April 30, 2018 / 10:59 PM / 7 months ago

UPDATE 1-PJM will test U.S. Mid Atlantic/Midwest power grid for resiliency

(Adds comment from Department of Energy, paragraphs 8 and 9)

By Scott DiSavino

April 30 (Reuters) - The operator of the biggest U.S. power grid said on Monday it would study fuel security vulnerabilities in its Mid-Atlantic and Midwest system and, if needed, compensate generators for the resiliency their units provide.

"We do not feel we have a vulnerability today, but will take a look at the system to see if we could have fuel security issues in the future," Andy Ott, president and CEO of PJM Interconnection, said in a conference call.

The fuel mix used to generate power in PJM, which serves 65 million people, has changed over the past several years with coal and nuclear plants retiring as energy firms add more natural gas and renewable units.

That transition has caused economic pain for owners of the retiring units, like FirstEnergy Inc, along with concern by some in the administration of President Donald Trump that the grid is becoming more vulnerable to the loss of a big gas pipeline or an extreme weather event.

FirstEnergy in March asked Energy Secretary Rick Perry to evoke emergency powers to help several struggling nuclear and coal plants remain open, including units owned by its FirstEnergy Solutions subsidiary, which sought bankruptcy protection just days after saying it would shut nuclear reactors in Ohio and Pennsylvania.

"We don't think there is an emergency today, but we do think these are legitimate questions to ask," Ott said.

PJM's Ott described potential fuel security issues as those that could cut fuel supply to critical resources due to extreme weather conditions or physical or cyber attacks on power plants and gas pipelines.

The Energy Department was encouraged by PJM's study, said spokeswoman Shaylyn Hynes. "Premature retirements" of nuclear and coal plants put the grid at risk and undermine national security, she said.

Hynes urged the Federal Energy Regulatory Commission, an independent agency of the Energy Department, to take immediate action to stop the shutting of power plants. The Energy Department is reviewing its options to ensure that the grid can withstand extreme threats, she added.

PJM said it plans to complete its assessment over the next six months. It will stress-test the system under various fuel supply disruption scenarios to understand potential future reliability concerns.

"We have the ability to identify risks to the system and to put a value on resources that offset that risk," Ott said, noting certain generators with weeks of fuel on hand or multiple sources of fuel could receive more money for the resiliency they provide.

Some coal plants, for example, keep weeks of fuel on hand or have access to mines on site. Nuclear plants can hold up to two years worth of fuel in their reactors. Some gas plants can also burn oil and have access to multiple pipelines, gas straight out of the ground and liquefied natural gas supplies. (Reporting by Scott DiSavino; additional reporting by Timothy Gardner, editing by Diane Craft and Lisa Shumaker)

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