On Capacity Pricing Reform: PJM is Doubling Down on the Wrong Solution
By Eric Gimon
It’s easy to love electricity markets. Mathematical algorithms efficiently, safely and transparently dispatch grid resources to match supply and demand. Market signals drive the most valuable grid additions and retirements over time, providing customer savings and a stable investment environment incorporating technology and input cost changes.
PJM has led power market development, embracing rising trends like demand response and grid-scale battery storage. But lately, PJM has doubled down on a “solution” leading down an ever-more complicated and fractious path: its Reliability Pricing Model capacity market.
Electricity power markets are not perfect; critics often cite the “missing money” problem, which contends — with only marginal justification — that price signals balance markets but do not sustain adequate system resources to guarantee supply matches demand. To address this, PJM created a singular “capacity” commodity traded in the RPM, which loads must purchase.
While the RPM has been a boon for some resources, a singular definition of capacity never fairly captures everything the grid needs, and the RPM is open to three criticisms:
Predictably, the RPM has cannibalized energy market revenues in favor of capacity markets and allowed uneconomic legacy coal and nuclear assets to create a large capacity overhang (>30% reserve margin in summer 2018 against a desired ~16%).
Today’s power markets are also flawed by not pricing externalities. Seeing nuclear generators, which have provided free emissions mitigation, on the verge of going under, states like Illinois decided to provide direct financial support. These “out-of-market subsidies” (terminology that ignores other existing direct and indirect subsidies) became PJM’s new bugbear, which contends state-sponsored resource drive prices “too low.”
Last June, PJM wanted to double down on capacity markets by re-engineering them to force some resources to overbid at minimum offer prices to “mitigate” impacts of state policies, making customers double-pay for capacity instead of allowing markets to re-equilibrate by closing uneconomic resources.
Because of push back from FERC, which wants to allow matched resources and load to opt out of the RPM, PJM is doubling down again, striving to protect existing resources at all costs by proposing a two-stage capacity market called the extended Resource Carve-Out (RCO).
Extended RCO forces certain resources to offer into the capacity market at a higher price than their direct costs if they want to participate, or “allows” those resources to opt out of RPM by offering into the auction at a zero price. After this first stage of the two-stage capacity market, PJM determines which resources clear. In the second stage of the two-stage capacity market, PJM would then carve-out the opt-out resources and rerun the auction with the same demand curve to determine a higher clearing price to be paid to all non-carve-out resources that cleared in the first stage.
This would cause serious — and unnecessary — additional consumer expense.
Furthermore, extended RCO has yet another component: a payment to resources that would have cleared the second auction but not the first (the one that identified the actually needed capacity resources). This proposal extravagantly pays these so-called inframarginal resources even though they neither incur a capacity obligation nor provide capacity to PJM customers.
PJM committed the original sin of getting into capacity markets (Band-Aid solutions FERC historically expected to wither away). Over time, these capacity markets cannibalized energy markets, required constant “fixing,” and became the last refuge of increasingly uneconomic legacy assets.
When low natural gas prices and states interested in shaping their resource mixes started to fray this safety line, PJM took a protectionist line and started treating states like monopsonist market manipulators. Then, when FERC — unfortunately sympathetic to these protectionist views — tried to offer a fig leaf to states with opt-out, PJM doubled down on its twisted economic logic to make even that unworkable and expensive.
What should PJM do instead? At the very least, it should allow loads and grid resources to sort out capacity needs bilaterally and unfettered if the RPM seems unfair.
But when you’re in a hole, stop digging! Instead of doubling down on unworkable capacity constructs, PJM should double down on real markets and seek a new paradigm, working with states, that gets it out of the capacity business altogether.
Eric Gimon is a senior fellow with Energy Innovation Policy & Technology, which “works with national and regional decision makers to develop policies that will manage the grid’s transition to a cleaner, lower-carbon resource mix.” Eric holds a B.S. and M.S. from Stanford University in mathematics and physics, and a Ph.D. in physics from UC Santa Barbara.
AUSTIN, Texas — The Gulf Coast Power Association’s 33rd Annual Fall Conference & Exhibition attracted more than 640 registered attendees for three days of workshops and discussions on the issues facing the ERCOT market. DeAnn Walker, chair of Texas’ Public Utility Commission, delivered the keynote address, while panels examined the evolution of the wholesale and retail markets, grid resilience, cyber and physical security, renewable generation sources and ERCOT’s fuel mix.
While October marks the beginning of ERCOT’s fall season, many minds were still on the grid operator’s performance during the summer of 2018, Texas’ fifth-hottest on record. The lead-off panel credited ERCOT’s preparedness and engagement with the market, the availability of wind and traditional generating units during peak-demand periods, and the lack of extended extreme heat with overcoming the retirement of more than 4 GW of coal-fired generation in 2017.
ERCOT survived the summer heat without making conservation calls or issuing alerts, despite recording 14 system demand peaks above the previous record set in 2016. All 14 peaks came during the summer’s lone period of extreme heat (July 18-23). (See ERCOT: Market Performed ‘as Expected’ During Summer Heat.)
The grid operator went into the summer with a planning reserve margin of 11%, below its target of 13.75%. Generator outages were half of what staff projected, doubling operating reserves to more than 2 GW, despite a peak demand 552 MW above forecast.
“This summer was a good example, or illustration, of how our expectations are related to ERCOT forecasts,” said former PUC staffer Julia Harvey, now director of regulatory affairs for Texas Electric Cooperatives.
Resmi Surendran, Shell Energy North America’s senior director of regulatory policy, pointed to renewable energy’s capacity contributions, which met peak demand of over 5 GW.
“We were extremely lucky, especially because of the wind generation,” she said. “All the major events happened for only one week; the generators operated throughout July. … If we had had extreme weather in August, I don’t know how that would have affected us.”
Luminant Energy Vice President of Origination and Pricing Claudia Morrow reminded the audience that the company’s Comanche Peak Nuclear Power Plant was offline for several months in the summer of 2017.
“Nobody is more pleased and happy than Luminant that our units were all online and performed as expected,” she said. “That just illustrates everything went really well, as best as could be expected.”
Panel moderator Beth Garza, director of ERCOT’s Independent Market Monitor, said average real-time prices were up 25% over 2017 at $36.2/MWh, but reliability unit commitments were a rarity. “That’s a credit to ERCOT and ERCOT operators,” she said. “It would be easy on some days, to say, ‘Wow, I’m really nervous. It would be great to get more capacity.’”
“Fortunately, we didn’t have to use all those [processes] we practice for,” ERCOT COO Cheryl Mele said.
A second panel, focused on a market design that is supposed to incent generation investments, discussed the grid operator’s ability to manage slim reserve margins and the effect on future decisions.
“This [summer] gave one more reason for the forward market to not price scarcity,” said Orion Energy CEO Nazar Massouh. “We had scarcity, but no forward reaction.”
“The summer of 2018 was not performing in a manner consistent with what people thought from coiling the spring a little tighter” through retirements, Merrill Lynch Commodities Managing Director Mark Egan said. “As prices fall on the spot market and forward market, it does serve to effectively push us down the curve. Some fossil asset investment decisions get deferred.”
Walker Expects 2019 Summer to be ‘More Difficult’
Walker agreed with the lead-off panel, saying everything worked out as well as it could have.
But that said, “Next summer will be more difficult,” she predicted, pointing to the state’s increasing demand and potential retirements and mothballing of aging plants. “What does that mean for 2019? We already know we need to make changes.”
Walker said the PUC and ERCOT are already planning for next summer, rather than starting in early March. The commission has scheduled an Oct. 25 workshop to review the summer’s events and determine improvements for next year. ERCOT hopes to see all plant maintenance completed by May 15.
“I encourage you to offer suggestions on what we could do better,” Walker said, noting final input is due Oct. 18 (Project 48551).
Walker expects ERCOT’s reserve margin to remain tight in the short term. She discovered this year that planning to have units in neighboring regions help the grid operator “in a crunch” is “more difficult than I thought,” so she is working on reliability coordinator agreements to resolve the situation.
“It’s not my intent to have MISO or SPP give those units’ control to ERCOT. My intent is to be more orderly than that,” she said. “We have issues to work through. I would like these processes to be in place by next summer, but it’s going to take some Protocol changes.”
Is There a Place for Distribution Assets in ERCOT?
During a panel discussion on “non-wire alternatives,” AEP Texas President Judith Talavera and NRG Energy Director of Regulatory Affairs Bill Barnes debated AEP’s proposal to install a pair of utility-scale lithium-ion batteries to solve distribution reliability needs in its West Texas service territory.
AEP’s plan to classify the facilities as distribution assets and include them in cost-of-service rates sparked broad opposition within the market. The PUC rejected the proposal in January, but it opened a rulemaking to address “non-traditional technologies in electric delivery service” (Project 48023). (See PUC Opens Rulemaking on Distributed Battery Storage.)
Talavera said the numbers — $2.3 million in costs for the battery facilities, as compared to $11.3 million to $22.5 million for “traditional” wires solutions — “demonstrated a battery was a much more cost-effective solution” in dealing with outages and other reliability concerns in the tiny towns of Woodson (estimated population in 2016: 246) and Paint Rock (287).
“We strongly believe [energy storage] has to be a tool. It’s no different than a transformer or any other distribution asset,” she said. “We view this as a distribution asset we will be adding to our system, and the rules don’t require a [certificate of convenience or necessity] for a distribution asset you’re adding or building.
“When the laws were written, we didn’t have these types of technologies,” Talavera said. “At the end of the day, we have a responsibility to serve everybody on our system.”
“Where we differ is how we see those non-wires alternatives come to be,” Barnes said. He said units that provide ancillary services such as batteries are generating assets. Ancillary services are defined in the ERCOT Protocols as any service needed to serve the transmission of load, he noted.
Barnes proposed extending transmission-level prices to the distribution system, “so you have distribution prices and distribution nodes.”
“That would create incentives for suppliers to locate batteries on the grid where you have reliability problems,” he said. “We create economic signals; we allow private investment to come into the market to solve those problems. For products that might not be priced, like voltage and stability, you create markets for them that ERCOT facilitates, like the existing ancillary services markets.”
“Judith owns the storage,” said panel moderator Bob King, president of Good Company Associates. “It’s not clear [who pays if] she can charge or discharge, but it’s clear she can’t participate in the wholesale market.”
“And we’re not trying to,” Talavera responded.
“The ultimate issue is the cost … is still funded through the rate base,” Barnes said. “If you’re awarded the [project], you’re happy. If you’re everyone else, you’re not. The cost is funded through noncompetitive revenue, and you still have distortion in the market. If customers want that reliability, they can pay for it.”
“Given the declining cost of batteries and the growing maturity of technology over the last few years, we identified two great options to help us provide reliable service,” Talavera said. “We didn’t get the approval, but I do think it helped open the conversation we’re having today. I feel energy storage can provide real, quantifiable benefits for the customer and our distribution system.”
Kenneth Medlock primed the pump for a panel discussion of ERCOT’s retail market by sharing the results of a residential pricing study that covered a 14-year span following the onset of customer choice in January 2002.
Medlock, senior director of the Center for Energy Studies at Rice University’s Baker Institute, stressed that sample averages don’t “tell the whole story,” but that price dynamics matter. He said prices fell in the state’s competitive areas but rose in the noncompetitive areas (Austin, San Antonio and other municipalities and cooperatives). Residential rates in competitive areas were 2 cents less than those in noncompetitive areas in 2002, but those rates were on par with each other by 2016.
“If you’re in a system with limited choice because you have one retail provider, then you don’t understand what individual consumer groups prefer,” Medlock said. “If you want to enhance the competitive paradigm, it’s important that you remain transparent and open. That’s the only way consumers can access enough information and data to make decisions in their best interest. Players in the market are forced to differentiate themselves in different ways, which introduces an entrepreneurial paradigm that can lower prices.”
Chris Brewster, a principal with law firm Lloyd Gosselink Rochelle & Townsend, said the retail market’s strength is rooted in the wholesale market.
“That’s what ERCOT, the stakeholders and the PUC want. It works smoothly,” he said. “We have a wholesale market that is very liquid and easy to transact in. It doesn’t impose a lot of administrative requirements. We have a true market. We have a wholesale market that transacts in a commodity, and a retail market that specializes in a customized service for customers.”
Connie Corona, the PUC’s director of competitive markets, said “the consistent small changes made to the market have been critical.”
“There’s a balance in this market between certainty [about how things operate] and the ability of the policymakers, the stakeholders and market participants [to adjust] the Protocols,” she said. “As a market, we’ve taken the opportunity to recognize how this and that could work better. Everyone has been open to examining that, from the Legislature on down to the subcommittee of the working group at ERCOT.”
Shell Energy North America’s Greg Thurnher, moderating a discussion of ERCOT’s fuel mix, recalled a not-so-distant past when the grid operator had 8 GW of wind, a 15% reserve margin, no major retirements, gas in the $10 to $13/MMBtu range, and construction of new nuclear and coal generation was expected.
Ten years later, ERCOT has 1 GW of solar, 21 GW of wind and another 13 GW planned, while coal capacity has dropped by more than 4 GW, noted Thurnher, Shell’s manager of real-time trading.
“Rather than say the resource mix is changing, it has changed, and the change is here to stay,” Thurnher said.
Clif Lange, manager of wholesale marketing for South Texas Electric Cooperative (STEC), said his business is investing in quick-start gas units, rather than renewables — or rather, because of renewables.
“The ability to be there quickly and, frankly, the ability to shut down quickly has provided a lot of value to STEC and ERCOT,” Lange said. “How do you make a thermal generator effective in a market where you have seen depressed pricing for so long? The ability to react quickly to market signals has provided a great benefit. We can respond very quickly to transmission constraints that pop up very quickly or disappear very quickly. When you’re not in the money, it’s very important to be able to take that unit offline.”
McCall Johnson, senior manager of government affairs for solar developer Recurrent Energy, said utility-scale solar will be essential to the future because of its ability to provide predictable power during the afternoon peak.
“Those [solar] megawatts are not causing a lot of operational issues,” she said. “We see that peak power, which is really cost-effective, driving a lot of interest. Solar … seems a more sophisticated purchase of renewables. You get a peak hedge. We all know when the sun is going to shine, and it’s easy to predict.”
Maura Yates, managing member of the Mothership Energy Group, which calls itself “a boutique group of female-owned energy solutions companies,” reminded the panel and audience to not forget about rooftop solar, “a silent asset happening behind the meter.”
“We have a lot of data in the market, important data driving the generation stack. But you don’t have an idea of how many behind-the-meter rooftop solar systems there are,” Yates said. “It’s a blind spot. It’s really important to get a hold of that data, because it’s driving the wholesale side now. Consumers want to be more involved and engaged. They’re an asset class themselves.”
Opinions Vary on Grid Resilience
Several transmission operators opened their panel discussion by recounting the Department of Energy’s proposal to prop up coal and nuclear generation and FERC’s definition of resilience: “The ability to withstand and reduce the magnitude and/or duration of disruptive events, which includes the capability to anticipate, absorb, adapt to and/or rapidly recover from such an event” (RM18-1).
“It does align itself to the Baskin-Robbins 31 flavors of resiliency,” CenterPoint Energy Associate General Counsel Patrick Peters said of FERC’s definition. “[Resilience] started with solid fuels and nuclear but has now evolved into other topics. The definition covers just the normal day-to-day work of operating the electric grid. When I think of resiliency, I think of out-of-the-box planning to ensure the grid stays reliable if you lose a piece of equipment.”
“One of the things I love about working in this industry is we’re not afraid to take on hard projects, and this is one,” said Southern Co.’s Katherine Prewitt, vice president of transmission. “We need to ensure we don’t have a one-size-fits-all approach. We can’t lose sight of our customers’ needs. We have to talk to them, understand what they need and help them understand the impact of what they’re asking for. There’s always a cost for the ask. We have to ensure we don’t over-engineer it and put ourselves in a position where we have unintended consequences.”
“Our view is the markets work best,” said John Gunn, vice president of regulatory affairs for ExxonMobil’s gas and power marketing unit. “The power industry does have to comply with a whole lot of regulations. We’ve seen that in reliability improvements and [its] ability to respond in natural disaster.”
CARMEL, Ind. — MISO leadership has not yet decided on how it can improve resource availability, though it is evaluating several possible remedies, the RTO told stakeholders last week.
MISO Executive Director of Market Development Jeff Bladen told an Oct. 4 Reliability Subcommittee that the RTO will return in November with a narrowed list of short-term solutions for review with stakeholders. MISO said it will work with its Steering Committee to assign longer-term recommendations to the RTO’s larger stakeholder groups for further development.
The RTO published a white paper last month focusing on four areas: improving its outage planning; studying characteristics of different resources to see how it can best incentivize them to perform; re-examining resource accreditation in the Planning Resource Auction; and reassessing what availability should be required of resources — especially load-modifying resources (LMRs). (See MISO Moving to Combat Shifting Resource Availability.)
Outage Control
Lately, MISO has been deliberating with stakeholders over whether it should ask FERC for more authority over outage scheduling to better manage reserves. (See Advisory Committee Divided on MISO Outage Authority.) Stakeholders generally agreed last month that MISO should keep the status quo while it works on process improvements.
Some stakeholders said MISO’s challenges may resolve themselves as large transmission buildout from its 2011 multi-value project portfolio begins to come online.
“So maybe it’s a bit of a wait-and-see as the processes we’ve been working on for years begin to bear some fruit,” Bladen said.
“There’s a cyclical nature to this discussion,” Minnesota Public Utilities Commission staff member Hwikwon Ham commented. He said he remembered similar discussions on reserve shortages in the industry around 2005 and 2006.
“This is not a new problem; we can handle it,” Ham said.
Bladen said MISO could require a minimum notice time for market participants taking planned outages. If owners cannot meet the requirement, their outages may be counted as forced outages in their resource’s capacity accreditation. In the long term, MISO said it might consider establishing an outage rights market like the financial transmission rights market that already exists.
MISO reports that about 70% of planned outages during peak months are scheduled with less than a week of notice, based on a three-year average.
“This is surprisingly high,” Bladen said. “There are several planned outages taken very, very close to the operating time frame. Maybe we should put a finer point on what the NERC standard for planning ‘well in advance’ in the MISO context will be.”
Bladen also said MISO could improve the specificity of data it provides to market participants on its nonpublic Maintenance Margin tool, which supplies market participants with projected capacity availability margins to assist them in selecting outage dates.
But MISO’s Independent Market Monitor criticized the Maintenance Margin as clunky, saying market participants are scheduling outages with vague information. Monitor David Patton said the Maintenance Margin information is “high-level and does not convey coincidental transmission outages or generator-specific details that may otherwise impact participants’ planning decisions.”
Historical, not Optimized
Bladen said MISO may begin using historical outage data to inform its planning reserve margin. Such a change could cause an increase to the planning reserve margin, he said.
“We currently anticipate in our planning reserve margin that outages are optimally coordinated. … We may need to plan for outages that are less optimally coordinated,” Bladen said.
Seasonal Auction
However, Patton said a four-season capacity auction with distinct seasonal availabilities assigned to resources would be “far simpler” than adjusting MISO’s existing outage planning.
“The megawatts that are available are the megawatts that matter, no matter why they’re available,” Patton said. “Our [seasonal] deratings are as big as our outages, and many of those go unreported.”
Patton said a four-season capacity auction is “one of the only” possible solutions MISO could explore to better align resource availability with energy needs. The RTO’s current capacity construct socializes the costs of outages and derates by raising capacity procurements, he said.
LMRs
For MISO’s LMRs, stakeholders and the Monitor suggested implementing lead time thresholds.
Bladen said stakeholders suggested MISO reduce capacity accreditation for long-lead resources and incentivize shorter lead time LMRs. Some said MISO should implement a cutoff on response time for a unit to be considered an LMR.
“We have a gamut of lead times in MISO; some are very long leads, some are medium leads and some are short response time. And we don’t think about those as different capacity values,” Bladen said.
MISO should only allow full capacity accreditation to emergency-only resources that can be ready for dispatch within one to two hours and are available beyond the summer season, Patton said. Currently, MISO’s LMRs do not have an obligation to respond to emergencies outside of the summer months.
Current MISO emergency process | MISO
“Do we have access to the planning resources we procured when we need them … and if not, why don’t we?” Patton asked stakeholders.
Planning studies of LMRs “don’t look anything like” the real-time response of LMRs during emergencies, Patton said. He also said some emergency-only resources’ long lead times render them “essentially unavailable in an emergency” because operators typically don’t see shortages more than a few hours in advance.
“I don’t have anything against LMRs … but if they don’t meet the needs of the system when we procure them in the capacity auction, then we shouldn’t pretend that they do,” Patton said.
Some stakeholders pointed out that MISO can call on LMRs only after it declares emergency conditions. Customized Energy Solutions’ Ted Kuhn said the RTO should consider sending notification to LMRs when emergency conditions are likely but haven’t yet emerged.
“You should be able to notify them that they might be needed, and earlier in the process,” Kuhn said.
MISO’s white paper suggests reordering the steps in its emergency declaration process as a potential solution.
Century Aluminum’s Brian Helms said MISO’s participant communication system should include more information to allow LMRs to decide when to reduce load for either economic reasons or as “the last stop before load shedding.” He also said MISO’s communication system is difficult for owners to navigate.
“Whoever created that, you didn’t get your money’s worth,” Helms said.
“You don’t know what we spent on it,” Bladen responded jokingly.
Reliability Subcommittee Vice Chair Ray McCausland reminded MISO that LMRs were once called “interruptibles.”
“And boy, they complained when you used them,” he said, warning that frequent deployment of LMRs will discourage loads from volunteering to provide the service.
Bladen agreed that MISO’s frequency of LMR use is a delicate balance. He encouraged stakeholders to send in more written suggestions on outage planning, LMR rules and a seasonal capacity auction.
He also stressed that any upcoming recommendations would be technology-agnostic in nature.
“Any technology that can provide solutions will have a shot,” he said.
In the run-up to the Kavanaugh denouement, our industry was not spared claims of disaster from confirmation.
In our case, the claim was that Judge Brett Kavanaugh had it in for independent regulatory agencies like FERC, and the implication was that he might somehow persuade four other justices to override many decades of Supreme Court precedent upholding the constitutionality of such agencies.
Now, whatever else the merits or lack thereof of Kavanaugh as a Supreme Court justice (and no, I’m not going there, so please put the ricin away),[1] this particular claim is basically wrong.
Brett Kavanaugh | D.C. Circuit Court of Appeals
The claim is grounded in Kavanaugh’s opinion in PHH Corp. v. Consumer Financial Protection Bureau, in which a mortgage lender challenged the delegation of executive branch powers to an agency headed by a single person — instead of to a multi-member agency.
Some press promoted the notion that this opinion is an existential threat to all independent regulatory agencies. Utility Dive,[2] for example, quotes Joel Eisen, an energy law professor at the University of Richmond, as saying: “In that opinion, he called into question the entire concept of the modern independent regulatory agency, and of course FERC is one such agency.” Now, of course, Eisen is entitled to his opinion, but the referenced Kavanaugh opinion, read in its entirety, does not support that sweeping interpretation.
In fact, quite the opposite. The opinion repeatedly stressed the difference between multi-member agencies and those headed by a single person:
“In other words, to help preserve individual liberty under Article II, the heads of executive agencies are accountable to and checked by the president, and the heads of independent agencies, although not accountable to or checked by the president, are at least accountable to and checked by their fellow commissioners or board members. No head of either an executive agency or an independent agency operates unilaterally without any check on his or her authority. Therefore, no independent agency exercising substantial executive authority has ever been headed by a single person.
“Until now. …
“Because the CFPB is an independent agency headed by a single director and not by a multi-member commission, the director of the CFPB possesses more unilateral authority — that is, authority to take action on one’s own, subject to no check — than any single commissioner or board member in any other independent agency in the U.S. government. Indeed, as we will explain, the director enjoys more unilateral authority than any other officer in any of the three branches of the U.S. government, other than the president.”
FERC got an honorable mention as a multi-member agency Kavanaugh did not have a problem with:
“Have there been any independent agencies headed by a single person? Prior to oral argument, in an effort to be comprehensive, the court issued an order asking the CFPB for all historical or current examples it could find of independent agencies headed by a single person removable only for cause. The CFPB found only three examples … the three examples are different in kind from the CFPB and other independent agencies such as the FCC, the SEC and FERC” (emphasis added).
Kavanaugh emphasized this distinction, again mentioning FERC, on the second day of his confirmation hearing in response to questions from Sen. Amy Klobuchar (D-Minn.), saying in that opinion “all I was talking about was a single-headed independent agency,” and distinguishing that agency from the “SEC, FTC, FERC, NLRB, the Fed” that “are all multi-member agencies.”[3]
Over the decades Congress has assigned Executive Branch powers to dozens of independent regulatory agencies.[4] In our ever increasingly complex society we are ever increasingly reliant on these agencies to perform countless governmental functions.
The notion that we could or would ever return to a time when Congress passed highly prescriptive legislation on everything so the Executive Branch would just perform ministerial administration is a joke.
Judge, now Justice, Kavanaugh knows that, and so does every other justice on the Supreme Court.
So FERC, and all of us who rely on and respect you, sleep soundly. The keg is half full.
For anyone who does not know where the keg reference comes from, please see one of the funniest SNL sketches with Matt Damon as Kavanaugh here, https://www.youtube.com/watch?v=VRJecfRxbr8. Again, I’m not taking a position on his confirmation, but hysterical is hysterical. ↑
From the opinion: Interstate Commerce Commission (1887), Federal Reserve Board (1913), Federal Trade Commission (1914), U.S. International Trade Commission (1916), Federal Deposit Insurance Corporation (1933), Federal Communications Commission (1934), National Mediation Board (1934), Securities and Exchange Commission (1934), National Labor Relations Board (1935), Federal Maritime Commission (1961), National Transportation Safety Board (1967), National Credit Union Administration (1970), Occupational Safety and Health Review Commission (1970), Postal Regulatory Commission (1970), Consumer Product Safety Commission (1972), Nuclear Regulatory Commission (1974), Federal Energy Regulatory Commission (1977) [somehow ignoring the creation of predecessor Federal Power Commission in 1920 – ouch!], Federal Mine Safety and Health Review Commission (1977), Federal Labor Relations Authority (1978), Merit Systems Protection Board (1978), Defense Nuclear Facilities Safety Board (1988), National Indian Gaming Commission (1988), Chemical Safety and Hazard Investigation Board (1990), Surface Transportation Board (1995), and Independent Payment Advisory Board (2010). ↑
FERC last week approved a settlement that will grant a NextEra Energy subsidiary congestion revenue rights (CRRs) that CAISO denied the company in 2015.
The agreement among the ISO, Southern California Edison and NextEra Desert Center Blythe allocates Desert Center CRRs created by its investment in a Southern California transmission project (EL15-47).
The Interim West of Devers (IWOD) project is meant to move renewable energy from eastern Riverside County to the Los Angeles area, and includes the removal and upgrade of 140 miles of existing 220-kV transmission lines.
CAISO, NextEra and Southern California Edison settled a case involving congestion revenue rights for the West of Devers transmission upgrade project in Southern California’s Riverside and San Bernardino counties. | CPUC
In denying Desert Center the CRRs in 2015, CAISO contended that its Tariff awards CRRs under only two circumstances: for facilities proposed and evaluated under the ISO’s transmission planning process; and for network upgrades identified in the generator interconnection process, when the generator funding the upgrades elects to receive the CRRs in lieu of a cash payment.
CAISO said the temporary upgrades for the IWOD — a project undertaken before construction of a permanent transmission solution — did not arise out of either circumstance.
FERC subsequently denied NextEra’s complaint and its request for a rehearing. In January 2016, NextEra filed a petition for review of the commission’s orders in the D.C. Circuit Court of Appeals, and in April 2017, the court remanded the matter to the commission.
Afterward, the parties engaged in settlement talks and came to an agreement, which FERC approved Oct. 4. The settlement stipulates that the CRR entitlements begin Jan. 1, 2019, and will remain in place as long as the IWOD project stays in service.
“For purposes of clarity, no merchant transmission CRRs will be awarded retroactively to Desert Center or SCE for the period of time that the IWOD project was in service prior to Jan. 1, 2019,” the settlement states.
MISO and PJM have whittled 20 prospective transmission projects down to two in their search for small interregional upgrades that relieve congestion on market flowgates.
If approved, the two targeted market efficiency projects (TMEPs) will be mostly paid for by MISO, which stands to reap the lion’s share of project benefits, stakeholders learned during an Oct. 5 conference call held by the RTOs’ Interregional Planning Stakeholder Advisory Committee (IPSAC).
MISO and PJM began the study process in spring, identifying 61 facilities that amassed about $500 million in congestion over 2016 and 2017. (See “Possible Interregional Projects,” FERC OKs MISO-PJM Double Charge Fix for Pseudo-ties.)
A TMEP must cost less than $20 million, completely cover its installed capital cost within four years of service and be in service by the third summer peak from its approval. The process has a shorter outlook than the RTOs’ interregional market efficiency project process, which evaluates projects over a 15-year timeline.
Alex Worcester, PJM interregional planning engineer, said the two projects that meet TMEP criteria will be recommended to the RTOs’ boards in December:
An upgrade on terminal equipment on the Marblehead 138/161-kV transformer in southeastern Michigan to increase its summer emergency rating. The facility has had $15.5 million in historical congestion. The RTOs said a $175,000 upgrade could yield $12.4 million in benefits within four years of service. MISO would pay for the entire project because it would reap all the project’s benefits, Worcester said.
A $4.3 million substation equipment upgrade to the Gibson-Petersburg 345-kV facility in southwestern Indiana. The tie has experienced $9.8 million in historical congestion over 2016 and 2017, and the project could provide a $19.5 million benefit within four years. MISO would cover 93% of the project cost, and PJM would cover the balance, pursuant to RTO benefits.
Worcester said the 18 remaining project candidates were disqualified from the TMEP process either because upgrades were already planned, upgrade costs were too high, the flowgate congestion was merely outage-driven or the issue was alleviated by the April retirement of We Energies’ Pleasant Prairie coal plant in southeastern Wisconsin.
MISO and PJM congested facilities on flowgates | IPSAC
MISO and PJM also said two northern Indiana flowgates that were being investigated for potential TMEPs — the Dumont-Stillwell 345-kV tie linking Northern Indiana Public Service Co. and American Electric Power territories, and NIPSCO’s Michigan City-Trail Creek 138-kV line — may be eligible in a future study to identify a larger interregional MEP project.
The New England Power Pool is trying to “have it both ways” in claiming FERC lacks jurisdiction to overturn the RTO’s press and public ban while holding special privileges as ISO-NE’s stakeholder body, RTO Insider said in filings Friday.
The publication’s filings followed NEPOOL’s Oct. 1 answer to protests that joined RTO Insider in calling for open stakeholder meetings. New England is the only one of the seven U.S. regions served by RTOs or ISOs where the press and public are prohibited from attending stakeholder meetings.
Many of NEPOOL’s meetings are held at the Westborough, Mass., DoubleTree Hotel. | Google
“While the opposition pleadings mostly repeat arguments previously made by RTO Insider, the opposition pleadings also seek to relitigate whether New England arrangements satisfy the commission’s Order No. 719 requirements,” NEPOOL said, referring to filings by New Hampshire Consumer Advocate D. Maurice Kreis, the Reporters Committee for Freedom of Press and a joint filing by the Sustainable FERC Project, Conservation Law Foundation, Earthjustice and Natural Resources Defense Council.
NEPOOL said preventing the public and press from attending and reporting on stakeholder meetings was necessary to ensure the meetings are “efficient and productive.”
“NEPOOL fully expects that if press reporters are present in NEPOOL meetings, interested members would continue to advocate their positions. But NEPOOL also expects that an increased amount of such advocacy would largely take place outside of NEPOOL meetings. The presence of press reporters in meetings, undeniably, would erode the confidence built among NEPOOL members over its almost five decades of successful history that specific statements made by others in NEPOOL meetings will not be published publicly.”
NEPOOL said its opponents are wrong in citing Order 719 as justification for opening its meetings. The commission said the order was intended to “establish a means for customers and other stakeholders to have a form of direct access to RTO/ISO boards of directors, and thereby increase the boards of directors’ responsiveness to those entities.”
“The ‘access’ referred to that of RTO/ISO customers and stakeholders to RTO/ISO boards. Press is neither a customer nor stakeholder, and they certainly are not a direct representative of either,” NEPOOL said. “Further, NEPOOL is not the RTO/ISO board. As such, any reliance on Order 719 is misplaced.”
On Aug. 13, NEPOOL asked FERC to approve amendments to its Agreement to codify an unwritten policy of banning news reporters and the public from attending the group’s stakeholder meetings (ER18-2208). The group drafted the revisions after RTO Insider reporter Michael Kuser applied for membership in NEPOOL’s Participants Committee as an End User customer in March.
Conditioning Authority
RTO Insider responded to NEPOOL’s filing with a Section 206 complaint Aug. 31 asking the commission to overturn the organization’s ban or terminate the group’s role and direct ISO-NE to adopt an open stakeholder process like those used by other RTOs (EL18-196).
RTO Insider said NEPOOL’s claims that it is not a public utility is “incompatible with having the NEPOOL Agreement on file with the commission, with NEPOOL making [Federal Power Act] Section 205 filings with the commission as a filing party, with NEPOOL having ‘jump ball’ Section 205 filing rights, and with commission orders involving NEPOOL governance,” RTO Insider attorney Steve Huntoon wrote. “NEPOOL’s attempt to avoid commission oversight while enjoying vast powers, privileges and subsidies is a classic case of trying to have it both ways.”
In making its jurisdictional argument, NEPOOL cited the D.C. Circuit Court of Appeals’ 2004 order rejecting FERC’s attempt to force CAISO to replace its governing board. Huntoon said NEPOOL ignored commission precedent in a 2016 ruling approving funding for PJM’s state consumer advocates (ER16-561-001). The commission in that order ruled that the “PJM stakeholder process is a practice that directly affects wholesale rates, and thus approval of a proposal that would enhance that process falls within the commission’s jurisdiction under Section 205a.” (See FERC Upholds PJM Advocates’ Funding.)
Even if the commission determines it lacks authority to force NEPOOL to change its rules, “the CAISO opinion was clear that the commission retains conditioning authority,” Huntoon said. “In CAISO, the court cited with approval a prior decision, Central Iowa Power Cooperative v. FERC, in which ‘FERC conditioned the approval of the power pool on removal of the membership criteria, rather than ordering the power pool to change those criteria directly.’”
Insiders and Outsiders
RTO Insider’s filing included letters submitted by six U.S. senators and 12 members of the House of Representatives calling on FERC to open the meetings. (See Wood, Brownell: Unaware of Press Ban When OK’d NEPOOL.)
Public Citizen filed comments Oct. 3 challenging NEPOOL’s claim that its members “voted overwhelmingly against having press reporters as NEPOOL members” at the June 26 Participants Committee meeting. Only 115 of NEPOOL’s more than 500 members were present or had proxies at the meeting.
While 32 votes were cast in favor of the press ban, 24 members were opposed and 59 abstained. In addition, NEPOOL records show that six officers or their associates represented companies that provided 21 of the 32 votes for the ban.
The six have conflicts of interest in voting for the ban because they earn income selling “intelligence” about NEPOOL proceedings, said Tyson Slocum, director of Public Citizen’s Energy Program.
“When deliberative bodies are transparent and open to the public, information resources regarding details of their proceedings are inexpensive, reflecting the ease with which the information can be obtained and disseminated,” Slocum wrote. “But restricting participation, and making access to deliberations more exclusive, bestows ‘financial market opportunities’ for those granted special access. Those participants on the ‘inside’ can sell their services to those on the ‘outside.’”
The Sustainable FERC Project, Natural Resources Defense Council and Conservation Law Foundation filed a joint motion also opposing NEPOOL’s motion to dismiss RTO Insider’s complaint.
“An RTO/ISO’s formal engagement with stakeholders is … squarely within the commission’s jurisdiction, and the commission should intervene when an opaque stakeholder process that completely excludes the press decreases stakeholder input, decreases public understanding and transparency, and creates a needless risk to the legitimacy of important RTO/ISO decisions,” they said.
California may be able to meet its goal of relying entirely on renewable and other zero-carbon electricity sources by 2045, but it’s going to be more difficult and more expensive without a wholesale market that includes multiple Western states, advocates of CAISO regionalization contend.
“This is essentially like leaving one of your best tools on the workbench when you’re trying to build a very complicated project,” said Carl Zichella, western transmission director for the Natural Resources Defense Council, a staunch proponent of a Western RTO. “You may end up with something jury rigged.”
Gov. Jerry Brown, CAISO leaders and other promoters of regionalization held the same opinion when they tried to pass AB 813 this year. The bill, which failed, would have started the process of turning the ISO into a multistate entity by creating a governing board independent of the governor and legislature.
Supporters reasoned it would greatly help California achieve a carbon-free grid if in-state generators could more easily sell excess solar power to neighboring states and buy clean energy from states that produce more wind and hydroelectric power.
Mojave Desert solar arrays are a large part of the state’s renewable energy production. | U.S. Dept. of the Interior
Solar power in the Mojave Desert, for instance, peaks in the late afternoon when it’s often least-needed in California but could be useful in states one time zone to the east — where residents of Arizona, Colorado and Montana are arriving home from work, turning on their TVs and adjusting their thermostats.
Wind from southeastern Wyoming and eastern New Mexico, meanwhile, could provide power after sunset in California, which currently relies on natural gas plants to meet each evening’s peak demand.
Wind power in Wyoming could help California meet peak demand, replacing natural gas. | Bureau of Land Management
That was a major reason behind AB 813. The bill stalled in the Senate Rules Committee on the last night of the legislative session Aug. 31. It was the third time in three years that efforts to turn CAISO into an RTO had fizzled. (See CAISO Expansion Bill Dies In Committee.)
In contrast, lawmakers passed, and Brown signed, the session’s other major piece of energy legislation, SB 100. The new law establishes an ambitious timeline for California to rely increasingly on renewable and zero-carbon energy sources, with the goal of achieving 100% carbon-free electricity by 2045. Along the way, it requires the state to accelerate its renewable portfolio standard program to approximately 50% by 2026 and 60% by 2030. (See Calif. Gov. Signs Clean Energy Act Before Climate Summit.)
That’s a daunting challenge. In 2017, California got about a third of its electricity from natural gas-fired plants and more than 40% from hydroelectric, solar, wind and other renewable sources, according to the California Energy Commission. Ending the reliance on natural gas to meet peak demand will be difficult, especially because wind and solar often aren’t available during the morning and evening peak periods. (The state’s last nuclear generator, Pacific Gas and Electric’s Diablo Canyon Power Plant, is scheduled to be retired in 2025.)
Mixed Reaction
For many supporters, the clean-energy and CAISO regionalization bills went hand in hand, with the goals of SB 100 achievable largely through a Western RTO.
“Right now, management of the Western grid that powers our homes and businesses is severely fragmented, with 38 separate [balancing] authorities managing electricity generation and flows over 14 states, two Canadian provinces and northern Mexico,” Zichella wrote in an NRDC opinion piece. “This makes it harder and more expensive to add renewable energy generation here and elsewhere in the region, because each time the electrons flow through one of the authorities, a new charge is added.”
Without regionalization, California will have to access other states’ electricity through bilateral contracts and pancaked transmission access charges, Zichella said in an interview with RTO Insider. “It’d drive the cost up dramatically not having them in the wholesale market where the lowest cost [power] is dispatched first,” he said.
Other interest groups supported SB 100 but not AB 813. They feared partnering with the coal-burning states of the Interior West could undermine California’s clean energy push. (Today, California has only one small coal-fired power plant and imports just a tiny percentage of its energy from out-of-state coal-burning generators, according to the U.S. Energy Information Administration.)
The Sierra Club, for example, hailed the passage of SB 100.
“It’s impossible to overstate how significant it is for a state as large and influential as California to commit to 100% clean energy,” the group’s executive director, Michael Brune, said in a Sept. 10 statement.
But the Sierra Club opposed creating a Western RTO, saying CAISO regionalization could result in “resource shuffling.”
“That is, it might actually encourage certain coal-heavy power companies to extend the life of their plants in one part of the West and shift the renewable energy to California,” the group said in a message opposing AB 813. “All that extended and increased use of fossil fuel plants to accommodate the ability of California’s ‘excess’ renewable energy to flow east and the Interior West’s supply to flow to California can add up to more localized air pollution, especially for communities already struggling with dirty air, and more greenhouse gas pollution.”
California can and should go it alone, those who opposed AB 813 but supported SB 100 argued.
“Rather than removing California authority over CAISO and eliminating a board appointed by the governor and subject to Senate confirmation, the legislature should direct CAISO to explore other measures that serve the goal of optimizing system operations, reducing GHG emissions, and addressing concerns about overgeneration and curtailment,” read a joint statement to the State Legislature by Sierra Club California, The Utility Reform Network, the State Building and Construction Trades Council of California and other labor unions.
California curtails large amounts of solar energy during many months. | CAISO
Among the coalition’s proposals was expanding the Energy Imbalance Market to include additional Western utilities and allow day-ahead scheduling. It said an expanded EIM would significantly reduce curtailments of renewable resources in California while allowing states to retain control over grid reliability, resource planning and transmission investment.
Steven Greenlee, a senior spokesman for CAISO, said the EIM helps avoid curtailment by selling renewable power on the real-time market and could do even more if day-ahead bidding is allowed. CAISO has a day-ahead market-enhancement initiative in the works, he noted.
“That’s going to help, but it’s still not quite as good as having a full-blown regional transmission market,” he said.
“It does appear possible to meet the 100% goal,” he added, “but the cost and challenge of doing so without a robust regional coordination effort will be significantly increased.”
Natural gas and renewables each make up a large part of California’s energy mix. | California Energy Commission
Some relatively simple methods could help reduce the state’s reliance on natural gas in accord with SB 100, he said. Such methods might include time-of-use rates to encourage consumers to use solar power when it’s most plentiful and demand response programs to alert consumers to change their energy use in response to peaks and troughs in electrical demand.
No Silver Bullets
Storage also could be a major piece of a solution, especially with improvements in cost and efficiency, Greenlee noted.
“Energy storage is going to be a game changer … if all of a sudden we see it go dirt cheap, and it’s just everywhere,” he said.
In February, FERC issued Order 841, requiring RTOs and ISOs to revise their tariffs to allow energy storage resources full market access and to ensure storage resources are eligible to provide all energy, capacity or ancillary services of which they are capable, while also enabling them to set clearing prices as buyers and sellers. Grid operators will also need to establish a minimum threshold for participation that doesn’t exceed 100 kW. (See FERC Rules to Boost Storage Role in Markets.)
Then in September, Brown signed SB 700, which will provide an additional $800 million in incentives over the next five years for consumers to purchase behind-the-meter storage systems.
Batteries, which have been limited in their ability to store and disperse energy, are improving thanks to companies such as electric carmaker Tesla, which also manufacturers utility-scale battery systems.
Probably more significant going forward, however, are systems capable of storing hundreds of megawatts such as pumped hydropower.
Zichella noted, for example, that the Eagle Mountain Pumped Storage Project — a controversial proposal in the California desert near Palm Springs — could store output from 1,300 MW of inexpensive solar power by using it to pump water uphill during the day and then releasing the water at night to spin turbines that would help meet peak demand. He also cited a proposed utility-scale system in Utah that would use renewable energy to compress air into underground chambers and release it later in the day to generate electricity.
Then there are storage projects that look and sound like science fiction. The 110-MW Crescent Dunes Solar Energy Project in Tonopah, Nev., uses thousands of revolving mirrors, called heliostats, to concentrate solar energy on a 550-foot tower and heat molten salt to 1,000 degrees Fahrenheit. The salt is stored in a thermal container, where it retains its heat for hours. That heat can be used at night to boil water and turn power-producing steam turbines, which light up Las Vegas.
The Crescent Dunes solar storage project near Tonopah, Nev., concentrates sunlight to heat molten salt to 1000 degrees. | Solar Reserve
With such large-scale storage, “you could have a much smoother variability curve” from wind, which is unpredictable and intermittent, and solar, which traditionally stops working after the sun goes down, Zichella said.
“None of these things by themselves are silver bullets,” he said. But added together they could help California pursue its goal of all-green energy. Then again, he said, another run at regionalization will likely happen in the next legislative session. (See Western RTO Proponents Vow to Keep Trying.)
Transmission planning in the Eastern Interconnection is well-coordinated among its planning authorities, ensuring NERC reliability requirements are met, according to a report released Wednesday by the Eastern Interconnection Planning Collaborative (EIPC).
The “State of the Eastern Interconnection” doesn’t get into the nitty gritty. At only 21 pages, it summarizes EIPC’s efforts since its formation in 2009 to examine the interconnection from the bottom up and ensure that planning coordinators’ individual regional transmission plans do not conflict with each other.
“The EIPC has completed a comprehensive description of Eastern Interconnection Planning Collaborative activities over the last decade, including results from its studies and analyses on the regional transmission plans of the major systems that make up the Eastern Interconnection,” said Stephen Rourke, vice president of system planning for ISO-NE and chairman of the EIPC Executive Committee. “The report details how the Eastern Interconnection grid is being planned in a coordinated manner, facilitated in part by the work of the EIPC.”
The Eastern Interconnection also includes the Canadian Maritime provinces: New Brunswick, Nova Scotia and Prince Edward Island. | ERCOT
EIPC is made up of 20 planning coordinators — including the five Eastern RTOs — in FERC-designated planning regions: the RTOs’ territories, the Florida Reliability Coordinating Council, South Carolina Regional Transmission Planning and Southeast Regional Transmission Planning. FERC Order 1000 only requires pairs of neighboring regions to coordinate their planning. SPP and MISO work together, for example, as do MISO and PJM — but PJM and SPP do not.
“EIPC efforts provide an additional forum to complement interregional coordination of the combined plans of the regional planning coordinators from an interconnection-wide basis,” according to the report. “While reliability requirements are achieved in the first instance at the regional level through regional processes, the work undertaken at EIPC confirms that the regional plans mesh properly into a combined plan for the interconnection.”
The heart of the collaborative’s work are its two “roll-up” studies, which involved combining the individual regional plans and their underlying data, such as resource mix and projected demand, into an integrated, interconnection-wide model.
The first study was conducted in 2014 for the summer peak hours in 2018 and 2023. The second, released in 2016, covered the 2025 winter and summer peaks.
As part of the latter study, EIPC identified several interconnection-wide power-flow interactions resulting from the regional plans that could cause constraints, leading planning coordinators to develop “conceptual upgrades” for inclusion in future planning cycles.
Another analysis in the study to locate potential constraints simulated 5,000-MW transfers between regions.
“The roll-up analyses demonstrate that the respective planning coordinator transmission planning and interconnection processes, which explicitly include requirements for coordination, have yielded transmission plans that are well coordinated on a regional and interconnection-wide basis,” the report says.
MIDDLETOWN, R.I. — The increasing interplay between energy efficiency and electrification was a hot topic at the 2018 Northeast Energy Efficiency Partnerships summit Oct. 1 to 3. But industry leaders and experts also discussed how to measure the benefits of energy efficiency — and how to motivate consumers to do more to save energy.
“The truths of how we did efficiency 10 years ago are not necessarily how we’re going to be doing it the next five years,” said Carol Grant, commissioner of the Rhode Island Office of Energy Resources. “How can we bring more people into the drive, make more people aware?”
To get people to value efficiency, policymakers need to make it more visible, said Mary Sotos, deputy commissioner for energy at the Connecticut Department of Energy and Environmental Protection.
The department realized it needed to set priorities for its limited resources following a state budget crisis this year, which saw a third of energy efficiency funding swept into the general fund, Sotos said.
“One clear priority that came out of that process is that climate needs to be at the front of all of our efficiency work,” Sotos said. “One of the biggest sectors of emissions in Connecticut is actually our home heating. So about half of Connecticut is heated with delivered fuels — fossil fuel, heavy emissions.”
DEEP has long discussed applying a carbon or fuels charge, but officials now are uneasy about “creating another pot of money” that could be commandeered to fix a budget shortfall, she said.
“We need to look at the resources we have, including our conservational management plan, and be willing to use those resources to make this transition away from fossil fuels,” Sotos said. “That’s something new for us.”
Energy marketing consultant Suzanne Shelton recommended brand marketing and psychological tactics to shift public perception — and find electricity’s equivalent to the “natural” in natural gas.
“We don’t know what we’re doing, we don’t think we need it, and we don’t think it works. That’s our huge problem with energy efficiency,” Shelton said. “Americans want to be greener. Forget education, that’s boring. Think of it in terms of engaging consumers, inspiring them, motivating consumers.”
Utility and auto industry shareholders should be responsible for the costs of accelerating electrification, Rhode Island Public Utilities Commissioner Abigail Anthony said.
Additional electricity sales increase cash flow, and new load may result in infrastructure upgrades that provide earnings opportunities for the utility, or the utility could receive new incentive-based earnings to absorb increased electric load without new wires, Anthony said.
“From a regulator’s perspective, I am cautious that electric utilities aren’t promoting electrification at scale because they are holding out to see how much preferential regulatory treatment they can get first,” Anthony said. “Why take on any risk if regulators are willing to put all the risk on ratepayers? In any case, we’ll lose the public trust if we don’t have good evidence for asking ratepayers to make the first move in a new business.”
Grant gave a “shout out” to National Grid as the primary utility in Rhode Island: “I’m excited about the leadership they’re providing in continuing to push themselves … their talent and their innovation is really growing, and their focus on new approaches is exciting as well.”
In Connecticut, DEEP this year for the first time asked the utilities to say how they could help homes convert from their current fuels to air-source or ground-source heat pumps, which are good for both heating and cooling, Sotos said.
One challenge in the nation’s capital is that “our energy is too affordable,” said Tommy Wells, director of the D.C. Department of Energy & Environment.
The whole regulatory structure is geared toward keeping electric power rates low, he said, “so when advocates say we want energy to cost more so you use less, it goes directly against the whole construction of our regulatory scheme.”
“In D.C. we have the most valuable, highest renewable energy credits in the country for solar … but the uptake of solar on people’s homes … is slow because their power bills are so low,” Wells said.
Electrification Metrics
Sotos noted that by 2030 Connecticut will need to reduce greenhouse gas emissions across all sectors 40% below 2001 levels, and each year it must save 1.6 MMBtu of energy.
“It’s important to us to make sure that the metrics that we’re applying to our programs actually match what we are trying to accomplish, she said. “Depending on how much you value carbon, or other environmental impacts, the cost-effectiveness of certain programs can potentially look very different.”
Paul Hibbard of the Analysis Group said there are two basic components to measuring the value of energy efficiency and electrification: forecasting and assigning a value to carbon.
“Forecasting avoided costs is incredibly complicated … [it] is really comparing the world with efficiency investments to a world without those investments, and calculating the difference,” Hibbard said.
Assigning a value to carbon is more of a political decision, but it will grow increasingly important for directing investments and determining the right way to use public funding to focus investments, Hibbard said.
Solid metrics benefit the decarbonization effort by providing consistent approaches to evaluating cost-effectiveness in outcomes, said Bruce Biewald of Synapse Energy Economics. He also got “abstract and philosophical” about public policy.
“I have raised six kids … and you have some influence, a little bit of control, but you don’t really control them,” Biewald said. “And that’s also in this nexus of companies and government regulations, and laws and individual consumer choice. So when you see something failing, like the pricing or not pricing of carbon, there’s room for everybody in the solution. The idea that there’s one actor or one policy approach that’s going to solve this is not reasonable.”
Pasi Miettinen, CEO of energy analytics firm Sagewell, said his company gave up energy efficiency to focus on electrification for non-regulated utilities because the latter gives better results for a dollar spent. Nonetheless, “we look at it as one category, maximum yield for dollars,” he said.
Reducing carbon emissions is neither easy nor simple, said clean energy advocate Steve Cowell of E4TheFuture, an organization that promotes residential clean energy.
“Government funding versus regulatory versus market-driven investment, legislative mandates versus rate design, all these are pieces that we have to fit together,” Cowell said.
New England has enormous potential to bring offshore wind and other non-carbon imports into the region, and is also facing the recent or prospective retirements of some really important assets on the grid, said Deborah Donovan of the Acadia Center, a regional, nonprofit advocacy and research organization.
Regarding the wholesale energy market, the region is “in the precarious position of ISO-NE procuring gas capacity through the capacity markets and then saying ‘oh my gosh, we’re over-dependent on gas,’ and really putting their thumb on the scale when we’re confronted with issues like a request for retirement from the Mystic station up north of Boston,” Donovan said.
The region needs natural gas to generate power and to heat its buildings, but the fuel security issue is really just about winter peak hours, she said.
The grid operator sees a natural gas problem and says it must have a natural gas solution, but “we and a lot of other advocates are pushing to stop that. … [It’s] costly to the environment solution,” Donovan said.
Mark Kresowik of Sierra Club’s Beyond Coal Campaign said the Northeast states lead the country in energy efficiency, but he decried the “insanity of [CEO] Gordon van Welie in ISO New England proposing to spend hundreds of millions of dollars to bail out the Mystic plant and push billions of dollars in investment into gas pipelines for fuels that are mandated to decline by state policies.”
NEEP Executive Director Sue Coakley turned the discussion back to scaling up energy efficiency in buildings.
Cowell said New York has decided to eliminate any ongoing residential or energy efficiency work in buildings and homes.
“We had a very difficult stakeholder session a couple weeks ago where the Public Service Commission basically said it’s not worth it, we shouldn’t be helping people insulate and air-seal their homes,” Cowell said. “That makes it tough.”
Coakley suggested basing the argument for efficiency on the costs of storm damage: “You could insulate and air-seal your house for $5,000 to $20,000 and do a really good job, and instead we’re paying to repair houses from damage from bad weather.”
Leah Bamberger, director of sustainability for the city of Providence, said that following natural gas pipeline explosions near Boston in September, residents in homes knocked off the gas system were reluctant to accept space heaters for fears that their outdated wiring couldn’t handle the extra load.
Sotos said that DEEP is expanding its thinking on what constitutes barriers to adoption of energy efficiency measures, and it now realizes that structural issues in a house, such as a difficult to reach boiler, should qualify for state-funded remediation.
