Energy Challenges for US Summer Electricity Supply

July 21, 2022

By: Bob Martin, Managing Director

Most recent energy headlines focus on gasoline and diesel supply and prices, as well as the spike in natural gas costs. Yet there is another significant energy challenge looming that will potentially affect numerous parts of the US and millions of customers this summer—electricity supply and cost. The 2022 Summer Reliability Assessment by the North American Electric Reliability Corporation and the Electric Reliability Organization Enterprise, reported out by the Federal Energy Regulatory Commission (FERC May 2022) has raised several electricity generation, transmission capacity, and operational concerns. These issues will very likely result in isolated black-outs and/or significant spikes in the cost of electricity.

As shown below, the report identifies areas of the north and central Midwest, Southwest, and the entire western half of the US that have either “Elevated” or “High” risk for “insufficient operating reserves in normal or above-normal conditions”. By contrast, the Northeast, Mid-Atlantic and Southeast portions of the US have adequate supplies and sufficient operating reserves “to manage normal summer peak demand and are at a low risk of energy shortfalls from more extreme demand or generation outage conditions.” (Figure 1 below).

At the macro level, the potential shortfalls in electricity are due to:

Higher summer temperature projections for the summer of 2022 versus 2021 based on NOAA temperature outlooks;
Drought conditions across the western half of the US raising the risk of significant spikes in demand and reduced hydroelectric production;
Capacity shortages from generator retirements (coal and nuclear);
Increased demand in several pockets within certain regions;
Weak hydroelectric power generation and wildfire risk threaten electricity transfers from other regions.

States and local communities in northern and central areas of the Midwest, as well as the Midcontinental ISO region (MISO), face capacity shortfalls that may result in “high risk of energy emergencies” during normal peak summer conditions. Key issues include:

Generation capacity declined 2.3% since 2021, which results in lower reserve margins;
Peak demand projections have increased by 1.7% since last summer;
There is some risk of insufficient operating reserves at normal peak demands;
Potential for extreme temperatures and low wind conditions (affecting wind generation);
Damaged key transmission line connections will not be back online for the summer.

At the same time, areas in the Southwest and the western half of the US, including the Southwest Power Pool (SPP), Texas (ERCOT), and the many areas of the Western Electricity Coordinating Council (WECC), also face capacity shortfalls that may result in “high risk of energy emergencies” during above-normal peak summer conditions. Key issues include:

Decreased hydro generation due to drought and below-normal snowpack;
Projected extreme heat demand and low wind in Texas;
Reduced output capacity caused low water levels on the Missouri River typically used for cooling thermal generators in the SPP.

These potential electricity supply challenges in the US this summer continue to remind us that policy makers need to take a long-term, disciplined approach to energy planning in all sectors, especially electricity. The transition to renewable and low/zero carbon energy, including in the electricity generation and transmission sector, is critical. The path there needs to continue to utilize fact-based and realistic projections to create realistic plans.

Policy makers need to take a full view of US energy needs in both the short-term and in the long-term, including how we grow valuable renewable resources, like wind and solar, and upgrade the electric grid. The transition from baseload resources, like coal and nuclear power to solar and wind, must be done carefully and deliberately. It needs to be done with significant planning to allow for ample reserve capacity even as we rapidly add wind and solar.

US policy and planning for electricity must consider:

Reliability and capacity reserves;
How we add renewables (wind and solar especially) into the energy mix;
How base-load resources are being valued and retired;
The cost of electricity, especially to best minimize spikes in demand and cost;
How to manage the risks of climate change and natural disasters (droughts; flooding, tornados, hurricanes, and wildfires);
Adequate investments in the electrical grid; and
How we can best protect our national security and economy.

A comprehensive and clear US Energy policy, along with robust long-term planning are necessary to protect the energy reliability, cost and security of the US.

Bob Martin is a senior executive with vast experience in both government and business, leading and working with large and complex organizations, including in the utility and energy sector.

| — | | Most recent energy headlines focus on gasoline and diesel supply and prices, as well as the spike in natural gas costs. Yet there is another significant energy challenge looming that will potentially affect numerous parts of the US and millions of customers this summer—electricity supply and cost. The 2022 Summer Reliability Assessment by the North American Electric Reliability Corporation and the Electric Reliability Organization Enterprise, reported out by the Federal Energy Regulatory Commission (FERC May 2022) has raised several electricity generation, transmission capacity, and operational concerns. These issues will very likely result in isolated black-outs and/or significant spikes in the cost of electricity.As shown below, the report identifies areas of the north and central Midwest, Southwest, and the entire western half of the US that have either “Elevated” or “High” risk for “insufficient operating reserves in normal or above-normal conditions”. By contrast, the Northeast, Mid-Atlantic and Southeast portions of the US have adequate supplies and sufficient operating reserves “to manage normal summer peak demand and are at a low risk of energy shortfalls from more extreme demand or generation outage conditions.” (Figure 1 below). |

| — | | Most recent energy headlines focus on gasoline and diesel supply and prices, as well as the spike in natural gas costs. Yet there is another significant energy challenge looming that will potentially affect numerous parts of the US and millions of customers this summer—electricity supply and cost. The 2022 Summer Reliability Assessment by the North American Electric Reliability Corporation and the Electric Reliability Organization Enterprise, reported out by the Federal Energy Regulatory Commission (FERC May 2022) has raised several electricity generation, transmission capacity, and operational concerns. These issues will very likely result in isolated black-outs and/or significant spikes in the cost of electricity. |

| — | | ost recent energy headlines focus on gasoline and diesel supply and prices, as well as the spike in natural gas costs. Yet there is another significant energy challenge looming that will potentially affect numerous parts of the US and millions of customers this summer—electricity supply and cost. The 2022 Summer Reliability Assessment by the North American Electric Reliability Corporation and the Electric Reliability Organization Enterprise, reported out by the Federal Energy Regulatory Commission (FERC May 2022) has raised several electricity generation, transmission capacity, and operational concerns. These issues will very likely result in isolated black-outs and/or significant spikes in the cost o |

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Energy Challenges for US Summer Electricity Supply

July 21, 2022