Winter Preparedness and Resource Adequacy Outlook
Winter temperatures are important when analyzing the impact to power prices and overall grid reliability. This winter, a weak La Niña is expected to develop and lead to colder temperatures than what we’ve seen the past two years. Typical La Niña winters can bring overall warmer than normal temperatures, but there is still the risk of colder than normal periods especially during January and February. Currently, a very cold pattern is expected for the rest of December and into early January. Some long-term models are showing volatility in the pattern for the rest of January, but most of the information suggests a colder than normal February. A long lasting is more likely across the northern tier of the U.S. with more volatility across the southern U.S.
In late November, the North American Electric Reliability Corporation (NERC) published its Reliability Assessment (WRA) to assess winter reliability in the North American Power Grid. In addition to this report, many regional Independent System Operators (ISOs) have also published individual winter reliability assessments detailing peak demand forecasts and addressing potential reliability concerns. Overall, the findings of these reports indicate no reliability concerns in the Northeast, PJM, MISO and ERCOT for the coming winter. There is some concern around potential gas shortages in southern California if extreme cold weather events occur. This concern is because Aliso Canyon is still operating with restricted volumes and several natural gas transmission pipelines that the Southern California Gas Company (SoCalGas) relies on are out of operation.
For a more detailed outlook for specific ISOs, see below:
New York Independent System Operator (NYISO)
According to NYISO, the New York electric system has the capacity to meet demand this winter and sufficient reserves to meet demand should extreme weather conditions arrive during the season.
- NYISO expects to have 44,557 MW of capacity resources available this winter through a combination of resources including generation, imports, and demand response.
- NYISO forecasted winter peak demand is expected to reach 24,365 MW, just above the 24,164 MW peak last winter which occurred when temperatures were above the 10 and 20-year averages.
- NYISO’s all-time winter peak was set in 2014 during the polar vortex. The peak came in at a whopping 25,738 MW.
- Operating reserves are required by NYISO to be available in the event of an outage or unforeseen surge in consumption. Each day, the grid operators maintain over 2.6 GW of additional resources above the forecasted peak for the day.
Independent System Operator of New England (ISONE)
ISONE found that their electric system also has capacity to meet demand this winter, although challenges will remain due to generation retirements and regional fuel constraints. The Winter Reliability Program, a program that provides demand-response resources that may be called on 30 times and incentives for reliability, has been a key factor in New England’s fuel security. However, this winter will be the last to utilize the program – which will be replaced by the Pay-for-Performance market in late 2018.
- The forecasted winter peak in ISONE is similar to last year’s forecast; a 50/50 peak forecast of 21,197 MW and a 90/10 forecast of 21,895 MW. Last year’s forecasts were 21,340 MW and 22,029 MW, respectively.
- Last year’s actual winter peak in ISONE was 19,673 MW which occurred in December.
- ISONE’s all-time winter peak was set January 2004 at 22,818 MW, but an increase in energy efficiency and demand response programs have helped reduce winter peaks year-over-year.
- Operable capacity is required by ISONE to have a surplus using the capacity surplus obligation. The ISO has found that capacity meets requirements in the 50/50 and 90/10 forecast.
PJM Interconnection (PJM)
Based on PJM’s winter 2017-2018 Seasonal Assessment of Resource Adequacy (SARA), the forecasted peak demand is expected to reach 135,526 MW this season. This is well above the 130,689 MW peak from last winter.
- PJM expects to have 184,926 MW of electric resources to meet the forecasted peak demand of 135,526 MW.
- Last winter, with milder-than-average temperatures, the winter peak of 130,689 MW was set on December 15, 2016.
- PJM’s all-time winter peak is 143,295 MW, which was set on February 20, 2015.
Midcontinent Independent System Operator (MISO)
According to MISO, this system also has the capacity to meet demand this winter despite increased competition for natural gas due to growth of gas-fired generation and firm transportation capacity contracts. As pipeline infrastructure continues to grow, bringing more gas into the region, production freeze-offs remain a risk in winter supply.
- MISO expects to have 142 GW of electric resources available to meet the forecasted peak demand of 103.4 GW this winter.
- In MISOs probable reserve margin scenario, they forecast 38.5 GW of reserves in a normal weather scenario. During high load and extreme outage scenarios, MISO may need to rely on “energy only” resources like Behind-the-Meter generation and Demand Response to meet peak demand.
- MISO’s all-time winter peak is 109,000 MW that was set in January 2014.
Electric Reliability Council of Texas (ERCOT)
ERCOT is expected to see adequate generation this winter with load expected to peak at 61,000 MW. ERCOT is traditionally a summer peaking market where load peaks around 69-71,000 MW.
- The forecasted winter peak demand is expected to exceed 61,000 MW, well above the 59,650 MW winter record set in January 2017 based on ERCOT’s winter 2017-2018 Seasonal Assessment of Resource Adequacy (SARA).
- Over the course of this winter, ERCOT will see the retirement of three large coal plants and older gas steam turbine plants totaling 4,273 MW or approximately 5% of generating capacity.
- ERCOT expects approximately 81,000 MW of capacity to be available this winter, with an additional 1,400 MW of new generation coming online that is comprised mostly of wind and solar.
California Independent System Operator (CAISO)
While CAISO has not published and official winter assessment, the big-ticket item this winter in California is the ongoing restricted volumes at Aliso Canyon as well as regional pipeline infrastructure issues. Currently, Aliso Canyon storage is limited to ~23 Bcf of overall storage out of 83 Bcf. Recent wildfires caused transmission issues that have boosted regional gas fired generation, but the fires should die down in the coming weeks. Regional pipeline infrastructure issues highlight the potential for supply constraints. Some of the key natural gas outages affecting SoCalGas delivery to its customers include:
- October 1- A rupture on SoCalGas Line 235-2 in the Northern Zone has reduced deliveries to SoCalGas through the Northern Zone by 800 MMcf/d through December 25, with 450 MMcf/d remaining out of service indefinitely.
- November 16- An unplanned outage because of a natural gas quality issue reduced receipts from Transportadora de Gas Natural de Baja California (TGN) at Otay Mesa in the Southern Zone to zero through December 1.
- December 1- A force majeure on the Mojave Pipeline Company’s Mojave 2, has reduced capacity by 80 MMcf/d from December 1–31.
- December 5- Planned repairs on SoCalGas Line 2000 at Ehrenberg/Blythe in the Southern Zone reduced capacity by 200 MMcf/d from December 5–15 and will reduce capacity by 150 MMcf/d from December 18–20.
These factors could contribute to unexpected, but possible reliability events. SoCalGas has implemented mitigation measures to address potential issues, but they will not fully eliminate reliability risks this winter in Southern California.
Protecting Against Volatility
NERC and regional ISOs take serious measures to ensure reliability during the winter months, when transmission constraints and weather-related issues can impact the grid. Overall, most of the US should have the capacity resources needed to meet demand this winter season, but resource availability does not necessarily translate to stable market prices.
Sustained cold weather can introduce price volatility and as gas-fired generation becomes more prevalent in the overall fuel mix, this is especially true in regions that are gas constrained. One of the best ways to minimize the impact of market fluctuations is by creating a strategic energy management plan. Constellation’s dedicated market professionals can work with you and your business to recommend customized purchasing strategies that minimize winter risks and help protect against price volatility.