Despite some improvements over last year, a long-term assessment by the North American Electric Reliability Corporation (NERC) depicts an uncertain future for the reliability of the bulk power system between now and 2017.  Out of fifteen regions identified, seven are expected to dip below recommended capacity margins in the next five years. 

NERC compiles its annual “Long-Term Reliability Assessment” using an active peer review process.  Each region conducts a self-assessment looking at existing and planned generation and transmission capacity, along-side projected peak demand.

According to the report nearly 25,000 MW of coal generation is still slated for construction in the ten-year period; however, the recent trend of cancellation and deferral of coal-fired plants casts doubt on many of these projects.

The uncertainty surrounding coal has led in the near term to greater reliance on natural gas, which brings increased risks for both reliability and affordability of electricity. 

An NRECA survey of generation and transmission cooperatives (G&Ts) conducted earlier this year confirms trends identified in the NERC assessment.  In 2007, G&Ts indicated that over the following ten years, coal-fired capacity would account for nearly two-thirds (68 percent) of total planned capacity additions whereas gas-fired capacity accounted for one-quarter (25 percent) of additions. 

This year’s survey results indicate that plans for new coal additions declined .  This decline, coupled with a sizable increase in planned new gas-fired capacity, has pushed  coal’s share of projected new capacity additions  down to 39 percent while gas is up to 53 percent.  Moreover, the survey shows that plans to build new coal capacity are being scheduled further back into the 10 year schedule, perhaps until there is more certainty with respect to outstanding financing and environmental issues. 

While building a natural gas plant, either combined cycle or combustion turbine, costs less than building a coal plant, the volatility of gas prices will almost certainly impose higher operating cost pressures on consumer members over the long term.

“The NERC assessment underscores the need for a pragmatic, workable federal energy policy,” said NRECA CEO Glenn English.  “Utilities need a sound plan for how to meet energy supply needs over the next ten years without imposing undue costs on consumers.  An increased reliance on natural gas can only be a stop-gap measure: volatility in price and uncertainty over future supply makes such a shift unsustainable over the long term.”

Over the longer term, according to the assessment, utilities report a potential of 145,000 MW of nameplate wind and 9,000 MW of new nuclear generation.

The continued implementation of demand response technology is also a factor.  Load shifting through demand response is helping decrease peak demand. By 2016, utilities expect to be able to shave around 1 percent from demand during peak periods.

In addition to issues surrounding energy supply, the 2008 Long-Term Reliability Assessment also highlighted difficulties posed by inadequate transmission. 

“We need more transmission resources to maintain reliability and achieve environmental goals,” commented Rick Sergel, president and CEO of NERC. “Transmission lines are the critical link between new generation and customers, yet we continue to see transmission development lag behind generation additions. Faster siting, permitting, and construction of transmission resources will be vital to keeping the lights on in the coming years.”