A Balanced Look at Our Power Supply System: Part 2

Posted: December 11, 2024 at 4:09 p.m.

EPUD General Manager Kyle Roadman

Kyle Roadman, EPUD General Manager

Hello Emerald Customer-Owners,

This is the second in a series of posts looking at the Northwest power supply system. Part 1 described the system’s diverse set of generating resources, anchored by the hydroelectric projects along the Columbia River basin. When complemented with legacy thermal resources, this system has long achieved a balance between affordability, reliability, and environmental responsibility.

Today’s post will examine what can happen when policymakers prioritize one of these areas above all else.

Part 2: A System Out of Balance

In recent years we’ve seen a move away from the affordable and reliable regional system described previously. The reasons are complex, but largely come down to state and federal policy decisions (often well intended) that prioritize environmental policy above all else.

At EPUD, we have a long history of environmental responsibility, including a resource portfolio that is around 90% carbon free. We’re proud to put our record on this front up against any utility in the nation. In fact, we feel so strongly about it we’ve put it right into our mission statement:

That said, we also recognize that environmental responsibility is but one component of a balanced power supply system. One that also accounts for near-term impacts on people and families. As I shared in the last post, this can be viewed as a three-legged stool:

While Environmental Responsibility certainly deserves equal footing here, it has instead become a near singular focus for policymakers. And it’s fast becoming clear this has distracted all of us from the other two planks.

The list of clean energy policies passed in the Northwest is extensive and I won’t describe them all here. In Oregon alone, the rundown includes:

Washington’s list of clean energy policies is just as extensive:

What does this all mean in practice? Our region has been rapidly removing legacy power resources (coal and natural gas) from the grid and (partially) replacing them with renewable energy (wind and solar). The chart below describes regional resource changes from 2018-2023:

Source: Reference Plant Updates for Annual Assessments (published by the Northwest Power and Conservation Council). https://www.nwcouncil.org/fs/18692/2024_04_p3.pdf

Clearly, the renewable energy policies are having their desired effect, with nearly 3,000 megawatts (MW) of coal having been replaced by over 3,000 MW of wind and solar.

This is mostly good news for environmental goals but is having a significant, underreported impact on both affordability and reliability. By its nature, renewable energy is intermittent, meaning it can’t be counted on 24×7 like the legacy resources we’re removing. The result is a more volatile system with less capacity to meet increasing demand.

This is no longer a theoretical issue. Although Northwest grid operators have mostly been able to keep the lights on, we’ve been dangerously close to blackout conditions during extreme weather events. The January 2024 cold snap is just the most recent example. The 2021 heat dome is another.

These policies have also dramatically altered the cost of power in our region. Like any other commodity, electricity is bought and sold each day in an active wholesale market. The two charts below illustrate the increasing volatility and overall higher cost for daily electricity in the Northwest.

The first of these displays pricing from roughly 2010-2020. Although the region saw a few spikes here and there, this was mostly a period of calm with abundant power supply pushing down prices.

The second chart displays pricing from roughly 2021 – 2024. Not only is the pricing at a much higher overall baseline, it’s also extremely volatile. This is particularly true around seasonal spikes in demand due to weather. Although these demand spikes happen every year, the extreme cost volatility is a recent phenomenon and reflects the impact (at least in part) of removing legacy power resources from the system.

Although for a time our industry was good at shielding retail customers from these market dynamics, this has started to change in a big way (as we’ll see in a future post).

Next time: a closer look at renewable energy. Why it’s part of the portfolio but not yet a replacement for legacy resources.

Please stay safe,