Pay Hike for Black Start Generators?

Payments to black start generators could increase by 27% to more than 500% under proposals scheduled to go to a stakeholder vote today.

The System Restoration Strategy Task Force will vote through Nov. 20 on up to four alternatives to the current compensation method for black start units.

An analysis presented to the task force in October showed the annual operations and maintenance compensation for a 20 MW combustion turbine would increase from the current $51,000 to more than $312,000 under NRG Energy’s market based “Proxy” formula. The PJM-Market Monitor “Modified Incentive” would boost compensation to $65,000, while Dayton Power & Light Co.’s “Minimum Incentive” would set compensation at $71,000.

While the increases could be large compared to current compensation, the overall impact on prices would be limited. Black start charges were responsible for only $0.03 of the $35.23/MWh total price of wholesale electricity in 2012 (0.1%), according to Monitoring Analytics’ State of the Market Report.

The Proxy proposal was based on a review of practices in New York and New England as well as cost figures provided by more than 50 generators that responded to PJM’s recent solicitation for black start resources. It would increase capital compensation more than six-fold and payments for fuel storage more than eight-fold.

Old Dominion Electric Cooperative (ODEC) proposed a “cost allocation” alternative that would allow increased compensation but seek to spread the costs beyond load to external generators that clear in the annual capacity auction and internal generators that neither provide black start service nor offer to do so.

“We would be willing to consider increasing compensation, but without [broader] cost allocation we remain troubled by this,” ODEC representative Steve Lieberman said at the task force’s most recent meeting last Tuesday.

Generator representatives reacted coolly to Lieberman’s request to negotiate a consensus with load-serving entities, with one calling it “worse than a zero-sum game” for generators relative to the status quo.

Black start units must be capable of starting without an outside electrical supply, maintaining frequency and voltage under varying load, and maintaining rated output for a specified time, typically 16 hours.

Proposed Changes

Black Start Annual Revenue Comparison for 20 MW CT (Source: System Restoration Strategy Task Force) — (Source: System Restoration Strategy Task Force)

The following changes are included in one or more packages to be considered by the task force:

Increasing the incentive factor — currently 10% of black start costs for units using base formula rates to determine O&M cost recovery — to the greater of 10% or $25,000.
Adding incentives based on unit availability, start times and fuel diversity.
Reducing the frequency of reviews of cost components from annual to once every five years.
Allowing compensation for NERC compliance insurance.
Allowing automatic load rejection (ALR) units to recover NERC Compliance costs as part of their variable operations and maintenance costs, as currently allowed for other black start units. ALR units can remain operating after disconnecting themselves from the grid during a disturbance.

Black Start Pool Increased

On Sept. 6, the Federal Energy Regulatory Commission approved tariff revisions that PJM said will increase the pool of potential black start generators by 64,000 MW (ER13-1911).

PJM initiated the changes over concern that it will lose much of its existing capacity by 2015 due to coal plant retirements. The RTO told FERC in its tariff filing that about 42% of its current black start capacity “may be impacted by environmental regulations.”

The changes included a broadened definition of units eligible to provide black start service and a provision allowing units in one zone to help restart generation in neighboring zones.

Revised Charter

In April, stakeholders expanded the task force’s charter to allow consideration of changes to black start cost allocation and compensation.

The Maryland Public Service Commission expressed concern with the expanded charter, telling FERC that the cost of black start service had doubled in recent years. The commission said there was a “need for cost controls given that black start service has rarely, if ever, been used.”

The task force’s expanded charter also included consideration of “back stop” options if response to PJM’s voluntary request for resources leaves gaps in coverage. However, PJM officials said last month they were pleased with the response to their recent request for additional black start resources.

PJM Executive VP Mike Kormos said the response indicated “a large pool of viable units, both proposed and existing.” Officials said it will take months to select their fleet of black start resources from among current resources and the new bidders.

November 12, 2013

PJM: Change Real-Time Pricing

PJM proposed a change in its real-time pricing mechanism, saying the current methodology is depressing energy and reserve prices.

PJM told the Market Implementation Committee Wednesday that it will propose a problem statement to consider increasing reserve requirements under certain circumstances. The revised methodology could increase reserve and real-time energy prices while reducing uplift.

Reserve requirements would be increased when operators are carrying additional resources (generation, reserves or emergency DR) to cover units at risk – for example when it is unknown whether a generator with environmental limitations will receive a waiver to continue operating.

Requirements also could be boosted when operators have data quality concerns or are uncertain about load or interchange.

PJM Load and Prices: July 18, 2013 (Source: PJM Interconnection, LLC) — An unexpected influx of imports caused prices to crash July 18 after PJM operators called on demand response.(Source: PJM Interconnection, LLC)

Because they cannot be exact in dispatching emergency demand response or scheduling generation, operators tend to err on the side of calling on more resources than are ultimately needed. PJM cited the July 18 heat wave, when an unexpected influx of imports from New York caused prices to crash after the deployment of DR.

“It’s really a matter of having the [pricing] engine recognize these actions. Right now we don’t have a mechanism to do that,” said PJM’s Angelo Marcino.

The proposal was welcomed by several stakeholders. “LMPs have been crushed for years and years and years when DR gets called,” said David Pratzon, who represents generators.

Some other members, however, said they feared that the changes could result in overly conservative actions by PJM operators, resulting in a net increase in costs rather than just a shift.

“I would hate to see reserve requirement creep,” said David “Scarp” Scarpignato, of retail marketer Direct Energy.

“We risk over-responding,” agreed one load-serving representative.

Barry Trayers, of Citigroup Energy, said the changes could increase uncertainty. “It’s going to make it even harder for stakeholders to ascertain where we are in the world of scarcity.”

One representative said PJM also should work to incorporate intraday changes in natural gas costs. But Pratzon said PJM should act promptly on this issue and defer a wider-ranging discussion until later. “People are already making arrangements for buying and selling energy” for next summer, Pratzon said.

Market Monitor Joe Bowring said he supports PJM’s efforts but added: “The mechanics of what PJM is planning need to be made substantially more clear.”

November 12, 2013

AP South, Cleveland Draw Congestion Relief Proposals

AP South and the Cleveland interface attracted the most attention in PJM’s inaugural window for proposed market efficiency upgrades.

PJM staff provided the Transmission Expansion Advisory Committee last week with a summary of 17 proposals ranging from $200,000 to $64 million.

Merchant developer LS Power was the most ambitious, proposing four projects totaling $181 million in eight zones. Transource (American Electric Power and Great Plains Energy) was second, proposing three projects in the AEP and ATSI zones totaling $135.5 million.

The three incumbent utilities that took part — Commonwealth Edison, Dominion Virginia Power and FirstEnergy — all stayed at home, with proposals in their own transmission zones. Duke (with partner American Transmission Co.) did the same, proposing one project in the Duke Ohio-Kentucky zone.

AP South

AP South attracted seven congestion relief proposals.

Transource proposed two alternatives to address congestion at AP South and the AEP-Dominion interface. The cheaper option features a 500 kV substation with series capacitors at a cost of $39.3 million. A second builds on the first with additional series compensation at an extra $24 million.

Dominion proposed three projects incorporating Thyrister-controlled series capacitors at costs ranging from $20.1 million to $24.6 million (total cost $69.4 million).

FirstEnergy and LS Power made pitches for AP South and the Hunterstown 230/115 kV line with projects of $54.3 million and $61.7 million, respectively.

Separately, LS Power proposed a new Hunterstown-Cumberland 230 kV line and substation improvements for $63.9 million. FirstEnergy proposed spending $8 million to add a 230/115 kV transformer and reconductor the Hunterstown-Oxford 115 kV line.

Cleveland Interface

Projected Annual Conjestion Costs (Source: PJM Interconnection, LLC) — (Source: PJM Interconnection, LLC)

FirstEnergy, LS Power and Transource each proposed projects to relieve congestion at the Cleveland Interface.

The most expensive is FirstEnergy’s $61.7 million proposal to improve a 138 kV substation in the ATSI zone.

LS Power’s $44.9 million project, which includes the ATSI and PENELEC zones, would add a new Erie West–Ashtabula 345 kV line and a 345/138 kV transformer.

Transource offered the least costly project, a new 138 kV substation in the ATSI zone at a cost of $32.9 million.

Next Steps

PJM’s request for congestion relief proposals was its first under Order 1000, in which the Federal Energy Regulatory Commission sought to increase competition by largely eliminating utilities’ monopoly over transmission development in their territories.

Proposals must clear a minimum 1.25 benefit-to-cost threshold to be considered by the Board of Managers for inclusion in the Regional Transmission Expansion Plan. PJM staff will review the projects through January and make recommendations to the Board in February.

PJM will conduct independent cost reviews on projects exceeding $50 million and on those below $50 million that have tight benefit-cost margins, said PJM’s Paul McGlynn.

November 12, 2013

Summer 2013 Load Growth Fastest Since Recession

PJM’s weather normalized summer peak increased 950 MW in 2013, the largest increase since load growth resumed after the recession.

The 0.6% increase over 2012 is “no great shakes but moving in the right direction,” PJM’s John Reynolds told the Planning Committee during a briefing last week.

The peak was 0.2% (368 MW) below PJM’s forecast. “It’s been a challenging time for us for load forecasting since the recession,” said Steve Herling, vice president of planning. “The primary input is econometrics — over which we have no control.”

Peak diversity for 2013 as 0.3%, much lower than the forecasted 4.3%, as a result of the single RTO-wide heat wave July 15-19.

It was the first summer that the top five coincident peaks have come in the same calendar week since PJM started collecting the data. “The entire story of the summer of 2013 can be told in one week in the middle of July,” Reynolds said.

November 12, 2013

PC OKs Move to Flag Transmission Upgrades Earlier

The Planning Committee approved a manual change that will result in PJM identifying potential transmission upgrade requirements earlier in the study process.

In past years, studies identified many reinforcements which were ultimately not needed as projects dropped out of the backlogged transmission interconnection queue. As the backlog has been reduced, however, some projects have cleared the Impact Study phase without any apparent violations, only to have violations indicated when they are evaluated at 100% in the Facilities Study.

As a result, PJM plans to eliminate the 19% probability for Feasibility Studies and replace it with the 53% currently used for Impact Studies. Impact Studies will use the 100% probability. The changes will be incorporated in Manual 14B. (See Transmission Studies to Flag Upgrades Earlier.)

November 12, 2013

PJM Kicks Off Grid 20/20 Conference

PJM CEO Terry Boston and Federal Energy Regulatory Commissioner Cheryl LaFleur kicked off PJM’s third annual Grid 20/20 conference in Philadelphia last night.

In keeping with the theme of this year’s conference, LaFleur told an audience of about 100 about the need to create a “culture of resiliency.”

“When there is a problem on the grid, very rarely is it the result of one thing. It’s a succession of mistakes where if you had defense in depth it could have been stopped,” she said. “There has to be a line of sight between what people are doing and the bigger issues…These little thing will add up to the big things.”

About 180 people gathered for today’s daylong session at the Sheraton Society Hill.

November 12, 2013

Company Briefs

Carlyle Group closed on its purchase of the 823-MW Red Oak combined-cycle plant in New Jersey from Energy Capital Partners, bringing to 11 the number of plants it has bought since acquiring Cogentrix Energy Power Management late last year. More: Carlyle Group

DTE Shakes Up Senior Management

Steve Kurmas, DTE Energy president — Steve Kurmas

DTE Energy named five executives to new positions, effective Dec. 30. Steve Kurmas becomes DTE Energy president and COO; Jerry Norcia president and COO of DTE Electric and Gas & Storage Pipelines; Dave Meador, DTE Energy vice chairman and chief administrative officer; Peter Oleksiak DTE Energy senior vice president and CFO; and Mark Stiers president and COO of DTE Gas. More: DTE Energy

Duke Utilities Eye Renewables Business

Having decided its regulated utilities should get much more into renewables, Duke Energy has established a group to determine how they should do it – by building, owning capacity or partnering. Duke’s utilities may take different approaches, says Ron Caldwell, who heads the new group, which is focusing initially on solar. Getting renewables into the utility mix is “the next place for our generation portfolios to evolve to,” Caldwell said. More: Charlotte Business Journal

Riverbend Demolition Set

Riverbend Steam Station (Source: Duke Energy)

Duke Energy will begin dismantling the 84-year-old Riverbend station in North Carolina this fall and level the powerhouse and chimneys in 2016. The company shut the little-used 454-MW plant in April as part of its coal plant-retirement program, and now has outlined permanent closure plans. Environmentalists will watch closely how Duke handles coal ash ponds at the site. More: Charlotte Observer

Exelon Reaps up to $100 Million in PTCs

Exelon continues to take advantage of the production tax credit for wind power even as it protests the PTC as a market distorter, particularly damaging to its giant nuclear fleet’s revenue. A Bloomberg New Energy Finance analyst pegged Exelon’s own wind PTCs for this year at $75 million to $100 million, based on the company’s 1.3 GW of wind projects. To environmentalists’ criticism, Exelon says it has a fiduciary responsibility to its shareholders to take the tax credits, but it opposes all market-distorting subsidies. Although Exelon has suffered this year from low power prices, Morningstar analysts say the company’s prospects are good because its low-carbon nuclear fleet will be valuable for years to come. More: Greenwire; Forbes

FirstEnergy Adds $2.8 Billion to Spending Plan

FirstEnergy’s board approved $2.8 billion for transmission system upgrades, on top of the $700 million it set earlier this year. FE sees most of its growth coming from transmission investment, CEO Anthony Alexander said. The company plans to cut the sales force of FirstEnergy Solutions, its unregulated subsidiary, to further reduce its market risk. More: The Plain Dealer

Seneca Pump Hydro plant in Warren, PA (Source: FirstEnergy)

FE Gets FERC Approval for Hydro Asset Sale

FirstEnergy companies won Federal Energy Regulatory Commission approval to sell 527 MW of hydropower facilities to LS Power Development. The plants include the 451-MW Seneca Pumped Storage facility in Warren, Pa., and assets in Virginia and West Virginia. FirstEnergy said in May that it would sell up to 1,240 MW of unregulated hydro assets. More: Electric Light & Power

NRG to Supply Phila. Convention Center

NRG Energy, which entered the residential retail market in Philadelphia in September, has won a big commercial customer in the city. The Pennsylvania Convention Center will buy its approximately 26.5 million MWh a year of power from NRG Business Solutions beginning next year. A competitive process resulted in choice of the NRG Energy unit, which is to provide 25% of the power from renewable sources. This is the first renewable power buy for the center, which later this month will host the world’s largest conference dedicated to green building. More: MarketWatch

November 12, 2013

PJM to Order Temperature Adjustments on Steam Units

PJM will require all steam generators to adjust their capacity ratings based on summer peak load conditions under manual changes outlined to the Planning and Market Implementation committees last week.

Manual 21 currently requires such temperature corrections only for combustion turbines and combined cycle units. The revisions will extend the requirement to coal and nuclear steam units.

About 60% of steam units already perform temperature corrections, with half increasing their capacity ratings and half reducing them, said PJM’s Tom Falin. The average adjustments were 0.5% with the largest adjustment 2%.

PJM also will begin requiring hydropower and pump storage units to perform their annual capacity tests — now allowed to be conducted any time — during the summer.

The adjustments can affect generators’ installed capacity values as well as capacity interconnection rights.

PJM plans to implement the changes after seeking endorsement by the Markets and Reliability Committee in the first quarter of 2014.

The changes will be incorporated in PJM’s planning studies in summer 2014, with a likely transition period before use for markets purposes.

November 12, 2013

State Briefs

Large-Eddy Simulation results. (Source: Cristina Archer, PhD; University of Delaware)

Stagger Turbines to Raise Output

A University of Delaware researcher says more generous spacing and staggered arrangement of turbines could raise a wind farm’s output by 13% to 33% over conventional arrangements. The issue is pertinent to the state, where offshore wind development is a yet-unrealized goal.

More: ABC Environment; The Naked Scientists

ILLINOIS

Feed-in Tariff Proposed for Chicago Efficiency

The Chicago Infrastructure Trust has proposed a kind of feed-in tariff to help the municipal buildings use less energy. The trust said its plan could help Commonwealth Edison meet the state’s energy efficiency targets, which the utility said it cannot meet with funds from an existing surcharge.

More: Crain’s Chicago Business

KENTUCKY

Coal being loaded into a hopper (Source: James River Coal)

James River Idles More Coal Mines

James River Coal idled four Kentucky mines at its Buckeye complex, eliminating 1.3 million short tons of annual thermal coal production on top of the 3.7 million tons it idled in September. The company might restart the Buckeye production if markets warrant it, but the earlier shutdowns are meant to be indefinite.

More: Reuters

MICHIGAN

30% Renewables Said Possible By 3035

The Public Service Commission and Michigan Energy Office have told Gov. Rick Snyder that the state could get 15% of its power from renewables by 2020 and 30% by 2035. The agencies will deliver reports on other power issues later, as part of Snyder’s effort to gather information for possible legislative action.

More: North American Windpower

NEW JERSEY

Business Coalition Can Keep Fighting PSE&G Plan

A big-business coalition has legal standing to oppose the Energy Strong program Public Service Electric & Gas is proposing to storm-proof its grid, the Board of Public Utilities ruled in rejecting a PSE&G challenge to the group. The coalition of large energy users object to the utility’s plan to fund the $3.9 billion program with ratepayer money on an ongoing basis instead of submitting the expenses for scrutiny and reimbursement afterward.

More: The Record

NORTH CAROLINA

Waste Argument Aired in NRC Hearing

Anti-nuclear activists and industry representatives wrangled over fundamental issues as the Nuclear Regulatory Commission held one of a series of hearings about its “waste confidence rule,” which governs storage of spent fuel. The Charlotte meeting drew a crowd, spurred by proximity to two Duke Energy nuclear plants. The NRC is weighing its rule, which a federal appeals court vacated last year.

More: The Charlotte Observer

PENNSYLVANIA

Cities, Towns Tackle Solar Issues

Municipalities in Allegheny and Beaver counties have begun to pass solar panel policies to be prepared as interest in installations increases. The municipalities participated last year in a project to develop a model ordinance.

More: Pittsburgh Tribune-Review

FE Pa. Utilities File Procurement Plans

FirstEnergy’s four Pennsylvania utilities sent the Public Utility Commission a proposal for buying default-service supply beginning June 2015. CRA International would run quarterly auctions starting in October 2014 and have a bidding process for supply of renewable energy credits.

More: FirstEnergy

November 12, 2013

Federal Briefs

Wyoming Republican Sen. John Barrasso has challenged Federal Energy Regulation Commission Chairman Jon Wellinghoff’s plan for recusing himself from decisions involving Stoel Rives law firm clients before he leaves FERC for a position with that firm. Echoing concerns that others have raised, Barrasso asked why the chairman has not recused himself from broader matters that could affect Stoel Rives’ current and future clients.

More: Sen. Barrasso; Greenwire

Utech New Obama Climate Adviser

Dan Utech, White House deputy energy and climate adviser since 2010, has moved up to succeed Heather Zichal, who left her climate adviser position last week. Utech is a former adviser to Sen. Hillary Clinton and aide to the Senate Environment and Public Works Committee.

More: The Hill

‘Social Cost of Carbon’ Revisited

The Obama administration is taking new comments on its determination of the social cost of carbon, a metric it uses to assess the benefits of greenhouse gas regulations. Industry has attacked the SCC levels set in May for lacking public input. “Minor technical corrections” since then have resulted in a cost of $37/metric ton of carbon dioxide in 2015, down from $38, the White House said in inviting comment on the matter.

More: The Hill

Maryland, Illinois in ACEEE Top 10

ACEEE 2013 Energy Efficiency State Scorecard Rankings Map (Source: aceee.org)

For the first time, Illinois made it into the American Council for an Energy-Efficient Economy’s top 10 states whose policies and programs support energy efficiency. Just above Illinois is Maryland at No. 9. Of other PJM states, Ohio at No. 18 is among a handful of “most improved” states, joined by No. 46 West Virginia. Pennsylvania, at 19, was recognized for “recent concentrated efforts.”

More: ACEEE

$84 Million for CCS Projects

The Department of Energy is investing $84 million in 18 carbon capture and storage R&D projects to reduce costs and improve the efficiency of CCS. Among them are a bench-scale project at Media and Process Technology in Pittsburgh and a pilot-scale project at the Gas Technology Institute in Des Plaines, Ill. The Environmental Protection Agency has called CCS a viable technology for future coal plants to meet the agency’s greenhouse gas regulations.

More: The Hill; DOE

Coal Has Brief Future, Study Says

Coal’s future is much shorter than the 200 years that government predicts, according to a Clean Energy Action study. The group said only 20% of remaining coal reserves will be economically recoverable. Ohio, where coal prices have risen 7.8% annually since 2004, is one of 16 states past their peak production years, according to the study.

More: Columbus Business Journal

Some See Gas Boom Petering Out Soon

Some experts are raining on the natural gas and oil production boom, saying production bonanzas from fracking are coming from only a few “sweet spots” that will play out in the next few years. Other experts disagree strongly, in part because they see technology developing fast.

More: USA Today

CO2 Strategy Can Include Co-firing with Wood

Firing wood with coal can help power producers cut their carbon dioxide emissions, but it is easier for some companies than for others, and the practice may be a bridge to future reductions instead of a permanent strategy.

More: The New York Times

Officials on Obama Climate Task Force

The governors of Maryland and Delaware and the mayors of Philadelphia and Hoboken, N.J., are among members of President Obama’s Task Force on Climate Preparedness and Resilience. The group is charged with identifying what governments can do to advance climate-resilient investments.

More: The White House