Dive Brief:

• Almost every major independent system operator in the U.S. has reformed its capacity accreditation process, or has started to in the wake of more frequent severe weather and the growing adoption of intermittent energy resources, Wood Mackenzie Senior Analyst Patrick Huang said during a Wednesday panel discussion.

• As a result of these reforms, most types of energy resources — from renewables and energy storage to thermal generation — have seen, or will see, their capacity accreditation downgraded, Huang said.

• The reforms have made resource planning more complicated, increasing demand for more flexible generation resources, according to Karl Meeusen, Wärtsilä's director of markets, legislative and regulatory policy for North America.

Dive Insight:

Beyond rewarding utilities that adopt an “all-of-the-above” approach to energy resources, capacity accreditation reforms at U.S. ISOs could also spur utilities to take a closer look at more novel generation technologies previously considered too expensive, Meeusen said during Wednesday's discussion, hosted by consulting firm Wood Mackenzie.

Reciprocating internal combustion engines have not been adopted in large numbers by utilities in the past due to the relatively high upfront capital cost. But they could offer a greater return on investment within ISOs that have adopted capacity accreditation reforms, Meeusen said. The reciprocating engines can ramp up or down more quickly than gas turbines, which allows them to better complement intermittent resources like wind and solar, and their modular design comes with potential reliability benefits, he said.

For example, a utility might choose to add 100 MW of capacity to its portfolio by deploying five reciprocating engines, or two peaker gas turbines. If one of the turbines goes down, the resulting outage will be significantly larger than if one of the five reciprocating engines goes offline, Meeusen explained. And that odds of all five engines going down at the same time are significantly lower than the potential that both turbines might — simply because there are more of them.

“When you lose one you lose less with more modular and granular resources,” Meeusen said.

Meeusen said he also sees a place in the modern grid for battery storage, which can also help provide reliability benefits, particularly during times of peak demand or during the early evening hours when renewable generation starts to dip. But he said battery storage tends not to perform as well during severe weather events, because most batteries remain limited to relatively short cycles and outages triggered by severe storms can span days at a time. He also noted that cycling batteries frequently tends to shorten their lifespan, potentially leading to greater costs in the long-run.

Wärtsilä has also experimented with hydrogen and other fuels such as ammonia and methane, and has found that its reciprocating engines performed well in a trial that used 20% hydrogen fuel by volume, Meeusen said. While he doesn't anticipate that any utility will use hydrogen for base load generation given the high cost, he said it could still play a role as long-duration energy storage.

“If you have a financial planner and they tell you to go out and invest every penny you own [in a single stock] you would find a new financial planner,” Meeusen said. “Just like any portfolio, you need diversity.”