The Electric Power Supply Association (EPSA) has released a set of policy principles it hopes will inform legislators and regulators as the grid transitions to cleaner supplies and greater demand from electrification.

Many in the industry refer to the “energy transition,” but EPSA CEO Todd Snitchler said in an interview Nov. 14 the changes also include an “energy expansion,” as electricity takes on new sources of demand including transportation and heating.

“Consumer adoption of new, electrified devices, heating and cooling systems, vehicles and industrial processes will drive further demand for electricity, and accurate wholesale pricing is needed that sends demand signals to customers to respond flexibly, economically and reliably,” says EPSA’s fifth principle.

The first principle is an endorsement of wholesale competition, the development of which enabled the independent power producer business model of EPSA’s members. It says competitive wholesale markets are the most effective tool to achieve policy objectives by encouraging private capital deployment and innovation at the lowest costs, while shifting risks to investors — not consumers.

“Hopefully, this will encourage policymakers to think about these issues as they’re making decisions about policy choices and resources and timelines,” Snitchler said. “Because it’s very easy to say you want a certain outcome; it’s much more difficult to achieve it, and we hope these will help inform the ‘achieving’ part of those policy goals.”

EPSA also says existing dispatchable resources will be needed to keep the grid reliable, even as they operate less often.

“As you see a greater penetration of renewable resources, you’re going to continue to see a need for natural gas, because of the performance characteristics it has,” Snitchler said. “It will be required when the sun isn’t shining, or the wind isn’t blowing, or you have other interruptions to non-dispatchable resources. Dispatchable resources that can respond quickly, power up and remain operational, like natural gas, are going to be profoundly important because they will be the difference between the lights staying on and us having a power outage.”

Such power plants will run less often, but they will be important to maintaining reliability when they do run. Some of the market reforms will be required to ensure plants that are vital for reliability but get fewer and fewer chances to earn money from the energy markets stay online.

“Market-based solutions, like a flexibility product, or a quick-ramping product, or something that will ensure that those resources are able to earn sufficient revenue to remain on the system, when they are needed, is going to be how we’re going to have to think about it,” Snitchler said.

Stepping back, system planning is based on parameters the industry came up with in the middle of the last century, but the grid already has changed significantly, with more on the way, so new planning methods must be developed.

In the past, EPSA focused on trying to limit the impact of subsidies on wholesale power markets, but since the Inflation Reduction Act added billions of dollars more, those debates are in the rearview mirror, Snitchler said.

“We just have to figure out how to incorporate that into the policies” needed to achieve policymakers’ objectives, he added.

Many of those subsidies and the plans to decarbonize the electric industry rely on moving past natural gas eventually. While EPSA technology is agnostic, the resources that could replace gas-fired power plants aren’t ready to do so at scale, and it’s uncertain when they will be.

“In the event that we can have the breakthroughs that will help us get to where small modular reactors can be the generation resource of the future, that would be great,” Snitchler said. “The challenge is those technologies are talked about today like we are on the cusp of having it tomorrow, and it appears that we’re farther away than that.”

Just last week, NuScale Power had to cancel a proposed SMR in Utah, while other technologies like clean hydrogen have yet to be developed at the scale and price needed where they would brgin to replace natural gas. (See Pioneering NuScale Small Modular Reactor Canceled.)

Competitive markets often are where new technologies are deployed once the economics make sense, but retiring natural gas plants too early will increase reliability risks, Snitchler said. Should there be a major crisis because of policy, it easily could lead to a backlash against the energy transition.

Polling consistently shows consumers value reliability when it comes to the grid, Snitchler said.

“If we’re moving too quickly, in any one direction, and that results in power outages, or crises that happen, public support will pretty quickly erode,” he added. “So, I think that’s something that we need to be mindful of as we go through this process, because it’s not going to happen overnight, and we need to be thoughtful about how we get from here to the ultimate destination.”