Episode 131: Understanding the Coming Resource Adequacy Crisis with NERC’s Jim Robb

[Music] By far and away, the issue facing the continent right now is we are in the early stages of what I can't describe as anything other than a resource adequacy crisis. [Music] Welcome to the Flux capacitor, a podcast about the future of electricity. I'm Francis Bradley of Electricity Canada. This is number one three one episode one hundred and thirty one of the Flux capacitor. I've been chatting with the industry's business leaders, thought leaders, new market players and stakeholders. I've built this as an opportunity for you the listener to get a sense of the conversations that are taking place in the sector. In hallways over coffee, outside of parliamentary committees, an airport lounge is sanded in industry events. This podcast was recorded immediately following just such an event at the North American Electric Reliability Corporations Electric Sector and Data Centret Leadership Roundtable. My guest on the podcast today is Jim Rob from NERC. Jim the NERC CEO joined me for a quick end of the year roundup on reliability issues. Jim notes that the upcoming long-term reliability report will highlight five regions at high risk of reliability issues with nine more at moderate risk. Our conversation covers the impact of data centers, extreme weather and grid transformation on reliability. Jim emphasizes the need for more generation, better resource diversity and improved fuel supply. We also discuss the role of NERC in educating stakeholders and the importance of timely standards development. We close our conversation with Jim's recommendation for an addition to the Flux capacitor book club. Here is my conversation with Jim Rob recorded in Washington the week before Christmas in 2025. Jim welcome back to the podcast. You're the year now I think the first the first person who is a three-timer on the podcast. Well I'm honored to play that role for you Francis. What that says to me is reliability is getting increasingly important. I'm glad I was able to come down and do this and have this conversation. The face is opposed to over zoom because we're here talking about data centers in large loads. It was certainly an interesting conversation but I was thinking of it in the context of my goodness how things have changed. Last year you and I were talking about incoming administration that was talking about 25% tariffs on everything and we didn't know what that was going to look like. The good news is it hasn't directly impacted the electricity sector. That was a pretty significant year of change. Two years ago we were chatting about inverter based resources and what they might look like. The first podcast which I think was you were podcast like number three. I think that's right. Which was six years ago and that really was kind of a bit of a bit of a primer. If somebody's been listening since the beginning they know who NERK is. They know what NERK is all about. They know that we were talking about inverter based resources two years ago. What's the big topic today? I mean not just today this afternoon but what are you principally focused on? What's really burning as a burning issue for you right now? I think by far and away the issue facing the continent right now is we are in the early stages of what I can't describe. Is it anything other than a resource adequacy crisis? Another lots of sub components to that data centers and load growth is one. Extreme weather is one. Red transformation is another. But at the end of the day right this is the first time that I can recall in my almost 40 years of working in the industry. Where we are seeing plans from the utilities in aggregate that don't add up from a reliability perspective. And from a reliability perspective I mean here a resource adequacy perspective. We'll be publishing in January our updated long-term reliability assessment. It's going to show five areas of the country at high risk. At high risk? Not the yellow but the red. And to remind everybody red means that they don't meet the reliability criteria of one in ten. They're normal circumstances. We're going to show another nine areas of the country in yellow which means that they don't meet it under extreme circumstances. And by the way just yesterday the results of the PJM capacity auction were published and by PJM's own calculations. They don't meet the one in ten criteria. So their capacity auction brought in things that are not going to support reliability? They didn't bring in enough stuff to support reliability. Right. So that's the challenge we have. And it's a challenge north of the border, south of the border, it's everywhere. We have to figure out how to get if we want to meet the load growth that most utilities are seeing across the continent. And most of that load growth would fall in this category of strategic national security. Global leadership is important for our continent to be ahead. We're going to need to figure out how to get new resources built and interconnected down to the grid very, very quickly. And all the supporting infrastructure to allow them to operate. And that's no small task for this sector. So I'm looking forward to seeing the new long-term reliability assessment. Because the one that came up last year was concerning enough given that there was a number of regions that were at elevated risk in some of them were in Canada. So things have not gotten better, things have gotten worse. They continue to degrade. I think the reality is setting in, particularly with the U.S. administration, who has very single-mindedly focused on how to keep resources on the grid that can still operate and to address the issues around bringing new resources on. It just doesn't happen fast. And while we can maybe change policies and stuff like that, we still have this nasty issue of supply chain. We've got to be able to actually get the turbines. You've got to get the relays. You've got to get the condo at the conductor to be able to build all this stuff. And then you need to get cited and permitted. So it's supply chain, it's citing and permitting. Is it also the mix? Is it that when these procurements are happening, we're getting more inverter-based resources and not enough base load? Or is that really not it? It's just a question. No, no, it's that too. Because the things that can come on the grid quickly, the quickest are going to tend to be solar and batteries. And solar and batteries play a very, very important role in the grid. But they can't do everything. We need the grid to do. So we need to have a certain amount. I think the term that people are using or gravitating towards now, rather than dispatchability, is we need clean firm or firm resources to be able to balance all of the variability associated with the grid. So the ability associated with wind and solar, we need to have resources that provide the reliability services. So the frequency and frequency management, voltage and voltage management, dispatchability to deal with variability and uncertainty and load forecasts. And we need fuel certainty. Because that's one of the things that has really changed since you and I did our first podcast six, seven years ago, however long ago it was. Is at that point in time, we still didn't have the concerns over fuel that we do today. So this is like in the Northeast, natural gas pipeline is constrained and it's not going to be a problem. So natural gas, thank you for the prompt. Natural gas has been one of the themes I've been pushing on. It's absolutely one of the most essential fuels for reliability right now. In the past, right, when we had winter, you know, bad cold events in the winter, like the 2014 polar vortex and so forth, we probably had similar issues with gas that we're seeing today. We had lots of other stuff so that if the gas couldn't operate, the coal plants could turn up, right, the nuclear plants were there. So we didn't have the same sort of load loss that we've seen in the more recent winter storms. But now as we've lost coal, as we've lost some of those other resources in the resource mix, gas is sort of the last man standing. And we know from Yuri, we know from Elliott that when winter storms, Elliott and Yuri that when it gets abnormally cold, right, the gas system can have issues. Right. So I think that's the first priority is always to serve the local distribution companies to keep in mind. the pilot lights lit as a massive public safety issue to ensure that that that the LDCs are taking care of. But now they have inherited this responsibility for keeping the lights on as well. And that's a real stress to the gas system to be able to meet both masters because both are very, very important for society. All right. So what's the fix? I get two questions. What's the fix? And what role does Merk have in this fix? So the biggest fix to everything is more stuff. Okay. More stuff. Right. Because one of the things is the, this is what our reliability assessments are showing. Right. Yes. Reserve margins are thinning. There aren't as many options. So when things go wrong, you don't have all of the backup alternatives that you might otherwise have. So we need more more generation. We need to keep our eye on diversity. Right. That's one of the other things is that we've generally are losing diversity over time and diversity is always reliability's friend. So we need to keep our eye on resource diversity. We need to keep our eye on the amount of generation we have, the characteristics of the generation we have. And increasingly we got to be paying attention to fuel supply. All of these things get solved with more stuff. In the meantime, because more stuff isn't going to come quickly. Right. We really have to rely on good information sharing, situation awareness, coordination across the electric and gas sectors and between electric operating areas. So that when one area gets in trouble, they have a broader set of resources they can draw from. And that those resources are prepared to come in and help to the extent that they can. Right. Right. Now, I want to ask the question, what what's nerfs role in this and what can nerd do? Because it sounds like a lot of these are going to require like legislative action and changes to how we regulate right. And that's not going to happen quickly. No, yeah. No, that happens quickly if it happens at all. And also you're not like you're not a lobbyist, right? No, absolutely. And so, like how does how does how does nerd make sure that the stakeholders that are able to push for the kind of changes that are going to be required or are actually pushing for the changes? Is it education? Is it through? So, so it mostly bully pulpit issues for us because we don't have we don't have authorities in many of these areas. But we do have a massive one of my one of the large utility CEOs has told me, you know, I have an obligation to serve Jim, you have an obligation to speak. Yeah. Right. And so we take that obligation to educate very, very seriously. One of the great things about nerd is we're a non-partisan organization. I didn't say bipartisan, we're non-partisan. Yeah. We are focused on the physics of the system and how different components of the system can come together to operate reliably or create challenges. And you've heard me say this before, I sometimes think of nerd as the trade association for physics. Yeah. Because they don't have one and they desperately need one. Yeah. Yeah. And politicians would have discovered, and this is true in Canada, it's true in the US. You know, when we talk, we have a special voice relative to other advocates, if you will, because we don't have a financial interest in the outcome. We don't have a commercial interest in the outcome. We don't have a business interest in the outcome. We are purely mission driven. And and our job is to inform. And I never want to give policy advice, but I like to give policy support. Right? Here's the information. Here's the data. Here's what the facts are saying. Now you can go do what you want to do with that. Because you know, you have your own constituencies, your own priorities, in your own contacts. But physics tends to be pretty universal. Right. I think math is number one, then physics, that then maybe chemistry. Right? So we're the we're probably the second most pure form of science there is. And and we need to make sure people understand the consequences of different choices that they make. Right. The choices are always theirs. But but we can help help them make better decisions. So chemistry is third. Chemistry is third and I think biology is fourth. Wouldn't you study chemical engineering? Yeah. So I'm a I'm a I'm a I'm a I'm in third class. Yeah. Well, physics chemistry. We took physical chemistry and we all raised to a different level of intellectual capability when we walked into that class. All right. Let's let's because I know I know time is tight. You've got you've got a hop on the NAMM track. Soon. Two years ago we were talking about inverter based resources, solar, wind, you know, batteries, guessing lead, how we're going to integrate them. Today we're talking about large loads. We're talking about data centers. If you and I circle back five years from now, what would we be talking about five years from now? Gosh, who knows? The pace of change that we've seen has been so unforeseeable. I mean, three years ago nobody talked about data centers. Even two years ago, we were just starting to talk about data centers. There was sort of Bitcoin mining and that was it. Yeah. And even then people said, oh, you're nuts. It's never going to turn into anything. And now here we are. You know, what I hope we're talking about in five years is how much we learned from the process of getting inverters linked onto the system that helped us get the data centers onto the system quickly and reliably. Right. That we are learning. Nerc is a learning organization that our ecosystem is learning and that we're learning how to bring new and disparate players into the fold to help us do our work. You know, because you know, we always talk about Nerc standards. Well, Nerc doesn't write the standards, right? We we work the process with industry and the and the subject matter experts to do that. But it's got to be done timely. It's got to be done well. And and it needs to enable things to happen and not not slow things down. So one of my big hopes is that we'll look back and say, wow, we achieved that. And and that the data center community, which is the topic to your, we'll look back and say, boy, that was time well spent. And we got a lot done. We're working very, very well with the with the sector. We're not seeing the reliability issues that we're very concerned about. And and that that's attributed to the collaboration between the between all the parties involved. So timely doing it well, it's been seven seven and a half years, I think you've been in the role. Uh, something like that. A little over that. Yeah. Yeah. I, I, I, I, years in April. Yeah. Yeah. That's right. I remember we, uh, we had a chat just as you moved into the role as you moved into the role. You were so, yeah, you were still at whack. And it was at a conference in, uh, in band for something. But the rain, we had a terrific chat back then. Um, I believe we've made some pretty significant progress in terms of making it more timely. Uh, and and doing it well. What would, what would your report card be in terms of, um, how, uh, I say we, because, you know, there's a lot of my members that are involved in the standard of course, and so on. But like collectively, how, how have we, uh, how we've been doing and how much better are we, uh, than we were when you first moved into this role, uh, close to eight years ago. I think everything is moving with a greater sense of purpose and urgency. Right. Now, whether it's sufficient yet or not, as another matter, right? And we're working to streamline many of our processes. You, we have this big effort underway to reimagine how we do standards development. Again, maintain all the great special sauce. Right throughout the way we do it, but to do it in a more timely way. I, I, I'm very, very impressed with how, uh, the industry has, has come to the table. I think there is great consensus across, particularly across the leadership of the industry on the priorities and the urgency to get things done. I will say that doesn't always translate down into the rank and file that do a lot of the work with us. So sometimes they, they probably feel that we're cajoling them, uh, more than, uh, more than they would like. But I think in general, we've seen a greater can do sense in moving things along. There's, there's a great realization that we're dealing with problems that are potentially quite consequential and new. Yeah. I think where people get nervous, including us is that we are having to parallel process things that we might normally do more in sequence. Mm-hmm. And I think the challenge for us and the challenge for industry and holding us accountable for our role is that we move things along, but we never get too far ahead of ourselves. Right. Right. Right. So what we didn't have seven years ago was that sense emergency. I don't think, right? That's right. Because seven years ago we were dealing with problems that we largely understood. Yeah. Right. And, and, you know, that the inverter issue is not the same. the data center issues and the behavior of these loads. And we just never dealt with it, gigawatt plus load before. So these are just new problems for us to solve. And we need to be a learning organization. And I think we are. I think we're doing a very good job of assimilating some of the learnings out of, for instance, the Iberian blackout last spring. I think we learn from the events we've studied around data centers. We've certainly learned a ton from the events we've studied around inverters. But, you know, we were set up to make sure the people trim trees and maintain facility gradients and all that good spinach stuff. Yeah, yeah, which we still need to do. But now we have all this other stuff that we need to be able to do as well. So what will a successful 2026 look like from, from your perspective for a New Yorker? A successful 2026 for us. I would say two major goals, one that we've got clarity on where we're going to go with the standards process. And it would be awesome if we could get an order from FERC that we can start actually implementing as opposed to making filings on that. And then we've got great clarity around how we're going to get all the data center work done. Okay. From a registration, possible standards, guidelines. Everything we talked about all this stuff we talked about today that that's stuff that's in play. As opposed to being talked about. Yeah, yeah. Okay, final question. You know, it's always the same final question is for the book recommendation. What are we going to add to our reading list? Well, I would love to say a soldier story because I told me that I can't already do that. I recommend a display. So I will give you the other book that I'm dusting off. Sure. That again, it was written probably 25 years ago by a sports psychologist, a guy named Bob Brotella. And it's called golf is not a game of perfect. Golf is not a game of perfect. Yes. And it's a sports psychology book. But if you read it and you think about it, not in the context of playing golf, but in the context of everything you do in your life, there is so much wisdom in that book about leadership. How to think like a professional, you know, as someone who's going to succeed at all times, which is the mind of a professional athlete. And how to deal with adversity, right, when you don't achieve what you think you're achieved. It's an easy read. It's about that big. You can read it on a two hour flight. But it's one of the most impactful books I've read on leadership in my life. The most impactful book on leadership in its call. Not a game of perfect. And Bob Brotella, R-O-T-E-L-L-A. Strongly recommended. Fantastic. We will add it to our reading list. And Jim, really appreciate this. I know it was a pretty quick hit. But I really wanted to get in just a kind of a very short snapshot of sort of the state of reliability. Because it's been such an important part of the conversations you and I have been having this past year. It's been a wild ride. But I really do appreciate you squeezing in the time before you jump on your own track to Baltimore. Right. Well, thank you very much, Francis. It's great to do it. And I'm glad we had a chance to connect here as well. Fabulous. [Music] For those that have been with the podcast since the beginning and those that have joined along the way. Thanks for listening. Please take the time to rate the podcast on whatever platform you use to listen. And let me know what you think of the Flux capacitor. You can find me on Instagram as the Brad Bradley, on LinkedIn and through our website at electricity.ca. The website for this pod is the Fluxcapacitor.ca. And it includes links for this episode on the show page, this being episode 131. And while you're there, check out the book club page, which provides information on and links to the books, which have been recommended by guests on the Fluxcapacitor. Including Jim's recommendation. Bob Rotell's book, "Golf is not a game of perfect." And let's continue the electricity conversation on our Facebook page, on Instagram, and at electricity.ca. [Music]