A rapidly growing state, increasing numbers of days with extreme heat, supply-chain disruptions and shut-down power plants all threaten to cause blackouts in the Southwest in coming years.
That’s the message Arizona Public Service Co., Tucson Electric Power and Salt River Project officials gave regulators this week during a normally routine meeting about the summer power supply.
Utilities meet every spring with the Arizona Corporation Commission to discuss their plans to meet the energy demand in the summer ahead. None of the utilities sees unusual problems for summer 2022.
But the next few years are worrisome for several reasons, they say.
“While we are prepared to meet summer here, I would not be surprised if over the next several years you see difficulty from the utilities in terms of continuing to maintain such a rosy outlook in terms of meeting the expectations,” Bobby Olsen, SRP senior resource planning director, told regulators Wednesday.
“We are going to have serious challenges meeting … requirements, as well as transitioning our resource needs.”
Regional power supply tight
Demand for electricity is growing while supply is not.
This summer, Arizona utilities say they have just enough power to meet the expected demand. But should a large power plant go offline, or a wildfire take out a key transmission line, or some other emergency occur, there’s essentially nowhere they can turn for backup power.
“The market is really tightening up,” said Lee Alter, TEP’s director of resource planning. “You see it in the prices.”
Utilities maintain what they call a “reserve margin” of power available in case demand is higher than they forecast. That power must be available at a moment’s notice.
Alter said that while TEP maintains a 16% reserve margin, utilities would have difficulty contracting to lock in a larger margin if they wanted to.
“We are keeping close tabs on the market and (power plant) closures and the ability to retain that reserve margin in the future,” Alter said.
Arizona can’t likely turn to the east, as Public Service Co. of New Mexico, or PNM, already has warned that its customers are likely to see rolling blackouts this summer.
PNM officials said they have essentially no reserve margin. That means they forecast customers to require as much or more electricity than the utility will be able to provide.
When that happens, utilities can initiate rolling blackouts, in which portions of the power grid are intentionally cut off for a set amount of time, usually for an hour or so, before the outage “rolls” to the next area.
Controlled outages are used to prevent a catastrophic, uncontrolled blackout that takes down electric service across a large area. Uncontrolled outages like that can leave customers without power for much longer as utilities struggle to recover the grid.
Arizona can’t look for relief from the west, either.
In August 2020, California experienced four of the five hottest August days the state has seen in the past 35 years, prompting customers to rely heavily on air conditioning and triggering rolling blackouts.
Electricity planners hadn’t lined up enough electricity to meet that demand, and the only way to keep the power grid from a massive failure was to cut off hundreds of thousands of customers for brief periods to keep supply and demand on the grid in balance.
Arizona utilities had to request customers voluntarily cut back on electricity use around that same time in summer 2020 to prevent the same situation from happening here. So did Nevada.
Summer 2021 wasn’t as hot, had more days with rain, and didn’t trigger the same concern in Arizona. But the three major Arizona utilities all forecast the peak demand in summer 2022 to top 2020.
Gas plant rejected
Arizona utility regulators recently rejected a more than 800-megawatt expansion at SRP’s Coolidge gas plant. Half of that power was anticipated to come online for summer 2024. Now SRP isn’t sure what it will do to meet demand that year.
State utility regulators voted 4-1 to reject SRP’s plan to build the plant, saying the impacts on the 150 or so people living nearby weren’t adequately addressed and that the utility hadn’t studied alternatives enough.
“We are evaluating what options we have to get around the loss of Coolidge in our resource plan,” Olsen said. “We are kind of looking at all options on the table.”
SRP should be OK this summer and next, thanks to four new gas units it is building at its Desert Basin and Agua Fria gas plants, Olsen said.
The four new units are all expected to be online by June and bring about 168 megawatts of new capacity to the utility. They did not require the same regulatory approval as the Coolidge expansion.
‘Substantial’ risks cited
A February study warning of “substantial reliability risks” released by Energy and Environmental Economics Inc., or E3, of San Francisco warned of the power-supply crunch in the Southwest, and the utilities, which commissioned the study, cited its conclusions Wednesday.
The key conclusion of that study was that the growing population and the closing of power plants “are creating a significant and urgent need for new resources in the Southwest region.”
“Maintaining regional reliability will hinge on whether utilities can add new resources quickly enough to meet this growing need and will require a pace of development largely unprecedented for the region,” the report said.
The report also concluded that existing power plants will not be enough to keep the power flowing in 2025 or 2033, two years the report used as benchmarks, without significant new additions.
It said utilities in the Southwest will require almost 4,000 megawatts of new power plants by 2025 and over 13,000 megawatts by 2033. One megawatt is enough capacity to supply about 250 homes at once while a power plant is running.
To put those figures in context, the Palo Verde Generating Station nuclear plant west of Phoenix can supply about 4,000 megawatts of power when all three generators are operating.
“The ability of the region’s utilities to preserve reliability over the next few years will depend on their success in bringing new resources online in a timely manner to address this shortfall,” the report said.
Utilities are actually planning much more than that, but most of the additions are solar plants with battery storage, and because that resource is not available 24 hours a day, the utilities have to build more capacity from them to ensure the power is available when needed.
The E3 report said utilities have 5,000 megawatts of new power plants under construction, an additional 10,000 megawatts planned by 2025 and 35,000 megawatts by 2033.
Hotter weather stresses grid
The hotter it is in the Southwest, the more air conditioning customers need to keep cool, and utility officials all emphasized that weather has been challenging their systems.
Demand tends to increase when there are consecutive days with extreme heat, which bring hot evenings and often prompt customers who are fatigued by the weather to use even more cooling than they would on a single hot day.
Most of the annual peak demand records set by Arizona utilities occur after consecutive days of hot weather with no rainstorms or other reprieve from the heat.
“We are starting to pay more attention to these heat extremes. We are seeing them more often,” Alter said.
Summer of 2021 gave utilities a break with the weather, but they can’t count on that every year.
“Last year … we received a bit of good fortune in the sense it was a wet summer,” Olsen said. “That helped mitigate load across our system as well as others.”
Drought threatens hydropower
The worsening drought in the West also is having an impact because it is resulting in less water in the Colorado River, which has massive hydropower dams that generate electricity used across the West.
Glen Canyon Dam is almost to the point where it can no longer generate electricity because the water level in Lake Powell behind the dam is so low.
The dam can’t generate power if the water level in the reservoir falls below 3,490 feet.
This spring the level hit a trigger point of 3,525 feet, 35 feet above the shutoff level. The Bureau of Reclamation takes note of this elevation because it could prompt further cutbacks in water releases to hold the level above the cutoff point.
Releases from the reservoir were reduced in 2022 to protect the power generation.
The eight turbines in the dam have a capacity of 1,320 megawatts. The Western Area Power Administration distributes that power across the West.
Downstream of Lake Powell is Lake Mead, which also is parched by drought. The turbines at Hoover Dam, which holds back that reservoir, already are producing less electricity because of the low water level, though that reservoir is further from the point at which the turbines can’t generate power at all.
Hoover Dam’s 17 generators can produce 2,080 megawatts of electricity, which also is used throughout the region.
Solar threatened by tariffs
Arizona utilities are planning several new solar plants, many with battery storage, to meet the increasing demand. But those projects also are facing problems.
Recently the U.S. Commerce Department announced an investigation of imported solar panels to determine if parts were being shipped and assembled in a manner to avoid tariffs on Chinese goods.
That action only will worsen the project delays utilities already are seeing, officials said.
For example, this week SRP opened the Central Line Solar plant in the Eloy-Coolidge area. The plant was planned to open last winter but had been delayed. Officials said such delays are expected for other solar plants under development.
SRP officials said they already have been notified that other projects it has contracted with are threatened with lengthy delays.
Expert: Utilities have options
Shelby Stults, a principal at Advanced Energy Economy, a national business association that advocates for clean energy, said Arizona utilities have options despite all the challenges they cite regarding power supply.
The first could be to expand the wholesale energy markets in the West, she said, citing a recent study funded by the U.S. Department of Energy.
Arizona utilities already buy energy on the wholesale market, but Stults said the entire West would benefit from broader trading to make more power sources available when utilities need extra capacity.
With more resources available to more utilities, power plants would be put to more efficient use and the overall cost to keep every customer in the region well supplied would be reduced, the study suggests.
“If a regional heat wave is causing a peak in demand, to source power from outside that regional heat wave could lead to cost savings,” she said. “Ultimately the region as a whole would benefit from development of large widespread western regional transmission organization.”
The second thing utilities could do is to increase their use of energy efficiency projects and “demand response” programs, where customers are asked or even paid to cut power use during the hottest hours of the hottest days, she said.
Arizona utilities already use such programs, including some that allow utilities to adjust thermostats for customers who opt into such a program, or briefly reduce power at large industrial facilities. Stults said there’s more they could be doing.
“Thinking through more creative ways they can invest in curbing peak demand at critical times, as opposed to just immediately investing in capital intensive new generation sources, could go a long way to meet those concerns,” Stults said.
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