Energy demand is on the rise. The data center boon, decarbonization, and modern electrification efforts are presenting energy challenges. At the same time, new energy sources are coming online with investments in renewable energy. As a result, the power grid is experiencing a transformation, and maintaining resource adequacy is paramount.
In an effort to prepare for and tackle this transitory time, the Pennsylvania Public Utilities Commission (PUC) recently hosted a technical conference with industry professionals to assess the potential risks of our energy supply and what solutions might be applied to overcome challenges in Pennsylvania and beyond. Areas of focus included how to get the right mix of resources online, facilitating the completion of construction for generation resources, and what the PUC can do to facilitate resource adequacy.
Diane Holder, the vice president of entity engagement and corporate services for ReliabilityFirst, participated in the conference and reflected on the North American Electric Reliability Corporation’s (NERC) Long-Term Reliability Assessments in 2022 and 2023, which found numerous areas across North America at risk of resource adequacy shortfalls.
“The pace of growth and demand can be difficult to match,” Holder said when addressing increased load growth caused by data centers coming online. “Building that new transmission and generation can often take years to plan, approve, construct.”
Dr. Joseph Bowring, an Independent Market Monitor for PJM Interconnection, offered insight on resources in the interconnection queue but cautioned that most of those resources are intermittent.
“Ninety percent of what’s in the queue is not going to solve the reliability problem. Only 10 percent of that number is going to end up as a capacity resource,” Bowring said.
So, what are potential solutions?
It was a market-based approach that emerged as a superior solution to challenges raised throughout the session.
“The answer is through markets,” said Adrien Ford, the Wholesale Market Development Director at Constellation Energy, in response to how to solve the problems facing Pennsylvania and many other states.
Travis Kavulla, Vice President of Regulatory Affairs at NRG Energy, went further, encouraging the formation of longer-term contracts and for regulators to drive retail customers toward considering the value of these contracts. He shared that among larger customer classes, there is an appetite for longer-term fixed-rate arrangements.
Kavulla pointed to contracts currently on PA Power Switch, Pennsylvania’s online shopping marketplace for retail energy, that are longer-range contracts available to customers that are lower in price than the default product even before the increased price of capacity is built in.
“It would be much better to try to get those customers to shop for longer-term products,” Kavulla said.
As Pennsylvania and other states work to navigate energy resource adequacy, collaboration between regulators, market operators, energy suppliers, and industry stakeholders is necessary. The challenges are steep, but solutions are already being identified and can be obtained. One thing is clear: retail energy markets will be essential for adequacy success.
