State officials in New England said last week that only they should have the ability to identify public policy-driven transmission needs for evaluation by ISO-NE.
“The plain language of [ISO-NE’s Tariff] designates NESCOE as the entity that identifies whether there are state or federal public policies driving transmission needs and, in turn, whether a public policy transmission study should be commenced to evaluate potential solutions,” the New England States Committee on Electricity said in a June 1 rebuttal to the Conservation Law Foundation.
CLF Senior Attorney David Ismay asked ISO-NE on May 16 to conduct a study to determine public policy transmission needs despite NESCOE’s contention that there are currently no such needs. (See CLF to ISO-NE: Override States, Order Public Policy Tx Study.)
Ismay said a D.C. Circuit Court of Appeals ruling in April confirmed the responsibility of ISO-NE, “not the states, to evaluate transmission needs and potential solutions as part of its Regional System Plan process, regardless of whether those transmission needs arise from state public policy requirements or any other source” (Emera Maine v. FERC, No. 15-1139). (See Court Rebuffs New England TOs, Upholds FERC ROFR Order.)
Misreading of Order 1000
| Massachusetts Clean Energy Center
NESCOE responded that “CLF misunderstands the Order 1000 process … and has conflated the process for evaluating solutions to policy-driven transmission needs with the process of identifying if there are any needs in the first place. Emera imposes no requirements on ISO-NE to determine public policy requirements driving transmission needs and directed no changes to the [Open Access Transmission Tariff].
“CLF mistakenly claims that Emera requires ‘ISO-NE to make its own determination … regarding the existence of [public policy requirements] that are driving, or may drive, transmission needs relating to the New England transmission system.’”
NESCOE said that ISO-NE’s rules on the identification of policy needs have never been in controversy, were not before the court and that FERC itself had affirmed to the court NESCOE’s role in that process. “If anything … Emera affirms the process reflected in the current OATT whereby NESCOE must first identify a state policy driving a transmission need before ISO-NE begins expending consumer dollars on evaluating a need. As Emera plainly states, ‘ISO-NE has no role in setting public policy for the states.’”
The organization closed its response by bemoaning CLF’s request as “precisely the kind of after-the-fact market participant action that causes the states serious pause in using a FERC-jurisdictional tariff to achieve their clean energy requirements.”
ISO-NE Director of Transmission Planning Brent Oberlin had told the Interregional Planning Stakeholder Advisory Committee for New England, NYISO and PJM on May 19 that if the RTO decides to conduct a public policy transmission study, it will need to provide a scope to stakeholders by Sept. 1.
California has moved a step closer to adopting a 100% clean energy standard.
The State Senate on Wednesday passed a bill that would require California load-serving entities to obtain all of their electricity deliveries from renewable resources by 2045 (SB 100).
de León
Sponsored by Senate President pro Tempore Kevin de León, a Los Angeles Democrat, the bill passed 25-13 along party lines. It now moves to the State Assembly.
“When it comes to our clean air and climate change, we are not backing down,” de León said in a statement. “Today, we passed the most ambitious target in the world to expand clean energy and put Californians to work.”
De León said it is now critical for California to “double down on climate leadership” given President Trump’s announcement today that the U.S. would withdraw from the Paris Agreement on climate change. (See related story, Trump Pulling U.S. Out of Paris Climate Accord.)
“We are sending a clear message to the rest of the world that no president, no matter how desperately they try to ignore reality, can halt our progress,” he said.
The new bill would accelerate the timeline for California’s current 50% RPS from 2030 to 2026, with an interim 45% goal put in place for 2023. The 2030 requirement would increase to 60%, and the bill gives the California Energy Commission discretion to establish “appropriate” three-year compliance periods subsequent to 2030.
The bill also directs state agencies to incorporate the planning goal into any energy and climate programs subject to their jurisdiction, which would include the utility integrated resource plans administered by the PUC.
Passage of the bill got expected support from environmental groups and advocates for renewable energy.
“Getting 100% renewable is 100% possible and 200% necessary,” said Kathryn Phillips, director of Sierra Club California. “SB 100 responds to what survey after survey shows that Californians want: clean energy, clean air and a future for the next generation.”
Strela Cervas, co-director of the California Environmental Justice Alliance, said the proposed law would move California away from fossil fuels that that have a disproportionate impact on disadvantaged communities and communities of color.
“The bill charts a pathway for the public health and economic benefits of local renewable energy to reach communities that need it the most,” Cervas said.
“Transitioning to a 100% carbon-free future in an economy the size of California’s requires persistence, commitment and vision,” said Bernadette Del Chiaro, executive director of the California Solar Energy Industries Association.
Solar Field | Sunworks
In urging his colleagues to vote against the bill, Republican Sen. Jeff Stone warned that the state might be getting ahead of its ability to actually implement a 100% RPS.
“If we don’t have the science to back up the methodology to get to 2030 with 60% coming from renewables, then it’s going to increase costs for our constituents,” Stone said. “We need to let the technology drive the innovations in alternative energy and not put mandates out there that may be unachievable.”
If it becomes law, the bill would make California the second state after Hawaii to require LSEs to rely on 100% renewables by 2045.
The Los Angeles Department of Water and Power (LADWP) on Thursday agreed to join the Western Energy Imbalance Market (EIM), adding the country’s largest municipal utility to the growing electricity market.
LADWP is the 11th utility to announce plans to participate in the CAISO-run market, which is designed to better balance supply and demand across the region by making more electricity resources available in real time.
LADWP General Manager David Wright touted the benefits of joining with other utilities across the western U.S. to more reliably integrate renewable energy resources.
“We are pleased to enter the EIM in what will be a solid step forward in partnering with our neighbors to find benefits for the City of Los Angeles,” Wright said in a statement.
While LADWP expects to begin participating in the market in April 2019, that timeline could be extended an additional year to accommodate the utility’s unique configuration and required upgrades. A separate agreement will have to be made once the LADWP system is integrated into the EIM.
Total implementation costs are estimated at $15 million to $20 million, and recurring expenses are projected at about $2.3 million per year. Third-party analysis pegged annual savings for ratepayers at $2 million to $5 million.
About 40% of LADWP’s 7,600 MW of capacity is coal-fired, 20% renewable, 22% natural gas-fired, 9% nuclear and 7% classified as “other.” The municipal utility began distributing electricity in 1917 and serves about 4 million customers.
The utility also individually or jointly controls about 4,600 miles of transmission, which includes the Pacific DC Intertie connecting Southern California with the Bonneville Power Administration system in the Northwest and the Intermountain DC system that carries output from coal-fired generation in Utah.
| CAISO
Already participating in the EIM are PacifiCorp, NV Energy, Puget Sound Energy and Arizona Public Service. Portland General Electric is due to join in October; Idaho Power in April 2018; Seattle City Light and Balancing Authority of Northern California/Sacramento Municipal Utility District in April 2019; and Salt River Project in April 2020.
Vancouver-based Powerex earlier this week became the first non-U.S. entity to announce its intention to join the market starting next spring. (See Powerex Slated to Become First Non-US EIM Member.)
The EIM began operating in November 2014 and now includes participants in Arizona, California, Idaho, Nevada, Oregon, Utah, Washington and Wyoming. CAISO estimates the market has so far produced approximately $173 million in gross benefits for its members.
SPP stakeholders approved a revision request Tuesday that allows the RTO to lower its planning reserve margin as it waits on a quorum-less FERC to act on a proposed Tariff change.
The Markets and Operations Policy Committee approved RR230 during a special conference call, changing SPP’s criteria to allow it to reduce the planning reserve margin to 12% from 13.6% effective June 1.
The new reserve margin was included in SPP’s March filing asking FERC to approve the changes effective June 1 (ER17-1098). SPP COO Carl Monroe said the RTO had yet to hear from the commission, necessitating a vote on an interim solution.
“We don’t know why they haven’t acted … we assume because of a lack of quorum,” Monroe said during the hour-long conference call.
On Wednesday, FERC responded by saying SPP’s resource-adequacy requirement filing was deficient and that additional information is required to process the request. The commission listed 18 questions to be addressed related to:
SPP’s firm power, firm capacity and net peak demand requirements.
How market participants may assign their obligations and responsibilities to other market participants.
The RTO’s annual deliverability study that determines the load a resource may deliver to the balancing authority area without effecting reliability or requiring additional transmission upgrades.
Deficiency payments and distributions of revenues.
FERC has been operating with only two commissioners since February, when former Chairman Norman Bay resigned and left the commission with three vacancies. The Trump administration only recently nominated two commissioners, who went through confirmation hearings last week. (See No Fireworks for FERC Nominees at Senate Hearing.)
SPP stakeholders resisted staff’s initial request to approve RR230 by an email vote, made when it became likely FERC was not going to act by the effective date. American Electric Power, Westar Energy, Kansas City Power & Light, Oklahoma Gas & Electric and Duke Energy were among those requesting further discussion.
Westar Energy’s Murray Gill Energy Center near Wichita, Kansas | Westar
“I feel like we’re pushing something through that would be better in a thought-out process,” Westar’s John Olsen said. “It’s a little item, but I don’t know what the unintended consequences are. If FERC doesn’t approve [the proposed Tariff] language, then where are we at?”
“Had this been advanced as an issue by OGE rather than staff … I would have worked with [OGE] beforehand,” AEP’s Richard Ross said.
As it was, Ross worked with OGE Energy’s Greg McAuley, Omaha Public Power District’s Joe Lang and Midwest Energy’s Bill Dowling to hammer out the final motion’s language. A key addition was language making RR230 effective for only 10 business days after FERC rules on SPP’s filing.
Members overwhelmingly approved the motion, with only five opposing votes and two abstentions.
RR230 earlier cleared the Supply Adequacy, Transmission, and Regional Compliance working groups with two opposing votes and three abstentions.
SPP’s filing came after the MOPC and the Board of Directors in January approved a package of policies that included the 12% planning reserve margin, which translates to a 10.7% capacity margin.
A task force spent two years on that package, which it says will reduce the RTO’s capacity needs by about 900 MW and save members $1.35 billion over 40 years. (See “Stakeholders Endorse 12% Planning Reserve Margin, Policies,” SPP Markets and Operations Policy Committee Briefs.)
The original revision request incorporated previously approved policies defining a resource adequacy requirement, identifying who is responsible for resource adequacy, and how and when the requirement should be met. The policies are to become effective this summer, with the exception of an assurance policy requiring entities short on their planning reserve margins to make payments to entities with excess capacity, based on forecasted information.
Members agreed to use 2017 as a “dry run” for the resource adequacy process.
WASHINGTON — President Trump followed through on his campaign pledge to withdraw the U.S. from the Paris Agreement on climate change Thursday, a victory for economic nationalists and conservatives that prompted howls of outrage from other signatories, environmentalists and corporate leaders.
“I was elected to represent the citizens of Pittsburgh, not Paris,” said Trump, who complained the agreement would do little to combat global warming but would cost the U.S. millions of jobs and leave the nation unable to produce enough power to support economic growth of “3 to 4%” — a pace the country has rarely seen.
“At 3 or 4% economic growth — which I expect — we need all forms of American energy,” he said.
The U.S., the No. 2 producer of greenhouse gases after China, joins Syria and Nicaragua as the only countries not party to the 2015 agreement, which was largely brokered by the Obama administration and has been signed by more than 190 countries. The U.S. agreed to a nonbinding goal of cutting carbon emissions by at least 26% below 2005 levels by 2025.
Trump, who has previously called global warming a “hoax,” did not address climate science, instead saying the U.S. would remain the “cleanest, most environmentally friendly” nation in the world and would seek to negotiate a new deal that doesn’t penalize it. “We’ll see if we can make a deal that’s fair,” he said.
Trump said the Paris Agreement would hamstring the U.S. economy while allowing India and China to increase emissions for years. “China can do whatever they want for 13 years,” he said. “India can double its coal production. We’re supposed to get rid of ours.”
In rejecting the agreement, Trump said he was reasserting American sovereignty and undoing a “self-inflicted wound.”
“This agreement is less about the climate and more about other countries gaining a financial advantage over the United States. The rest of the world applauded when we signed the Paris Agreement. They went wild, they were so happy. For the simple reason that it put our country … in a very, very bad economic disadvantage.”
Speaking after the president, EPA Administrator Scott Pruitt praised what he called “an historic restoration of American economic independence.”
“We owe no apologies to other nations for environmental stewardship. After all, before the Paris accord was ever signed America had reduced its CO2 footprint to levels of the early 1990s,” he said, citing an 18% reduction in carbon emissions between 2000 and 2014. “This was accomplished not through government mandate but accomplished through the innovation and technology of the American private sector. … Other nations talk a good game. We lead with action, not words.”
Former President Barack Obama issued a statement rejecting Trump’s criticism. “It was steady, principled American leadership on the world stage that made [the agreement] possible. It was bold American ambition that encouraged dozens of other nations to set their sights higher as well. And what made that leadership and ambition possible was America’s private innovation and public investment in growing industries like wind and solar — industries that created some of the fastest new streams of good-paying jobs in recent years, and contributed to the longest streak of job creation in our history.
“The nations that remain in the Paris Agreement will be the nations that reap the benefits in jobs and industries created,” Obama continued. “I believe the United States of America should be at the front of the pack.”
Little Surprise
Although Trump said in November that he had an “open mind” on the subject, his announcement in the White House Rose Garden was not surprising given his campaign pledge and his executive order directing EPA to undo the Clean Power Plan.
The CPP would have required a 32% reduction in power plant CO2 emissions from 2005 levels by 2030. (See Trump Order Begins Perilous Attempt to Undo Clean Power Plan.) The U.S. Energy Information Administration says emissions were 12% below the 2005 level as of 2015.
Opposition to the Paris Agreement was led within the administration by Pruitt and political aide Stephen Bannon, who were in the audience for the announcement along with about 100 Trump supporters, including members of the conservative Heritage Foundation and Competitive Enterprise Institute.
During his trip to Europe last week, Trump was lobbied by European officials and Pope Francis to honor the deal. Others who made their case to Trump for remaining included former Vice President Al Gore and leaders of dozens of Fortune 500 companies.
Thirty top CEOs, including Pacific Gas and Electric’s Geisha Williams, signed an open letter urging Trump to remain in the agreement, which they said would strengthen U.S. competitiveness, benefit American manufacturing and support investment “by setting clear goals which enable long-term planning.”
“It expands global and domestic markets for clean, energy-efficient technologies, which will generate jobs and economic growth. It encourages market-based solutions and innovation to achieve emissions reductions at low cost,” they said.
Also weighing in with support were Trump’s daughter Ivanka and Secretary of State Rex Tillerson, neither of whom attended the announcement.
Trump’s speech started 30 minutes late, leaving the hundreds of reporters, photographers and guests sweltering in the sun as a military band played jazz.
Some analysts contend Trump’s decision to abandon the Paris Agreement and the CPP will have limited effect because of decarbonization efforts already adopted by power generators and others. (See EBA Panel: CPP’s Demise not Certain — and it Doesn’t Matter.)Economic consultancy company Rhodium Group estimates the U.S. would reduce carbon emissions by 21% below 2005 levels in 2025 under the CPP but that the reduction would flatten at 14% under Trump’s rollback.
Shortly after Trump’s announcement, Democratic Govs. Jay Inslee (Wash.), Jerry Brown (Calif.) and Andrew Cuomo (N.Y.) announced they had formed the U.S. Climate Alliance, a pact dedicated to upholding the country’s commitments under the agreement. On Monday, the group expanded to include Connecticut, Delaware, Hawaii, Massachusetts, Minnesota, Oregon, Puerto Rico, Rhode Island, Vermont and Virginia.
More than 180 U.S. mayors — including Pittsburgh Mayor Bill Peduto and the chief executives of Los Angeles, Boston, New York, Chicago, Houston, Seattle, Philadelphia and Atlanta — issued a statement saying they would “adopt, honor and uphold the commitments” under the agreement.
The Paris Agreement is intended to prevent the planet’s temperature from increasing by more than 3.6 degrees Fahrenheit, which many experts say would lead to an irreversible future of rising oceans and extreme weather, causing drought, flooding, and food and water shortages.
It will take the U.S. until November 2020 to complete its exit from the agreement.
Reaction
The Business Council for Sustainable Energy, which has been an observer at the United Nations Framework Convention on Climate Change for the past 25 years, was dismayed by the news. “Withdrawing from the Paris Agreement weakens the U.S. government’s ability to protect U.S. commercial interests in these discussions as well as in other important international negotiations,” President Lisa Jacobson said. “This international agreement is an opportunity to bolster American economic development, not a barrier to it.”
Mike Tidwell, director of the Chesapeake Climate Action Network, said Trump’s decision “sealed his reputation as an economic and environmental wrecking ball with few rivals in U.S. history. Locally, his decision to withdraw from the Paris Climate Agreement threatens to reduce jobs and shrink our regional economy. It would do so by embracing fracking and a dying coal industry over the jobs-creating markets for wind and solar power.”
Myron Ebell, director of the Competitive Enterprise Institute’s Center for Energy and Environment, who attended the announcement, issued a statement saying the decision will lower prices. “The agreement involves enormous costs for zero benefits, and requires member countries to submit new, steeper commitments to reduce emissions every five years,” he said. “Its global energy-rationing regime consigns poor people in developing countries to perpetual energy poverty.”
Heritage Foundation President Ed Feulner said the withdrawal was “a commonsense approach that helps the American people and businesses. … From lost jobs, higher electric bills or more overzealous government regulations, the Paris Agreement was by all accounts a rotten deal.”
Senate Majority Leader Mitch McConnell (R-Ky.) thanked Trump for “dealing yet another significant blow to the Obama administration’s assault on domestic energy production and jobs.”
Senate Minority Leader Chuck Schumer (D-N.Y.) called the withdrawal “a devastating failure of historic proportions. Future generations will look back on President Trump’s decision as one of the worst policy moves made in the 21st century because of the huge damage to our economy, our environment and our geopolitical standing.”
Corporate, International Responses
Several corporate leaders blasted the move, with Tesla CEO Elon Musk and Walt Disney Co. CEO Bob Iger pledging to quit a White House advisory council. “Leaving Paris is not good for America or the world,” Musk said.
General Electric CEO Jeff Immelt tweeted his disappointment. “Climate change is real. Industry must now lead and not depend on government,” he said.
IBM issued a statement rejecting Trump’s view that the agreement would hurt the economy. “IBM believes that it is easier to lead outcomes by being at the table, as a participant in the agreement, rather than from outside it.”
But Peabody Energy, the largest coal mining company in the U.S., praised the decision. It said it “continues to advocate for greater use of technology to meet the world’s need for energy security, economic growth and energy solutions through high-efficiency, low-emissions, coal-fueled power plants, and research and development funding for carbon capture.”
The decision was not well received in Europe.
“The Paris Agreement provides the right global framework for protecting the prosperity and security of future generations, while keeping energy affordable and secure for our citizens and businesses,” U.K. Prime Minister Theresa May said.
French President Emmanuel Macron rejected Trump’s call for renegotiation. “I tell you firmly tonight: We will not renegotiate a less ambitious accord,” he said. “There is no way. Don’t be mistaken on climate; there is no plan B because there is no planet B.”
Powerex has signed an agreement with CAISO to become the first non-U.S. participant in the Western Energy Imbalance Market (EIM).
Vancouver-based Powerex markets the surplus generation of parent BC Hydro, Canada’s third largest utility. The company’s role is similar to that of U.S. federal power marketing agencies, such as Bonneville Power Administration and the Western Area Power Administration.
Powerex is wholly owned subsidiary of BC Hydro, responsible for marketing the utility’s surplus hydroelectric generation to customers throughout the West. | Kootenay Canal Generating Station image courtesy of BC Hydro
Mexican grid operator El Centro Nacional de Control de Energía (CENACE) last year announced that it was exploring having its Baja California Norte join the market, but it has not yet signed a participation agreement.
Powerex is slated to join the EIM in April 2018, an aggressive timeline compared with other utilities that have signed on to the market. Preparations typically take 18 months or longer, but the company has long experience selling into the ISO’s real-time market.
“Powerex has actively participated in the ISO’s five-minute market since 2005 through a dynamic scheduling arrangement, so joining the EIM is a logical extension of our intra-hour market participation,” Powerex CEO Teresa Conway said in a statement.
Conway noted that Powerex’s participation in the growing EIM footprint will allow the company to engage in sub-hourly transactions across multiple utility service territories, helping to integrate renewables and improve the region’s grid reliability.
With its access to BC Hydro’s ample hydroelectric resources, Powerex is well-positioned to provide EIM participants with the flexible ramping capacity increasingly needed to firm up the growing number of variable renewable resources coming to the region’s grid. That type of resource sharing is touted as a key benefit of the market.
The company also holds transmission rights on lines throughout the West, including the California-Oregon Intertie, a key transfer point between the Pacific Northwest and California. Constraints on that line periodically act as a chokepoint that isolates the PacifiCorp West and Puget Sound Energy balancing authority areas from the rest of the EIM, resulting in prices that diverge from the rest of the market.
Washington’s Puget Sound Energy — whose service area stretches from suburban Seattle to the Canadian border — began transacting in the EIM last October. (See Seattle City Light Signs EIM Membership Agreement.)
Other future participants in the EIM include Portland General Electric (October 2017), Sacramento Municipal Utilities District (April 2019) and Salt River Project (April 2020). CAISO also said that it expects the Los Angeles Department of Water and Power to soon announce a formal agreement to join the market.
Exelon announced Tuesday that it will retire Three Mile Island Unit 1 in September 2019 “absent needed policy reforms.”
The announcement was not unexpected after the company acknowledged May 24 that the plant had not cleared the PJM capacity auction for delivery year 2020/21, the third year in a row it had come away empty-handed.
In a filing with the U.S. Securities and Exchange Commission, Exelon said the plant has lost money for the last five years as a result of “prolonged periods of low wholesale power prices,” its failure to clear the last three PJM capacity auctions and “the absence of federal or state policies that place a value on nuclear energy for its ability to produce electricity without air pollution while contributing to grid reliability.” As a single-unit plant, TMI also had high operating expenses, the company added.
The 837-MW reactor near Middletown, Pa., directly employs 675 workers.
“Today is a difficult day, not just for the 675 talented men and women who have dedicated themselves to operating Three Mile Island safely and reliably every day, but also for their families, the communities and customers who depend on this plant to produce clean energy and support local jobs,” CEO Chris Crane said in a statement. “Like New York and Illinois before it, [Pennsylvania] has an opportunity to take a leadership role by implementing a policy solution to preserve its nuclear energy facilities. … We are committed to working with all stakeholders to secure Pennsylvania’s energy future and will do all we can to support the community, the employees and their families during this difficult period.”
A Successful Strategy
In threatening to close the plant, Exelon is repeating the strategy that won approval of zero-emission credits for its troubled nuclear plants in New York and Illinois.
Last June 2, Exelon announced it would close the Clinton and Quad Cities plants in 2017 and 2018, respectively, because of “the lack of progress on Illinois energy legislation.” The company said the plants had lost a combined $800 million over the prior seven years, “despite being two of Exelon’s best-performing plants.”
Six months later, the Illinois legislature approved the ZEC program on the last day of its veto session. Gov. Bruce Rauner signed the bill Dec. 7. Following the passage of the Illinois legislation, Exelon revised the expected economic lives to 2027 for Clinton and 2032 for Quad Cities.
On June 12, Exelon told the New York Public Service Commission it would close its Nine Mile Point Unit 1 nuclear plant in spring 2017 if the state did not guarantee it a financial lifeline by September.
The company had also told regulators in October 2015 that its R.E. Ginna nuclear plant would not be financially viable following the expiration of a reliability support services agreement with Rochester Gas & Electric.
The PSC approved ZECs for Nine Mile Point and Exelon’s R.E. Ginna nuclear plants last Aug. 1. Receiving payments under the program in addition to Ginna and Nine Mile Point is the James A. FitzPatrick plant, which Entergy sold to Exelon in March after saying it would also close.
Next Steps
Exelon said it will send PJM and the Nuclear Regulatory Commission deactivation notices within 30 days. It complained that nuclear generation produces 93% percent of Pennsylvania’s emissions-free power but is not included in Pennsylvania’s Alternative Energy Portfolio Standard, which benefits solar, wind and hydropower.
The Pennsylvania General Assembly’s Nuclear Energy Caucus said in a statement that Exelon’s announcement shows “there are serious and consequential underlying issues in Pennsylvania’s energy sector that must be addressed.”
“As state lawmakers, we take seriously our obligation to set energy policies that help promote Pennsylvania’s economy,” the legislators said. “We equally are concerned about meeting the commonwealth’s environmental goals. The closure of Three Mile Island will make meeting these challenges even more difficult.”
The 79-member caucus has yet to introduce legislation.
Gov. Tom Wolf’s press office released a statement in which it “expressed a willingness to engage in conversations with state lawmakers about possible energy policy reforms.”
“Pennsylvania is a major supplier of energy and we need a diverse energy sector,” Wolf spokesman J.J. Abbott said. “… As we move forward, we expect a robust conversation about the state’s energy sector. Governor Wolf is open to these conversations and looks forward to engaging with the General Assembly about what direction Pennsylvania will go in regards to its energy sector, including the future of nuclear power.”
Legal Challenges
The ZECs in both Illinois and New York are being challenged in the courts and before FERC by plaintiffs including the Electric Power Supply Association, Dynegy, Eastern Generation, NRG Energy and Calpine.
Exelon’s motion to dismiss a federal lawsuit filed last October challenging the New York ZECs was the subject of oral arguments March 29 (U.S. District Court, Southern District of N.Y., 1:16-cv-08164). Thus far, the court has approved Exelon’s request to intervene, as well as requests to file amicus briefs by the Natural Resources Defense Council, the Environmental Defense Fund, PJM Independent Market Monitor Monitoring Analytics and a group including the New York Public Interest Group.
Independent power producers filed suit in February alleging that the law authorizing Illinois’ ZECs violates FERC jurisdiction over the wholesale electricity market (U.S. District Court, Northern District of Illinois,1:17-cv-01164). (See IPPs File Challenge to Illinois Nuclear Subsidies.)
The judge in the case has delayed action on a motion for a preliminary injunction while he receives a full briefing on Exelon’s motion to dismiss the cases. On April 24, the court invited FERC to file an amicus brief on the jurisdictional question.
In February, the IPPs also sought expedited rulings against the ZECs in FERC dockets initiated over earlier disputes.
Docket EL16-49 had been opened in 2016 to challenge subsidies Ohio regulators had awarded to FirstEnergy and American Electric Power fossil fuel generators. In EL13-62, opened in 2013, the IPPs asked FERC to broaden the use of the minimum offer price rule in New York.
FERC has been without a quorum since February and thus unable to take substantive action on the cases.
At a FERC technical conference May 1-2, NYISO CEO Brad Jones told the commission that the ISO is working on a plan that would incorporate the social cost of carbon into generation offers and reflect it in energy clearing prices. Observers differ on whether FERC — expected to have at least two new commissioners nominated by President Trump soon — will approve Tariff changes to implement the initiative. (See Carbon Adder to Test FERC’s Independence, IPPNY Panelists Say.)
TMI’s Place in History
Whether or not Three Mile Island shuts down in 2019, it will occupy a special place in nuclear power history.
The partial meltdown of TMI Unit 2 on March 28, 1979, the most serious accident in U.S. commercial nuclear power history, effectively ended nuclear power construction for decades and resulted in major changes regarding emergency response planning, operator training and radiation protection.
Unit 2, owned by FirstEnergy, never reopened following the accident. Exelon purchased half of Unit 1 in 1999 and became sole owner of the plant in 2003. The plant received a 20-year extension in 2009, allowing it to operate until 2034.
Financial Repercussions
Exelon said it is taking a one-time charge of $65 million to $110 million for 2017, and accelerating approximately $1 billion in depreciation and amortization through the shutdown date, terminating capital investment projects and canceling 2019 fuel purchases and outage planning, impacting about 1,500 outage workers.
It said there could be as much as $25 million in additional charges in each of 2018 and 2019.
The shale gas revolution that has undercut the economics of coal and nuclear plants doesn’t appear to be ending anytime soon.
Economists Craig Roach and Vincent Musco say the revolution will continue, despite evidence that “there is a limit to how low natural gas prices can go and for how long low prices can persist.”
In producing their seventh annual looking-forward report for SPP’s Board of Directors, Bates White Economic Consulting’s Roach and Musco say low gas prices will continue “if and only if” technological improvements continue to delay the search for more hard-to-find gas reserves.
Roach said they see two risks to the continued shale gas revolution: underground and aboveground risk.
“The underground risk is whether the technology for shale gas production will continue to improve, so that even as the U.S. turns to more difficult reserves, the price will continue to fall,” Roach said in a presentation to the Board of Directors/Members Committee meeting last month. “That is happening. All new wells drilled last year are producing more gas on average than the wells drilled in previous years.”
In the report, Roach and Musco note “proven reserves reflect not only the physical abundance of natural gas reserves but also estimates of whether those reserves can be produced at prevailing market prices.”
The economists say data indicate a floor of roughly $3/MMBtu, based on a recent 16.6% decline in proven reserves. According to the U.S. Energy Information Administration, Henry Hub spot prices fell 42.4% in 2015, from $4.37/MMBtu to $2.62/MMBtu, and the agency predicted a further 6.1% decline in 2016. April’s spot prices were $3.10/MMBtu, up from $2.88/MMBtu the month before.
“The bet is that big-data analytics of the massive amount of data captured on actual gas and oil wells will be what sustains the technologic improvement needed to keep prices moderate,” Roach and Musco write.
Six states in SPP’s footprint — Arkansas, Kansas, North Dakota, New Mexico, Oklahoma and Texas — account for 46% of the country’s total natural gas proved reserves.
Low gas prices have led to an increased investment in combined cycle resources, which, along with subsidized renewable generation and flattened energy demand, has led to low market prices and the early retirement of baseload plants, the report says.
Concerns over Nuclear Generation’s Viability
“You have people saying this is the markets working. You also have people saying this isn’t the markets working, because prices are artificially low,” Musco said. “The markets aren’t capturing the full value of nuclear generation. They’re not capturing the full reliability value and the zero-emissions value of nuclear generation.”
| U.S. Department of Energy Quadrennial Energy Review; Bates White Economic Consulting
The report notes that reductions in nuclear capacity could increase carbon emissions, citing EIA data that 28% of all U.S. nuclear generation has recently retired or is at risk of retirement by 2030.
Nuclear generation has provided about 20% of the country’s energy each year and accounts for 60% of zero-emissions generation in the U.S. “Developers are turning almost exclusively to natural gas-fired combined cycle generation to replace retiring baseload capacity,” the report says, noting 100 GW of natural gas-fired combined cycle generation is under development. “However, it may also be argued that these retirements are part of the natural course of generation investments. As plants age, uneconomic plants give way for new, more efficient generation to take their place.”
That has already happened within SPP’s footprint. Last October, the Omaha Public Power District retired its 500-MW Fort Calhoun nuclear plant, saying it would save up to $994 million over the next 20 years. OPPD’s board blamed the retirement on low gas prices and load growth, among other factors. The plant’s operating license was good until 2033.
Fort Calhoun’s retirement leaves SPP with only two nuclear plants contributing to its generation mix: Nebraska Public Power District’s Cooper Nuclear Station (771.5 MW) and Kansas’ Wolf Creek (1,205 MW), which is owned by three separate companies.
Moody’s has reported that both plants “could face a ‘similar fate’” because they produce power at a cost that is often higher than SPP’s north pricing hub.
But Roach and Musco say they believe the plants won’t retire early, noting that Cooper and Wolf Creek have lower operations and maintenance costs than the smaller Fort Calhoun, their ownership has less available capacity to offset their loss and NPPD CEO Pat Pope expects a “‘capacity-short environment’ in SPP,” making the nuclear units a “good long-term strategy.”
The report notes efforts to address the problem through out-of-market payments in New York and Illinois, FERC’s Notice of Proposed Rulemaking on fast-start pricing, small modular reactors and other technological improvements.
It also warns of legal challenges to states considering “special action to ‘save’” baseload generation; the “direct impact” to SPP’s markets if FERC changes the way wholesale market prices are calculated and the threat posted to baseload generation as existing power purchase agreements expire.
Other Issues to Watch
The report also evaluates five other market and regulatory issues that could affect SPP’s markets or require the board’s special attention:
The changing utility model in the face of distributed energy resources and decentralization.
The U.S. Supreme Court’s ruling in cases involving PJM stakeholders and the states of New Jersey and Maryland, which held that the Federal Power Act “‘provides FERC with the authority to regulate wholesale market operators’ compensation of demand response bids,’” and other jurisdictional issues.
Lessons from the 2016 Electricity Policy Modernization Act, which died because of unresolved differences between the House and Senate versions but nonetheless raised legislative concerns over the “catastrophic consequences of long-term power outages.” Future legislation could include provisions on grid hardening and security and provisions related to markets and distributed energy resources, the report says.
The outcome of the Trump administration’s plan to undo the Obama administration’s Clean Power Plan. Because the Supreme Court has already ruled that EPA has the authority under the Clean Air Act to regulate carbon emissions, some observers say Trump can’t repeal the CPP without providing a replacement, such as a carbon tax.
Electric vehicles. Although EVs have not gained significant market share to date, the authors say the SHEAM model — shared, electric, autonomous mobility — can significantly reduce their payback period.
The report says while DER are not an “existential threat” to the grid, they are “likely to challenge generation-owning utilities in the production of electricity and could also emerge as alternatives to traditional grid investments.”
While the report was Roach and Musco’s seventh for SPP, it’s their first for Bates White Economic Consulting. The previous reports were done with Boston Pacific, which joined Bates White’s energy practice in November.
WILMINGTON, Del. — Mike Bryson, PJM’s vice president of operations, announced at last week’s Markets and Reliability Committee meeting that a scheduled vote on new pseudo-tie provisions would be postponed because of ongoing negotiations with MISO.
The proposal, developed through the Underperformance Risk Management Senior Task Force, would make deliverability requirements uniform for resources within and outside of PJM’s footprint and require feasibility studies for all pseudo-ties. Existing pseudo-ties would have five years to conform to the deliverability standards for internal resources.
Coal Replaced by Gas and Nuclear in 2020/21 BRA
PJM’s Jeff Bastian reviewed the Base Residual Auction results from May 23, noting that coal-fired generation cleared about 3,450 MW less than last year while gas and nuclear increased 3,700 MW and 1,500 MW, respectively.
“Here we see the reduced offerings of resources that might have a hard time because of their intermittency meeting the CP,” Bastian said.
Roy Shanker, an industry consultant, asked about negative megawatts of capacity transfer rights in the MAAC locational deliverability area, which cleared roughly $9.50 higher than the rest of the RTO at $86.04. The negative CTR megawatts mean there’s less load paying for the capacity in that region than there is capacity receiving the LDA’s price, Bastian said.
“[It’s] a function of that area’s share of the peak load forecast, which is a disconnect completely from the way the load is represented at the clearing of the auction, so you can have that kind of an outcome,” he said.
Exelon’s Jason Barker asked PJM to develop a written explanation of how CTRs were calculated to describe how negative megawatts can occur.
Bastian noted that the Duke Energy Ohio/Kentucky LDA, which cleared about $54 higher than the rest of the RTO at $130, was modeled individually “due to potential for deactivations in that area,” which might reduce the amount of power potentially deliverable to the LDA below the amount PJM feels is required for reliability.
“We find it prudent to model them from a reliability perspective,” he said, noting that it’s been done before in the PPL, BGE and ComEd LDAs. Of the three, only the ComEd LDA has ever separated from the rest of the RTO, he said.
American Electric Power’s Dana Horton asked how 119 MW of solar could clear as Capacity Performance, given that the sun usually isn’t shining during the morning and evening daily demand peaks in winter, when resources are most likely to be called. This auction was the first year in which all resource offers must comply with CP rules that require year-round availability and impose stricter nonperformance penalties if units fail to be available.
“The sun does shine in the winter,” Bastian said. “There was a recognition by the resource owners that there’s more risk involved with offering solar, so that the annual quantity is significantly lower than what those resources were required to offer in the past.”
Greg Carmean, the executive director of the Organization of PJM States Inc., asked if all nuclear units cleared, but Bastian declined to address the specific unit results. Barker confirmed for attendees that not all nuclear plants cleared, apparently referencing the company’s Three Mile Island, which the company announced earlier had not cleared for the second year in a row.
New Black Start Units Will Have New Annual Revenue Requirements
Stakeholders endorsed by acclamation changes to the annual revenue requirements for black start units. PJM and its Independent Market Monitor had previously come to an agreement on the time periods for member submission of data and review by the Monitor. They also agreed on having the revenue go into a non-interest-bearing account for each unit until its costs have been approved, at which point the RTO will conduct a true-up. (See “PJM to Review Black Start Prior to New RFP,” PJM Market Implementation Committee Briefs.)
The move comes as PJM prepares for its second request for proposals on black start units, which is scheduled for 2018 for projects to be available in 2020.
PJM Defends Interest in Paying for Frequency Response
Stakeholders endorsed by acclamation a problem statement and issue charge on analyzing generator requirements for primary frequency response, but not before renewing debate over compensation.
FERC issued a Notice of Proposed Rulemaking last November that would require primary frequency response for all new units except for nuclear plants. The NOPR did not address compensation. At previous meetings, the Delaware Public Service Commission’s John Farber has challenged PJM’s plan to investigate compensation and requested language be added to the problem statement and issue charge that allowed it only “if appropriate or necessary.”
“The intent is to ensure that it’s not a given that compensation is required,” Farber said on Thursday, responding to an inquiry from Public Service Electric and Gas’ Gary Greiner about why the text was added.
PJM staff reiterated the RTO’s desire to study whether units should be paid for maintaining primary frequency response capabilities.
“Back at the [Operating Committee meeting] in the fall, PJM made a statement about how we didn’t think compensation was necessary,” Bryson said. “We’re clearly more open minded about that now, and the wording of the issue charge is intended to imply that.”
Stakeholders eventually agreed on discussing potential compensation mechanisms and recommending compensation changes “if appropriate or necessary.”
FTRs to Get a Longer Perspective
Members endorsed by acclamation a proposed problem statement and issue charge to consider changes to long-term financial transmission rights modeling.
PJM’s Regional Transmission Expansion Plan looks out up to three years into the future in ordering upgrades, but approved projects aren’t captured in FTR analyses because they are only able to capture information on a six-month horizon.
“It is concerning to PJM that today, the current process is not capturing these upgrades. Because what this means to us is that they’re not fully transparent to the market participants,” PJM’s Asanga Perera said.
In the documents, PJM guaranteed that FTR-capability allocations would be made “without violating firm transmission customer priority rights.”
Other FTR changes developed in response to the FERC order impacting the annual revenue rights and FTR process also were endorsed during the meeting, though not without some modifications.
PJM requested endorsement for Manual 6 revisions, which prompted Mike Cocco of Old Dominion Electric Cooperative to request that the phrase “no longer viable” describing transmission paths be clarified.
Monitor Joe Bowring questioned PJM’s planned changes for the FTR forfeiture process.
“I would ask that you give it more thought,” he said.
Steve Lieberman of American Municipal Power followed Bowring’s comment with a motion to defer a vote on that language until next month. (The Monitor is not a member and could not make the motion on its own behalf.)
Stakeholders worked on the proposal, and PJM’s Brian Chmielewski returned later in the meeting to seek endorsement of the revised package. Per Bowring’s request, the forfeiture changes were removed, he said, and “no longer active” was substituted for “no longer viable,” along with a definition of the phrase that matched the definition in the Tariff.
Stakeholder Approvals
Stakeholders endorsed by acclamation several manual revisions and other operational changes:
Manual 14D: Generator Operational Requirements. Revisions to develop requirements for solar generation facilities, in compliance with FERC Orders 828 (Requirements for Frequency and Voltage Ride Through Capability of Small Generating Facilities), issued July 21, 2016, and Order 764 (Integration of Variable Energy Resources), issued June 22, 2012. (See FERC Issues Ride-Through Requirement for Small Generators.)
Manual 36: System Restoration. Revisions developed in response to a periodic review.
Manual 13: Emergency Operations. Attachment E updated with 2017/18 load forecast and Mid-Atlantic load shed allocation information; Attachment F updated with 2017/2018 load shed capabilities and allocation percentages. The data in the attachments affects only transmission owners and has been validated by them.
An updated charter for the Incremental Auction Senior Task Force, which was created in response to a problem statement by Direct Energy that was approved by the MRC in November 2016. The revisions reflect an increase in scope resulting from a problem statement by NRG Energy on replacement capacity that was approved in March 2017. The revisions set a target for completing work and making recommendations to the MRC by January 2018. (See “Stakeholders Approve Variety of Actions,” PJM Markets and Reliability and Members Committees Briefs.)
MISO’s Steering Committee recommended that all but one of a handful of the Independent Market Monitor’s oft-repeated recommendations be included on the 2018 Market Roadmap as potential market rule changes.
Most of the recommendations have already been brought up in Market Subcommittee meetings or are part of past State of the Market reports.
MISO’s 2016 stakeholder redesign process dictates that for issues to be discussed in stakeholder meetings or added to the Market Roadmap list, they must first be submitted to the Steering Committee for a committee assignment. The Market Roadmap is a prioritized and tracked list of market revision goals that stakeholders and the RTO agree to pursue in stakeholder meetings.
The Steering Committee made the decision to move the following recommendations forward during a May 24 conference call:
Establishing regional reserve requirements and cost allocation through expansion of a 30-minute reserve product. MISO stakeholder relations staff member Justin Stewart said the issue might be too similar to a project already on the Roadmap that will create short-term capacity reserves, so the Steering Committee added the Monitor’s recommendation to the existing project candidate.
Changing the day-ahead margin assurance payment and real-time offer revenue sufficiency guarantee (RSG) payment rules and performance incentives to reduce gaming. The Monitor last year suggested some wind generators were deliberately over-forecasting to collect more RSG payments; the issue is expected to surface in this year’s State of the Market report. (See IMM Report Highlights Outages, Wind Over-Forecasting.) Stewart said the issue was similar to an existing Roadmap project to tighten thresholds on uninstructed deviations from dispatch orders, which is currently in the software development phase. Steering Committee members nevertheless assigned the Monitor’s suggestion new candidate status.
Creating a method for validating wind suppliers’ forecasts and using the results to alter dispatch instructions if needed, and improving forecasting incentives by modifying deviation thresholds and settlement rules. The two wind recommendations were added to an existing Roadmap candidate covering dispatchable intermittent resource modifications.
The one recommendation not added to the Roadmap was that MISO consider the economic cost of congestion, not just reliability, before granting planned outages. We Energies’ Tony Jankowski said the issue has existed “for over 10 years.”
The Monitor’s suggested operating reserve demand curve in blue. | Potomac Economics
“You’re venturing down a road here of what’s acceptable congestion or excessive congestion. … I don’t see this as being a simple Roadmap item,” he said.
Other stakeholders agreed to table the issue, with some predicting the topic will be raised again in the next State of the Market report. Last month, MISO stakeholders took up a separate outage issue, debating whether resources on extended outages should be barred from participating in future Planning Resource Auctions. (See MISO May Bar Units on Extended Outage from Capacity Auctions.)
The deadline for submitting candidates for consideration in the 2017 Market Roadmap project selection was May 11. Market improvements submitted after the deadline will be considered for prioritization in the 2018 Market Roadmap process.
LADWP is the 11th utility to announce plans to participate in the 
The Business Council for Sustainable Energy, which has been an observer at the United Nations Framework Convention on Climate Change for the past 25 years, was dismayed by the news. “Withdrawing from the Paris Agreement weakens the U.S. government’s ability to protect U.S. commercial interests in these discussions as well as in other important international negotiations,” President Lisa Jacobson said. “This international agreement is an opportunity to bolster American economic development, not a barrier to it.”
