Over the past year, power systems in many parts of the United States have faced severe reliability challenges, but thanks to a series of policy measures implemented over the past two years and a certain amount of luck, the grid has avoided the worst-case scenario of prolonged blackouts. Experts say this outcome is worth examining.

Eric Gimon, a senior fellow at Energy Innovation, pointed out that climate change and extreme weather events—whether high temperatures, low temperatures, or storms and hurricanes—are threatening the reliability of power grids across the United States. Weather patterns are deviating from U.S. historical experience and will continue to become more extreme. He warned: "What seems abnormal today will become commonplace tomorrow. This is a one-way street."

In Texas, the Electric Reliability Council of Texas (ERCOT) grid experienced extreme temperatures and peak loads, but has avoided large-scale blackouts so far in 2022. California faced a heat wave in September, and despite extremely tight power supplies, also successfully prevented widespread outages. The Pacific Northwest also experienced high temperatures this year, though not as severe as the 2021 heat wave, and did not see prolonged outages.

Arne Olson, a senior partner at Energy and Environmental Economics, said that parties involved in the power system are addressing these issues and doing their best to prepare the grid for changing weather and demand patterns in a relatively short period of time.

Overall, grid performance in 2022 was better than in the previous two years. Experts attribute this partly to luck—namely, relatively less severe weather conditions—and to a series of measures implemented by grid operators and planners, such as mobilizing demand response and bringing new battery storage online in California. Olson emphasized: "If they hadn't done these things, we couldn't have avoided blackouts under those circumstances."

Looking ahead, experts believe that different regions of the United States need to invest in transmission and other grid infrastructure, build more power resources and demand response capabilities, and collaborate with each other in a more organized manner to ensure reliable power supply.

Utility Dive took an in-depth look at three regions facing grid reliability challenges—California, Texas, and the Pacific Northwest—reviewing their 2022 performance and offering outlooks for 2023 and beyond.

California: '2022 proved the value of changes implemented'

In September of this year, the western United States experienced a 10-day heat wave that broke multiple temperature records in the region, including a high of 116 degrees Fahrenheit in downtown Sacramento on September 6. However, the California Independent System Operator (CAISO) did not initiate rotating outages, thanks to increased battery storage on the grid and expanded use of demand response.

Since mid-2020, California has brought about 3.5 gigawatts of storage online. On September 6—the day the grid set a record peak load of about 52 gigawatts—conservation calls led to a drop in energy use of about 1.5 gigawatts. Grid operators also noted that improvements in market mechanisms, such as adjustments to resource adequacy assessments, helped avoid the need for rotating outages.

"Batteries and other capacity resources have shown their value, and coordination with other regions and sorting out import and export issues have also been important."
—Severin Borenstein, professor at the Haas School of Business, University of California, Berkeley

Severin Borenstein, a professor at the Haas School of Business at UC Berkeley and a member of the CAISO Board of Governors, said: "I think compared to 2020—when CAISO did initiate outages during another record heat wave—2022 proved the value of the changes and investments implemented since then." He added: "Batteries and other capacity resources have shown their value, and coordination with other regions and sorting out import and export issues have also been important. So the good news is we've made a lot of progress—the bad news is we're still very close to rotating outages."

Ben Kujala, senior research lead at Dunsky Energy + Climate Advisors, agreed, saying that the outcome of the 2022 western heat wave shows that although many reliability improvements are small marginal gains relative to the past, "the accumulation of all these small improvements made a significant difference."

After the August 2020 outages, California regulators introduced a series of demand-side and supply-side measures to strengthen the grid. Borenstein said the state has made progress on the supply side, with the influx of batteries being the best example. At the same time, California still has a lot of work to do in bringing more resources online, especially more storage. In the medium term, the September event reinforced the need to keep existing plants running—whether it's the 2.2-gigawatt Diablo Canyon nuclear plant or fossil fuel plants. He added: "When discussing the rapid phase-out of fossil fuel plants, we must be clear-eyed about how tight the grid is."

On the demand side, Cisco deVries, CEO of OhmConnect, said that California's attitude toward demand response has fundamentally shifted over the past few years. "There's no question that demand response has become an important part of the state's response to extreme weather, and there's no question that this Labor Day weekend demand response saved the day."

On September 6, Pacific Gas & Electric (PG&E) met a record peak demand of 22,672 megawatts, utility spokesperson Paul Doherty said in an email. Meanwhile, since the August 2020 outages, about 1.2 gigawatts of new battery storage capacity in PG&E's portfolio has come online, and the utility has also procured additional emergency reliability power supplies.

Doherty said the utility also modified and expanded its demand response programs this summer. More than 1.5 million customers participated in voluntary programs that offer rewards for reducing electricity use during high-demand periods; other customers participated in the SmartAC program, which cycles air conditioners on and off every 15 minutes for up to 6 hours. Additionally, thousands of PG&E customers with Tesla Powerwall batteries participated in a virtual power plant, discharging to the grid during high-demand periods.

Doherty said: "This summer we were better prepared to meet peak load, partly because a large amount of new supply came online. However, it was Californians and PG&E customers who responded to conservation calls during the historic September heat wave, avoiding rotating outages."

Pacific Northwest: 'We need to prepare for more heat waves'

In 2021, the Pacific Northwest experienced a heat wave that stressed grid infrastructure and caused outages, which experts say served as a "wake-up call" for the utility sector.

This summer, the region faced high temperatures again, with about 11 million people under excessive heat warnings and another 12 million under heat advisories at one point, according to a July 29 report from The Washington Post.

Although this year's temperatures were far less severe than the 2021 heat wave, the occurrence of such an event again in such a short time certainly confirms the view that expected temperatures are changing. Olson said: "We need to prepare for more heat waves—more frequent and more extreme—even in parts of the northern part of the country that have never experienced heat waves before."

"The past climate is no longer a good guide for the future, so (utilities) really need to start incorporating changes in weather over time into their planning."
—Arne Olson, senior partner at Energy and Environmental Economics

For utilities, this raises at least two issues. Olson said: "When doing power planning, they need to anticipate changed weather." Historically, this meant planning systems around multi-year weather variability. "But the past climate is no longer a good guide for the future, so they really need to start incorporating changes in weather over time into their planning."

Utilities also need to ensure that their guidelines for transmission and distribution infrastructure—such as sag standards for transmission lines—reflect actual experienced temperatures. The higher the temperature, the more the wires sag, and "high temperatures can indeed cause damage to distribution system transformers," Olson said.

But addressing these issues itself faces challenges. Kujala said that in building new capacity, the Pacific Northwest faces the same obstacles as other parts of the United States, such as siting and local opposition. Additionally, project developers nationwide face supply chain constraints, critical material shortages, and other delays.

Larry Bekkedahl, senior vice president at Portland General Electric (PGE), said in an email that the utility used the 2021 reliability challenges as a learning tool, developing new grid hardening projects, implementing technologies to improve reliability, and adjusting plans to respond to changing customer behavior. This includes identifying high-risk areas to bury power lines, adding batteries to the system, and installing cameras to more quickly identify and respond to wildfires in its service area.

Bekkedahl said PGE also offers customers options such as peak-time rebates, as well as two-way grid capabilities that support distributed energy resources. He added: "Looking ahead, we see this as a key area—how to use analytics and smart forecasting to work with customers to create virtual power plants and manage load on the hottest and coldest days. We find that many industrial customers are eager to participate in these programs because they offer mutual benefits, but they need advance notice to adjust their production. The smarter our grid and modeling, the easier it is for customers to participate in decarbonization efforts, even without realizing it."

Kujala said that while demand response has shown very positive effects in enhancing reliability in California, it tends to be more difficult in the Pacific Northwest due to the hydro system. "The conditions requiring demand response each year can vary greatly due to year-to-year variability in hydro generation." Although there are good examples of regional utilities using demand response, "in the Pacific Northwest, the path for demand response is more difficult."

Texas: Focus on thermal generation

Texas did not experience a reliability crisis this year like the one during Winter Storm Uri in 2021, but the ERCOT grid faced extremely challenging conditions—the grid'stop 10 peak demand eventsall occurred in 2022, hitting a record 80 gigawatts of demand on July 20.

"Texas is still a summer-peaking system, so some of the policies aimed at winter, we'll see how they hold up as we go into the next winter."
—Caitlin Marquis, managing director at Advanced Energy Economy

Caitlin Marquis, managing director at Advanced Energy Economy (AEE), said that after Winter Storm Uri, Texas regulators began considering a range of market reforms, including new requirements for winterizing generators and the expansion of distributed energy resources. Texas regulators are also consideringa new market mechanismthat would require utilities to purchase performance credits that generators earn based on their availability during periods of high system risk.

Marquis said: "Texas is still a summer-peaking system, so some of the policies aimed at winter, we'll see how they hold up as we go into the next winter." So far, the grid has maintained reliability on peak demand days, but there is still room for improvement in utilizing technologies such as distributed energy resources and battery storage. "I think the focus so far has been more on... thermal generation and its retention and output."

Gimon of Energy Innovation said that more broadly, one advantage in Texas is that the region is building a lot of resources, including solar, wind, and batteries, which will improve expected future capacity margins. "The really critical dynamic during the energy transition is how long old facilities can stay while new facilities come online. Texas has provided very strong incentives for retaining old facilities by adjusting its so-called operating reserve demand curve—a program that raises prices when day-ahead reserves start to be low."

What happens next?

Looking ahead to 2023 and beyond, experts largely agree that the power system will continue to face more extreme weather events, and the industry will need to invest in infrastructure, demand response, and additional power supply resources to address them.

Borenstein said that on the demand side, regulators need to take a closer look at rate plans, which should better convey information and provide stronger incentives to shift demand to the middle of the day. This may take time, as medium- and long-term adjustments may involve capital investments—"we're talking about automated systems, such as water heating during off-peak hours to reduce peak demand, installing heat pumps, and so on."

Borenstein added that in the short term, states like California need to implement more effective critical peak pricing programs rather than the current simpler time-of-use rates, because the peak-valley price difference is quite small and does not necessarily reflect the grid's tight periods of about 10 days per year.

Amisha Rai, managing director at AEE, added that another issue western regulators need to address is how California and its neighboring states can cooperate in a more organized manner to ensure power supply. Multiple western states are increasing their use of renewable energy and have strong demand for affordable clean energy, which means policymakers need to consider the most efficient ways to use transmission assets. This includes "really thinking about how a western RTO can better facilitate power delivery, drive renewable development across the system, and ensure that no renewables are curtailed during periods of oversupply..." she added. AEE'sJuly reportfound that establishing a western-wide regional transmission organization—which policymakers have discussed for more than two decades—could bring an additional $79.2 billion in annual gross regional product to 11 states.

Meanwhile, in Texas, regulators earlier this monthapproved a pilot projectallowing distributed energy resource aggregations to participate in the ERCOT market, aiming to utilize about 80 megawatts of flexible resources on the grid. The pilot is expected to last three years, with multiple utilities expected to participate.

Marquis of AEE said that looking ahead to the coming years, a key priority for regulators in the region should be to learn from the first phase of the pilot and expand those lessons to better enable DER participation in the market. Another priority will be expanding energy efficiency opportunities. She added: "Texas is one of the least energy-efficient states, while its residential population is growing very fast, so the potential for efficiency gains is enormous... This is critical to ensuring the state can meet customer demand in both winter and summer."

There is also the issue of transmission planning, which has become a key priority at the federal level. In July 2021, the Federal Energy Regulatory Commission initiated a proceeding to deeply examinereforming federal transmission policy, which stakeholders say is critical to achieving long-term clean energy goals. Congress is also exploring ways to promote new transmission and other infrastructure development.

Marquis said that addressing transmission infrastructure needs to ensure that new resources such as wind, solar, and battery storage can come online in Texas and that generation can reach the load centers where it is needed is critical to reliability.