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As Reliable as Your Morning Coffee: Why Do We Go Overboard on Generation Resource Adequacy?

On a recent Tuesday morning, we had a blackout here in Key West. Five Brothers Grocery, the best Cuban coffee shop in town, is just around the corner, and owner Heriberto “Pepe” Paez was out of the café con leche business for nearly an hour in the middle of the morning rush. Always imperturbable as he does his magic behind the counter, Pepe was philosophical. “Might need to put a solar panel on the roof,” he mused as the usual queue of regulars and tourists shuffled about uncertainly, some drifting away in disappointment.

Like most American electricity consumers, Pepe and his customers are accustomed to such events happening a couple of times a year. They’re not happy about it when it happens, to be sure, but they accept that it’s par for the course. The data, imperfect though they are, bear that out—the System Average Interruption Duration Indices (SAIDI) in most areas of the U.S. tell us that over the years, the standard of service reliability to which consumers have become accustomed involves nearly 150 minutes a year of involuntary service curtailment (and this excludes “extraordinary events” like Hurricane Irma).

Pepe’s customers would soon learn that the cause of this blackout was also familiar—a blown distribution transformer about a quarter-mile away. But when your Tuesday morning shot of Cuban rocket fuel is suddenly unavailable, knowing the reason why doesn’t make much difference. As far as they’re concerned, a blackout is a blackout is a blackout.

When the next one occurs, however, there’s one thing that’s very unlikely to be the cause: a shortage of available generating capacity on the Florida grid. In fact, going by the official standard, a generation shortfall can be expected to lead to forced curtailment of service once, but only once, over the next ten years. And when that happens, it is expected to shut Five Brothers Grocery down for no more than five or ten minutes. Waiting five or ten minutes for a café con leche sounds a lot better than waiting almost an hour.

That’s the practical effect of the minimum standard we impose for “resource adequacy”—that we have enough generating capacity connected to the system so that we would be expected to fall short only once in the course of a decade (By how much we’re short and for how long is left to local interpretation). If and when such a shortage occurs, system operators will first try to exercise just about all other options available, including calling on customers who have agreed to be compensated in return for their power supply being interruptible during such events. Then, if necessary, the operators would ration the available production capacity through a series of controlled, rolling “blackouts”—involuntary service curtailments imposed on one local area after another—until the event has passed.

In recent years we’ve been treated to periodic spasms of industry-inspired hysteria about the threat of blackouts due to coal plant retirements, or to a lack of incentives in the markets for new investment in generating capacity, or to a shortage of gas pipeline capacity during peak winter heating periods. Each apocalyptic weather event brings warnings about the catastrophe sure to follow if we don’t find a way to protect and promote investment in baseload power plants. Events like the infamous “polar vortex” deep freeze of early 2014 are often cited as prime examples of just the sort of thing about which we should be having nightmares. This despite the fact that during the polar vortex, with demand nearly 30 percent above normal winter peak and with about 22 percent of generating capacity forced offline (a large percentage of it coal-fired), virtually no forced curtailments of service were actually required.

That achievement was due at least in part to the fact that the system operators in the Eastern United States—whose territories were most affected by the polar vortex—impose mandatory reserve margins higher than what is needed to deliver the resource adequacy standard I’ve just described. And in practice, the reserve margins in those regions are even higher. The same is true for nearly all regions of the country, in both traditional vertically integrated power systems and restructured markets.

In other words, while the standard for resource adequacy says the average customer will only experience generation-related blackouts for a few minutes once every ten years or so on average, there is enough generation in service to ensure that the average customer may never experience a forced service curtailment due to a shortage of available generating capacity. Indeed, most American electric customers have never experienced such an event. We all pay for that remarkably robust generation margin—with the cost of the marginal kWh of energy running well into the hundreds of thousands of dollars a MWh—despite the fact we all also continue to expect a level of service quality that assumes our service will be curtailed about 150 minutes a year … every year for other reasons.

We all care deeply about reliable electric service. We should be sure we have sufficient production capacity—and the best mix of capacity resources—to provide it. But we should also have public officials who understand what that means and who spend our ratepayer money wisely to deliver it. Industry data show that from 2012 to 2016, only 0.00858 percent of customer service interruptions were the result of inadequate generator availability. Of that vanishingly small number of events, less than 1 percent were due to fuel problems, and 98 percent of those fuel-related service curtailments were attributable to a single event in Minnesota. All the rest of the instances when customers had gaps in service were due to problems on the transmission or distribution systems.

Reliability and resiliency are not—or should not be—about generators, or coal companies, or gas pipeline companies. They’re about what people like Pepe Paez and his customers experience, day in and day out, year after year. Would they like us to reduce the risk of a controlled, rolling generation-related blackout interrupting their morning café con leche routine? In principle, of course they would. But knowing what we know, is that what they’d want us to prioritize when evaluating where to invest hundreds of millions or billions of dollars of their money to improve their service reliability? I can tell you what Pepe’s answer would be.

By Michael Hogan

Photo Credit: Key West Wedding Photography – CC BY 2.0, via Flickr

The post As Reliable as Your Morning Coffee: Why Do We Go Overboard on Generation Resource Adequacy? appeared first on Regulatory Assistance Project.

Photo Credit: Umberto Salvagnin via Flickr

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