains the largest single source of generating capacity in every organized wholesale market.

Report Details

FERC cited data from the National Oceanic and Atmospheric Administration that “assesses a greater than 50% probability” of above-average temperatures throughout the Western U.S. and parts of the Southern and Eastern U.S. this summer, while average temperatures are predicted for the upper Midwest. NOAA also predicts that the 2020 Atlantic hurricane season will be more active than usual, with up to 16 named storms, eight hurricanes and four major storms between June 1 and Nov. 30.

Other findings from the report include the following:

• Natural gas production is expected to average around 88 Bcf/d, a 3.7% decline from last summer. This will be accompanied by a 3% decrease in demand to about 78 Bcf/d. A major driver for this drop is falling consumption for electric generation, the largest sector of gas demand, which is expected to fall 1.6% this year.
• U.S. natural gas exports are expected to “reach new highs” this summer, thanks in part to 5.3 Bcf/d of capacity additions at four LNG liquefaction terminals. Pipeline exports to Mexico are also expected to grow as new pipeline connections are added. LNG exports, combined with pipeline exports, are expected to average 14 Bcf/d in the summer months, up from 10.9 Bcf/d last year.
• Natural gas storage levels are expected to end the injection season at 3.84 Tcf, around the five-year average. Staffers said the injection season began relatively high due to a mild winter, which helped to build back inventories from a large deficit in 2019.
• Hydropower generation in California is expected to be lower than last year due to a below-average snowpack, which could lead to increased use of gas-fired plants and imports of power. Utilities in the state may also have to selectively de-energize transmission and distribution lines due to continued risk of wildfires. (See CAISO Predicts Adequate Summer Capacity.)

NERC Summer Assessment Previewed

In a preview of NERC’s 2020 Summer Reliability Assessment, planned for release June 1, FERC revealed the organization is forecasting net demand of approximately 750 GW, about 0.9% higher than summer 2019. Growth in demand is concentrated in ERCOT and WECC, with reductions predicted for PJM and MISO. Total generating capacity is expected to grow by about 0.2% over last year.

The team preparing NERC’s report told the Reliability Assessment Subcommittee in April that it has been a challenge to address the ongoing impact of the coronavirus outbreak while still providing a balanced look at other reliability issues. (See RAS Balancing COVID-19 Impacts in Reliability Report.) Nearly all of the report’s key findings have been affected by the pandemic in some way.

NERC released a separate report earlier this year to help with the issue. The Pandemic Preparedness and Operational Assessment — Spring 2020 is described as a “bridge” to the summer reliability assessment that can examine the effects of COVID-19 and provide guidance so that the main report is not overwhelmed with a single issue. (See PPE, Testing Top Coronavirus Concerns for NERC.)