Black start issue casts a growing shadow on local grid reliability

Sporn Plant is one of AEP’s coal units being retired due to EPA emissions requirements.

(Story by Sherri Monteith)

Black start service — the ability of a power plant to re-start on its own and re-energize the electric grid following a regional blackout without the aid of outside resources.

For many decades, black start services have been taken for granted. The service is critical for reliability, but is rarely needed and often overlooked.

Today, new environmental regulations regarding power plant emissions have resulted in thousands of megawatts of coal plants being retired over the next five years. The plants that are being forced to retire include many black start generating units. PJM, AEP’s eastern regional transmission organization (RTO), will see about 15,000 megawatts (MW) of generation retired by 2015, including about 5,200 MW of AEP generation. Almost all of those retirements will occur in mid-2015.

“The days of depending on the units that currently have black start ability are dwindling, and the clock is ticking as regulators, transmission owners and generation developers try to find common ground for a solution. Many stakeholders are concerned, but often disagree about who actually should be required to provide this service, how it is provided, and how it should be compensated. What they do agree upon is that black start is a critical component of reliability,” said Dan Snider, managing director — RTO Regulatory and NERC Compliance.

PJM has indicated a need to replace the retiring black start services provided within the AEP service territory as well as other zones in its footprint, including New Jersey, Maryland and northern Ohio. PJM has issued several requests for proposal (RFPs) for replacement black start generation for all of these zones. The proposals, however, are not pouring in. Specific to AEP, two RFPs for replacement black start service were issued, beginning in August 2011. Currently, PJM is close to signing contract proposals for some, but not all, of AEP’s service territory requirements. To fill the gap, PJM expects to issue additional RFPs.

Today, RTOs determine which generating units will provide energy on a regional basis. Also, regional tariffs approved by the Federal Energy Regulatory Commission determine what a generation owner should be compensated for ancillary services – those functions performed by a power plant that support transmission.

Those tariffs don’t always cover the additional costs to provide ancillary services, such as black start capability. Developers seek incentives to take on the added risk of becoming a black start unit. One of the biggest risks is reliability compliance, monitored by the North American Electric Reliability Corp. (NERC). For example, if a black start generator fails to re-energize the grid following a major outage – such as a hurricane, human error or act of terrorism – the financial risk of NERC’s non-compliance fines could be monumental.

“These fines can be in the millions of dollars, which would more than eliminate the existing revenue generated by black start facilities in PJM,” Snider said, Unfortunately, PJM says an incentive for adding black start capability to a new plant – such as basis points added to a generator’s return on equity – does not fit into its tariff.

PJM stakeholders are currently discussing incentive rates, but the process is slow and may not result in a timely or cost-effective outcome. AEP is investigating other cost recovery options, including the possibility of appealing directly to FERC.

The cost to consumers in PJM for black start service is small. The chart below shows that black start costs amounted to only 3 cents per megawatt-hour (MWh) of the $47.77/MWh total cost of supplying power to the grid.

While assessing the pros and cons presented by opposing stakeholders in the black start issue, it’s important to keep in mind the overall cost of energy, and the role of black start in that cost. In the PJM market, the average full-year cost of energy in 2012 was $47.77/MWh. Three cents of that total was attributable to black start costs.

In a March 18 meeting between AEP and PJM senior executives, AEP expressed its concern over the black start procurement process. Senior AEP executives in the meeting included Nick Akins, president and CEO; Bob Powers, executive vice president and chief operating officer; Lisa Barton, executive vice president-transmission; Mark McCullough, executive vice president-generation; and Chuck Zebula, executive vice president-energy supply.

AEP executives were clear that black start service is not optional and should not be provided for free. PJM seems to understand the concerns and the need for replacement services, but so far has not issued any contracts for replacement service in the AEP territory.

“For months now,” Snider said, “Transmission, Generation, Commercial Operations and Regulatory all have been investing hundreds of hours in working toward an integrated solution that will keep our system reliable. We continue to work diligently with PJM and other industry stakeholders to find a timely resolution of this issue.”