WASHINGTON, D.C. — FERC Chairman Willie Phillips and Sen. Joe Manchin (D-W.Va.) want to pass policies this year that speed up the rollout of transmission, they said at the National Association of Regulatory Utility Commissioners’ (NARUC) Winter Policy Summit on Feb. 27.
FERC already has released Order 2023, which Phillips said he hoped would speed interconnection queues. Taking a project from entering the line to putting shovels in the ground now takes an average of five years.
“We’re looking forward to doing long-term and regional planning as well,” Phillips said. “And we’re going to do it in a way that absolutely works with the state, collaborates with our state regulator colleagues, because you do understand the system better than anybody else.”
When it comes to long-term planning, FERC is not looking to favor one group of state policies over any others, but rather wants to reflect the reality of what is happening on the ground, he added.
“We know the policies across the country change,” Phillips said. “And we know we have more and different resources coming on all the time. It makes no sense to pretend otherwise.”
Another transmission issue Phillips is committed to tackling is interregional transfer capability, which is beneficial in the increasingly common winter reliability events that have affected the grid over the past decade.
“We can say that there are unplanned load sheds, but when something happens every other year, for the past 11 years, it’s difficult to say that it’s unplanned. I think it is stunningly predictable what can happen on the system. So, it’s our responsibility, I believe, to make sure that we have interregional capability to handle this.”
NERC is working on a study on just how much interregional capacity would make sense, and Phillips said once that was complete, FERC would hit the ground running with a proposal to get that built.
Manchin, who is retiring at the end of this year, hopes to get a “permitting reform” bill out of what he said was one of the least productive Congresses in history, having passed just 39 bills through its first year-plus compared to an average of more than 250.
“The politics that we’re dealing with today has been weaponized,” Manchin said. “Whether you’re Democrat or Republican, independent, whatever you might be, God bless you, you’re not the enemy. And the person on the other side is not your enemy.”
While people certainly have opposing views, they should be viewed as opponents who help strengthen arguments and are people you can work with, not enemies who need to be destroyed as many in Washington view them, he added.
Manchin hopes to get an exception to that brand of politics by working with his fellow Energy & Natural Resources Committee leader, Sen. John Barrasso (R-Wyo.), on a bill to get energy infrastructure built quicker.
It’s important to get some significant votes from both parties for their proposal to pass because in recent years, both Republicans and Democrats have made purely partisan pushes on the issue that have gone nowhere, Manchin said.
“This is our last chance, and I am not walking out of here until I give every ounce of effort that I have to get a permitting bill done that gets you from the start to the finish within two to three years,” he added.
Manchin said they’re still working out specifics on how to give states a first pass on dealing with major transmission projects that cross multiple states. He floated the idea of giving states and utilities a year to negotiate on siting and cost allocation before the federal government would step in.
Another issue a bill would tackle is judicial reform, specifically by proposing to limit to six months the time parties have to sue once a project has been approved. They can wait up to six years now, he said.
All these new policies are against the backdrop of an industry expected to see growing demand in the coming years from data centers, new manufacturing, and increasing electrification of transportation and heating. NERC has said demand should grow 38 GW in the next five years, which Phillips said would continue into future decades, as one study has demand growing at an average of 1% per year for the next three decades.
“That means 5,000 terawatt hours of new energy on the system by 2050,” Phillips said. “It’s something that we think about a lot. Increasingly, when I’ve been meeting stakeholders, executives across the country, we’re talking about rapidly increasing demand.”
A group representing the Northwest’s extensive network of publicly owned utilities has asked the Bonneville Power Administration to choose SPP’s Markets+ when the agency issues its day-ahead market “leaning” in April.
The Portland, Ore.-based Public Power Council (PPC) laid out its case for favoring Markets+ over CAISO’s Extended Day-Ahead Market (EDAM) in a Feb. 23 letter addressed to BPA Administrator John Hairston.
The PPC’s argument included the need to defend the right of BPA’s “preference” customers to access low-cost electricity from the Federal Columbia River Power System, continued reservations about CAISO’s ability to alter its state-run governance structure and concerns about the fairness of CAISO’s existing market practices — with the last point eliciting a pointed response from CAISO provided to RTO Insider.
The letter also praised SPP’s stakeholder-driven approach for developing Markets+.
“Currently, the Southwest Power Pool (SPP) Markets+ offering is PPC’s preferred day-ahead market option, and we support BPA making a similar declaration in its April leaning,” said the letter signed by PPC Executive Director Scott Simms and members of the group’s Market Development Committee (MDC). “While information is still evolving, the majority of criteria that PPC has evaluated supports continued pursuit of BPA’s participation in Markets+.”
The letter was signed by all eight members of the MDC, which includes representatives from Idaho Falls Power, Tacoma Power, Fall River Rural Electric Cooperative (Idaho), Clatskanie (Ore.) Public Utility District, Pacific County (Wash.) PUD, Modern Electric Water Co. (Wash.), Grant County (Wash.) PUD and Snohomish County (Wash.) PUD.
The MDC crafted the letter at the direction of the PPC’s Executive Committee, Lauren Tenney Denison, the organization’s director of market policy and grid strategy, told RTO Insider.
Until recently, the MDC included Seattle City Light’s (SCL) Emeka Anyanwu, who left the utility last fall to take over as CEO at Lincoln Power in Nebraska. SCL, which operates a small balancing authority area, has been a key participant in the West-Wide Governance Pathways Initiative, which is working to establish the framework for a Western RTO that expressly includes CAISO and rests on the ISO’s technical capabilities. SCL did not respond to a request for comment on its position on BPA’s market choice in time for publication of this article.
‘Dual Roles’
The Feb. 23 letter indicates PPC members clearly doubt the Pathways Initiative will be able to settle the CAISO governance issue in a manner they think is equitable for entities outside California.
“Current California law stipulates several areas that keep CAISO’s mission and operation tied with the interests of California,” the PPC letter says. “First, CAISO’s corporate status is tied to oversight from the state of California and thus the CAISO Board of Governors can neither irrevocably delegate authority nor allow another entity to unilaterally make decisions on market policies.”
Second, the ISO’s Board of Governors is appointed by California’s governor and confirmed by the state Senate, the letter notes.
The letter also argues that CAISO’s independence as the operator of a multistate market is “further confused” by its “dual roles.”
“The CAISO functions both as a market operator and as a participant Balancing Authority Area (BAA) in the [Western Energy Imbalance Market] and EDAM markets. At times there is a lack of transparency about which role CAISO is serving when taking certain actions. This only adds to concerns about equity among market participants,” the letter states.
Tenney Denison told RTO Insider that legal analysis conducted by the PPC and CAISO’s own legal staff as part of work by the WEIM’s Governance Review Committee indicates “a legislative change would be necessary to provide PPC members the assurance they need that their interests would receive equal consideration under CAISO governance.
“We are closely watching the approach that is being taken by the Pathways Initiative, including developing a legal review of multiple options, and look forward to discussing those results with other stakeholders,” she said. “We are uncertain at this time whether there would be sufficient support for the types of changes that PPC is seeking and there is not a clear timeline of when such changes could be implemented if they are pursued.”
The PPC’s governance concerns extend to CAISO market design issues that the group contends will carry over into the EDAM from the WEIM. The letter particularly points to market outcomes stemming from a sharp January cold snap in the Northwest, when the region was forced to import large volumes of power from the Rockies and Southwest regions, with supplies from the latter wheeled through the ISO. (See WPP: Cold Snap Showed ‘Tipping Point’ for Northwest Reliability.)
Energy flows during the Jan. 12-16 weather event, which caused four entities to enter an Energy Emergency Alert (EEA) Watch, EEA 1 or EEA 3, and caused significant northbound transmission congestion out of CAISO and into Oregon, leading some Northwest entities to contend the ISO unfairly raked in the lion’s share of the revenue associated with that congestion, a point amplified in the PPC’s letter.
“CAISO’s congestion policies resulted in over $100M of congestion revenues being collected by the CAISO BAA, despite most of the generation serving the Northwest coming from outside California. The policy creating this result is explicitly maintained in the CAISO EDAM,” the PPC wrote.
But CAISO contested that assertion in its Feb. 27 email to RTO Insider. The ISO said outages on Oregon transmission lines during the cold snap meant the ISO could not send some energy north without damaging the Northwest grid. The resulting congestion on the California-Oregon Intertie resulted in CAISO collecting about $100 million in congestion rent from Northwest entities.
“Despite the assertions in the PPC letter, the ISO does not collect congestion rent for itself,” CAISO said in the email. “It distributes it to holders of congestion revenue rights (CRRs). CRRs are mechanisms that guard against high congestion prices. They are available to a variety of market participants, including load-serving entities in the Pacific Northwest.”
The ISO also noted it operates the only mechanism in the West for managing congestion in the day-ahead time frame.
“Operators of transmission lines in the Pacific Northwest do not,” it said. “As a result, CAISO cannot ignore transmission constraints; it must avoid sending energy to areas where it cannot be received.”
“That is why the ISO had to take action, and why congestion rents were collected on the California side of the constraint of the border and not by entities in the Pacific Northwest,” the ISO said.
The PPC letter also raised another, more enduring complaint among Northwest electricity sector participants — that CAISO’s pricing policies don’t accurately account for the value of the region’s flexible hydroelectric generation.
“This means that the federal generating facilities funded by PPC members would receive lower compensation for their generation, thus increasing the costs borne by PPC members for operating those facilities. A study co-funded by the PPC showed the potential for CAISO’s pricing policies to reduce revenues for Northwest generators selling into the CAISO BAA by $100M-$200M per year,” the PPC wrote.
The PPC also points to a complaint shared with entities elsewhere in the West regarding CAISO’s decision, after California’s 2020 summer blackouts, to alter its tariff to restrict “wheel-throughs” in its territory during periods of extremely tight supplies. (See FERC Approves CAISO Wheel-through Rule Changes.)
“This policy, which was heavily criticized by non-California parties, demonstrates the California-centric nature of the CAISO decision making process,” the PPC said.
Stakeholders, Not Staff
The PPC’s critical comments about CAISO were matched by laudatory ones regarding SPP and Markets+.
“SPP Markets+ has an equitable, inclusive, representative and independent governance structure. It includes committees comprised of market participants and stakeholders, which has resulted in a high level of engagement in the market’s design,” the group said.
In a reference to CAISO’s more staff-driven model for initiating market changes, the PPC pointed out that in Markets+, “participants and stakeholders determine what proposals advance to the decision-makers, not SPP staff.”
Referring to the proposed board structure for Markets+, the letter noted that “decisions are also made by a ‘panel’ of independent members who have no responsibility or obligations to any group of participants over another. This decision-making process ensures all market stakeholders have a voice in what policies are explored, developed and ultimately implemented.”
The letter also points out that Markets+ includes elements that “will help BPA continue to serve its historic mission and return value to Northwest ratepayers for the federal assets they have financed through BPA’s rates.”
Those include price formation policies that “will more adequately compensate BPA (and all suppliers) for flexible and reliable generation made available to the market — particularly in times of scarcity,” as well as the ability to “attribute” generation to specific loads.
“PPC sees this as a useful tool for meeting BPA’s statutory obligation to serve preference customers from the federal system,” the letter said. “These and other tools included in Markets+ will also ensure that BPA customers can claim the environmental attributes of the low-carbon federal system,” helping PPC members to meet policy goals to reduce carbon emissions.
“As stated in their letter to Bonneville Power Administration, the PPC believes Markets+ will allow fair pricing for generation and the ability to attribute generation to specific loads,” SPP spokesperson Meghan Sever said via email. “While these are a few of the benefits most recognizable to this group of entities, there are many more benefits of participation in Markets+, and SPP is pleased to be a part of developing a market that provides financial and environmental benefits and enhances electric reliability in the Western Interconnection for years to come.”
Seams vs. ‘Superior Market Design’
The PPC letter played down the concerns among some industry stakeholders about potential costs and inefficiencies stemming from “seams” between two Western day-ahead markets. The issue was the subject of a recent study commissioned by the Western Power Trading Forum and Public Generating Pool. (See Western Market Seams Issues to Differ from East, Study Finds.)
“Seams do have the potential to reduce market efficiency, but they also exist today in multiple areas (not just market to market, but [between] different Resource Adequacy programs, different carbon regulations, etc.) and will continue to exist into the future,” the PPC wrote, noting the loss of efficiency “can be outweighed by the benefits of superior market design and governance.”
The group also expressed hope there will be “large incentives” for the two markets to work together to reduce seams issues “to the greatest extent possible, to facilitate continued trade.”
PPC expects seams impacts could be mitigated by “significant amounts” of trading outside the day-ahead market.
“Multiple studies evaluating different market footprints have suggested that seams have the greatest potential to impact entities in California, who rely on imports of Northwest resources at a low price,” the letter said, pointing to studies conducted by the Western Markets Exploratory Group. “This should only work to create an even greater incentive for the existing CAISO market to work together with Markets+ to ensure that trading can continue.”
Asked how the PPC’s letter will influence BPA’s day-ahead market decision, agency spokesperson Nick Quinata said: “BPA appreciates the PPC’s participation in our public process and it is a comment we will consider as we continue to do our due diligence on whether or not to join a market and which market we select if we go that way.”
The New York Power Authority (NYPA) and the New York University Tandon School of Engineering on Feb. 22 announced a partnership that could help state utilities prevent costly and time-consuming large power transformer outages through a novel monitoring technique.
NYPA will test NYU Tandon’s “Online Detection of Winding Deformations in Large Power Transformer” study at its Advanced Grid Innovations Laboratory for Energy (AGILe) simulation facility to assess if the school’s technique can be scaled up for the wider New York grid to improve the detection of transformer-winding deformations without statewide interruptions.
“NYU Tandon aims to integrate into NYPA’s AGILe processes by developing a comprehensive model encompassing various common deformations in transformer windings,” Shayan Behzadirafi, a project engineer on NYPA’s Research, Technology Development and Innovation team, told RTO Insider.
Experimental setup for winding deformation diagnostics system test; normal transformer (right), deformed transformer (left) | NYU Tandon, IEEE Transactions on Power Delivery (April 2018)
The partnership, supported by a nearly $190,000 grant from the New York State Energy Research and Development Authority’s Future Grid Challenge program — itself funded through the nearly $2.4 billion Clean Energy Fund — aims to digitally monitor NYPA’s large-scale transformers by continuously tracking the voltage and currents of transformers while accurately calculating its leakage impedance (14-M-0094).
“The idea is to scale up the technique, which was tested with a 1-kVA lab transformer, to the NYPA large transformers of hundreds of megavolt-amperes,” Francisco de Leon, a NYU Tandon professor of electrical and computer engineering and one of the study’s authors, wrote in an email to RTO Insider. “If the project is successful, the condition-monitoring device will save money in unnecessary tests when the transformer is healthy or prevent catastrophic failures when the transformer has been damaged.”
NYPA estimates that if the technique prevents many of the diagnostics required once a transformer is taken out of service because of winding deformations, the state could save about $15,000 per day and up to $1.5 million per incident.
“Basically, what we are doing for transformers is giving them a smartwatch,” de Leon said in an interview with RTO Insider. “It is something that is monitoring all the time and giving real-time analysis of some of [the transformer’s] components without having to disconnect the transformer.”
This has big implications for NYPA, the largest state public power organization in the U.S., as it operates more than 1,400 circuit-miles of transmission lines, has 16 generating facilities — including the hydroelectric Niagara Power and the St. Lawrence-FDR Power projects — and produces more than 80% of its electricity from renewables.
Transforming the Future
NYU Tandon’s paper, published in the journal IEEE Transactions on Power Delivery in 2018, emphasizes how transformers’ windings, which consist of metal coils wound around the transformer’s core, “are subjected to strong electromagnetic forces” that can cause deformations.
“To avoid crucial damage, it is necessary to detect winding deformation at an early stage,” the paper reads.
New York has experienced transformer-related outages, explosions and fires, often because of equipment failures, which led to extended disruptions and costly repairs.
Notable incidents include the December 2018 transformer explosion at a Consolidated Edison plant in Astoria, Queens, which painted New York City’s skyline bright blue. A 2021 incident captured on video in which a man in Queens survived a transformer explosion directly beneath him, and in January, another Con Ed transformer in Queens reportedly exploded, knocking out power for hundreds of customers for hours.
Transformers with deformed windings are typically taken out of service for a frequency response analysis to test the mechanical integrity, but the technique being studied at AGILe could reduce the frequency of these occurrences and the need for such service interruptions.
“Traditionally, bringing transformers out of service for frequency response tests is the norm,” Behzadirafi said. “However, if NYU Tandon’s methodology proves successful, it would eliminate the need for such disruptive measures.
“By enabling the detection of transformer issues while the unit remains in service, the study offers a substantial improvement in minimizing downtime, increasing efficiency and enhancing the overall reliability and performance of the energy infrastructure.”
New York Stays AGILe
Launched in 2017 in Albany, AGILe is described as a “a global center for electric grid research,” responsible for developing and testing “new and off-the-shelf clean energy technologies” to strengthen the state’s electric grid by fast-tracking their commercialization.
It also helps utilities better understand the potential impacts of new technologies or techniques on the state’s grid.
“Through this study, we hope to be able to give utilities confidence that this technique is reliable and will work for full-size transformers in the field,” said Alan Ettlinger, NYPA’s senior director of research, technology development and innovation.
Behzadirafi elaborated on how NYU Tandon’s developed prototype would be evaluated. “Leveraging AGILe’s hardware-in-the-loop facilities, we will test the developed hardware against the deformation models to assess its performance and ensure its effectiveness in real-world applications.”
“NYPA will conduct the study by evaluating whether the developed hardware can effectively detect various winding deformations using information provided by the software model,” he said. “The success of the study will be determined by the alignment between the outputs generated by the software model and the actual data obtained from the transducers, as well as hardware’s ability to detect, ensuring that the hardware reliably detects winding deformations in practical applications.”
The prototype being assessed by AGILe identifies changes in short-circuit impedance, a key transformer health indicator, using advanced techniques like Lissajous curve methods to track winding deformations in real time.
If found to work, the digital tool will detect emerging transformer winding deformations caused by stress from short-circuit events and send a warning alarm to an operator informing them the unit has a leakage reactance higher than the standard 3% recommended by the Institute of Electrical and Electronics Engineers.
“If the outcome of this collaboration proves successful, NYPA is considering a potential second phase, which involves implementing the detector relay in conjunction with a real transformer,” Behzadirafi said. “Additionally, there is a possibility of engaging popular relay manufacturers to contribute to the development of the relay during the practical phase in the real-world scenario.”
Overview of New York Power Authority’s existing assets in state | NYSERDA
“My dream,” NYU’s de Leon said, “is that our technique is found to be successful and viable, since then we can partner with a relay manufacturer to produce a new relay prototype that is equipped with our tools and is then commercialized.”
“Unique research collaborations like this one with NYU Tandon, supported by NYSERDA, enable the Power Authority and New York state to innovate and modernize its electric grid for the benefit of all New Yorkers,” NYPA CEO Justin Driscoll said.
FERC threatened to revoke Idaho Power’s market-based rate authority in its home balancing authority area, citing the utility’s failure of a key market power test.
The company, which provides electricity in a 24,000-square-mile territory in southern Idaho and eastern Oregon, submitted an updated market power analysis in October 2023, noting that it had increased its generation capacity in the Idaho Power BAA by 100 MW (ER10-2126-008).
Although the company passed the pivotal supplier indicative screen for its BAA, it failed the wholesale market share indicative screen in three seasons, FERC said.
The commission said the failures establish “a rebuttable presumption of horizontal market power” and required it to open a proceeding under Section 206 of the Federal Power Act to determine whether the utility’s market-based rate authority in its home region remains just and reasonable.
FERC’s Feb. 27 order to show cause (EL24-62) does not threaten Idaho Power’s ability to charge market-based rates outside its home territory. The company said it passed the pivotal supplier and wholesale market share indicative screens in the Avista Corp., Bonneville Power Administration, Nevada Power Co., NorthWestern Corp., PacifiCorp-East and PacifiCorp-West balancing authority areas, as well as CAISO’s Western Energy Imbalance Market.
Idaho Power told FERC it increased its generation by 100 MW:
In June 2023, it began taking delivery of the entire output of the 40-MW Black Mesa Solar facility under a long-term firm power purchase agreement that runs until 2043;
in June 2023, it downgraded the capacity rating at its Langley Gulch Power Plant by 20 MW; and
in July 2023, it energized its standalone 80-MW Hemingway battery energy storage system.
FERC gave the utility 60 days to respond to its order by either challenging the commission’s threat to revoke its MBRA, proposing mitigation to eliminate its market power or accepting cost-based rates.
The commission said it already is examining a delivered price test analysis Idaho Power submitted to prove it lacked market power. It said the company can submit additional evidence that it lacks market power, such as historical sales and transmission data.
The company can continue charging market-based rates in the BAA — but will be liable for potential refunds — while the commission evaluates the delivered price test.
With an ever-increasing number of adversaries in cyberspace targeting the North American power grid, speakers at a webinar hosted by the Texas Reliability Entity on Feb. 27 emphasized that rigorous planning and testing are essential to maintaining electric reliability.
“We need to remain at high alert and have a decisive plan that can respond to these types of threats,” said Texas RE CIP cyber and physical security analyst Jason Georgoulis at the regional entity’s regular Talk with Texas RE event. He cited the Pipedream and Volt Typhoon malware campaigns, which are linked to Russia and China, respectively. (See CISA Highlights China Threat in 2024 Priorities Report.) “Proper training, testing and learning from the gaps in these tests can help meet the purpose of the standard, which is to mitigate the risks to the reliable operation” of the power grid.
The focus of the webinar was NERC’s reliability standard, CIP-008-6 (Cybersecurity — incident reporting and response planning), which outlines the requirements for utilities to implement in their cybersecurity incident response plans (CSIRP). Georgoulis reminded listeners the standard is meant to ensure “quick and decisive action is taken in the event of a cybersecurity incident” and that having a comprehensive response plan can help entities “mitigate any risks that may arise” from a security compromise.
Georgoulis said a CSIRP must spell out the process by which entities will identify attempts to compromise their systems, classify what kind of threat is occurring, and respond to incidents appropriately. He noted a potential roadblock to compliance with CIP-008-6 in the fact that NERC did not define “attempts to compromise” in the standard. This means entities must create their own criteria to determine if such attempts have occurred.
To satisfy this requirement, Georgoulis suggested sample criteria, such as “suspicious or excessive failed login attempts [or] reports of an unsuccessful social engineering attempt.” Attendees also provided examples of criteria their entities use, including security event logs and unexplained spikes in CPU activity.
Once an entity has concluded an incident is underway, it must determine whether the incident needs to be reported to the Electricity Information Sharing and Analysis Center and the Cybersecurity and Infrastructure Security Agency. In this case, Georgoulis noted NERC does specify the incidents that must be reported are those that compromise or disrupt:
a cyber system that performs one or more reliability tasks of a functional entity;
an electronic security perimeter of a high- or medium-impact grid cyber system; or
an electronic access control or monitoring system of a high-impact grid cyber system.
Another key requirement of the standard, Georgoulis noted, is to clearly define the roles and responsibilities of the cybersecurity incident response team. He explained that “having an established cybersecurity incident response team with the corresponding roles and titles listed in the plan can minimize any kind of confusion on who needs to do that during a scheduled test or in the event of an actual cybersecurity incident.”
Finally, Georgoulis reminded entities that simply having a response plan is not enough to satisfy the standard. Entities must test the plan “at least once every 15 calendar months” either through a tabletop or operational exercise based on an actual reportable cybersecurity incident.
In response to a question from the audience, Georgoulis confirmed that GridEx, the biennial security exercise hosted by NERC and the E-ISAC, might count as an “operational exercise” to satisfy the requirements of the standard, depending on the details of the scenario. He clarified that the GridEx scenario would have to be based on an actual incident and would have to include an applicable system.
American Electric Power’s leadership on Feb. 27 added further color to its board’s decision the day before to remove Julie Sloat as CEO and replace her with former Xcel Energy CEO Ben Fowke on an interim basis.
In his scripted remarks to financial analysts during the company’s quarterly conference call, Fowke said the decision was not an easy one, but “in the best interest of AEP and its stakeholders to do so.”
Fowke and other AEP executives appeared to indicate they were unhappy with several regulatory outcomes. They pointed to the disallowance of recovering some deferred fuel costs in West Virginia and the probable disallowance of certain capitalized costs associated with a Louisiana power plant as a hit to earnings.
One analyst pressed Fowke over the earnings presentation’s “leaning” on AEP’s successes and growth rate capital expenditure numbers ($43 billion over five years). “What do you see is broken?” the analyst asked.
“I don’t think I would use the word ‘broken.’ I think there’s areas where we can do better,” Fowke said. “We also recognize that we can do better on getting constructive regulatory outcomes. So strategically, our priorities remain the same. We’re going to look at the people, the process and the planning that goes into that those constructive outcomes, and we’re going to do it through the lens of what’s important to our local leaders and stakeholders … and then you get into that virtuous circle where invested capital now is good for customers in the community.”
Fowke said more than once that the leadership decision was made by the full board. “You need the full board to make a decision to remove the CEO,” he said.
AEP recently increased the board’s size by adding two directors after entering into an agreement with activist investor Icahn Capital. The board also invited Icahn to place a portfolio manager as a nonvoting observer during its meetings.
“The additional board members came after discussions with the Icahn team and AEP team,” Fowke said. “We actually welcome their perspective. They share the opinion, as we do, that AEP shares are undervalued, and we want to work together to unleash shareholder value.”
In the Feb. 26 press release announcing the leadership change, AEP said the board had determined after discussions with Sloat that it was “time to identify a new CEO to lead the company’s next chapter.” The company said the decision was not a result of any disagreement with Sloat over AEP’s operations, policies or financial performance and “was not made for cause or related to any ethical or compliance concern.”
AEP will conduct an external search for its next CEO. Fowke said AEP will be an “attractive destination” and that he expects the candidate list to be a long one.
“I think it’s going to be great to pick from that talent. Ideally, you get somebody that is a seasoned executive in the utility industry and is well known in the investor community,” he said, adding that it would be ideal if the next CEO has multijurisdictional experience.
Fowke retired from Xcel in August 2021 after more than a decade as its CEO. He joined the AEP board in February 2022.
Sloat, a 23-year AEP veteran, replaced Nick Akins as CEO in January 2023.
The company reported year-end earnings of $2.21 billion ($4.26/share), a drop from 2022’s performance of $2.31 billion ($4.51/share). Fourth-quarter earnings were also down, at $336.2 million ($0.64/share), a drop from the same quarter the year prior of $384.3 million ($0.75/share).
After saying in its earnings announcement that it made “positive progress” toward the $9.4 billion in regulated renewables in its five-year capital forecast, AEP issued another release about the sale of its 50% interest in New Mexico Renewable Development’s solar assets. The transaction will net the company about $104 million in cash after tax, transaction fees and other adjustments.
The company’s share price closed at $80.77 on Feb. 26 but shot up to $83.39 in after-hours trading following the CEO change’s announcement.
It closed at $84.07 on Feb. 27, a 4.1% gain on the day.
Constellation Energy Corp. is setting high financial goals for the rest of the decade, confident its mix of clean and reliable energy generation gives it an excellent market position amid renewed support for nuclear power.
The company reported strong 2023 financial results Feb. 27 and investors liked what they heard — its stock price closed 16.9% higher in heavy trading.
CEO Joe Dominguez focused heavily on Constellation’s nuclear fleet in a conference call with financial analysts.
Constellation also operates oil, gas, solar, wind and hydroelectric generation, but nuclear accounts for 60% of its installed capacity and 86% of its output — without emitting any zero greenhouse gases in the process.
Nuclear has the highest capacity factor of any power generation, Dominguez said, and Constellation has not only the largest but the best-performing nuclear portfolio in the nation, operating at a capacity factor of 94.6%.
This puts Constellation in an excellent position at a time of growing demand for electricity and a soaring desire for clean electricity. Combined with the nuclear production tax credit contained in the IRA, he said, Constellation can confidently predict consistent earnings growth for years to come.
“In the changing power markets, we provide something that I think others struggle to do, and that’s carbon-free energy and reliability together,” Dominguez said. “We think that’s going to be the bedrock of the future for the country.”
Part of this speaks to the intermittent nature of solar and wind compared with the fossil fuel generation they are replacing.
Constellation’s commercial-industrial customers are committed to renewables, Dominguez said, but they need power around the clock. Nuclear is a nonfossil resource dispatchable at scale when the sun does not shine or the wind does not blow.
Just in the PJM system, he said, the day-to-day swing in renewable generation can equal the output of five nuclear plants.
Dominguez noted another key factor in Constellation’s favor: growing bipartisan policy support for nuclear power, a longtime pariah for many on the left and some on the right because of its cost and the risks of radioactivity.
“Years ago, we couldn’t get customers to look at nuclear, regardless of its economics, its reliability or its environmental benefits, but that’s changed,” he said. “Once customers see what we can do from affordability and time-match perspective, they like it.”
Constellation said it holds a 21% share of the U.S. competitive commercial/industrial market, the most of any operator.
Which is not to say nuclear power is without problems.
The first commercial reactors built from scratch in the United States in decades — at Plant Vogtle in Georgia — are by some estimates the most expensive power generation ever built, coming online years behind schedule and many billions of dollars over budget.
Dominguez said this only makes a stronger business case for an existing fleet of well-run reactors.
“Our assets are the best in the world, run by the best people. This company can’t be replaced — there’s simply not enough nuclear out there to replace it. And we all know, from having seen Vogtle, what the cost of new nuclear is.”
In February, Constellation asked the Nuclear Regulatory Commission to extend its license for the Clinton Power Station in Illinois from 2027 to 2047.
The 1.08-GW plant came online in 1987. Actually running it until 2047 would depend on market and/or policy support, Constellation said when it announced the decision Feb. 15.
But Dominguez said Feb. 27 that age is not an issue — most of the fleet could run at least 40 more years. “I say ‘at least’ because we believe that some of our plants could actually run to a hundred years — much longer than existing wind and solar operating today and also longer than all the renewables that are being built right now.”
In mid-2023, Constellation twice raised the earnings guidance it offered financial analysts. The year-end results released Feb. 27 were higher yet.
Constellation reported 2023 GAAP net income of $1.62 billion, which compares with a 2022 loss of $160 million. It had a fourth-quarter 2023 loss of $36 million, compared with income of $34 million in the same period a year earlier.
Its market capitalization has been increasing steadily since Exelon completed its spin-off of Constellation. The share price is 194% higher than when it began trading in February 2022.
Two proposed wind farms off the New England coast are nearing approval by federal regulators.
The U.S. Bureau of Ocean Energy Management on Feb. 26 announced it had finalized the environmental impact analysis of New England Wind.
Publication of a project’s final environmental impact statement (EIS) typically is followed several weeks later by a record of decision. All six of the decisions BOEM has issued so far have been approvals.
In this case, the EIS is for two wind farms proposed by Avangrid within the 101,590-acre Lease OCS-A 0534: Park City Wind and Commonwealth Wind, neither of which currently has an offtake contract for their combined potential output of more than 2 GW.
Avangrid terminated its power purchase agreements for both projects in 2023 when their terms became financially untenable amid rising construction costs. (See Avangrid Avoids Major Offshore Wind Losses.)
Avangrid has said it still plans to develop the projects, but under profitable terms. There is a chance to pursue this now: Connecticut, Massachusetts and Rhode Island remain eager to decarbonize their grids and are holding a combined offshore wind solicitation for up to 6 GW of capacity, with bids due March 27. (See New England States Delay Offshore Wind Solicitations.)
BOEM published a draft EIS in December 2022 and received 776 public comments in response. It considered multiple scenarios within the final EIS before choosing as the preferred alternative a version of the original plan modified to minimize impacts on complex fisheries habitats.
There is minimal operational data in U.S. waters from which the environmental impact of a given offshore wind proposal can be estimated. The first two utility-scale projects still are under construction.
As with the assessments BOEM has carried out for other proposed wind farms in the New York-New England region, the New England Wind EIS presents a range of possible outcomes good and bad for each assessment category.
Most effects are assessed as minor to moderate beneficial or harmful.
However, the critically endangered North Atlantic right whale; commercial and for-hire recreational fishing; cultural resources; scientific research and surveys; the view from land; and national security and military uses could see “major” negative impacts from New England Wind under BOEM’s preferred scenario, particularly in combination with other underwater energy activities in the region.
One of the EIS appendices indicates an increased potential threat to whales and other marine mammals from vessel strikes and fishing gear entanglement. (See Feds Issue Strategy to Protect Right Whale Amid OSW Push.) This and some of the other effects are potentially “irretrievable.”
But BOEM concludes the majority of marine and onshore environments would return to normal long-term productivity upon decommissioning.
The predicted impacts of the status quo — continued greenhouse gas emissions from fossil power generation, and the resulting climate effects — are judged to be almost as significant in their own way as the potential impacts from construction and operation of New England Wind, an emissions-free power source.
The record of decision is the next milestone for New England and one of the biggest, along with securing contracts for its electricity. Additional reviews and approvals must be secured before construction can start, but a positive record of decision essentially is a green light for a project.
BOEM said in its announcement of the EIS that the record of decision would come in April or later.
Phase 1 of New England Wind is Park City Wind, with one or two offshore substations and up to 62 turbines with combined capacity of at least 804 MW coming online as soon as 2028.
Phase 2 would be Commonwealth Wind, with one to three offshore substations and up to 88 turbines rated at 1,232 to 1,725 MW; full buildout would be dependent on market conditions and offshore wind turbine technology advancement.
In an adjacent lease area, Avangrid and Copenhagen Infrastructure Partners are building Vineyard Wind 1 in a 50-50 joint venture.
WASHINGTON, D.C. ― The year 2023 was record-breaking for sustainable energy in the U.S., according to the Business Council for Sustainable Energy’s 2024 Sustainable Energy Factbook.
Renewables, EVs and the grid, among others, attracted a “record-shattering” $303.3 billion in private investment, while 42 GW of wind, solar and storage were added to the grid and more than 1.4 million new EVs hit the road, the factbook reports.
The challenge is maintaining and then accelerating such levels of growth, said Tom Rowlands-Rees, North America head of research for BloombergNEF, which compiled the factbook’s 69 pages of graphs and charts. Looking at clean energy investments on a global scale, “every country that we tracked, except Japan” had a record-breaking year, Rowlands-Rees said at a press briefing Feb. 20.
Now in its 11th edition, the factbook tracks a U.S. energy transition that is, as advocates like to say, hardwired into the economy but still facing uneven financial and political terrain. The momentum created by the billions of dollars in incentives and tax credits in the Infrastructure Investment and Jobs Act and the Inflation Reduction Act has been tempered by supply chain constraints and the effects of inflation.
High interest rates can have a significant impact on renewable energy projects “because they are [capital expense] heavy compared to alternatives like gas, where so much of the cost is in the fuel itself,” Rowlands-Rees said.
Permitting and interconnection bottlenecks also continue to slow solar, wind and storage deployments. According to the factbook, utility spending on transmission hit a record $30 billion in 2023, but estimates suggest it could remain flat for two more years.
Corporate Contracts and LCOE
Corporate contracts for renewable energy ― a major growth driver ― are also feeling the pinch, falling 15%, from 20.2 GW in 2022 to 17.1 GW in 2023, the first year since 2017 with fewer than 100 deals.
Perhaps the biggest red flag is the levelized cost of electricity ― the all-in, lifetime cost for specific types of generation ― calculated without the IIJA or IRA’s tax credits and other incentives. For the first time since 2017, the LCOE for natural gas is lower than either wind or solar.
Rowlands-Rees sees LCOE as a benchmark of economic competitiveness, underlining the critical role of federal support.
With wind and solar tax credits, renewables “come out substantially cheaper than the alternatives,” he said. But wind and solar won’t “magically” overcome other issues if they are not sitting well economically.
Renewable capacity contracted by corporations (annual and cumulative GW) | BloombergNEF
Emissions and Productivity
U.S. “energy productivity” has long been a key indicator in the factbook, and since 1990, it has risen steadily as gross domestic product increased while energy consumption stayed relatively flat.
In 2023, GDP was up 2.4%, while energy consumption dropped 1.4%, producing a 4% increase in energy productivity, the factbook says.
These numbers demonstrate “very simply that economic growth and energy consumption are not tied together at the hip,” Rowlands-Rees said. “You can have a thriving economy without a huge growth in energy consumption.”
At the same time, U.S. greenhouse gas emissions dipped 1.8%, signaling a possible downturn following the post-COVID rebound in energy consumption and emissions. The country still must slash emissions to reach its commitment under the 2015 Paris climate accords ― a 50-52% drop in emissions below 2005 levels by 2030 and net zero by 2050 ― but the downward turn is a step in the right direction.
The challenge is that clean energy investments aren’t completely aligned with the main sources of emissions, Rowlands-Rees said. While power, the grid and transportation are the top targets for private investment, industrial emissions now are the second largest source of U.S. GHGs. What’s needed is “to kickstart more investment in reducing industrial emissions,” he said.
U.S. GDP (real) and energy consumption, indexed to 1990 levels | BloombergNEF
Solar
Also speaking at the Feb. 20 briefing, Justin Baca, vice president for markets and research at the Solar Energy Industries Association, pointed to a mismatch between supply chain investments and needs in the solar sector.
The industry is racing to build out a U.S. supply chain to meet domestic content provisions in the IRA and to blunt the June 2024 end of President Biden’s two-year moratorium on tariffs on solar cells and panels from Cambodia, Malaysia, Thailand and Vietnam. The Commerce Department finalized its decisionon the tariffs in August 2023, finding that solar companies in those countries were using Chinese components already subject to tariffs.
While announcements for 34 solar manufacturing projects have been made since passage of the IRA, Baca said, “we have seen over 100 MW worth of solar module factory announcements, then closer to 50 for solar cell [factories] and closer to 20 for solar wafer[s].
“[That] means the further you go up the supply chain … we’re getting more and more constrained,” in an imbalance, he said, that “creates an opportunity for supply chain bottlenecks.”
The supply chain for high-voltage power transformers ― used to step power up and down on the grid ― is equally problematic, Baca said. Worldwide, only a few factories produce this critical equipment, “and we have back orders of about two years,” he said.
Clean-tech manufacturing investments announcements post-IRA (number of facilities) | BloombergNEF
Energy Efficiency
Energy efficiency is another example of potential misalignment of investments. The factbook shows that, as of 2022, more than 25 states have enacted energy efficiency resource standards, for electricity only or for electricity and gas.
But, as of 2021, the most recent figures available, utility investments in energy efficiency had yet to recover from their pandemic drop, from $8.4 billion in 2019 to $7.7 billion in 2021.
The U.S. is one of the 130 nationsthat committed to tripling renewable energy and doubling energy efficiency by 2030 at the United Nations 28th Climate Conference of the Parties in the United Arab Emirates in December 2023. That commitment means energy efficiency must be thought of as a “first fuel, not a secondary thing,” said Paula Glover, president of the Alliance to Save Energy.
Efficiency is vital to keep the curve on energy productivity going up, Glover said. “The more we grow our economy, the more energy we are going to need.” Energy efficiency can mean “less to build and displaces additional demand.”
Referring to the factbook’s energy productivity chart, Glover asked, “What would happen if we actually doubled efficiency? … What would it do to the energy productivity? What would that graph look like?”
Utility energy efficiency spending (in $ billion) | BloombergNEF
Natural Gas and Carbon Capture
Perhaps one of the greatest challenges for clean energy advocates is the role of natural gas in the U.S. energy transition. While coal-fired generation provided less than 16% of U.S. electricity generation in 2023, it has been replaced primarily by natural gas, which now accounts for 43%, up from 40% in 2022.
Overall, power sector and liquid natural gas exports are driving demand, Rowlands-Rees said.
BloombergNEF anticipates that carbon capture, utilization and storage may become a growing factor in both natural gas processing and power generation, again supported by incentives from the IRA, specifically, the 45Q tax credit for carbon and direct air capture.
Carbon capture capacity is set to explode from around 23 million metric tons of CO2 per year in 2020 to 160 MMT per year by 2030 in projects announced. Natural gas processing and power generation could account for more than a quarter of that growth.
But the factbook cautions that, like solar and wind, permitting and other delays could slow growth.
Historical and proposed carbon capture capacity in the U.S. (CO2 MMT per year) | BloombergNEF
EV Tax Credits
Rowlands-Rees downplayed recent negative headlines about EV sales, noting the U.S. has had three record years in a row, and “these are not just record years by a small margin. It’s very substantial,” he said.
Another encouraging sign is that 2023 saw Tesla’s market dominance slip as other automakers introduced more EV models.
But new Treasury Department rules issued in December have cut the number of EV models that now qualify for the IRA’s top $7,500 tax credit. The new rules terminate tax credits for lithium and other materials mined or processed in China or other “foreign entities of concern” (FEOCs). The factbook shows that only about a quarter of lithium processed will meet the new requirements, with even smaller percentages for nickel (11%) and cobalt (7%).
Share of battery metal supply (left) and lithium supply (right) by location in 2023. | BloombergNEF
The Election
The very large elephant in the room (pun intended) at the briefing is what will happen if Republicans take back the White House and both houses of Congress in the upcoming election, now just over 10 months away.
Former President Donald Trump, the all-but-certain GOP presidential candidate, did all he could to slow the growth of clean energy in his previous term, withdrawing the U.S. from the Paris Agreement and rolling back environmental and emission-reduction measures.
Some Republicans in Congress have called for the repeal of the IRA.
Lisa Jacobson, BCSE president, argues that multiple factors are driving the U.S. energy transition ― customer demand, supportive policy, digitization of the power system, and the growing interest and engagement in communities on being able to make choices about their energy supply and services.
“No one knows where we’ll be a year from now in terms of the makeup of our federal government,” Jacobson said. “But I feel very strongly these [clean energy] investments will go forward … because this is what people and communities want, and we have the technology available to offer improved, modern, efficient and better energy services.”
Other speakers pointed to the flow of IRA dollars into rural areas, red states and Republican-held congressional districts.
According to John Hensley, vice president for markets and policy analysis at the American Clean Power Association, “for the projects we’re tracking at ACP, 80% of those are located in congressional districts that are currently held by Republican representatives. So, there are a lot of reasons to be supportive of these policies, to embrace the investment, the job creation and the economic development benefits they’re bringing.”
CAISO staff and stakeholders are looking to address an inconsistency in how the ISO tests for structural market competitiveness inside and outside of its balancing authority area in the Western Energy Imbalance Market.
The issue was a topic of discussion at a Feb. 21 meeting of the ISO’s Price Formation Enhancements Working Group.
CAISO’s BAA-level Dynamic Competitive Path Assessment (DCPA), which is used to test for structural competitiveness and determine the need for market power mitigation, tests BAAs in isolation and does not consider external supply, ISO staff noted at the meeting.
But within its own BAA, CAISO does consider external supply, creating conditions that could make it easier for the ISO to pass the DCPA and avoid price mitigation.
To address the problem, the ISO has suggested grouping BAAs that are otherwise separated by price differences and testing them together, instead of testing them in isolation and looking only at internal supply relative to internal demand.
“The impact of this problem in the market is that balancing areas in the Western EIM may fail the DCPA, which is the market power mitigation test, more frequently than their actual competitiveness justified, subjecting them to mitigation too often,” said James Friedrich, lead policy developer at CAISO.
However, some stakeholders were concerned that the grouping method would apply the DCPA to two different types of market power — local and BAA-wide.
“It’s almost in our minds like you’re taking aspects of a local market power mitigation test and especially that triggering mechanism and trying to apply it to a BAA-level or system market power condition,” said Kallie Wells, senior consultant at Gridwell Consulting.
Responding to stakeholder concerns about the grouping methodology, Friedrich said he didn’t see a difference between local and BAA-level market power.
“You could define a balancing area as a local area that’s congested from the larger market and the larger system and all of the suppliers within that local area can potentially exert market power. … That’s what the test is for,” he said. “I don’t see why we would have a differentiation between local market power identifying price separated local areas and BAA-level market power. It’s just that the area with which you’re defining is a balancing area and not a single node on the system or a collection of nodes.”
Wells elaborated on stakeholder concerns regarding the differentiation of markets, saying it comes down to demand.
“The demand number that you’re using and that test to figure out if you should actually mitigate resources is different. So, in local market power, that demand is the counterflow,” she said. “But that’s not what you’re using in the BAA-level calculation. … You’re saying we’re going to take this binding transfer constraint as the trigger, and then instead of using the demand for counterflow on that transfer constraint, we’re actually just going to use the demand in the BAA-level area.”
Friedrich said Wells’ explanation helped him think about the issue differently, but that he’d need time to consider how to respond.
DMM Data Demonstrate DCPA Problems
In November, CAISO’s Department of Market Monitoring presented data breaking down how often WEIM BAAs are subject to mitigation and, within that subset, how many times their resources had bids altered.
The data revealed another issue: that because the existing BAA-level market power mitigation uses a transfer constraint-based trigger to test for structural uncompetitiveness, mitigation occurred most frequently in hours inconsistent with when one would expect to need to test, such as in times of high renewable and low load conditions.
“I think because of the mixing and matching of the trigger and the test or the type of market power you’re trying to address, you’re actually seeing that issue pop up in your results,” Wells said.
Dan Williams, principal adviser at The Energy Authority, suggested the ISO examine how transfer constraints materialized for WEIM entities that were using transmission rights to export from the CAISO or another area into their BAA to examine how it affects market power mitigation.
The Price Formation Enhancements Working Group is scheduled to meet again March 18. CAISO also plans to publish an FAQ to address stakeholder questions on issues arising during the Feb. 21 meeting.
