November 14, 2018 - Fuel Security, like ball security for you football fans, is something you don’t think much about until you don’t have it. Unfortunately, the fuel security of the grid is no longer a sure thing.

The loss of so much baseload power so fast is setting off a growing chorus of alarms. The latest voice to join the chorus comes from the North American Electric Reliability Corporation, or NERC, the organization that oversees the reliability of the North American grid.

S&P Global Market Intelligence got its hands on a draft report titled “Accelerated Generation Retirements; Special Reliability Assessment” and characterized its conclusions by writing, NERC “warns that an accelerated retirement of coal-fired and nuclear power plants over the next several years could lead to power outages, temporary shortfalls in surplus generation and transmission problems in several regions.” In the eternal words of broadcasting legend Keith Jackson, “Whoa, Nellie!”

NERC is concerned, and for good reason. In the measured parlance of regulatory bodies, warnings of power outages, shortfalls and transmission problems speak volumes.

What NERC sees, what the Department of Energy has seen, are electricity markets that aren’t valuing critical attributes provided by baseload coal and nuclear plants. The loss of these reliable, fuel-secure facilities and a shift towards growing reliance on just-in-time fuel delivery and intermittent sources of power is deeply troubling.

The grid is entering unchartered territory. We have taken fuel security for granted because the sources of power that have so long made up the backbone of the grid have been inherently fuel secure. This is a challenge we just haven’t had to consider before.

As coal and nuclear power’s share of our electricity mix recedes – or evaporates in some regions of the country – fuel security is suddenly front of mind. Regional grid operators have already dealt with some close calls during bitter cold, and the problem – the loss of these fuel-secure plants, particularly coal plants – has gone from bad to worse.

Consider New England. The abandonment of coal generation there, and the region’s overreliance on natural gas and a constrained pipeline network, is a case study in self-imposed reliability challenges. ISO New England’s own fuel security analysis from earlier this year found that the retirement of 4,500 MW of remaining coal and oil power plants by 2025 could result in days of load shedding or rolling blackouts.

NERC’s justifiable concern is that grid operators’ processes to adjust for power plant losses – the very processes and market mechanisms grid operators are holding up as fail safes – don’t move quickly enough to compensate for the accelerating speed of retirements. According to S&P, NERC’s report notes that these measures can take five years or more to account for capacity losses and additions. That simply isn’t good enough.

Just as troubling, these same electricity markets can’t see over the proverbial hill. Even in markets with capacity auctions that are supposed to provide balance to short-term market signals – such as in the PJM marketplace – capacity markets only account for capacity needs just three years ahead. With the type of titanic changes now turning our electricity mix upside down, the need for some longer-term thinking is glaring.

The uncertainty surrounding future electricity demand and commodity prices, coupled with the relative certainty of additional baseload retirements, is a recipe for disaster. At the very least, it’s now past time to recognize that current market construction is opening consumers to completely unnecessary and avoidable risks.

While there are those that continue to question the need for, or cost of, strengthening grid reliability, too few are thinking about the costs of not acting. Preserving a balanced, fuel diverse and secure electricity mix is essential. As NERC and DOE have made clear, the moment to act is now. This is an opportunity we can’t afford to fumble away.