A lack of dispatchable resources will leave the Northwest with a capacity deficit of several thousand megawatts over the next few years that could spiral into widespread outages unless a regionwide mechanism for addressing resource adequacy is developed.
That dire warning was presented to an overflow crowd at the Northwest Power Pool's resource adequacy symposium Oct. 2 in Portland, as speakers rallied utilities to begin collaborating and working towards developing a solution to the region's predicted capacity shortfalls.
An estimated 375 people representing nearly every utility in the Northwest, along with representatives from FERC, state commissions, governor offices, as well as utilities from California and Canada attended the day long symposium.
The meeting closed the first phase of the Power Pool's year-long assessment of potentially developing some kind of resource adequacy program that would allow for regionwide sharing of resources during peak events. But the road to a potential solution is filled with obstacles, and there's little time to debate, speakers said.
Greg Carrington, managing director of energy resources at Chelan County PUD, led the Power Pool's initial assessment of the region's willingness to engage in finding a solution.
"There isn't a single CEO or GM leading a utility of any kind that doesn't feel like we need to do something," Carrington said. "Everyone is in agreement; we need to take this to the next level. I'm optimistic that we have a consensus."
The capacity shortfall is being driven largely by the closure of coal plants around the Northwest and in the Western Interconnection, which today can generate over 34,000 MW. By 2030, 18,000 MW of coal will be taken off line in the Western Interconnection, according to the Northwest Power Council. On Oct. 3, PacifiCorp announced plans to remove an additional 2,800 MW of coal from its system by 2030 (see previous story).
Meanwhile, California also has capacity issues. The state is scheduled to retire about 4,000 MW of older once-through cooled (OTC) power plants at the end of 2020 (CU No. 1920 ).
The Northwest could face a capacity shortfall as early as next year, and by the middle of the next decade could be several thousand megawatts short.
Utilities aren't replacing that lost generation with dispatchable resources, but are building mostly intermittent renewable resources that can't be counted on during extended cold or hot weather.
"There is a lack of firm capacity coming [on line] today, and loss of firm capacity, that creates the challenge," Arne Olsen, senior partner at the consulting firm Energy and Environment Economics. "We are approaching a period of capacity shortfall, if we aren't already there."
Steve Wright, general manager of Chelan PUD and former BPA administrator, spoke of his experience managing the agency through the Western energy crisis of 2000-2001, when Bonneville lost nearly $1 billion and was forced to curtail power to the region's aluminum smelters that resulted in 5,000 people losing their jobs.
"It was a failure of the industry," he said. "Some people took advantage of the market, and California's deregulation was poorly done, but we allowed supply and demand to get out of whack."
Wright said the situation today is "eerily similar" to the days leading up the energy crisis.
"I have to say the alarm bells sound very similar today," he said. "It feels a lot like 1999."
Wright told the crowd that the decision to curtail power isn't just a utility or industry decision, but "becomes a moral issue."
The next step in thePower Pool's process will be to form a steering committee of director level executives from a variety of organization. From there, an experienced project manager could be hired to help guide the Power Pool through the process, said Frank Afranji, executive director of the Northwest Power Pool.
Afranji said that initially the steering committee will evaluate 21 different elements of a resource adequacy program, and then wheedle those down to 10 for deeper analysis. That phase of the program could end in spring 2021, and with consensus, something could be in place by 2022.
But what that something is, and who manages it, is an open question.
The region could decide to form a capacity market that would allow utilities to share resource and send price signals for when new resources are needed.
Or the capacity mechanism could look something like the Northwest Power Pool's contingency and frequency reserve sharing programs, which are voluntary. Members continue to own the resources and the Power Pool dispatches those resources when needed. Parties then settle the transactions bilaterally. That model could also include capacity planning element that would take a one- to four-year look at the market and suggest where and when new resources are needed, that would then guide utility investment.
"This is about reliability and finding a mechanism that's able to provide energy and capacity to the market," Afranji told Clearing Up. "There are some ideas out there on how to do it, but at this point it's still really premature to talk about what it would look like. For us, it's just about reliability, reliability, reliability."
Historically, public power in the Northwest has been fearful of markets and the prospect of falling under FERC jurisdiction. But thanks to previous FERC rulings, the success of the Western EIM, and the urgent need to address capacity shortages, may help single a new willingness to join a regional market.
BPA Administrator Elliot Mainzer, who joined Wright and Portland General Electric CEO Maria Pope on an afternoon panel, applauded the Power Pool's work up this point.
"I think there's a cleareyed sense of urgency to get ahead of the resource adequacy issue before it's a real-time problem, and I think there's a sense of commitment and motivation to take it on." Mainzer said, in an interview with Clearing Up Oct. 1. "We need to move from identifying the problem to finding a solution—that's the big thing."