NERC: Reserve Margins Down but Adequate

Posted by Cooperative Finance Corporation - December 9th, 2011

DECEMBER 5, 2011

A decrease in projected generation resources has led to narrowed reserve margins in some regions, although most appear to have adequate resource plans to meet projected peak demands in the coming decade, according to the North American Electric Reliability Corporation’s (NERC) 2011 Long-Term Reliability Assessment.

“Though sufficient conceptual resource plans are in progress, for the ERCOT portion of Texas and for New England more certainty is needed to address resource adequacy in the coming years,” NERC President and CEO Gerry Cauley said in announcing the report. “We will monitor these two areas in the upcoming year for progress in firming these resource projections.”

Several variables could affect future grid reliability, including a growing dependence on natural gas as a fuel source; significant growth in variable sources of generation such as wind and solar power; increases in demand-side management that offset future resource needs; transmission growth in support of remote sources of renewable energy; and existing and proposed U.S. environmental regulations—a highly likely risk, according to the report.

The report addresses four regulations from the U.S. Environmental Protection Agency in particular: the proposed Coal Combustion Residuals rule, the proposed Cooling Water Intake Structures rule, proposed Mercury and Air Toxics Standards for Utilities, and the final Cross-State Air Pollution rule.

If all four regulations are implemented, they could necessitate between 576 and 677 coal-fired unit retrofits—totaling 234 to 258 GW of capacity—by the end of 2015, according to NERC.

“The industry faces considerable operational challenges to complete, coordinate and schedule the necessary environmental retrofits,” Cauley said. “To ensure bulk power system reliability, sufficient time and certainty to schedule retrofits of more than 500 units, as well as acquire replacement resources or prepare system reinforcements, is needed.”

The full 559-page report is available for download from NERC’s website.

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