A Free-Market Energy Blog

Smart Grid Problems Revealed: The NERC Study

By Kent Hawkins -- August 4, 2010

The North American Electric Reliability Corporation (NERC), an international regulatory authority whose purpose is to ensure reliability of the bulk power systems in North America, has just released a study on the Reliability Impacts of Climate Change Initiatives. It provides a comprehensive review of future reliability risks including smart grid initiatives. NERC appropriately looks at a number of future time frames, or horizons, which provide perspective in its analysis – 1-10 years, 10-20 years, and 20-plus years (up to 2050).

A review of the NERC study by Environment & Energy Publishing (E&E), reproduced as an appendix to this post, noted:

“A task force on climate change formed by North American Reliability Corp. urges that policy makers not count on large amounts of renewable energy, demand reduction from smart grid systems or new storage technologies before they prove they can be worked into the grid without endangering the system’s reliability.”

The study, E&E notes, sounded a very cautionary tone about the prospects of the ‘smart grid’:

  • The magnitude of the electricity system transformation required
  • The policy assumptions of (1) the timely availability of two transformational technologies – vehicle-to-grid systems (V2G) and carbon capture and sequestration (CCS) – the potential for which will not be known for decades, as well as (2) yet-undeveloped storage technologies
  • The aggressive timetables of climate change measures
  • The necessary mitigation measures in the event that policy assumptions are not realized, including the possible need for a substantial number of additional nuclear plants, which have long lead times for implementation
  • Cyber threats to smart grid technologies
  • The complexity of the interdependence of bulk power systems and regional networks   

What is the Smart Grid?

No one knows. The concept is evolving, and will take decades of development before it is fully understood.

The DOE provides a description of the smart grid in a brochure, which has been critically reviewed previously here, it claims that a “smarter grid,” that can be deployed “within the very near future or already deployed today,” is a necessary prelude to the smart grid. It lists the following vague benefits (emphasis added):

  • Ensuring its reliability to degrees never before possible.
  • Maintaining its affordability.
  • Reinforcing our global competitiveness.
  • Fully accommodating renewable and traditional energy sources.
  • Potentially reducing our carbon footprint.
  • Introducing advancements and efficiencies yet to be envisioned.

And these are supposed to be realized with the now proposed grid measures, including substantial capacity upgrades and smart meters, to allow large implementations of wind plants, which have questionable environmental benefits.

Is this starting us on the right path? Read on and decide for yourself.

[Editor’s note: For more commentary on the smart grid click on the Smart Grid sub-category under Policy Issues. The NERC report is recommended reading for a more complete understanding of the issues.]

Peter Behr, “Monitor Urges Utilities to Go Slow on Smart Grid Renovations,” E&E News, July 27, 2010

A report by the operations monitor of the North American electricity grid, issued today, raises a large yellow caution flag over climate policy initiatives that would require a massive change in the nation’s power and transmission infrastructure.

A task force on climate change formed by North American Electric Reliability Corp. urges that policymakers not count on large amounts of renewable energy, demand reduction from smart grid systems or new storage technologies before they prove they can be worked onto the grid without endangering the system’s reliability.

Deep cuts in generators’ greenhouse gas emissions require an unprecedented transformation from current generation, says Mark Lauby, NERC’s director of reliability assessment and performance analysis.

“One of our main concerns is looking at the technology and realizing this is a 1-million-megawatt system. What kind of time is required to integrate new technologies?” Lauby said in an interview.

Vehicle-to-grid (V2G) systems and carbon capture and sequestration (CCS) are two transformational technologies whose potential won’t be known for a decade or more, says the task force, whose members included representatives of investor-owned power companies and cooperatives, grid managers, a consumer organization and the Energy Department, among others. It was chaired by Ben Crisp, director of system planning and regulatory performance for Progress Energy Florida in St. Petersburg , Fla.

The report, “Reliability Impacts of Climate Change Initiatives: Technology Assessment and Scenario Development,” considers how the reliable operation of the grid could be affected if the U.S. adopted carbon reduction goals at the levels of the House-passed “American Clean Energy and Security Act of 2009.”

The bill calls for greenhouse gas emissions reductions below 2005 levels of 42 percent by 2010 and 83 percent by 2050. The report was finished before climate legislation died in the Senate last week.

“We’re not trying to paint a picture that we can’t get there,” Lauby added, speaking of the goals in the House legislation. “We need to consider what does that do to the reliability of the system? I think the major concern I have is that enough time is provided so that industry can gain experience with these technologies.”

Worries about timetables that won’t be met

New climate policies could create timetables that may not be met, the report says. “If CCS [carbon capture and storage needed for coal-fired power plants] isn’t commercial by 2025, then what?” asked John Moura, NERC’s technical analyst on the project.

Advocates for climate change measures and new clean energy technologies may fault the task force’s work as too conservative or too protective of the interests of energy companies that operate the generation and transmission infrastructures today.

The report clearly calls for building new power systems on top of the grid’s existing regional organization, suggesting that is the reality.

“While the carbon emission targets may be common to all jurisdictions, the impacts will be regional. There are significant differences in generation, transmission, and distribution infrastructure” across North America , producing different levels of carbon emissions. Meeting national carbon reduction targets “will have significant and varying regional impacts,” the task force said.

“Regional solutions are needed to respond to climate change initiatives, driven by unique system characteristics and existing infrastructure,” the report says. It concludes that “a concerted, North-American-wide cooperative effort will be required to meet the goals of climate change initiatives while maintaining regional reliability of the bulk power system.”

The report provides a general assessment of challenges that may lie ahead in restructuring the industry, including construction of a large number of new nuclear plants; widespread demand-side management with strong consumer involvement; new or upgraded transmission lines, or both; integration of wind, solar and biomass; and expansion of smart grid technologies with strong cyber threat defenses. It does not express preference for any particular option.

Will millions of electric cars cause blackouts?

Lauby said there were active discussions among task force members and advisers about when federal or regional policies should prevail, and over the current split between the bulk power high-voltage transmission grid and the local utilities’ distribution systems that deliver power to customers. In many parts of the country, these networks are managed by different companies.

NERC’s authority does not reach the distribution network, and local utilities have lobbied to keep it that way. But increasingly, businesses and residences may become generators of power as well as users, as rooftop solar units multiply. Millions of electric-power vehicles may become linked to the grid, taking and contributing power. These trends could compromise the reliability of the bulk power system if not handled properly, the task force said. “The bulk system needs more visibility into the distribution network,” Lauby said.

The task force did not provide a road map for managing the grid’s transformation, but it expressed concerns about how key pieces of the transformation will fit together.

Climate change policy could speed up the retirement of many older fossil fuel generators, particularly “smaller, older, and less efficient coal plants, which are responsible for most of the load-following, voltage support, and other ancillary services in part of North America .” The need for such services will grow, however, as more wind and solar power is tied to the grid. New technologies to fulfill this need are still being developed.

The task force report describes a future of risks in which new ways of keeping the grid going will have to appear as old ones vanish, a balance likely to involve different actors whose investment timetables may not match.

In the 2030-2050 period, large coal units that now meet baseline power needs could be shut down because of the cost of carbon capture and sequestration, the task force said. To keep them online, CCS must work. That requires construction of a large-scale pipeline network to deliver chemicals required for the process and to take away captured CO2 for storage. This infrastructure “will require the development of what will essentially become an entirely new industry.”

What happens when older nuke plants die?

Between 2025 and 2030, the majority of the current 104 nuclear plants on the grid will have to be retired because their reactor cores will have “reached the end of their useful lives.” There is currently no means for replacing them.

“It is vital that climate change initiatives consider the impact on unit retirements, including their contributions to capacity and operational flexibility, to ensure reliability of the bulk power system,” the task force said.

“Vehicle-to-grid electrical storage can provide multiple benefits,” including additional capacity that would delay or eliminate the need for peaking generation, and strengthening “spinning” reserves that provide fast-response backup to maintain voltages and frequency levels, it said.

“The total effect on reliability will be to stabilize power quality and the grid overall by balancing the voltage in the grid. However, V2G technology will not be commercially available to enable full integration into the grid for another ten to 20 years.”

There is significant potential to lower peak power demand by increasing demand response programs for large businesses. Residential demand response has an even greater potential, but only if grid managers can count on the programs to cut power in emergencies and peak periods. “It is not clear if smaller customers will resist mandatory real-time pricing and other incentives to change their energy use,” the task force said.

The task force urged that NERC continue to assess reliability challenges as climate policies evolve; support development of critical new technologies, tools and skills; and keep upgrading reliability standards.


Substantial work in architecture, engineering and technologies must be done to flesh out the plan and verify its feasibility.  We need to start on this journey now, but on the proper path. Any hasty, even revolutionary, implementation of major measures is not advisable at present. There may be current need of grid improvements for “normal” capacity upgrades and to increase reliability, but calls for substantial grid extensions, capacity upgrades, and demand management measurement devices (primarily smart meters) to allow the connection of large-scale integration of intermittent renewables is unwise. Such hasty initiatives will likely lead to large future stranded costs if they do not fit into the evolving understanding and technologies needed for practical long-term grid improvements.


  1. Jon Boone  

    I would be more encouraged about NERC’s concern about the various unreliable bees buzzing about North America’s grid systems if the organization began to do some realtime modeling analysis showing what some of these bees, if unloosed, would likely do. For example, last year when the NREL maintained that wind could provide 20% of the electricity for the eastern United States, why didn’t NERC develop a simulation showing precisely what this would do for maintaining reliable, affordable, secure electricity production and distribution? As a sidebar to its concern about reliability, NERC could also have attempted to measure wind integration effects on fossil fuel usage and greenhouse gas emissions, since these are collateral concerns for policy makers.

    As it is, organizations like FERC and NERC too often gnostically twiddle their collective thumbs, inscrutably keeping their concerns packed in bureacrateze, evidently content to let politicians of every stripe politicalize–jeopardize–our system of electricity.

    Glad to see with this report some signs of life, even an attempt at public service.


  2. Mark Lively  

    For the Smart Grid to work we need Smart Pricing, a real time market for electricity that has prices that can vary by orders of magnitude in a matter of seconds. We typically think of prices changing by a factor of two or three in regard to the difference between the cost during the day or night. But those extremes are not enough.

    My analysis of the ERCOT electricity market (Renewable Electric Power—Too Much of a Good Thing: Looking At ERCOT. August 2009 issue of Dialogue, by the US Association for Energy Economics, predating Kent’s Dialogue article by a year) shows how prices in ERCOT go negative. So lest anyone think that my comment about prices changing by orders of magnitude is extreme, negative prices, which are produced by functioning markets, are even more extreme.

    But the prices need to change rapidly. Some markets around the round include a reserve service where generators are supposed to respond within six seconds. I say we need change such offerings to being energy markets, paying for deliveries over such short periods of time. But for an energy delivery over six seconds to be “real money”, the price of that energy needs to be extreme.


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