Join World Resources Institute on December 13 for a webinar that explores grid reliability in the United States and how to help state decisionmakers, regulators, RTOs, and other key stakeholders understand what is needed in the immediate and long-term to build a more reliable grid.

1. MEETING THE GRID RELIABILITY CHALLENGES
OF THE CLEAN ENERGY TRANSITION
KarlHausker, Ph.D. KelliJoseph, Ph.D.
Senior Fellow Senior Fellow
khausker@wri.org kelli.joseph@gmail.com

2. Agenda
• Presentation
• Kelli Joseph presents new working paper
• Comments by
• Karen Palmer, Director, Electric Power
Program, Resources for the Future
• Steve Corneli, Principal, Strategies for Clean
Innovation and Board Member, ISONE
• Q&A
• Submit in Q&A Zoom box
Check out the new paper and previous WRI
workshops:
https://www.wri.org/initiatives/
electricity-market-design
Or search “market design” at wri.org

3. Meeting the Reliability Challenges
of the Clean Energy Transition
Kelli Joseph, PhD
Senior Fellow in Electricity Market Design
World Resources Institute

4. Meeting Paris Agreement Targets … The U.S. Challenge
U.S. Nationally
Determined
Contribution
(NDC)
States with
various clean
energy targets
No National
Electricity Policy
And no one in charge of setting decarbonization
targets while also meeting grid reliability.

5. Outline
• What is grid reliability?
• What are grid reliability challenges as the resource mix
changes?
• What are regional market structures for grid operations?
• Why are there different market frameworks for generation
procurement across the United States?
• What kind of coordinated planning is needed?

6. What is grid reliability?
North American Electric Reliability Corporation (NERC):
1) Resource Adequacy = Loss of Load Risk Assessments
(“planning”)
2) Operating Reliability = To withstand sudden disturbances
(“operations”)

7. What happened in Texas during Winter Storm Uri?
Source: ERCOT

8. Challenges as the Resource Mix Changes
• Resources that can produce at all times
• Meeting “Net” Load
• Flexible, Dispatchable Resources that are Quick-Start and Fast-
Ramping
Growing sources of uncertainty
• Generation output
• Electrification Targets (heating + transportation)
• Changing and extreme weather
• Customer-sited generation (not visible to bulk grid operators)

9. Reliable Grid Operations (“Ancillary Services”)
• Balancing Energy
• Flexible Generation Resources
• Fast-Start
• Quick-Ramping
• Operating Reserves
• Produce within 10 min/30 min
• Once deployed, must be replaced within
60-90 min
Today
provided by
batteries
and gas
generators…
And both are
limited

10. Regional Market Structures
Regional Transmission Organizations (RTOs)
Energy Imbalance Markets (EIMs)

11. Regional Integration: RTOs and EIMs
EIM = Enables some regional
coordination across different
BAs (RTO managed)
Regional Integration provides a
“Diversity Benefit” that helps
mitigate net load uncertainty
RTO = Type of BA, wide
area, many utilities
Balancing
Authorities (BAs)
manage
supply/demand in
real-time
operations
… But focus on which structure
ignores coordination needed to
enable regional benefits

12. Key Differences between an RTO and an EIM
RTO EIM
Ancillary services
providing regional
benefits in real-time
system operations
Balancing Energy and
Operating Reserves
Serves as the Ancillary
Services supplier of last
resort
Balancing Energy only
and only as a last resort
BAs participating in an
EIM are not to “lean
on” their neighbors

13. How are the resources needed to meet
operating reliability needs procured?

14. States have different market frameworks
within these different market structures
RTOs EIMs
Various market
frameworks, depending
on the state.
Outside of the EIM market,
through utility IRP
processes.
No regional procurement
coordination for balancing
resources (prices alone).
No regional procurement
coordination for balancing
resources.

15. Challenges with relying on prices alone
• Idea = Electricity is a commodity (deregulated/restructured states)
• Doesn’t matter type of resource producing, only that produce
• Hedging price/delivery risk….relies on exposure to high prices
Challenge: Reliable delivery requires ancillary services. Not all resource types meet
requirements for operating reserves and balancing energy equally at all times
Challenge: Various market “fixes” since prices not enough (RA/Operating Reserves)
Challenge: Relying on prices alone for balancing energy in RTOs

16. Coordinated Planning for the Energy Transition

17. The uncoordinated policy reality in the U.S.
• Do not determine
type, size, location,
timing of resource
entry
RTOs and EIMs
DO NOT set
electricity policy
• RTOs and Individual
BAs in an EIM are
NERC-defined
reliability-coordinators
Responsible for
Reliable Grid
Operations
• States are not NERC-
definedreliability-
coordinators
States DO set
electricity policy

18. Electrification challenges in all market
frameworks (restructured and non-restructured)
Systems become winter peaking…significant ramping needs
MISO
PJM
ISO-NE NYISO

19. Generation Production in the U.S.
• Natural Gas = 40% today
• Increasingly used to provide
balancing energy (NERC 2023)
• Challenge in the U.S.:
• Coordinated policy planning
• Bring on clean, flexible
resources while ensuring the
natural gas system is capable of
supporting electric system
needs throughout the transition
(see FERC 2023; NAESB 2023)

20. State Electricity Policy Challenges
1) Need resources that meet
operating reliability needs in
all hours and all seasons as
more renewable resources
come online. (TODAY)
That provide specific grid services
Batteries + Gas with sufficient fuel
available
2) Targeted incentives for
the kinds of resources
that can replace fossil
assets. (FUTURE)
That provide specific grid services
Examples: Geothermal, Advanced Nuclear, Hydrogen,
Bioenergy, Long-Duration (Multi-day) storage, Fossil
with Carbon Removal (“abated”)

21. A regional planning solution

22. Bulk Electric System Reliability is a Public Good
• What grid operators do to prevent network collapse is both non-exclusive and
non-rivalrous. (Report to Congress on Electricity Market Competition 2007)
• Everyone gets the benefit of what grid operators do to maintain system
reliability on an AC system. Must have the “right” mix of resources.

23. Reliability-Informed State Policy Planning
RTO Studies
• Of Various State-
Determined
Policy Pathways
Reliability
Implications
• RA and
Operating
Reliability
Reliability-
Informed Policy
Planning
• Inform Resource
Selection
• Targeted
Incentives
Coordinated, reliability-informed, regional planning
for a reliable energy transition

24. Electricity is too important, too critical, too essential.
• Uncoordinated policy is a reliability risk (NERC 2023).
• Getting it right in electricity is key to reaching any decarbonization
targets.
• Reliability throughout the transition depends on having a SPECIFIC
MIX of resources that meet:
• Policy targets + Balancing energy needs (ramping, quick-start) +
Operating reserve requirements.
• Coordinated, regional planning is needed

25. Appendix

26. Market/Financing Implications
MIT: Capacity Expansion Model (“perfect foresight”)
• Expect significant price volatility
• Even with DR (Automated demand on TOU+CPP), LDS, dispatchable low-
carbon gen, hydrogen
• All resources more dependent on these high-priced hours
• Uncertainty in policy = uncertainty in the resource mix
• How encourage investment in balancing resources and operating
reserves that meet RA + operating reliability under deep
decarbonization?

27. Possible market design solutions?
• Hybrid Markets? (e.g. Joskow)
• Competition “in” the market (keep current energy markets) PLUS
competition “for” the market
• Policy as driver of new entry. Informed by system planning.
• Auction designs that avoid lock-in when no longer needed?
• Strategic Reserves?
• All pay the cost of resources needed to maintain reliable grid operations.
• Could still have competitive solicitation…which could enable new assets
types that can fully replace fossil when commercially available?
• Regional IRP?
• Other?