As published in Toledo Business Journal - May 1, 2017
Aerial photo of Davis-Besse nuclear power plant
Utility industry executives gathered recently in the Marriott Hotel at the Philadelphia International Airport to address a number of critical subjects focused on the issue of “fuel security” and the electric power grid “resilience.” Results of the work now being done on this issue will determine if homes and businesses avoid extended interruptions of power in the future during events that challenge the grid. This issue may play an important role in determining the future of nuclear power plants in deregulated markets in the United States. FirstEnergy’s Davis-Besse nuclear plant located in Ottawa County close to Toledo operates in Ohio’s deregulated electricity market.
Extended stockpiles of onsite stored fuel at nuclear plants, the rigorous security structure, the hardened infrastructure, and established capacity along with no greenhouse gas emissions provide important benefits that nuclear power plants bring to the issue of “fuel security” and “resilience.”
The recent session in Philadelphia was organized by PJM Interconnection, LLC (PJM), a Regional Transmission Organization (RTO) that plays a major role in coordinating the movement of wholesale electricity in all or parts of 13 states and the District of Columbia that includes Ohio and parts of Michigan and Indiana.
Major changes are taking place in the utility industry in the United States. With the decline in natural gas prices, low-cost gas-fired generation plants are continuing to be put in place. The economics of legacy facilities utilizing coal or nuclear power, and new alternative energy facilities, are not able to be cost-competitive with the new gas-fired plants, especially in a deregulated market such as Ohio. Some industry professionals see the possibility of gas-fired plants gaining high market share in the US as other power generation options exit the market.
Legacy coal and nuclear plant closures are being scheduled that include the potential decommissioning of Davis-Besse. FirstEnergy is moving toward the possible sale or closure of this facility by the middle of next year.
PJM, in coordination with the Federal Energy Regulatory Commission (FERC), has been working for over a year now with the assistance of industry professionals to determine the impact of continued legacy plant closures and the implications to the electric power grid if gas-fired generation plants gain a high market share.
PJM is focusing on several major issues that will drive the outcome in this area. The organization is looking at potential future energy generation scenarios and working to assess 1) the operational reliability of power generation and distribution under normal conditions and 2) it is also attempting to assess the “resilience” of the electric power grid to respond to emergency conditions.
PJM recently completed a study, PJM’s Evolving Resource Mix and System Reliability, to begin to address the issue of energy diversity and its impact on operational reliability.
In addition to the issue of energy diversity, there is also the critical issue involving fuel security and the “resilience” of the system to respond to a variety of potential crises that might threaten the supply of power in this country. The recent PJM study does not address the issue of fuel security and “resilience”, but the organization is working to include such an assessment in its operations plans. The recent PJM gathering in Philadelphia was the first of two sessions to address the issue of “resilience.”
Two new steam generators are delivered by rail to the Davis-Besse Power Station in Oak Harbor for installation in spring 2014
PJM defines this issue: “Resilience, in the context of the bulk electric system, relates to preparing for, operating through, and recovering from a high-impact, low-frequency event. Resilience is remaining reliable even during these events.”
According to the PJM study, “History has shown that, despite having a system that meets reliability standards and requirements, rare extreme events, such as those experienced in PJM and other parts of the world (that include the 2014 polar vortex, past hurricanes and tornadoes, and other events), may produce negative impacts to the system that threaten the ability to continue to deliver energy services. Such events may trigger higher-than-average unit unavailability rates that are not captured by the reliability risk analysis.”
In his opening comments at the recent session in Philadelphia, Andy Ott, PJM president and CEO, addressed issues involving fuel security and resiliency. “ … There’s a lot of anxiety out there …related to, ‘Are we sure that our infrastructure is secure?’… Are we accommodating more or recognizing those risks in our planning … I think that’s the real question that I think we need to start to look at …
“But also from a fuel security perspective, and that’s really more the focus of today’s session … as we look at this notion of resilience from a fuel perspective, there’s still the issue of fuel diversity, and there’s also the issue of fuel security …
“So when we look at this issue, do we have too much gas generation? That’s a question I get asked a lot … Now we don’t see a problem where we have too much, but we do see a call to action. We see some things that need to be addressed, and most of those are operational risks … But again, when you peel down the onion and look at these aspects of fuel security, there are things to address …’Are we recognizing those types of risks’ …
“But they’re also questions about how does price formation work in the capacity market, the interaction between State policy and the market, and certainly that issue’s front-and-center within the stakeholder process …
“When we talk about resilience, though, we’re looking beyond the individual unit performance … and we’re looking more at the operational risks that I’d mentioned before, driven by ‘What if something would happen on a pipeline where we have a couple units connected to that pipeline? Are we realizing that operational risk? Are we planning around that risk, and are we making sure that we’re stepping up to the plate, if you will, as an industry?’ …
“It’s saying, ‘Do we really look with our eyes wide open and say there are ways we can address it?’ … Instead of worrying and saying ‘Are we sure we’re secure?’ I think finding the problem and looking toward planning solutions is the way to go … I think it’s a different type of risk that we look at. So as we look at this resilience initiative which is the second tract, really it comes down to that issue of fuel security, fuel adequacy, and also a look at the way we address contingencies …”
Identifying it as the third major initiative, Ott addressed planned nuclear plant closings.
“Then there’s one last initiative, I think, that there’s a lot of questions that I get asked about, beyond the issue of resilience, capacity, market price formation. It comes down to the question of … resources that are facing economic challenges, looking potentially to retire. I get asked a lot ‘Will certain nuclear plants retire? You know, we fast-forward 10 years, will we look back with regret?’ That we, as a community, if all those units retire, destroyed useful life left.
“They (nuclear plants) have very good emission attributes … is there some missing piece there on valuation? I think that really gets down to something we haven’t looked at … in State regulatory processes and energy price formation.
“This is the energy market … I think that next we need to turn to look at that ‘Should we have some type of valuation in the energy market?’ One inconsistency I think that exists today is we do have some I’ll say public policy or environmental attributes priced into the market. … So these questions on price formation I don’t think have been clearly asked and clearly dealt with, and I think that’s another track, if you will, that we as a community have to discuss…”
Following Ott’s opening comments, a number of panel sessions were conducted that focused on issues involving fuel security and resilience.
PJM officials and industry executives discussed critical issues to the power grid from Hurricane Sandy, the massive natural gas leak at the Aliso Canyon storage facility near Los Angeles, Hurricane Katrina, the Polar Vortex of 2014, and other past events.
There was significant discussion involving the issue of cybersecurity of the power grid. “Considering today’s advanced adversaries, we are not talking about off the shelf (cybersecurity) protections. Today’s adversaries easily adapt to those. We are talking about advanced threats from the most persistent adversaries,” stated Joseph McClelland, director, Federal Energy Regulatory Commission.
An individual at the session from the MIT Lincoln Laboratory at the Department of Defense shared additional information. “Just a couple of days ago, the Council on Foreign Relations came out with a policy paper on cybersecurity or cyberattacks on the US power grid and there was one section that talked about early warning indicators where they spoke about how an adversary would likely do a test run on control infrastructure that is used by US operators in preparation for a larger attack on US (power grid) systems.
“We are getting thousands of (cyber) attempts on our system. It is a very real issue,” stated Mark McCullough, executive vice president, AEP.
PJM management and industry executives emphasized the need to incorporate the issue of fuel security and “resilience” in their planning and operation of the electric power grid.
During the session, Glenn Thomas, president, PJM Power Providers Group stated, “If anybody read the 9/11 Commission report, they cited 9/11 mostly as a ‘failure of imagination.’” Officials had failed to imagine that terrorists might use commercial airplanes as weapons. He then noted that it is necessary to spend the time imagining all possible threats to the power grid and then putting the system in place that can react and recover from each of these threats. “We have to be imaginative about what it means to be resilient for this group in the future,” emphasized Thomas.
“(Fuel) diversity is important because of the elements of the future unknown… The threats to the grid are out there,” stated AEP’s McCullough.
“Having (fuel) diversity does help to mitigate risks … We have a diverse portfolio and when Hurricane Katrina happened several years ago in 2005 and when tornados came through the Tuscaloosa and Birmingham area in 2011 and, because of the portfolio (fuel) diversity, we were able to bounce back in a relatively quick manner from those events,” stated PJM Power Providers Group’s Thomas.
Cara Lewis, associate general regulatory counsel, PSEG Long Island (utility) emphasized the need for PJM and other organizations to have a sense of urgency in addressing the issue of resiliency. “Superstorm Sandy served as a wakeup call for the way we think about our roughly 2.2 million customers in New Jersey and our 1.1 million customers on Long Island. The lessons we learned in trying to restore power to 1.7 million customers over a two week period currently guides our thinking on what is resiliency … A diverse energy portfolio is one element of addressing this need … Heavy reliance on one fuel source negatively impacts resiliency and is not good for consumers … We believe that there is some urgency in (PJM and others) developing criteria around resiliency with the goal of developing a mechanism that values fuel diversity, fuel security, and economic stability.
The full day session in Philadelphia made it clear that the issue of the power grid’s resilience is complex. Deregulated markets make it even more difficult to address.
The recently released PJM study ended with a number of questions involving resilience. “However, unlike the reliability services used in this analysis, criteria for resilience are not explicitly defined or quantified today. Some questions PJM and its stakeholders should consider include:
“There are no easy answers here …,” stated PJM president and CEO Ott during closing remarks at the session. The session also made it clear that the issue of fuel security and resilience is of critical importance and the cost of not being able to quickly recover the power grid from a crisis would be disastrous.
“From PJM’s perspective, advancing resiliency is one of our main initiatives in 2017 and will continue on into 2018...,” Ott explained in his conclusions at the session.It is not clear if PJM decisions and implementation involving fuel security and resiliency will be completed prior to the shutdown of a number of nuclear plants in the US including FirstEnergy’s potential decommissioning of Davis-Besse.