Market Insights

NERC Adds Energy Policy as Key Risk for Grid Reliability

September 21, 2023 by Jessica Zimmer

NERC recently stated energy policy is a concern for the U.S. and Canada's bulk-power supply. Energy policy determines whether the two countries can maintain sufficient power and manage security risks.

For the first time since its formation in 1968, the North American Electric Reliability Corporation (NERC) has identified energy policy as a risk priority for grid reliability. NERC added energy policy to factors like resilience to extreme events because of the heightened legislative focus and mandates regarding decarbonization, decentralization, and electrification. NERC expects energy policy to drive many rapid changes in the near future. 


A power plant combining conventional and renewable energy.

A power plant combining conventional and renewable energy. Image used courtesy of Unsplash


Energy policy can influence other risks because policy affects changes in the planning and operation of the U.S. and Canada’s bulk-power supply (BPS). The enactment of new policies can strengthen or compromise the reliability and resilience of the BPS. 


Engineers Encouraged to Assess Energy Sufficiency

After changing focus, NERC is now encouraging legislators and engineers to find new approaches to assess and ensure energy sufficiency for all hours throughout the year. 

The resource mix for power is rapidly changing from one that is limited by rated capacity to one that is more fuel and energy-constrained. Specifically, there is a shift away from conventional, synchronous central-station generators toward a mix that includes natural gas-fired generators and a higher use of non-synchronous resources. The latter resources include renewables and energy storage. 

Engineers can assist with the effort by providing the entities for which they work with a better understanding of energy sources and relating how energy policy affects these sources. Engineers can also help these entities grasp how severe, repeating or long-term, and broadly impactful weather events like winter storms can affect energy sufficiency. 


NERC’s Role in the U.S. and Canada 

NERC is a nonprofit regulatory authority that oversees six regional reliability entities across the U.S., Canada, and a portion of Baja California in Mexico. These entities are organizations that represent all segments of the electric industry, including electric utilities, independent power producers, and end-users. NERC advocates for measures to reduce risks to the BPS. 

NERC’s statements on energy policy can be found in its 2023 ERO Reliability Risk Priorities Report, which the organization’s Reliability Issues Steering Committee (RISC) released in August. RISC is an advisory committee that reports to NERC’s Board of Trustees.  


The six regional reliability entities that NERC oversees.

The six regional reliability entities that NERC oversees. Image used courtesy of NERC (Page 4) 

NERC’s energy policy argues for more communication, coordination, and collaboration between federal, provincial, and state policymakers, regulators, owners, and operators. Engineers could facilitate this by developing educational materials for policymakers, regulators, and colleagues. The energy industry would benefit from more information to understand the processes and implications of policy decisions. 

NERC sees energy policy at all levels, including local levels, as providing incentives and targets for resource changes and end-use applications. The organization holds that the emerging resource mix is more susceptible to long-term, widespread, and extreme events like sustained loss of wind power. 

The change means there will be more instances of critical infrastructure interdependencies. For example, natural gas-fired generation must rely on more fuel delivery from the natural gas industry. That industry will need more electricity to support operations to extract and transport gas. 


How industry respondents in a NERC survey ranked the severity of risks facing the BPS in 2023.

How industry respondents in a NERC survey ranked the severity of risks facing the BPS in 2023. Image used courtesy of NERC (Page 16) 


Lessons From the 2003 Northeast Blackout 

This year, NERC clarified how energy policy can affect the BPS by remembering the 2003 Northeast blackout. That mid-August event affected approximately 50 million people and severely affected commerce, according to Tim Gallagher, president and CEO of ReliabilityFirst, the Cleveland, Ohio-based regional reliability entity that oversees the East North Central states. Yet, if the blackout had occurred during the winter, it could have resulted in the loss of lives. 

In the NERC’s July 2023 newsletter, Gallagher remarked that 20 years after the blackout occurred, it is evident that energy policy significantly helped the industry. The U.S. benefited from Congress creating mandatory, enforceable standards and giving regulatory agencies the ability to fine companies for non-conformance. The legislative work resulted in the discovery and correction of thousands of violations over the past two decades. 


Future Policy for Energy Reliability

As energy producers look toward the future, they are transforming the grid to be greener and further electrify the U.S. and Canada, Gallagher claimed. Consequently, the burden on the existing system increases, along with the consequences of it not working properly. 

Gallagher described the transition to a cleaner grid as a massive engineering problem. The many tasks to be figured out include developing methods for systems to restore themselves and creating system security measures that support critical industries like steelmaking. 

In NERC’s July newsletter, Gallagher indicated that because the North American power system is so tightly integrated, entities do not have the luxury of making the necessary modifications on their own. He added that all of the problems have to be solved at the same time by everyone, and perhaps in the same manner. 

The question is how this assessment of what needs to be accomplished meshes with the fact that energy policy is rarely uniform, especially across three countries. 

Still, there are bright notes in the policy sphere. One is the set of changes resulting from the passage of the U.S. Inflation Reduction Act (IRA) of 2022. This act has been one of the most significant drivers in clean energy investment in the U.S. So far, the legislation has provided approximately $271 billion in clean energy incentives, according to American Clean Power, supporting projects ranging from the production of second-life solar panels to the opening of wind turbine manufacturing plants.