October 25, 2023
The U.S. power grid is a complex beast.
Handling the second largest amount of power in the world (after China), it includes over 160,000 miles of high-voltage transmission lines, broken into three sections: Eastern, Western, and ERCOT.
Several factors are driving that complexity even higher:
With federal and some state policies supporting renewable energy investment at the expense of conventional power plant technologies—primarily coal and nuclear—concerns have been raised about future electric system reliability.
Others argue that this evolution is a natural consequence of market competition, with low natural gas prices and rapid improvements in renewable generating technology leading to the retirement of older, less economic power plants.
Regardless of how you explain the shift, the result is a more diverse set of energy resources feeding into the grid that is—so far—being capably managed to provide reliable electric power.
Against this backdrop of increasing energy diversity, what is the significance of baseload capacity?
Baseload power has traditionally come from nuclear and coal plants, operating at large and constant generation rates for months at a time.
At its peak in the early 2000s, coal accounted for almost 60% of US baseload power (~3,000 TWh), with nuclear peaking at about 30% of baseload (~900 TWh).
However, given the attributes of today’s electrical system, the term “baseload” is seemingly outdated.
An increasing proportion of the country’s supply is coming from renewable capacity and gas-fired resources working in tandem to provide round-the-clock power.
Rather than having a few, large, fixed baseload sources, the new mix depends on many, flexible sources cycling on and off as needed to meet demand.
Renewables advocates say that the US electricity system is stronger than it has ever been, providing highly reliable power at lower costs, while simultaneously reducing its carbon footprint.
Skeptics point to the Great Texas Freeze in February 2021 as a harbinger for grid fragility, crippling the nation’s largest energy-producing state and leaving tens of millions in the dark and cold.
Leaders at ERCOT (Energy Reliability Council of Texas) and PUCT (Public Utility Commission of Texas) were accused of “hoping for the best instead of planning for the worst.”
Indeed, in the decades since the Texas grid was deregulated, the emphasis had been on providing affordable, clean energy, but not so much on reliability.
Since 2021, ERCOT has invested heavily to implement its “Roadmap to Improving Grid Reliability”, including winterization initiatives, adding generating capacity, and purchasing more reserve power for days with uncertain weather.
If baseload power is a thing of the past and a larger, more diverse group of sources are expected to meet demand, how do we ensure that enough is enough?
Reliability assessments have consistently identified power source diversity as a key factor in sustaining U.S. power grid reliability.
However, the greater the diversity of sources, the harder it becomes to ensure resource adequacy—that enough generating capacity will be available to maintain a steady supply under any circumstances.
This can be treated at three different levels: system, local, and flexible.
System resource adequacy aims to meet the most likely peak demand forecast, plus some reserve margin—the North American Electric Reliability Corporation, NERC, uses 15% reserve by default—on a long-term basis.
Local resource adequacy aims to produce enough power to meet regional needs in the event of a transmission grid outage. This is particularly important in areas like California, where power is routinely imported from neighboring states.
Flexible resource adequacy aims to ensure enough reserve capacity has been contracted to meet the highest expected load during short (few hour) peak periods during the month.
Resource adequacy standards vary but typically state that outages due to a lack of generation capacity should occur less than 1 day in 10 years—a so-called “1-in-10” loss of load expectation.
Such calculations must account for the inherent unpredictability of non-dispatchable wind and solar resources, which require dispatch-on-demand reserve power—known as “peaker” capacity—to properly manage short-term demand changes.
Since peaker capacity may sit idle for long periods of time, some incentive is necessary for power market participants to build and maintain the capacity that someday might be called upon to maintain grid balance.
Some independent system operators (ISO) use an installed capacity requirement (ICAP) that allows members to pool their resources and purchase ICAP credits from other companies in the pool that already have excess capacity.
Regulations typically require a load-serving entity to purchase firm capacity contracts for 110-120% of annual peak power.
Naturally, this relies on credible estimates of “firm capacity”, which are relatively easy to make for conventional dispatchable sources but complicated in the case of renewables.
As the grid evolves from an era of nuclear and coal dominance into one characterized by a wider range of less predictable power sources, natural gas emerges as the big winner.
A fleet of demand-response natural gas power plants is springing up across the country to assure grid stability and resource adequacy.
One might say this is a new natural gas “baseload”—even though these plants will not operate continuously like prior baseload providers.
Some energy industry critics lump all fossil fuels together and claim that nothing has really changed but, as we’ve discussed, this couldn’t be further from the truth.
Generating dispatchable power from natural gas produces significantly less emissions than the baseload coal power it has replaced.
Arguably, the natural gas footprint is as good as—or even better than—that of solar when full lifecycle emissions are considered.
Natural gas generation is on the nation’s critical path to cleaner and more reliable power.
As we consume less and less coal and learn to manage the variability of wind and solar generation, we can rely on the flexibility and availability of natural gas while simultaneously building toward a greener future.
At Trellis Energy, we believe that a modern natural gas supply chain should be digital, efficient, and easy to manage, ensuring the delivery of clean energy when and where it’s needed. We’re in business to make that a reality for natural gas in North America.
Talk to us about Digital Simplification for your climate, trading, and logistics goals.