cover image: Meeting the Reliability Challenges of the Clean Energy Transition


Meeting the Reliability Challenges of the Clean Energy Transition

30 Nov 2023

Achieving state and federal targets for a decarbonized electricity sector will not happen merely by switching existing fossil resources for renewable resources. The energy transition requires planning and coordination for the types of generation resources that maintain reliable grid operations throughout the transition to a cleaner grid, and for the specific types of resources that could enable a fully decarbonized electric system. Reliable grid operations require both resource adequacy and operating reliability (NERC 2007). This paper focuses on the limits of prices alone to enable the reliable transition of the electricity sector, and the need for coordinated, reliability-informed policy planning that meets both resource adequacy and operating reliability. Despite its Paris Agreement commitment to achieve specific clean energy and greenhouse gas emissions reduction targets, the United States (U.S.) does not have a plan to manage the reliable transition of its electricity sector. The reality—and the challenge—in the U.S. is that no one is in charge of setting decarbonization targets in the electricity sector while also meeting grid reliability. States set renewable targets, the Inflation Reduction Act (IRA) provides incentives for various technologies, and the Environmental Protection Agency (EPA) has proposed binding power plant emissions reduction targets, but fully decarbonizing the electricity sector requires coordinated, regional planning and targeted investments for specific types of resources, many of which are not yet commercially available.1 When resources providing essential reliability services—like balancing energy and operating reserves—are retired and are not replaced with assets providing similar capabilities, regional grid reliability is at risk, and so is the goal of fully decarbonizing the electricity sector. Encouraging greater regional integration can enhance grid reliability, but regional market structures do not, on their own, resolve the policy coordination challenges that must be addressed. A Regional Transmission Organization (RTO) takes advantage of all resources to meet load and reliability requirements, but RTOs rely on market prices alone to incentivize the resources that provide balancing energy needed to maintain reliable grid operations. Additionally, evidence shows that relying on market prices alone has not been enough to incentivize sufficient generation resources to meet reliability targets. While an Energy Imbalance Market (EIM) enables the sharing of balancing energy, individual participants remain responsible for meeting their own reliability requirements, and without planning and coordination, there is no guarantee that balancing energy will be available to share in real-time grid operations. The choice of a regional market structure is separate and apart from decisions about the procurement of the mix of generation resources that enable grid operators to keep the lights on in the first place. Coordinated, reliability-informed policy planning requires input from individual Balancing Authorities (BAs) and RTOs, who do not set policy but are responsible for maintaining reliable system operations with resources that enter and exit in response to policy targets. State regulators and state policymakers, who do set policy, must recognize their role in ensuring that the targets they set enable reliable grid operations now and in a future decarbonized system. Today, only two states, New York and California, are beginning to consider reliability-informed system planning and targeted incentives for the types of resources that can enable a fully decarbonized sector. A recent task force established by the U.S. Department of Energy, with the National Association of Regulatory Utility Commissioners (NARUC) and the National Association of State Energy Officials (NASEO), offers ways to begin addressing these challenges. The task force focused on the need for an aligned system planning process that considers generation resource adequacy, along with transmission system planning and distribution system planning.2 It also identified the fundamentals of system planning, mechanisms for considering policy goals within specific planning processes, and options for holistic planning in both restructured and non-restructured states. An important next step in the work of the NARUC-NASEO Task Force effort could be to consider how regional advisory bodies, national and regional reliability entities,3 and state-led institutions within different market structures could enable coordinated planning that meets resource adequacy and operating reliability needs now and throughout the transition.
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Kelli Joseph

Published in
United States of America
The World Resources Institute
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