Fuel Oil and the Grid

“The health and safety of New England’s 14 million residents and the vibrancy of its economy depend on a reliable power supply, and that requires fuel security—that is, a reliable supply of the various fuels used to generate the region’s electricity.”

That’s from a report by ISO New England, operator of the region’s six-state power system. As fuel oil suppliers and marketers know well, fuel oil is among the various fuels used to generate the region’s electricity. The connection between fuel oil and the grid is spelled out in detail in Operational Fuel-Security Analysis, the ISO New England report, which was made public in January and bears on its cover the subtitle, “For Discussion.” As ISO New England states in the report, it is charged with planning and operating the grid “to ensure a reliable supply of electricity.”

The report notes, “New England’s generation fleet relies primarily on fuels imported from elsewhere in the United States or from overseas to produce power, giving fuel procurement, transportation, and storage a pivotal role in power system operations. This is particularly true during winter when fuel for nearly half the region’s generating capacity may become inaccessible due to priority demand for natural gas from the heating sector.” Hence the focus on “fuel security.”

ISO New England’s report points out that “fuel-security risk—the possibility that power plants won’t have or be able to get the fuel they need to run, particularly in winter—is the foremost challenge to a reliable power grid in New England.”

As background ISO New England’s report observes, “On multiple occasions in recent winters, the ISO has had to manage the system with uncertainty about whether power plants could arrange for the fuel—primarily natural gas—needed to run. Because the ISO has no jurisdiction over other industries’ various fuel-delivery systems, it has addressed the effects of insufficient fuel supplies on the power system by employing real-time emergency operating procedures and implementing market design changes to incentivize generators to arrange for adequate fuel supplies. The ISO has also worked on improving communication and coordination with natural gas pipeline operators.”

Keeping the grid up and running can be a challenge, as the report conveys:

“The ISO has been able to maintain power system reliability during severe winter conditions without using all its emergency procedures. However, the evolving generation mix is increasingly susceptible to variable and uncertain factors. Natural gas pipeline constraints, the logistics of importing liquefied natural gas (LNG) and fuel oil, the impact of New England’s weather on the availability and timing of fuel deliveries, and the amount and timing of electricity generated by renewable resources all contribute to a high level of uncertainty for ISO system operations.”

In fall 2016, ISO New England says, it initiated a study “to better understand any potential future impacts of fuel-security risk. The study estimated the operational impacts of possible fuel-mix scenarios so that the ISO and the region can assess the level of risk and plan appropriate mitigation, if needed.”

The ISO says it found that, “in almost all future resource combinations, the power system was unable to meet electricity demand and maintain reliability without some degree of emergency actions.”

It should be an interesting discussion.

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