Why 100% Clean Energy Advocates Must Overcome the ‘Resource Adequacy’ Challenge

As renewable energy capacity continues edging out fossil fuels, the clean energy revolution seems inevitable. But this clean future could be hamstrung unless we overcome “resource adequacy” challenges^[1].

For the first time in 130 years, renewables surpassed coal^[2] as a U.S. energy source and the trend is projected to persist^[3] as solar and wind prices plummet. With renewables cheaper than new fossil capacity^[4], the clean energy industry anticipates a renewables majority by 2030^[5].

Unfortunately, transitioning to 100 percent clean power is more complicated than adding renewables and storage. Solar and wind are transforming how we power our economy, creating sustainable jobs, and improving public health. But adding variable, fuel-free resources to the grid also requires major changes in power system planning to ensure reliability — what grid operators call “resource adequacy.”

Failing to address outdated resource adequacy models — ensuring grid operators always have energy resources available to balance supply and demand — risks the clean energy transformation. This isn’t just a problem in states dominated by fossil fuels. In California, these concerns spurred new rules giving the state’s biggest utilities control over power plant procurement^[6], undermining clean energy and storage investments that could otherwise meet resource adequacy requirements.

Incumbent fossil fuel generators, no longer the cheapest option available in many parts of the U.S., have defined “resource adequacy” in ways that leave out innovative new market entrants, so as to maintain market share.

Defining resource adequacy, and why it matters for renewables

On a moment-by-moment basis, grid operators match electricity supply with demand by managing generation resources they can dispatch. To avoid outages, operators must have enough resources at their disposal to match demand at any given time, especially when demand peaks unexpectedly due to weather extremes.

As cheap clean energy pushes more coal plants offline, more power supply is composed of intermittent resources that cannot always be dispatched at will. Meanwhile, more distributed energy resources (DER), such as rooftop solar and energy efficiency, complicate planning for future electricity demand and open up possibilities for customers to get cheaper, cleaner electricity.

Renewable energy challenges resource adequacy in two primary ways.

First, renewables’ increasing ability to offer lower prices than the marginal cost of “baseload” resources like coal and nuclear steadily push these resources off the system, along with the resource adequacy value they provided. Historically, these resources were a mostly reliable presence during peak periods, while renewables varied based on local weather factors.

Second, the inflexibility of many fossil resources — needing to commit well ahead of time, minimum run rates, and limited ramp rates — threatens resource adequacy as variable resources become a greater share of the grid mix. Because wind and solar are often the cheapest source of real-time energy, maximizing their use for economic reasons can drive more system variation. This means conventional resources may be called upon to ramp output more often or become available with less advance notice.

Why ‘reserve margin’ is not the metric it used to be

Traditional resource adequacy planning has rested on two ideas: One, power plants can be called on at will, provided they are ready in advance to provide electricity. And two, real-time fuel costs dominate calculations of the most cost-effective resources to run at any given time and which new resources to plan for. This model also treats demand as an independent input into the moment-by-moment challenge of running the grid.

Planners have used the “planning reserve margin” (PRM) metric to decide if a generation fleet will be adequate to meet future demand. PRM considers total available capacity likely to be available to meet anticipated peak demand, with the PRM the anticipated percentage extra capacity over load. To determine how much any single plant contributes to PRM accounting, planners assign each resource a capacity value: a percentage of peak megawatts based on historical patterns with an applied discount to account for planned and unplanned outages.

PRM accounting reduces the probabilistic distribution of production outcomes to a single number and blinds planners to challenges for traditional resources operating in a more variable world. Capacity value is especially reductive for renewables, which have broader distributions of possible production outcomes.

PRM also values peak capacity more than flexibility. Battery storage systems have limited peak output durations (requiring a portfolio of resources with different duration abilities for meeting peak demand) but can nimbly come on and offline in quick bursts and instantly go from absorbing to producing power.

This means PRM is no longer a good catch-all metric. The wrong resource mix can leave more than enough on hand for anticipated peaks but still face reliability challenges at other times. Traditional planning mindsets risk failing to plan holistically for a least-cost solution using a broader portfolio of resources.

Incumbent generators exaggerate challenges for DERs

While the challenges renewables pose to resource adequacy planning are real, incumbent generators exploit them to delay the clean energy transition. Challenges are mischaracterized as fundamental reliability threats rather than problems solvable through new metrics, models, planning design, and technology advances like longer duration storage and demand response. Exaggerating technical issues as “insurmountable barriers” and pointing to immediate job losses or reliability considerations often make regulators and legislators pay attention to one party’s favorite “solution.”

Incumbents also use existing rules to keep competitors out, for instance by intervening in commission proceedings to prevent DERs from counting toward local reserve capacity in dense urban pockets served via transmission lines from distant generation. Or, as in PJM, requiring energy storage to sustain maximum output for up to 10 hours, when most objective analyses on a large grid shows storage can deliver significant resource adequacy value with much shorter durations.

Decarbonization requires building a larger, cleaner electricity grid without sacrificing reliability. Resource adequacy concerns threaten to slow the transition. The clean energy industry must prioritize changing policymakers’ resource adequacy perceptions and develop new planning models allowing all technologies capable of providing reliable service to compete on equal footing.

Ignoring the resource adequacy problem by expecting falling solar and wind prices to simply displace fossil fuel power sources will unnecessarily delay the transition. And with climate change, we’ve no time to spare.

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