The Federal Energy Regulatory Commission’s Office of Electric Reliability and the Office of Enforcement on May 19 presented to the commission their 2016 Summer Seasonal Assessment.
Said the report: “Market conditions going into this summer continue to reflect the impact of low natural gas prices that have resulted from robust production and near record levels of natural gas in storage. Moreover, despite modest load growth, regional electric system reserve margins are forecast to be adequate.
“However, despite an optimistic national outlook, the recent events at the Aliso Canyon natural gas storage facility in California present an area of particular concern. The loss of this resource may pose a risk to local electric reliability and has the potential to result in elevated energy prices.”
Preliminary data from NERC’s Summer Assessment indicates that the total U.S. load forecast, when weather-adjusted, is essentially unchanged over the past few years, the FERC report said. This can be attributed to little to no load growth in the commercial and residential sectors. Meanwhile, the total generating capacity in the U.S. has decreased by approximately 2% since last summer. The ongoing downward trend in capacity over the past several years is primarily due to coal plant retirements across the nation. The factors that prompted these closures include increased competition from natural gas, environmental regulations and an average fleet age that exceeded 50 years old.
NERC’s Summer Assessment data indicates that reserve margins for all assessment areas are anticipated to be adequate this summer. The anticipated reserve margin in Texas continues to be tighter when compared with the other regions this summer. However, the region is expected to have sufficient generating capacity to serve peak demands during the expected weather conditions for this upcoming summer season.
Over 18 GW of new generating capacity will be installed nationwide through the summer, with a majority of these capacity additions coming from renewables such as wind and solar. Looking at the Western Interconnection, approximately 1 GW of natural gas, 3 GW of solar and 1 GW of wind will be added to the system. In the Electric Reliability Council of Texas (ERCOT), approximately 2 GW of natural gas will enter commercial service by the end of season. The generating capacity in the Eastern Interconnection will see an additional 1 GW of natural gas, 2 GW of solar, and 4 GW of wind. Also, the Tennessee Valley Authority‘s Watts Bar Nuclear Unit 2 will also go into commercial operation this summer, adding over 1 GW in generating capacity and will mark the first time in over two decades that a new nuclear unit will come on-line in the United States.
This summer’s installed nameplate wind capacity is forecast to increase by 7 GW, or approximately 10% from 2015, according to NERC. This would bring the total capacity of wind resources to 76 GW nationwide. NERC is also projecting that about 4 GW of new utility-scale solar capacity will come on-line this summer.
Renewable sources of power production have grown substantially over the past few years, as both wind and solar power now have a significant presence in many electricity markets. However, as renewable’s share of the generation fuel mix portfolio increases, grid operators are continually seeking operational solutions to address the challenge of integrating wind and solar resources, the report added.
This year wind has provided half of the production in the Southwest Power Pool (SPP) in some hours. This increased wind generation can pose challenges for grid operators and both the Midcontinent ISO (MISO) and SPP have developed systems and procedures to take advantage of this seasonal output, while also managing its volatility and contribution to congestion. However, wind generation tends to be lower during the summer, especially on the hottest days when there is little wind.
Traditionally, coal has been one of the least expensive fuels for power generation. However, natural gas prices reached a 17-year low in early March, making it less expensive than coal when adjusting for relative power plant efficiency. As coal plants continue to retire and natural gas power plants remain price competitive, FERC staff expects natural gas-fired generation to remain robust.
Natural gas-fired generation has surpassed coal plant output since July 2015 and the U.S. Energy Information Administration (EIA) projects this will continue through 2016. This decrease in coal generation has led to an increase in coal stockpiles. EIA reports that coal stockpiles are 22% higher than last year and 12% above the 5-year average.
While PJM Interconnection continues to depend substantially upon coal-fired generation to meet demand, the region’s generation contribution from coal-fired units has fallen from 44% five years ago to 34% in 2015. In addition to contributing to the rate of coal generator retirements, the shift to natural gas has had an impact on power flows. Historically, power has flowed from lower-cost generation located in the western half of PJM to more expensive markets in eastern PJM. In 2015, power flows across the central PJM transmission interfaces dropped to about 3,000 MW, from almost 5,000 MW in 2013. Given the forward price indicators for power and natural gas, FERC expects this trend to continue this summer.