FERC/NERC Report on Winter Storm Uri Recommends Enhanced Cold Weather Preparation

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Morgan Lewis

A report presented on September 23, 2021, into the February 2021 power outages in Texas and the US Midwest caused by extreme cold weather identified the causes of the outages and outlined a series of recommendations. Commenting on the report, jointly authored by the Federal Energy Regulatory Commission (FERC) and the North American Electric Reliability Corp. (NERC), FERC Chairman Richard Glick stated FERC “must take these recommendations seriously, and act decisively, to ensure the bulk power system doesn’t fail the next time extreme weather hits.”

The recommendations focus on enhanced protection against cold weather for critical generation as well as the natural gas assets supplying gas-fired generation so that this infrastructure remains operational even in extreme cold weather. Whether these recommendations become binding will depend on legislative and regulatory action at the federal and state levels and, if adopted, could impose significant compliance costs on the electric and natural gas sectors. Moreover, electric utilities and natural gas producers and pipelines making expensive capital improvements could face an uncertain path to recovery of such compliance costs.

WINTER STORM URI TRIGGERS THIRD-LARGEST LOSS OF MEGAWATTS IN US HISTORY

From February 8–20, 2021, Winter Storm Uri brought unusually cold weather and freezing precipitation throughout Texas and the Midwest. The affected Balancing Authorities—Electric Reliability Council of Texas (ERCOT), Southwest Power Pool (SPP), and Midcontinent Independent System Operator (MISO)—each issued cold-weather preparation notices on February 8 and 9 to generation and transmission operators in anticipation of the event.

Despite the preparation notices and the resulting actions by electric and gas utilities and natural gas producers and pipelines to prepare for the event, Winter Storm Uri resulted in the largest controlled load shed and third-largest loss of megawatts or load in US history. The extreme cold triggered the loss of 61,800 megawatts of electric generation when more than 1,000 generating units were forced offline, derated, or failed to start on more than 4,000 occasions over the course of the event. Winter Storm Uri also caused a reduction of more than half of daily natural gas production, including the production necessary to keep many gas-fired power plants operational. Further, as natural gas wells rely on electricity for producing, processing, and transporting natural gas, the outages, derates, or failures to start compounded fuel supply issues.

The severity of the outages peaked from February 15–18, with the most severe and prolonged effects hitting ERCOT, which experienced three consecutive days of firm load shed—at one point up to 20,000 megawatts. SPP and MISO had to shed load for five and two hours, respectively. The report noted the February 2021 event was the fourth in the last 10 years that jeopardized the bulk power system due to unplanned generation outages resulting from extreme cold weather.

SIGNIFICANT CAUSES OF GENERATOR OUTAGES, DERATES, AND START-UP FAILURES

The report identified three primary causes of the outages, derates, or failures to start: freezing of generator components, fuel availability, and mechanical/electrical issues.

Freezing equipment represented the primary cause of unplanned outages, derates, and start-up failures, accounting for 44% of these unplanned events. Freezing resulted from insufficient winterization of generation facilities. Many generating facilities in the southern US lack enclosed building structures to avoid heat buildup in the summer, but this solution places facilities at increased risk for freezing in the winter. Another significant cause was icing on wind turbines. Mechanical and electrical issues due to the extreme cold, other than frozen equipment, caused another 21% of unplanned outages, derates, and start-up failures.

A loss of fuel to generation facilities resulted in 31% of the unplanned outages, derates, and start-up failures. The extreme cold required natural gas wells and processing facilities to shut-in. Some facilities shut-in to avoid freezing while cold weather took others offline as equipment froze or power was cut off as frozen equipment took other generators, forcing load shedding. Further, freezing precipitation impaired roads, and thus in turn diminished the ability of these facilities to make repairs and to remove production-related wastes. Additionally, most natural gas production and processing facilities in ERCOT were not identified as critical load, and thus the controlled load shedding took fuel sources offline, forcing further load shedding. The report concluded preliminarily that load shedding did not materially affect gas pipelines in part because of backup power and also because the need for gas transmission declined as production facilities shut-in and natural gas generators went offline.

On a positive note, the report found that SPP, MISO, and ERCOT coordinated and communicated well with each other during the event, coordinating to alleviate the most critical conditions. For example, due to the severity of the emergency in ERCOT, both MISO and SPP tolerated emergency conditions for a longer period to allow additional power flow into ERCOT over the limited direct-current connections between the interconnections.

PATH FORWARD

The report made 28 preliminary recommendations, including nine “key recommendations” and five recommendations for further study. The nine preliminary key recommendations are:

  1. NERC should revise its reliability standards to require:
    • Generation owners to identify and protect critical components from cold weather by winter 2023/24, build new or retrofit existing generators to operate in weather based on extreme temperature and weather data and account for effects of precipitation and wind by winter 2023/24, provide annual training on winterization by winter 2022/23, protect critical natural gas infrastructure from load shedding by winter 2023/24, and prohibit use of critical natural gas infrastructure loads for demand response by winter 2022/23.
    • Transmission operators and distribution providers should separate the circuits for manual load shed from circuits used for underfrequency load shed or critical load and use the underfrequency load shed only as a last resort, by winter 2023/24.
  2. Applicable independent system operators, regional transmission organizations, or state commissions should allow generator owners to be compensated for building new or retrofitting new resources to operate to a specified ambient temperature and weather conditions through markets or cost recovery surcharges by winter 2023/24.
  3. Congress, state legislatures, or public utility commissions as applicable should consider requiring weather preparedness plans for natural gas production, processing, gathering, and transportation facilities by winter 2023/24.
  4. Natural gas production, gathering, and processing facilities should implement measures by winter 2022/23 to protect against freezing and cold-related limitations, such as enclosing sensitive facilities, adding heating equipment, or installing emergency generators.
  5. FERC should consider establishing a forum by winter 2022/23 of state legislatures and regulators, NERC and regional reliability entities, balancing authorities, and natural gas infrastructure entities to identify actions they can take to improve the reliability of the natural gas infrastructure to support bulk power system reliability. One suggested topic is whether Congress should close a purported jurisdictional gap over natural gas pipeline reliability.
  6. Generator owners should identify and communicate the reliability risk of their natural gas fuel contracts to their Balancing Authority by winter 2021/22.
  7. FERC, NERC, and the Regional Entities should host a joint technical conference to discuss how to improve the winter-readiness of generating units by winter 2022/23 to cover the period before new reliability standards can be developed, approved, and become effective.
  8. Generator operators should specify times for inspecting and maintaining freeze protection measures by winter 2022/23.
  9. Planning coordinators should reconsider by winter 2022/23 some of the inputs to their publicly reported winter-season anticipated reserve margin calculations for their respective Balancing Authority footprints so that the reported reserve margins will better predict the reserve levels that the Balancing Authorities could experience during winter peak conditions.

The five areas preliminarily recommended for further study consist of black start unit reliability, the need for addition transmission connections to ERCOT, measures to address natural gas supply shortages, the effect of low-frequency events on generators, and guidelines for identifying critical natural gas infrastructure loads. The report also lists 14 other preliminary recommendations, including addressing effects of cold weather on mechanical fatigue, real-time monitoring of gas well-heads, emergency response centers for severe weather events, rapidly deploying demand response, and retail incentives for energy efficiency improvements. Final recommendations will be presented in the full report, which FERC and NERC expect to issue this winter.

As reflected in the recommendations, many of these improvements to address winter performance could be expensive capital investments. It is unclear, however, whether the recommendation on a cost recovery would go forward, particularly given the lack of FERC jurisdiction over wholesale electricity in ERCOT. Presumably, cost-of-service generators will be able to receive rate recovery for prudently incurred costs to meet such mandates, but for the vast number of merchant generators and upstream gas producers, processors, and gatherers likely to be subject to winterization requirements, the path to recovering those costs is clouded.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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