UPDATE: The nation's independent system operators (ISOs) and regional transmission organizations (RTOs), which operate interstate energy transmission networks, reported back to the Federal Energy Regulatory Commission (FERC) on March 9, 2018 with their responses to FERC's 18 questions on grid resilience and reliability. These organizations mostly agreed in stating that, while there are no urgent threats to resilience and reliability on their systems, operators could stand to coordinate more with each other on transmission and power issues. They also pointed out potential future weaknesses in grid resilience, such as with cybersecurity. Most also stated that resilience was an extension of reliability rather than an independent concept.
Of note, however, PJM Interconnection, the largest ISO on the grid, stated in their filing that resilience should take into account threats to grid stability due to the closure of power plants, which has been interpreted as a request that FERC update its pricing and cost recovery guidelines to subsidize aging coal and nuclear plants.
ORIGINAL POST: On September 28, 2017, Secretary of Energy Rick Perry submitted a Notice of Proposed Rulemaking (NOPR) directing FERC to create a financial mechanism that would incentivize “resilient” power generators. Secretary Perry’s NOPR instructed FERC to begin a rulemaking process that would make the following changes:
- Require organized electricity markets to provide price incentives for power plants “necessary to maintain the reliability and resilience of the Nation’s bulk power system.”
- Create a pricing system that allows for “full recovery of costs” for eligible units.
- Eligible units must:
- Provide “essential energy and ancillary reliability services.”
- Maintain a 90-day fuel supply on the site in the case of a crisis situation.
- Comply with all required environmental regulations.
The Rule was commonly interpreted as an attempt to help coal power and nuclear power, which typically store fuel on-site, be more cost-competitive with cheaper generating plants like natural gas and renewables, which do not store fuel on-site.
On January 8, 2018, FERC terminated the Proposed Rule, finding that it would violate their requirement that rules are not unduly discriminatory. In the termination order, FERC declined to continue rulemaking for the following reasons:
- The order violated FERC’s requirement under the Federal Power Act that electricity rates are not unduly discriminatory to any type of electricity generation 16 USC 824e(a).
- The rule would be unduly discriminatory because it would provide a preferential rate to certain electricity generation types (such as coal and nuclear) and not others (such as natural gas and solar energy) even though generation types not eligible for special treatment under the proposed rule may also have resilience benefits.
FERC also highlighted the conflation of resilience (recovery from service interruption) and reliability (continued uninterrupted services) in the NOPR. Resilience and reliability are related but distinct topics. Although Secretary Perry’s NOPR specifically highlighted resilience, FERC considered the NOPR a mechanism to address both resilience and reliability. A portion of FERC’s termination of the NOPR also outlined the need for a unified definition of resilience. The Commission defines resilience as:
"The ability to withstand and reduce the magnitude and/or duration of disruptive events, which includes the capability to anticipate, absorb, adapt to, and/or rapidly recover from such an event.”
Finally, FERC ordered regional grid operators (RTOs or ISOs) to conduct a holistic examination of resilience. General topics that RTOs/ISOs are expected to address and report on are:
- Criteria established to measure resilience.
- Resilience-based studies the operators have conducted.
- Initiatives (including market-based mechanisms) the operator has taken or considered taking to improve resilience.
- Obstacles the operator is facing to address resilience, including an identification of what role FERC may play to remove such obstacles.
RTOs and ISOs were instructed to produce a response within 60 days of the order.