Surprisingly, There Is No National Standard for Resource Adequacy

Grid planners nationwide have an opportunity to adopt innovative new planning practices for reliability.

Most of the time, those of us in the United States take for granted the reliability of the electric power sector — until the lights go out, that is.

That’s because the US electric power system is extremely reliable — the average US customer experiences less than five hours of outages per year (99.95% reliability across all hours annually), and almost all of these outages are due to issues on the distribution system as opposed to imbalances in electricity supply and demand on the “bulk power system” (which includes generation and transmission, but not the distribution system). Nevertheless, a reliable grid today doesn’t guarantee a reliable grid in the future.

The North American Reliability Corporation (NERC), the nation’s reliability watchdog, is sounding the alarm over concerns about resource adequacy — a component of reliability that minimizes the risk of blackouts or brownouts due to insufficient generation while balancing the costs of maintaining a reliable power system. In fact, NERC’s 2023 Long-Term Reliability Assessment, which assesses resource adequacy across the continental United States and parts of Mexico and Canada, places the majority of the country at “high” or “elevated” resource adequacy risk.

Resource adequacy planning attempts to balance the costs of building generating capacity today against the potential cost of failing to meet demand in the future. Because future costs are highly uncertain, planners typically accomplish this by using a “resource adequacy criterion” that establishes a threshold for a socially acceptable level of outages.
Resource Adequacy Assessment Is Left Up to Utilities, States, and Regional Reliability Entities  

Part of the reason that the bulk power system has been so reliable are the dozens of Reliability Standards developed by NERC. Yet, there is no national standard for resource adequacy, placing decisions about how resource adequacy is assessed in the hands of regional grid operators, state regulators, utilities, or NERC-designated regional entities.

For example, the regional entity ReliabilityFirst proposed its own Reliability Standard on resource adequacy assessment to NERC in 2009; in 2011, this standard was ultimately approved by the Federal Energy Regulatory Commission, and has remained the only regional resource adequacy assessment standard to date. In developing that standard, ReliabilityFirst recognized that planners in its footprint would benefit from aligning behind a common methodology for assessing resource adequacy. ReliabilityFirst proposed a “1 day in 10 years” assessment criterion for resource adequacy, which means that planners expect an outage due to insufficient resources one day every ten years, on average. A version of this standard (BAL-502-RF-03), which still maintains the “1 day in 10 years” criterion, has remained on the books, and is currently up for five-year review.

Notably, ReliabilityFirst’s resource adequacy standard only lays out requirements for assessing resource adequacy in its region; it does not mandate that any action be taken as a result of the assessment. This is because NERC and regional entities like ReliabilityFirst cannot legally require any new generation or transmission. Resource adequacy assessment is important but isn’t sufficient for maintaining a reliable grid —that requires procuring and maintaining generating resources. This means that it is up to the electric power industry itself — within ReliabilityFirst and nationally — to take action to maintain resource adequacy, presenting a crucial role for regulators in ensuring that the lights stay on.

State Regulators, NERC, and Regional Entities Have an Opportunity to Advance Resource Adequacy Planning

The flexibility across planning jurisdictions — from individual utilities to states to multi-state regional grids — for planners to choose their own approaches to assessing and ensuring resource adequacy presents a challenge and an opportunity. On the one hand, lack of a common assessment approach could create challenges for inter-jurisdictional planning if planners lack a clear understanding of the differences between approaches.

On the other hand, this flexibility allows jurisdictions to determine their own standards and practices for how to assess resource adequacy, based on a level of adequacy that they deem appropriate. These choices can vary significantly from state to state and region to region, for example, given differences in state policies and ratepayer toleration of costs and levels of reliability. To that end, state regulators, NERC, and regional entities can take several actions to advance resource adequacy planning and help ensure that the lights stay on:

Recommendation 1: State regulators, NERC, and regional entities can explore more advanced approaches to assessing resource adequacy. In recent years, experts have showcased the benefits of moving beyond the 1-in-10 criterion toward multi-metric adequacy standards that better account for the changing resource mix. These standards would consider not only the frequency, but the duration, depth, and timing of outages. Some utilities have begun taking up this mantle themselves, such as Tri-State’s recent adoption of multi-metric resource adequacy criteria. This presents opportunities for several non-utility stakeholders as well:

  • State regulators can be proactive in their investigations of those advanced approaches. For example, the Public Utility Commission of Texas in 2023 sought comments on their existing use of the 1-in-10 loss of load expectation and other alternatives to it in Project 54584.
  • NERC’s Reliability Assessment Subcommittee and more broadly, Reliability and Security Technical Committee, should explore how to incorporate these emerging practices into its national resource adequacy assessments.
  • ReliabilityFirst should consider realigning its BAL-502-RF-03 standard with more advanced approaches to reliability assessment as part of its five-year review.

Recommendation 2: State regulators must ensure that sufficient resources are procured and maintained to ensure resource adequacy. Since any regional or national Reliability Standards for resource adequacy can only guide resource adequacy assessments, state regulators must ultimately ensure that sufficient supply- and demand-side resources are actually procured to keep the lights on. In states with vertically integrated utilities, regulators should plan proactively for new procurements in light of expected load growth, leveraging all-source procurement practices, and ensure that integrated resource plans are properly capturing the resource adequacy value of all resources. And in restructured states, regulators can petition regional grid operations to ensure they are considering cost effective reliability and resource adequacy solutions.

Recommendation 3: Think and plan inter-regionally. As inter-regional interactions become increasingly important in grid planning, state regulators have an opportunity to take a broader view of planning. Inconsistencies between resource adequacy practices between neighboring states and regions can lead to sub-optimal resource procurements, so regulators can require integrated resource plans to consider transmission and market transactions between neighboring systems. They can also engage with neighboring states and their jurisdictional utilities in resource adequacy planning in order to break down barriers and reduce those gaps.

For decades, the United States has maintained an impressive level of reliability in the bulk power system without a national standard for resource adequacy, thanks in part to thoughtful oversight and assessment from state regulators, NERC, and regional reliability entities. A transitioning grid creates an imperative for these stakeholders to maintain — and even improve — this track record of performance, by both strengthening how resource adequacy is assessed and implementing innovative planning practices to ensure that tomorrow’s grid is not only cleaner, but more reliable than ever.