‘Unacceptable’ power plant failures during Christmas storm could lead to $2 billion in penalties

Power plants could face up to $2 billion in penalties after nearly a quarter of the fleet serving the electricity grid for Pennsylvania and 12 other mid-Atlantic states failed to run during the frigid winter storm over Christmas weekend.

The outage rate was “unacceptable,” regional grid operator PJM Interconnection said this week in its initial analysis of a close call that risked blackouts across the electrical system that serves 65 million people.

At the height of the unplanned power plant outages, on the morning of Saturday, Dec. 24, more than 23% of the expected power supply for the regional grid was unavailable.

The vast majority — 87% — of the power plants that failed to run when called upon that morning burn fossil fuels, like natural gas and coal.

“Quite frankly, while a lot of resources did perform well, generator forced outages were unacceptable,” Mike Bryson, PJM’s senior vice president of operations, said in a news release.

Natural gas plants performed especially poorly, making up 70% of the unplanned outages, even though they represent less than half of PJM’s power fleet. Coal plants represent about a quarter of the fleet and made up about 16% of the outages.

The other 13% of outages were at facilities powered by nuclear, oil, wind and solar, PJM said.

The winter storm put extraordinary strain on the grid during a holiday weekend.

The average temperature dropped a record 29 degrees in 12 hours, causing a spike in demand for power to keep homes warm. Even the lowest ebb of power demand on Dec. 24 was significantly higher than any peak of demand during any Christmas Eve in the past decade, PJM said.

The demand was 10% higher than PJM expected, but officials said they had secured commitments from power producers to more than make up the difference.

But when the grid operator called up generators who are paid to provide reliable power, they repeatedly failed to run.

More than 92% of the forced outages came with no notice or less than an hour’s notice, according to PJM. “Dispatchers were calling generators to bring them online, only to be told for the first time that the unit wasn’t available,” the report said.

Penalties for those power plants could be between $1 billion and $2 billion, according to PJM’s early estimates. The final calculation could take several months.

The primary causes for the outages included equipment breakdowns at the plants, shortages of natural gas and other fuels, and startup failures, PJM said.

Daily gas production from the region’s Marcellus and Utica shales dropped nearly 30%, PJM said, because of freezing conditions seizing up equipment at well sites and along pipelines.

The grid operator ultimately did not have to resort to rolling blackouts after it deployed emergency measures, including putting out an urgent public appeal to conserve energy for the first time since 2014.

Tom Rutigliano, a senior advocate at the Natural Resources Defense Council, said the near-miss was a warning.

“History has proven again and again that gas is not as firm as it claims to be, and reliability will continue to suffer until that fact is accepted,” he said. “PJM must plan accordingly, and reform rules that subsidize fossil fuel power plants by pretending they’re more reliable than they really are.”

In a blog post, Rutigliano explained that payments that power plants get for committing to provide reliable power far surpass the penalties they will pay for failing to uphold their end of the deal.

“That makes promising to provide power and then failing to do so a profitable business. That’s absurd,” he wrote.

The Marcellus Shale Coalition, a trade group whose members produce, transport and generate power from natural gas, said the cold snap was a “historic event.” Coalition president David Callahan said in a statement that natural gas “like virtually every energy source, was impacted in some way by the storm’s significant effects.”

He suggested the way to provide “maximum resiliency across our energy delivery systems” is “to build more modern energy infrastructure, particularly natural gas pipelines.”

In a research note to clients, analysts at ClearView Energy Partners said poor performance by natural gas generators could “pose political problems going forward in addition to potential penalty exposure.” That’s because natural gas plant owners “have often argued that they are more flexible and more reliable,” including as a backup for intermittent renewable energy sources.

“Broad underperformance could provide contradictory evidence for such assertions,” the research firm said.

PJM will do a comprehensive analysis of the grid’s performance during the storm and plans to produce a report in April with recommendations and actions.