North America's bulk power system is poised to undergo an "unprecedented" change in its generational resource mix over the next decade, the North American Electric Reliability Corp. found in its "2011 Long-Term Reliability Assessment," released Nov. 28.

Growing dependence on natural gas as a primary fuel source for on-peak capacity and more gas-fired generation for baseload functions, a surge in wind and solar generation, as well as new environmental regulations coming down the pike and the attendant retirements of coal-fired units will drive a change in the fuel source portfolio, the report found.

In addition to a more diversified power source mix, the report found that depressed energy demand and increased use of demand-side management - such as energy efficiency, conservation, and demand response programs to manage peak demand and overall energy use - could help to alleviate supply concerns sparked by new landmark environmental regulations.

NERC produces the annual report following an order by Congress to conduct periodic assessments of the reliability and adequacy of the bulk power system of North America, providing an independent examination of key reliability indicators including peak demand, energy forecasts, resource adequacy, transmission developments and other factors.

Renewable resources are expected to see the greatest jump over the next decade, climbing to 7.6% in 2021 from 4.3% in 2011. That comes in part due to explosive growth in solar energy, which is expected to make up nearly one-third of all non-hydro renewable resources, up from just over 2% in 2011. Growth in wind and solar generation has surpassed on-peak growth forecasts for all other types of generation. Natural gas, over the same period, is expected to edge up by about one percentage point, to 38.5%.

Coal, on the other hand, is projected to dip over the same period by nearly three percentage points, to 27.1%. The projected decline in NERC-wide net coal capacity over the 10-year period is the first drop recorded, according to the report.

NERC's finding builds on a trend that it identified in its 2010 report, in which it cited an "unprecedented, continuing change in the generational fuel mix."

As for renewables, their expanded use has been driven by a host of policies, the report stated, including emerging requirements for renewable portfolio standards, potential limits on greenhouse gases and increased demand response, energy efficiency and conservation measures, as well as societal and political pressures. Yet another factor facilitating the move toward the use of renewable energy sources is the increase in transmission plans to integrate renewable resources distant from load centers.

The report projects planned gas-fired capacity additions in NERC to climb to 44,882 MW in 2021, up from under 18,000 MW in 2012.

"With a shift to unconventional gas production in North America, the potential to increase availability of supply makes gas-fired generation a premier choice for new generating capacity in the future," the report maintained.

The trends that could ease any potential supply constraints include a lower growth in energy demand. The 2011 demand forecast average annual compound growth rate is the lowest 10-year growth rate recorded by NERC's long-term reliability assessments, which started in 1967. That, in part, is a result of continued dismal economic growth. Increases in NERC-wide total capacity over the decade - down to 90,000 MW from the year-ago projection of 131,000 MW - also may reflect reduced long-term peak demand and energy projections in a majority of the assessment areas.

Additionally, demand-side management over the next decade throughout NERC is expected to total roughly 55,000 MW by 2021 - or enough to offset approximately four years of peak demand growth. Energy efficiency across all assessment areas is forecast to reduce 2021 demand by about 15,300 MW on-peak.

"As a result of implementing energy efficiency programs alone, the electric industry in North America has effectively deferred the need for new generating capacity by approximately one year," the report asserted.

NERC also noted that for the majority of the system, planning reserve margins "appear sufficient to maintain reliability during the long-term horizon."

While NERC found that most areas "appear to have adequate resource plans" to meet peak demand, the Electric Reliability Council of Texas Inc. and ISO New England Inc. were exceptions.

"Though sufficient conceptual resource plans are in progress, for the ERCOT portion of Texas and for New England, more certainty is needed to address resource adequacy in the coming years," NERC President and CEO Gerry Cauley said in a Nov. 28 statement. "We will monitor these two areas in the upcoming year for progress in firming these resource projections."



Copyright 2011 SNL Financial LC. All Rights Reserved.

(Originally published November 30, 2011, in SNL FERC Power Report.)