As renewable energy capacity continues to edge out fossil fuels, the clean energy revolution seems inevitable. But this clean future could be hamstrung unless we overcome “resource adequacy” challenges.
For the first time in 130 years, renewables surpassed coal as a U.S. energy source, and the trend is projected to persist as solar and wind prices plummet. With renewables now cheaper than new fossil capacity, the clean energy industry anticipates a renewables majority by 2030.
Unfortunately, transitioning to 100 percent clean power is more complicated than adding renewables and storage. Solar and wind are transforming how we power our economy, creating sustainable jobs and improving public health. But adding variable, fuel-free resources to the grid also requires major changes in power system planning to ensure reliability — what grid operators call “resource adequacy.”
Failing to address outdated resource-adequacy models — ensuring grid operators always have energy resources available to balance supply and demand — puts the clean-energy transformation at risk. This isn’t just a problem in states dominated by fossil fuels. In California, these concerns spurred new rules giving the state’s biggest utilities control over power-plant procurement, undermining clean energy and storage investments that could otherwise meet resource-adequacy requirements.
Incumbent fossil fuel generators, no longer the cheapest option available in many parts of the U.S., have defined “resource adequacy” in ways that leave out innovative new market entrants in order to maintain market share.
Defining resource adequacy, and why it matters for renewables
On a moment-by-moment basis, grid operators match electricity supply with demand by managing generation resources they can dispatch. To avoid outages, operators must have enough resources at their disposal to match demand at any given time, especially when demand peaks unexpectedly due to weather extremes.
As cheap clean energy pushes more coal plants offline, more power supply is composed of intermittent resources that cannot always be dispatched at will. Meanwhile, more distributed energy resources (DERs), such as rooftop solar and energy efficiency, complicate planning for future electricity demand and open up possibilities for customers to get cheaper, cleaner electricity.
Renewable energy challenges resource adequacy in two primary ways.
First, renewables’ increasing ability to offer lower prices than the marginal cost of baseload resources such as coal and nuclear steadily push these resources off the system, along with the resource-adequacy value they provided. Historically, these resources were a mostly reliable presence during peak periods, while renewables varied based on local weather factors.
Second, the inflexibility of many fossil resources — needing to commit well ahead of time, minimum run rates and limited ramp rates — threatens resource adequacy as variable resources become a larger share of the grid mix. Because wind and solar are often the cheapest source of real-time energy, maximizing their use for economic reasons can drive more system variation. This means conventional resources may be called upon to ramp output more often or become available with less advance notice.
Why "reserve margin" is not the metric it used to be
Traditional resource-adequacy planning has been based on two ideas: One, power plants can be called on at will, provided they are ready in advance to provide electricity. And two, real-time fuel costs dominate calculations of the most cost-effective resources to run at any given time and which new resources to plan for. This model also treats demand as an independent input into the moment-by-moment challenge of running the grid.
Planners have used the “planning reserve margin” metric to decide whether a generation fleet will be adequate to meet future demand. PRM considers total available capacity likely to be available to meet anticipated peak demand, with the PRM representing the anticipated percentage of extra capacity over load. To determine how much any single plant contributes to PRM accounting, planners assign each resource a capacity value, which is a percentage of peak megawatts based on historical patterns with an applied discount to account for planned and unplanned outages.
PRM accounting reduces the probabilistic distribution of production outcomes to a single number and blinds planners to challenges for traditional resources operating in a more variable world. Capacity value is a particularly reductive metric when it comes to assessing renewables, which have broader distributions of possible production outcomes.
PRM also values peak capacity more than flexibility. Battery storage systems have limited peak output durations (requiring a portfolio of resources with different duration abilities for meeting peak demand) but can nimbly come online and offline in quick bursts and instantly switch from absorbing to producing power.
This means PRM is no longer an effective catch-all metric. The wrong resource mix can leave more than enough on hand for anticipated peaks but still face reliability challenges at other times. An over-reliance on the traditional planning mindset can lead to a failure to plan holistically for a least-cost solution using a broader portfolio of resources.
Incumbent generators exaggerate challenges for DERs
While the challenges renewables pose to resource-adequacy planning are real, incumbent generators exploit them to delay the clean energy transition. Challenges are mischaracterized as fundamental reliability threats rather than problems that are solvable through new metrics, models, planning design and technology advances such as longer-duration storage and demand response. Exaggerating technical issues as “insurmountable barriers” and pointing to immediate job losses or reliability considerations often compel regulators and legislators to pay attention to one party's preferred solution.
Incumbents also use existing rules to shut out competitors, for instance by intervening in commission proceedings to prevent DERs from counting toward local reserve capacity in dense urban pockets served via transmission lines from faraway generation sources. Or, as is the case in PJM, they can require energy storage to sustain maximum output for up to 10 hours, when most objective analyses of large grids show that storage can deliver significant resource-adequacy value with much shorter durations.
Decarbonization requires building a larger, cleaner electricity grid without sacrificing reliability. Resource-adequacy concerns threaten to slow the transition. The clean energy industry must prioritize changing policymakers’ perceptions of resource adequacy and the development of new planning models that allow all technologies capable of providing reliable service to compete on equal footing.
Ignoring the resource-adequacy problem by expecting falling solar and wind prices to simply displace fossil fuel power sources will unnecessarily delay the transition. And with climate change, we have no time to lose.