The Federal Energy Regulatory Commission on Feb. 16 approved two new extreme cold weather reliability standards aimed at implementing key recommendations from a joint inquiry into 2021’s Winter Storm Uri to prevent a recurrence of the power outages affecting millions of people in Texas and the South Central U.S.

The reliability standards, proposed by the North American Electric Reliability Corporation in October 2022, contain new and revised requirements to advance reliability of the grid during extreme cold weather temperatures.

They include implementation of generator freeze protection measures, enhanced cold weather preparedness plans, identification of freeze-sensitive equipment in generators, corrective actions for when equipment freeze issues occur, annual training for generator maintenance and operations personnel, and procedures to improve the coordination of load reduction measures during a grid emergency.

While FERC approved the new extreme cold weather reliability standards, it also identified areas for improvement, and directed NERC to modify the extreme cold weather preparedness and operations reliability standard to address concerns related to applicability, ambiguity, a lack of objective measures and deadlines, and prolonged, indefinite compliance periods.

Also, along with the approval and directives for modifications, FERC directed NERC to collect and assess data over time to monitor and assess entities’ implementation of the new requirements.

The reliability standards FERC approved implement approximately half of the standards-related recommendations from the joint inquiry into the 2021 winter storm.

The remaining recommendations will be addressed in a second phase of NERC’s standards development, which is now under way.

In February 2021, Winter Storm Uri led to the largest controlled firm load shed event in U.S. history, with over 4.5 million people losing power. 

Shortly thereafter, the Commission, along with NERC and Regional Entities, initiated a joint staff inquiry into Winter Storm Uri that resulted in the issuance of a joint report in November of 2021.

The report included recommendations for reliability standard enhancements to improve extreme cold weather operations, preparedness, and coordination.

A broad coalition representing stakeholders in the distribution transformer supply chain is urging the Department of Energy to reconsider its intention to increase energy conservation standards for distribution transformers, as signaled in a recent Notice of Proposed Rulemaking issued by DOE.

The American Public Power Association and other members of the coalition made their request in a Feb. 15 letter to Secretary of Energy Jennifer Granholm.

“Since 2021, our organizations have been communicating with DOE regarding the severe and ongoing supply chain challenges that have prolonged and complicated distribution transformer production and availability,” the groups said in their letter.

“The inability to quickly manufacture and deliver these critical components threatens the ability of the electric sector to service current and planned housing markets, swiftly recover and restore service following natural disasters, and deliver the benefits of economy-wide electrification,” they told Granholm.

The groups pointed out that Granholm last June directed the Electricity Subsector Coordinating Council to establish a “Tiger Team” to examine the supply chain crisis. “It concluded that current transformer production is not meeting demand — demand that is expected to increase for the foreseeable future,” APPA and the other groups noted.

Moreover, both the electric and manufacturing sectors have raised awareness of the risks caused by lengthy lead-times in the production, procurement, and deployment of transformers. Under existing production output capabilities, manufacturers estimate the current order-cycle for most new distribution transformers to be longer than 16 months, the letter said.

In January, DOE issued a NOPR that would, through its various requirements, further exacerbate the supply chain situation, the groups said. The proposed rule would dictate that manufacturers increase the efficiency of distribution transformers by a mere tenth of a percentage point. DOE already mandates distribution transformers be manufactured to incredibly high efficiency standards, the groups noted.

“Our organizations agree that energy efficiency standards play an important role in reaching decarbonization benchmarks while transitioning our nation to a clean and increasingly electrified economy. However, as proposed, the rule would delay the realization of these benefits by worsening supply chain complications already well known to DOE.”

In addition, APPA and the other groups said that the proposed rule would require manufacturers to transition to a different type of steel, which is largely untested, less flexible, and more expensive.

“Further, the existing supply chain of this alternative steel is very limited and mostly foreign-sourced. This rule would impose unnecessary cost burdens and further delay the delivery of such critical products. Simply put, this DOE proposal does nothing to address, and is likely to exacerbate, the current distribution transformer shortage crisis,” the letter said.

“Given the unprecedented demand for distribution transformers, our organizations urge DOE to maintain the current efficiency levels required of these products. Getting these already highly efficient products into the market more quickly should be the highest priority and will result in the realization of electrification benefits much sooner — benefits that will far outweigh any gains achieved through a fractional percentage increase in efficiency.”

Other groups signing on to the letter were the Edison Electrical Institute, GridWise Alliance, Leading Builders of America, National Association of Home Builders, National Electrical Manufacturers Association and the National Rural Electric Cooperative Association.

Groups Say Department of Energy Proposal Raises Reliability, Affordability Questions

In recent related news, APPA and NRECA told the Department of Justice that reliability and affordability for U.S. electric utilities and their customers could be threatened under the DOE NOPR.

The DOE’s NOPR would transition almost the entire distribution transformer market in the U.S. to use amorphous steel cores, but there is only one domestic producer of amorphous steel cores today and that producer’s current output “is a mere fraction of what would be required to adequately meet the electric utilities’ demand,” the groups noted.

Michigan public power utility Holland Board of Public Works continues to make progress on the construction of a new substation.

The East Point Substation will be the utility’s 10th substation and is projected to go online by June 30, 2023. It will be able to serve 80 megawatts of additional load.

Over the past four years, Holland BPW’s electric territory has experienced a substantial amount of meter growth in every customer category: residential, commercial, and industrial, noted Julie DeCook, Communications Manager at the utility.

She said that the biggest driver for building the new East Point substation is an expansion of the LG Energy Solution EV battery plant in Holland. The LG Energy Solution expansion is expected to increase Holland BPW’s annual energy needs by roughly 40%.

“On top of that, other companies are building new construction and expansions in the same area. Those additional companies are also increasing the need for electrical distribution capacity,” she said.

When asked if there have there been any supply chain challenges related to the substation project, DeCook said that while supply chain issues are present, “we try to navigate those challenges with forethought. We ordered specific equipment well in advance in order to keep the project on schedule. We expect to bring this substation online in Summer 2023.”

The U.S. microgrid market reached 10 gigawatts in the third quarter of 2022, with more than 7 GW in operation and the rest in planning or construction stages, according to a new analysis from Wood Mackenzie.

“In terms of customer segments, Commercial and Industrial leads the way with significant project development in industries such as retail (department stores) and manufacturing, which indicates a rise in demand for an uninterrupted electricity service,” said Elham Akhavan, senior research analyst at Wood Mackenzie. “The government sector takes second place, driven by the military’s resilience and decarbonization targets, followed closely by the residential and education sectors,” Akhavan added.   

The U.S. microgrid market has seen a 47% increase in solar and storage capacity in 2022 compared to 2017 levels. Moreover, Wood Mackenzie data shows that more than 175 solar- and solar-plus-storage microgrid projects have been in active development and were scheduled to come online by the end of 2022.

Akhavan said: “There’s been a significant shift in technology type, in particular the rise of solar and storage demand among microgrid customers, largely driven by corporate ESG goals. This has triggered an uptake of multi-distributed energy resource microgrids – known as advanced microgrids – which are used in cases where solar and storage alone are insufficient to mitigate long-duration outages. A fossil fuel generator, often sized to cover the entire site, acts as backup for the solar and storage to ensure uninterrupted service when the grid is down.”

The turnkey microgrid-as-a-service business model is projected to experience continued growth across various non-utility customer segments. The influx of diverse investors eager to finance long-term projects, often with ESG attributes, has led to the dominance of the microgrid-as-a-service model. Simultaneously, the industry is seeing a gradual shift away from end-user ownership, the consulting firm said.

According to Wood Mackenzie’s data, the percentage of microgrids owned by end-users dropped 31% from 2019 to Q3 2022, while the share of MaaS deals grew 25% over the same period.

While third-party financing in general is not a new model, microgrid-as-a-service “is evolving beyond PPA contracts, which often involves procurement from a single DER to an affordable solution for financing the construction, operation and maintenance of multiple DERs, tailored to the customer’s energy objectives,” Akhavan added.

Wood Mackenzie data shows that there are 28 states with utility microgrids, with approximately 35 megawatts expected to have come online in 2022. This implies total utility microgrid capacity of over 1.1 GW. 

“From a microgrid capacity perspective, if the market continues to develop at a rapid pace, we will see more than 20% growth in annual capacity installation across the US compared to last year,” Akhavan said

“The West coast, led by California, is growing substantially, with a strong pipeline due to go into operation by 2024. This is followed closely by the Southwest market which has expanded more than three times since 2019. Texas is the frontrunner, with two of the leading developers in the region, PowerSecure and Enchanted Rock, having installed all capacity so far in 2022,” Akhavan added.   

The industry has also seen growth in the Northeast where a range of competitive grant programs are supporting resilience projects for critical facilities. However, recovery from the COVID-19 slowdown is uneven across regions in the US. For example, the Southeast has yet to recover to pre-pandemic growth.

Reliability and affordability for U.S. electric utilities and their customers could be threatened under a Department of Energy Notice of Proposed Rulemaking related to energy conservation standards for distribution transformers, the American Public Power Association and the National Rural Electric Cooperative Association recently told the Department of Justice.

The DOE’s NOPR would transition almost the entire distribution transformer market in the U.S. to use amorphous steel cores, but there is only one domestic producer of amorphous steel cores today and that producer’s current output “is a mere fraction of what would be required to adequately meet the electric utilities’ demand,” the groups said.

“Our members are some of the primary consumers of distribution transformers and if this proposal is implemented as currently contemplated, it would have serious consequences on their ability to provide affordable, reliable electric service to millions of Americans,” APPA and NRECA said in Feb. 10 comments submitted to DOJ.

“We urge DOJ to fully consider the competition issues raised by the DOE NOPR and work with DOE to address these concerns before a final rule is issued by DOE,” the groups said.

As drafted, DOE’s NOPR would transition almost the entire distribution transformer market in the United States to use amorphous steel cores, as compared to the current widespread use of grain-oriented electrical steel (GOES) cores, APPA and NRECA told DOJ.

“We have numerous concerns about the proposal, but within the DOJ Antitrust Division’s purview, we specifically raise (1) the lack of domestic suppliers available to produce amorphous steel cores and (2) the untenable timeline in the proposal,” the groups said.

Despite the insistence in the NOPR that its effects go into place in 2027, it has immediate market implications, APPA and NRECA said.

“There is only one domestic supplier of GOES and this proposal risks putting the domestic electrical steel market in a precarious state. Rather than helping to diversify supply, the DOE NOPR is counterproductive as it would deter further domestic investment in GOES production because only amorphous steel cores would be able to meet the new energy conservation standard proposed by DOE,” they argued.

APPA and NRECA said that the NOPR will not foster competition and is instead likely to create a new monopoly supplier while simultaneously driving the existing GOES supplier out of the market. “This would create a ripple effect of likely killing further investment in the domestic production of GOES for distribution transformers under consideration or announced by other steel producers.”

The groups also have serious concerns about whether the only domestic producer of amorphous steel cores today “would even be able to meet electric utilities’ demand for distribution transformers.”

They pointed out that the only amorphous steel core producer’s output today “is a mere fraction of what would be required to adequately meet the electric utilities’ demand, raising serious implications for electric reliability and affordability. As currently drafted, the NOPR relies on a single supplier in the market to ramp up output to meet the demand in just three years.”

In addition, APPA and NRECA said that the labor shortages currently facing many U.S. industries today, including distribution transformer manufacturers, make it very unlikely that domestic production of amorphous steel cores will ramp up to the level that DOE assumes in the NOPR.

“We have serious doubts about the ability of one supplier to increase output in the timeline envisioned in this proposal. If this NOPR is finalized as drafted, and the sole supplier cannot meet the demand, manufacturers will be forced to source their material from international sources (particularly China) representing a significant national security risk to the United States,” APPA and NRECA said.

The NOPR would not increase the diversity of steel suppliers in the market, “but would rather drive out the lone GOES supplier in favor of an amorphous supplier because the new efficiency standards will drive nearly all distribution transformer manufacturing away from GOES,” the groups said.

The current manufacturing base serving electric utilities is struggling to meet demand and DOE’s NOPR exacerbates this ongoing crisis, APPA and NRECA said.

“Our members are facing unprecedented challenges securing equipment and material to provide reliable electric service to their customers. Electric utilities have been sounding the alarm for more than a year about the supply chain constraints around multiple types of equipment they require to keep the lights on, with distribution transformers being the most acute challenge.”

They noted that it now takes more than a year on average for utilities to receive distribution transformers, compared with 60 days just a couple years ago.

“Further, we expect the backlog to continue to increase absent U.S. government support as utilities invest in grid resilience and modernization projects and federal and state policies drive more electrification. With that backdrop, DOE’s NOPR sends the wrong signal at a critical moment when we need more investment in production capability right now and for the next several years to meet growing demand.”

A proposal of this magnitude requires more time and analysis to avoid unintended consequences, APPA and NRECA said.

“At a minimum, DOJ should work with DOE to better understand the competition implications raised by the DOE’s NOPR and take the requisite time to ensure that we do not create unintended consequences that will be detrimental to electric reliability and affordability, as well as U.S. national security.”

The Federal Energy Regulatory Commission should work to ensure that any directives FERC ultimately issues in an ongoing proceeding related to inverter-based resources and reliability capitalizes and dovetails with related work already underway by the North American Electric Reliability Corporation and the power sector, the American Public Power Association and other groups recently said.

IBRs are solar photovoltaic, wind, fuel cell and battery storage resources that use power electronic devices to change direct current power, produced by generators, to alternating current power, to be transmitted on the bulk-power system. “As use of this technology grows, it is important to ensure that IBRs do not adversely impact the technical reliability of the grid,” FERC noted last year.

The comments submitted by the groups to FERC on Feb. 6 were filed in response to a Notice of Proposed Rulemaking issued by the Commission in late 2022. In November 2022, FERC Commissioners  approved an order and a NOPR containing directives and proposed directives to the North American Electric Reliability Corporation, to account for the increasing number of IBRs in the nation’s resource mix. 

Joining APPA in the comments were the Large Public Power Council, the National Rural Electric Cooperative Association, the Transmission Access Policy Study Group and Edison Electric Institute.

The NOPR proposes to direct NERC to develop new or modified reliability standards that address the following issues related to inverter-based resources: data sharing; model validation; planning and operational studies; and performance requirements.

The trade associations said in their comments that they agree with the Commission that new or revised standards are needed to manage the impact of the rapidly increasing presence of IBRs on the Bulk Electric System. The groups “recognize, as does the Commission, that the topics addressed in this NOPR are broad and impact issues within multiple jurisdictions, including those overseen by state and local retail regulators, and coordination among them is critical.”

They said that undoubtedly, there is a category of IBRs that should be subject to certain standards.  Critical to ensuring that the reliability standards properly apply to IBRs is identifying and registering the IBRs that have a material impact on the bulk power system, APPA and the other groups said.

At the same time, the groups pointed out that NERC has launched a series of related initiatives aimed at the collection and sharing of IBR data, model validation, IBR planning and operational studies and needed IBR performance requirements. 

“While this certainly does not mean the Commission’s proposed directives are mislaid, it seems critical for NERC and the industry to be able to work cooperatively to shape these standards in ways that enhance the industry’s ability to plan and operate the grid reliably,” they said.

The groups recognize the NOPR’s proposal is to direct NERC to make a compliance filing within 90 days of any final rule explaining how it is prioritizing its IBR reliability standard projects to meet the directive in the final rule.

“We support that proposed directive, but also ask that NERC provide a plan ensuring that the significant work undertaken to date is not in vain; that the ensuing work of the drafting teams is fully informed by this work; and that the recommended standards be shaped by the work undertaken to date,” APPA and the other groups said.

The groups included details on various NERC projects relevant to the NOPR.

The groups also said that FERC should not require distribution providers and transmission owners to collect and share data and model information supporting IBR-distributed energy resources (IBR-DERs) that they cannot reasonably obtain.

With respect to sharing of IBR data, the Commission proposes that transmission owners should provide planning coordinators and other entities with detailed modeling data and parameters for unregistered IBRs with an aggregate material effect on operation of the BPS. The Commission would also require such information sharing by distribution providers for IBR-DERs.

Similarly, the Commission proposes to (1) require transmission owners to provide validated unregistered IBR models to the planning coordinators for interconnection-wide planning and operational models; and (2) require distribution providers to provide validated models of IBR-DERs in the aggregate to the planning coordinators for interconnection-wide planning and operational models. 

The NOPR recognizes that it may not be practical for distribution providers to provide modeling data and parameters to model individual IBR-DERs directly, in light of the small size and location of many of the IBR-DERs on the distribution system.

The NOPR thus proposes that distribution providers be permitted to provide IBR-DER modeling data and parameters in the aggregate or equivalent.

The groups said they appreciate that the Commission recognizes the practical challenges of modeling individual IBR-DERs. 

“But a more fundamental challenge must also be acknowledged: A registered entity cannot provide data that the registered entity itself does not have and has no ability to collect,” they said.

“In particular, it would be unrealistic to expect a transmission owner or distribution provider to have information about unregistered IBRs and IBR-DERs at the same level of detail and accuracy that registered generator owners can provide about their own facilities.”

In most if not all cases, the transmission owner or distribution provider has only the information provided to it during the interconnection approval process, APPA and the other groups said.

“Interconnection agreements may not require the IBRs to provide modeling data, and transmission owners and distribution providers may not have the contractual right to add such requirements unilaterally and retroactively. Furthermore, some IBR-DERs on the distribution system interconnect under utility retail tariffs without a separate interconnection agreement.”

The practical limitations that transmission owners and distribution providers have to collect and model data regarding unregistered IBRs and IBR-DERs are unlikely to have a significant adverse impact on BPS reliability due to a number of factors, the groups said.

In the alternative, the Commission should limit the obligations to be shouldered by distribution providers and transmission owners to what is feasible, the groups said.

“In ascertaining what it is realistic to require of transmission owners and distribution providers with respect to asset owners they do not control, the Commission may consider convening a forum to consider the relative benefits of directing new or revised reliability standards applying to distribution providers with IBR-DERs, or else directing NERC to submit a study on the challenges of developing and implementing such standards.”