It’s been almost 10 months since deadly Winter Storm Elliot left a deep freeze over much of the country, resulting in widespread blackouts right before Christmas.
And ever since, electricity companies have been squabbling over the fallout with PJM Interconnection, the sprawling electricity market that stretches from the mid-Atlantic coast to the Midwest. About a quarter of the market’s capacity fell offline during the storm, with most of the blame falling on natural gas plants that were unable to deliver power. Penalties that PJM extracted from these plants drove some to bankruptcy while others went to federal energy regulators to say the penalties were too high.
Finally, on Friday, the parties told the Federal Energy Regulatory Commission that they were ready to settle. The settlement, if approved, would reduce the penalties from $1.8 billion to around $1.2 billion, which also means shaving payments to generators who were able to stay online during the storm by about a third.
But it probably won’t be the end of the story. Both the widespread failure during Elliott and the resulting tussle over how to pay for it underline just how hard it is to guarantee reliability, especially as the country becomes more electrified.
Generally, reliability on the electric grid is guaranteed by natural gas plants, which are supposed to be able to easily switch on and off to generate power when they’re needed most. In fact, about 40% of our electricity comes from natural gas. But you see the problem: When the gas system goes down, households lose access to heating, provided by natural gas directly via furnaces or by electricity via heat pumps. In the winter this means people will die.
And natural gas really did fall to pieces during the storm. According to a PJM report, “outages on gas units were primarily attributed to physical plant issues,” both because the cold made power plants inoperable and because the distribution network itself seized up, leaving gas plants unable to access the fuel they needed to produce power. This is similar to what happened during 2021’s Winter Storm Uri, a deep freeze that led to days of power outages in Texas that claimed over 200 lives.
Both situations suggest a few things: First, we need better forecasting. FERC said in its own review of the power outages that forecasts by grip operators underestimated how much electricity would be needed at peak times during the storm, in some cases by more than 10 percent.
Second, natural gas plants might not be as reliable as they’re supposed to be — and it’s unclear where the money will come from to make them more resilient.
And third, that merely incentivizing energy markets and individual generators to get this right only goes so far — huge portions of the generation fleet were unable to cope with the high demand for power, even at the risk of massive (if slightly reduced) penalties.
Electricity markets might need a little more oversight.
