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At a forum intended to spark discussion about the fragile state of New England’s electric grid, State Rep. David Arconti, D-Danbury, had a clear question in mind – can the problems be solved in a deregulated energy market?
Arconti posed the question to a series of panelists during a wide-ranging, five-hour discussion at the Energy and Technology Committee’s Tuesday forum, “Staring into the Storm.”
While most panelists offered a steady refrain that the shortcomings of the current market are correctable, Arconti said he believed the root problem was the decision in 1998 to replace a system of state-regulated utilities generating their own power, with a market where those utilities bought power from third-party power plants.
Arconti said he didn’t think his constituents think deregulation and competition have improved the electric system – especially after ISO-New England warned last year that there was a risk of rolling blackouts or other “load shedding” measures because of fuel shortages this winter.
Arconti said he’s become more and more convinced that returning to a vertically-integrated grid would be the best way to ensure reliability, transparency and accountability – even though he acknowledged that the change back would be expensive, and likely impossible.
Arconti warned that the fragility of the system has to be resolved, given the risk that people in Connecticut could die if there are rolling blackouts during a winter cold snap.
“In a competition, somebody has to lose, and in a load-shedding event, the loser is going to be all of us and the residents of Connecticut, and that’s not acceptable,” he said.
Panelists say reform is possible
Grid operator ISO-New England President Gordon van Welie said that no power system in the world is designed to never suffer a power outage. The goal, he said, is instead to minimize disruption as much as is practical, and to control when these outages occur.
“Really what this all boils down to is, how much money do we want to spend on the insurance?” van Welie said. “We’ve got a trend where weather is becoming more extreme, our fuel system is becoming more constrained, and it brings to the surface questions of: how much insurance do we want, who pays for it, and where do you want to spend the money?”
Van Welie said the energy supply chain is the primary risk for New England’s grid – especially for the gas-fired plants that the states count on to balance intermittent sources of electricity, like wind and solar power. Outages are a particular concern during polar vortex events, he said, when the forecast is unpredictable and the cold can reduce the reliability of equipment.
“There are things we can do as a region so that we can ride through these events, but it’s going to come down to whether or not we can pay – and ultimately consumers have to pay,” van Welie said. “The consumers also have to look at the consequences of the controlled outages, and so I think that’s the judgment that we have to make, and we have to make it collectively as a region.”
Arconti asked whether the market had the tools to solve the reliability problem, noting that a program to ensure that power plants maintain adequate reserves of fuel in case of a drop in temperatures appeared to work well until federal regulators ended it.
Van Welie said, simply, the ISO can’t do anything unilaterally. It can advance proposals to the Federal Energy Regulatory Commission for its approval, and even with federal approval, a proposal could end up being appealed in court.
“I just want to dispel the notion that we’ve somehow got magical powers to solve every problem out there,” van Welie said.
Arconti asked if there was anyone who could hold the ISO accountable, recalling that under the vertically-integrated system, utilities could be brought in front of state regulators when they didn’t “hold up their end of the bargain.”
Van Welie replied that the ISO was accountable to federal regulators, and to its member states.
Katie Dykes, commissioner of the Department of Energy and Environmental Protection, suggested that ISO had more power than van Welie was letting on. Dykes said the grid operator should be finding its own solutions and posing them to the states and to federal regulators, not waiting for the states to come up with solutions.
“We are eager as states to be more involved with the ISO. We certainly should not relieve them of their responsibilities,” Dykes said. “They are the ones responsible for this. They have the best information about our grid challenges.”
Arconti posed a similar question to representatives of United Illuminating, asking if the market could really solve for reliability. In a competitive market, Arconti said, someone has to lose.
Alan Trotta, United Illuminating’s senior regulatory director, said that market solutions could work, but that a short-term solution was needed to procure enough fuel in reserve over the next few winters, while a longer-term market solution could be devised to incentivize plants to maintain sufficient quantities of fuel. Power plants won’t make needed changes on their own, said Trotta, who emphasized the need for a market solution.
Dykes said she didn’t think the only two options were to continue with the market as usual, or return completely to having vertically-integrated utilities. But to ensure the needed reforms, she said, ISO would need to improve its transparency, especially in working with the member states. Dykes said that several of the states are already working together to propose reforms to the ISO.
“Ultimately, competition I think has been a good thing for ratepayers, and we have been talking about reforms to the market that would harmonize and perhaps create a hybrid, where states continue to pursue their goals, but in shared regional markets that embrace competition,” she said.
Arconti wasn’t convinced.
“At the end of the day, the merchant generators are making business decisions,” Arconti said. “For a merchant generator to make a business decision on something that could literally cause life and death, I think that’s something we need to reconcile.”
Fatal trio
Meredith Angwin, the Vermont-based author of Shorting the Grid: The Hidden Fragility of Our
Electric Grid, who participated in the forum, explained that New England had the “fatal” trio of factors that make an electric grid fragile.
One is an overreliance on renewable sources of energy that start and stop on their own schedule, like wind and solar.
The second is relying on “just in time” resources like natural gas to fill in when the renewables aren’t running – which becomes a problem when the fuel for those resources doesn’t arrive in time.
The third is relying on connections to neighboring grids that are dealing with the same weather, and will need more power at the same time.
Angwin recounted public recriminations after the February 2021 blackouts in Texas during an expected cold snap.
“After Texas, there were immense numbers of op-eds and Twitter storms saying, ‘See, wind failed.’ Or ‘No, no, don’t you understand, it was natural gas, it was a fossil fuel,’” said Angwin, who encouraged state officials instead to consider each facet of the problem. “It’s the mixture. It’s backing up wind, or renewables which have their own schedule, with a fossil fuel that’s delivered just in time.”
Dykes said the goal of deregulating the energy market in 1998 was to provide a more affordable and reliable supply of electricity.
During the 1980s and 1990s, electric customers in New England were upset about the cost of building and maintaining power plants, especially after cost overruns on nuclear plants, said Dykes, who explained that deregulation was intended in part to protect customers from the risks of those large capital investments.
But in the push to deregulate, Dykes said, the state overestimated the number of power plants that would be built by third-party power generators to supply the grid, and failed to ensure that there would be enough fuel to run those plants.
Power plants have every reason to lower costs as much as possible, because they bid into auctions that, by rule, select the lowest-cost generator, said Angwin. Purchasing additional oil to have on-hand raises costs and lowers the odds of a project being selected at auction – so they won’t buy it.
And it’s not clear who is responsible for making sure there is enough fuel to meet demand, Angwin said.
“We use more natural gas as we close off coal plants or nuclear plants, and the fuel is turning into natural gas, and we don’t have new pipelines,” Angwin said. “So we’ve ended up being more reliant on [liquefied natural gas] deliveries. We’re on an international market for LNG, we have to pay a lot of money for it, and we can be outbid any day by Asia or Europe.”
State Sen. Norm Needleman, D-Essex, co-chair of the Energy and Technology Committee, said lawmakers should keep three goals in mind with their energy policy: reliability, cost and reducing carbon emissions. The point of the forum was to spark discussion on how those goals could all be achieved on the regional grid, but the lack of an entity with “overarching responsibility” for those goals is a challenge, he said.
“I want us to be mindful as a legislature, as we move ahead with policy, to make sure we’re mindful of cost and we’re mindful of reliability as we proceed to mitigate the impact of climate change one state at a time,” Needleman said. “It’s not an easy topic.”