Winter Energy Market Update
on Tuesday, December 27, 2022
CFU cautioned customers earlier this year that significant changes to the national power grid had the potential to create an energy shortfall on peak electric demand days. The electric grid held strong this summer. However, the risk of energy shortages during extreme weather persists.
The North American Electric Reliability Corporation (NERC) recently published a winter reliability assessment. The report outlines the challenges our region faces due to power plant retirements and shifts in the energy market.
CFU wants customers to know more about the changing energy market and our role in continuing to provide reliable and low-cost electricity.
Regional Energy Market
CFU and many utilities in the Midwest are members of the Midcontinent Independent System Operator (MISO). Utilities like CFU are required to be part of regional groups like MISO.
Think of the MISO energy market like a giant pool. Members like CFU generate energy that flows in every day. The energy generated by nearly all the wind turbines, fossil fuel and nuclear plants across the region flow into MISO's power market daily. Members also purchase energy out of the pool to meet their communities' daily electric needs. MISO is the organization in charge of managing the balance of supply and demand of the energy "pool" to ensure efficiency and reliability.
For many years the MISO region had the capacity to produce more electricity than needed by customers. The excess energy capacity has been shrinking. Our Midwest MISO region has 5% less generation capacity than a year ago.
This is largely due to retirements of fuel-based plants. Many nuclear and coal-fired plants have been retired throughout the upper Midwest in recent years due to economic, regulatory and environmental pressures. These plants were controllable, so production could be turned up or down to respond to demand. They provided reliable power 24/7 in all weather conditions.
There have been large additions of wind generation to the electric grid, and significant new solar arrays are expected soon. However, they have not come online fast enough to fully replace traditional power plants. Wind and solar are also intermittent resources. They do not provide certainty when planning for days with high electric demand or unfavorable weather conditions.
The reduction of controllable generating plants is a major factor in the NERC assessment of the potential for energy shortages during extreme weather.
Natural Gas and Electric Generation
Electric demand is typically lower in the winter, as natural gas is the prominent fuel for heating homes and businesses. However, NERC cautions that natural gas supplies could affect both the Electric and Gas Utilities.
A growing portion of our country’s electricity is generated using natural gas. Severe winter weather increases demand for natural gas for heating and may limit natural gas supplies in the U.S. This has the potential to impact power plants that typically use natural gas. Extremely cold weather can also cause more power plants to have unplanned outages.
Improvements have been made to national gas distribution systems since the February 2021 Winter Storm Uri. The NERC winter reliability assessment stated, “While the risk of energy emergencies for the upcoming winter has not been eliminated, improvements—due to lessons learned from Winter Storm Uri—are expected to reduce the likelihood and lessen the severity of a future Winter Storm Uri scale event.”
Winter Energy Risk Assessment
While the NERC winter reliability assessment outlines the challenges our region faces, utilities are prepared and taking steps to ensure adequate power generation. The current risk of power interruptions due to energy shortfalls is very small. MISO expects to maintain reliable power this winter season.
CFU’s Generating Assets
Ensuring electric reliability across the country going forward will take the cooperation of many participants – utilities, regulators and policy makers, transmission owners and utility customers.
One of the NERC winter reliability assessment’s key recommendations is to ‘preserve critical generation resources.’ CFU understands the value of a balanced power mix and maintaining traditional fuel-based generation.
CFU continues to operate the Streeter Station power plant in Cedar Falls, local natural gas fired generators and a community solar array. In addition, CFU owns shares of large coal-fired plants in western Iowa. These plants provide reliable power during extreme weather and reduce the amount of energy CFU must buy to supply to customers when prices are high.
CFU is supportive of the wind and solar energy available in Iowa today and welcomes future additions. While the energy market shifts to renewable technology, controllable fuel-based generation continues to be important to ensure customers have affordable energy when they need it.
We are doing our part by preserving traditional generation and investigating new resources that can help facilitate a smart transition to renewable energy.