by Jeff St. John
May 04, 2018

It’s been a tense week for watchers of FirstEnergy’s coal and nuclear power plant bankruptcy, with supporters of clean energy and rational markets awaiting a decision from the Trump administration on the company’s proposed emergency bailouts or national security interventions to keep the uncompetitive power plants open. 

Meanwhile, grid operator PJM dismissed FirstEnergy’s nuclear closure plans as a non-threat to future grid reliability, but also launched a “fuel security” study that has drawn fire from some clean energy advocates as a backdoor effort to prop up coal and nuclear power. 

Like most of the debate over grid resilience sparked by Energy Secretary Rick Perry's failed intervention into federal energy market regulations last year, this week’s focus has been on the role of generators and transmission grid operators to prepare for, mitigate and recover from storms, physical or cyberattacks, natural disasters and other major grid disruptions.

But a new report from Grid Strategies and Alison Silverstein, the veteran energy consultant who co-wrote last year’s Energy Department report on grid resilience, argues that it’s far more cost-effective to build resilience from the customer level on up.

The reason is simple: The vast majority of outages come from weather-related disruptions to the distribution grid, and the longest and most deadly outages are caused by hurricanes, winter storms and other major weather events, not power plants closing down. 

Less than 0.1 percent of outages between 2012 and 2016 were caused by generation shortfalls or fuel supply disruptions, according to analysis from Rhodium Group, while 90 percent of electric power interruptions arise on the distribution system, most of them weather-related. And about half of the outage minutes between 2012 and 2016 were caused by a handful of hurricanes and winter storms. 

On these measures, not all resilience investments are created equal, according to the report, A Customer-Focused Framework for Electric System Resilience. In terms of cost per unit of improvement, coal and nuclear subsidies, capacity payments or fuel-supply guarantees have little value, since power plants have little or nothing to do with power outages. 

Far simpler and more valuable are local efforts like tree trimming and emergency preparedness; utility investment into distribution automation and fault restoration; and distributed generation, backup power, and hardening of community critical infrastructure. Because these investments can be made incrementally, they’re far more cost-effective than policies aimed at large-scale power plants. 

The report doesn’t presume to have the data to prove out these assumptions, and “encourage(s) others to undertake the data collection and analysis required” to prove them out. 

But since distribution-level problems cause most outages, and since severe weather causes the longest-duration outages, “It logically follows that measures that strengthen distribution and hasten recovery would be highly cost-effective,” compared to keeping power plants open. 

“A constructive resilience analysis process will define resilience goals, articulate system and resilience metrics, characterize threats and their probabilities and consequences, and evaluate the effectiveness of alternative resilience measures for avoiding or mitigating the threats,” the report notes. “Regulators and stakeholders should ask how each remedy (individually and in suites of solutions) might reduce the frequency, magnitude and duration of customer outages relative to the entire scope of customer outages, not just those resulting from generation- or transmission-level causes.”

FirstEnergy and Energy Secretary Rick Perry have argued that coal and nuclear generators provide “baseload” power services that can’t be matched by wind, solar or natural gas. But the report notes that wind, solar, demand response and battery energy storage can, in combination, cover all and more of the discrete reliability services provided by coal and nuclear power plants. 

“Reliability services should be defined in functional, technology-neutral terms based on actual system needs, rather than in terms of the characteristics or attributes of resources that historically provided those services,” the report notes. 

The report also highlights the massive investments being made into backup power systems and microgrids in the wake of last year’s hurricanes in Texas, Florida and Puerto Rico. But currently, the “Value of Lost Load studies” used to calculate how much outages cost customers are underestimating the impacts of these long-term outages, or “the full cost of the various measures that customers undertake, as personal resilience efforts, to make expected outages more bearable,” the report notes.

“Many recent severe, extended outages such as the ongoing Puerto Rico tragedy indicate that Value of Lost Load estimates greatly underestimate the full cost or burden that extended outages place upon affected electric customers.” The cost is detailed in the following table.

Transmission system-level disruptions are a smaller, but still important, source of outages. The report presents in-depth data on how independent system operators (ISOs) and regional transmission organizations (RTOs) are working with FERC, with a special focus on PJM’s capacity market reforms following the 2014 polar vortex. It also looks at how PJM and ISO New England are managing future reliability concerns in the wake of the 2017-18 low-pressure bomb cyclone.

The report also highlights the fact that grid resilience is a real and pressing issue, even if power plant retirements aren’t the reason for it. This chart from DOE’s 2017 Quadrennial Energy Review lists the relative risks across a range of weather extremes and natural disasters, including geomagnetic storms.

In the past decade, these threats have moved to center stage for utilities across the country. The report cites this year’s response by Pacific Gas & Electric in the wake of last year’s devastating Northern California wildfires as one example. 

The key challenge in putting these findings into practice is that “many of the best solutions to maintain and enhance resilience lie beyond the limits of the bulk power system and federal jurisdiction,” the report states.

Investing in grid resilience without measuring these kinds of relative costs and benefits could lead to “committing significant amounts of money and effort to improve resilience, yet have little constructive impact on the probabilities or actual levels of future customer outages.”

The report closes with the sober warning that no amount of investment can prevent power outages or safeguard all customers. It cites the National Academies of Sciences' 2017 report on electric system resilience, which notes that "all mitigation strategies have cost-performance tradeoffs, and it may be difficult to estimate the actual reduction in risk or improvement in resilience associated with a specific action. If some comprehensive quantitative metric of resilience becomes available, it should be combined with reliability metrics to select a socially optimal level of investment."