Early Power Retirements Contributing to Energy Scarcity This Summer Warns NERC

Summer is here and the North American Reliability Corporation (NERC) warns that two-thirds of the United States can see energy shortages if demand surpasses normal summer peak demand. According to NERC’s 2023 Summer Reliability Assessment, the growing gap between available supply and peak demand is caused by the early retirements of firm generating capacity, including natural gas.

Summer Reliability Challenges

The 2023 report continues NERC’s consistent warnings of tight electric supplies as states retire firm generating capacity or fail to invest in new capacity to meet rising demand. According to this year’s report:

“The elevated risk outlook is driven by a combination of conventional generation retirements, a substantial increase in forecast peak demand, and an increasing threat to reliability from a wide-spread heat event.”

Although NERC makes it a point to note that the growth of renewables is making a positive impact, they aren’t enough on their own to meet the entire demand. The intermittency of renewables has to be met with the firm capacity of natural gas and other fuel sources if policymakers want to keep the lights on.

President and CEO of NERC Jim Robb put a finer point on the role of natural gas in the reliability and rising deployment of renewables when he recently testified before the Energy and Natural Resources Committee:

Natural gas will remain essential to reliability for total energy and as a balancing resource. In many areas, natural gas-fueled generation is needed to meet energy demand during shoulder periods between times of high and low renewable energy availability…And on a daily basis in areas with significant solar generation, the natural gas fleet is a flexible generation resource to fill the gap.” (emphasis added)

Additional natural gas and renewables deployment can support grid resiliency and continue the record emission reductions that the United States has seen since 2005. And the few regions that understand this are shown as low risk on NERC’s Risk Area Summary.

Source: 2023 Summer Reliability Assessment

PJM Interconnection – one of the few areas at low risk – identified policy-driven retirements of firm capacity as a threat to reliability in a report earlier this year, and has planned to bring additional natural gas plants online. Meanwhile, Midcontinent ISO (MISO) and Southwest Power Pool (SPP) could be forced to perform rolling blackouts if they see low wind output and high demand.

But at the rate of current energy project deployment, it isn’t possible to build a way out of the problem because capacity retirements are happening faster than they can be replaced. Even Texas, which has seen an 8 percent growth in natural gas power generation and 4GW of solar deployment – enough to power 3 million homes – is at risk. Summer just began and already ERCOT has called for voluntary energy conservation as it watched for a “projected reserve capacity shortage” during the afternoon peak on June 20.

In his testimony, Robb calls for the retirement of traditional units to be managed, until energy, capacity, and essential reliability services are fully replaced.

Bottom Line: NERC finds that the retirement of power generators is reducing firm capacity at an unsustainable rate. Policies that have favored renewables and forced older plants offline across the United States are failing to account for natural gas’ important role as a balancing resource and enabler of renewable deployment. Between a lack of natural gas generation, increased demand, and the possibility of higher temperatures this summer, residents could pay for policies that have ignored reliability in favor of less diversity in the energy mix.

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