At this point, there is no clear record as to:

• How many blackstart resources have been retired or may be contemplating retirement;
• The reasons those resources are being retired;
• Which regions of the country are the subject of retirements; and,
• Whether there are differences in retirements between and among organized market regions and those regions which do not have organized markets.

In order to answer these questions, the Federal Energy Regulatory Commission (FERC) should issue a Notice of Inquiry to determine the facts and, if needed, take actions to ensure there will be adequate blackstart resources to restart the grid, now and in the future, at just and reasonable prices.

In 2018, FERC, the North American Electric Reliability Corporation (NERC) and Regional Entities (Regional Transmission Organizations (RTOs) and Independent System Operators (ISOs)) conducted a study of the availability of blackstart resources.[2] The report concluded that “participants have sufficient blackstart resources to support their current system restoration plans.”[3]

However, the report noted that some participants had seen a decrease in the “total number of available blackstart-capable units over time,” but had made compensatory adjustments.[4]  One of the report’s recommendations is that RTOs and ISOs consider an examination of the adequacy of compensation for services and benefits provided by blackstart resources, including any potential threat or impact on blackstart resource procurement and retention under current compensation mechanisms.”[5]  It is not clear how, or if, RTOs and ISOs responded to this recommendation.

It appears that NERC has recognized that its standards may create disincentives for blackstart generation owners to make their resources available.  For example, CIP Version 5 does not require Blackstart Resources to be classified as high or medium impact BES Cyber Systems.[6]  To explain this change, NERC stated that “discussions on the CIP Version 5 standards suggest entities owning Blackstart Resources and Cranking Paths might elect to remove those services to avoid higher compliance costs.”[7]

NERC further stated that “the CIP Version 5 drafting team sought informal input from NERC’s Operating and Planning Committees. The committees indicate there has already been a reduction in Blackstart Resources because of increased CIP compliance costs, environmental rules, and other risks; continued inclusion within Version 5 at a category that would very significantly increase compliance costs can result in further reduction of a vulnerable pool.”[8]

However, if the cost of CIP compliance is fully compensated, what significant increase in compliance costs does NERC believe would threaten reduction of Blackstart Resources?[9]  It appears that the risk of “higher compliance costs” to which NERC refers is, as PJM stated, actually is a risk of non-compliance with the CIP standards and corresponding financial penalties.[10]

However, without a factual record, it is difficult for FERC and the Transmission Operators to determine the cause of potential retirements and to put forward solutions.

Assuming that some owners of Blackstart Resources are no longer willing to offer those resources due to compliance risk, what can be done to reverse this trend?  As with any problem, the first step is to determine the facts.  While there appears to be some evidence of a reduction in Blackstart Resources,[11] there is little hard data about which Transmission Operators are affected; which specific risks do the resource’s owners believe they will not receive adequate compensation for; or whether specific cost recovery methodologies or risks of litigation do not account for the costs and risks of providing blackstart service.

What little information exists in the public record appears mostly in litigation concerning compensation for blackstart service in organized markets.  For example, in the context of whether certain existing rates remain just and reasonable, PJM stated that owners of blackstart units face “unique risks,” and further identified one such risk as “NERC audits and NERC penalties for non-compliance identified in an audit or through the required testing.”[12]

In the same litigation, a provider of blackstart service argued that generators that make investments to provide that service make “complex risk assessments,” require rate certainty and are subject to an “increased risk of audits and penalties for non-compliance.”[13]  Similarly, in answering objections to a proposed return on equity submitted by a prospective Blackstart Resource, the California ISO stated that the blackstart owner would face a number of risks, including compliance and enforcement risk under NERC Reliability Standards.[14]  On the other hand, it appears that the New York ISO has the ability to require market participants to provide blackstart service by participating in the New York ISO markets.[15]

This paucity of information begs the broader question of determining whether or not there is a problem.  For example, are the risks of retirement of Blackstart Resources limited to some or all organized markets, as opposed to non-market areas?  Are risks limited to non-compliance with NERC Reliability Standards or are there broader risks?  Are the risks different from those affecting other generation resources? Are there specific compensation methodologies that do not provide reasonable compensation for the asserted risks?  Are the units at risk of being withdrawn mostly older, highly depreciated units, for which the return on investment is lower than for newer, less depreciated units?

In order to address these issues, FERC should issue a Notice of Inquiry seeking answers to these and other questions.  With multiple emerging risks to Blackstart Resources which may require significant investments to mitigate, such as dual fuel capability;[16] hardening against severe weather;[17] hardening against cyber and physical threats; and, hardening against EMP, it is important that federal and state regulators get ahead of the compensation and cost recovery issues to ensure that: (1) compensation is sufficient to ensure adequate Blackstart Resources; (2) costs to all customers is just and reasonable; and (3) there are no regulatory disincentives to providing Blackstart Resources.

As cyberattacks continue to escalate in volume and sophistication, and the potentially critical role of Blackstart Resources in grid recovery become more and more apparent, we should not be in the dark about the availability and adequacy of those resources.

Sources

[1] Design Basis Threat Development is Key to Proper “Blackstart” Grid Capability; “Black Start” Capability is Critical to a Resilient Electric Grid.

[2] Report of the FERC-NERC-Regional Entity Joint Review of Restoration and Recovery Plans, Recommended Study:  Blackstart Resources Availability (BRAv) (May 2018)(“BRAv Report”).

[3] Id. at 15.

[4] Id. at 13-15.

[5] Id. 3-4.

[6] CIP-002-5.1a, Guidelines and Technical Basis, at p. 30.

[7] Id.  The first draft of CIP Version 5 had classified Blackstart Resources as medium impact facilities.  See Draft 1 CIP-002-5 Attachment I, Part 2.4 (unnumbered page)(Nov. 7, 2011).

[8] CIP-002-5.1a, Guidelines and Technical Basis, at p. 30.

[9] In Docket No. ER19-251, ISO New England eliminated certain CIP costs from its compensation for blackstart resources stating that “NERC CIP requirements for blackstart resources are now no different than the requirements for any generator that is part of the Bulk Electric System” but if NERC required more stringent standards for blackstart resources, then ISO New England likely would proposed compensation to comply with such standards.  ISO New England, Inc. and New England Power Pool, Docket No. ER19-251-000, Attachment 4, Testimony of Jonathan B. Lowell, at 24:6-25 (filed Nov. 1, 2018).

[10] See note 6 supra.

[11] See PJM Interconnection, L.L.C., Affidavit of Michael E. Bryson, Attachment A at P 11 (Docket No. ER21-1635, filed Apr. 7, 2021)(owner of Blackstart resources announced retirement of several units); CIP-002-5.1a, Guidelines and Technical Basis, at p. 30 (“one Reliability Coordinator reported a 25% reduction of Blackstart Resources” purportedly due to the language in an earlier draft of CIP Version 5).  But see PJM Interconnection, L.L.C., Protest of Joint Consumer Advocates at pp. 12-13 Docket No. ER21-1635, filed Apr. 28, 2021) (claiming “PJM’s concerns about potential terminations are overblown).

[12] See PJM Response to Commission’s Show Cause Order, Docket No. EL21-91 at 3 (filed Oct. 12, 2021).

[13] See Answer of Vistra, Docket No. EL21-91 at 7-9 (filed Dec. 10, 2021).

[14] See Motion for Leave to Answer and Answer of the California Independent System Operator Corp., Docket No. ER20-1074 at 10 (filed March 31, 2020).

[15] See New York Independent System Operator, Inc., 150 FERC ¶ 61,057 at PP 58-59 (2015).

[16] BRAv Report at 25-26 (need to mitigate risks of reliance on a single fuel).

[17] See FERC-NERC-Regional Entity Staff Report:  The February 2021 Cold Weather Outages in Texas and the South Central United States, Recommendation 1f at 18, 187-188 (Nov. 2021)(require Generation Owners to retrofit existing generation and design new generation) to operate at specific weather conditions); Standard Authorization Request (SAR), Extreme Cold Weather Grid Operations, Preparedness, and Coordination at 3 (specified weather conditions to be based on “available extreme temperature and weather data for the generating unit’s location, and account for the effects of precipitation and accelerated cooling effect of wind).