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November 9, 2024

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Vistra Teases ‘Re-segmenting’ Businesses in 2024

Vistra said Nov, 7 that its acquisition of Energy Harbor will accelerate the company’s transformation and lead to a “re-segmentation” of its businesses when the deal closes.

CEO Jim Burke told financial analysts during the company’s quarterly earnings call that Vistra’s “transformative acquisition” of Energy Harbor will support the Irving, Texas-based company’s clean-energy transition, one of its four strategic objectives. He said management expects to disclose the specifics of the combined company’s long-range plan in the first half of next year.

“In the meantime, we continue to opportunistically invest in renewables and energy storage growth,” Burke said.

Ohio-based Energy Harbor and its three nuclear plants — Davis-Besse, Beaver Valley and Perry — will add more than 4 GW of nuclear generation to Vistra’s existing Comanche Peak plant and its 2.4 GW of capacity.

The $6.3 billion transaction, announced in March, has run into a delay at FERC over market power concerns. The commission has said it will rule on Vistra’s application by April 11. The Nuclear Regulatory Commission in September approved the transfer of the plants’ operating licenses to Vistra. (See FERC Delays Ruling on Vistra Purchase of Energy Harbor.)

Vistra has committed to selling more than 1,000 MW of gas-powered generating plants to alleviate the market power concerns and says it made substantial concessions to comply with a Justice Department request in August.

“We have responded to requests from FERC, and that process is progressing,” Burke said. “We believe that will eliminate any potential remaining concerns around market competition. We continue to target a closing before the end of the year.”

The company will also begin construction on its three largest combined solar-and-storage projects next spring as part of the Illinois Coal-to-Solar and Energy Storage Initiative.

Vistra reported $1.61 billion in ongoing operations adjusted EBITDA, compared to $1.04 billion during the same period a year ago. The record-breaking Texas summer boosted its ERCOT fleet’s output to 2.5 TWh during the third quarter, its highest quarterly performance by 10%.

The company uses adjusted EBITDA as a performance measure because, it says, outside analysis of its business is improved by visibility into both net income prepared in accordance with GAAP and adjusted EBITDA.

Vistra’s share price closed at $34.77 Thursday, down 56 cents on the day.

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Obstacles to Decarbonizing Key New York Housing Sector Flagged

Decarbonizing New York state’s million-plus midsize apartments will be difficult under current regulatory and financial structures, a report by the Federal Reserve Bank of New York found last month.

Decarbonization is critical for the state’s emissions-reduction goals, but it is expensive and cumbersome for those businesspeople who are generally short of the money and expertise to carry it out. Moreover, the return on investment — slowing damage to the planet — is societal rather than individual. When the benefits of taking action do not accrue to the decision-maker, the report’s authors point out, there is no impetus to decide to take action.

“Window of Opportunity: New York’s Small Multifamily Buildings, Expiring Equipment and Clean Energy Goals” was published in late October as part of the New York Fed’s Community Development initiative. It looked at a specific segment of the state’s 8.6 million housing units: those in five- to 50-unit buildings.

More than 1.45 million housing units are in this category. Those units are aging; almost 70% of their occupants are low- or middle-income; 1.3 million are heated with fossil fuel equipment that is nearing the end of its service life; and many are owned by small-scale landlords.

The conflict is readily apparent: A perfect target for decarbonization is owned by people who lack the resources and knowledge to carry out the work and inhabited by people who cannot afford to pay for it.

The Problems

New York already has one of the lowest per-capita levels of greenhouse gas emissions of any state, among the fewest vehicles per capita and a dominant industry — finance — that does not spew emissions.

So as state leaders pursue the goals and mandates of the Climate Leadership and Community Protection Act, and New York City leaders implement Local Law 97, a primary goal is decarbonizing buildings, the largest single source of emissions in the state.

But actually decarbonizing all those buildings is a tall order. New York’s population growth has been stagnant or negative in recent years, so the effort must focus heavily on retrofitting its existing, aging housing stock: 80% of the buildings that will exist in 2050 have already been built, the authors predict.

The report is based on a series of interviews and a roundtable discussion with 28 stakeholders in the housing and finance sectors. They flagged numerous problems facing decarbonization of the five- to 50-unit sector of New York’s housing stock:

    • Absent any legal mandates, the decision to electrify ultimately is up to the building owner. Owners of smaller properties often run the operation themselves, without benefit of support teams. They are less likely than large-property owners to know about electrification or have the means to pursue financing for it.
    • Owners have far more pressing concerns, such as basic maintenance, and lack bandwidth to undertake a sweeping new initiative.
    • Owners often cannot self-fund a deep retrofit, which can cost more than $100,000 per unit. Financing is dicey, because electrification may actually increase operating costs. The owner cannot raise the rent on a regulated unit, and if the local market is struggling, the owner may not be able to raise rent on an unregulated unit either.
    • Many five- to 50-unit properties already are financed to maximum leverage, making it hard to secure new debt; also, senior lenders worry about lien priority when new mid-process debt is issued.
    • Government incentives and financing for electrification are not optimized for five- to 50-unit properties; the process to apply for such funding is arduous; and the administrative costs are prohibitive.
    • Owners of nonregulated units fear their property will become regulated if they accept funding.
    • Owners of regulated units fear their property will go through a lengthy and potentially costly rent restructuring when utility bills rise post-electrification.
    • Contractors qualified to do the work are in short supply. Small contractors often consider the five- to 50-unit projects too large to undertake, and large contractors consider the projects too small.
    • Risk allocation is lopsided: Owners have no recourse if, as first-movers, they invest in equipment that becomes technologically obsolete or becomes noncompliant with superseding state regulations soon after installation.
    • Predevelopment processes can be lengthy, expensive and cumbersome, potentially including gathering and analyzing historical data, conducting an energy audit and modeling energy savings projections.
    • There is no standardized solution — every project is essentially done from scratch.
    • There is no one-stop shop where small property owners operating on a thin margin with minimal resources can go for assistance with the many aspects of decarbonizing their buildings.

Suggested Remedies

Many of the problems cited in the report boil down to high cost and complex regulations, stubborn issues common to many endeavors in New York.

The report offers no ready list of solutions, but it does flag potential improvements, including increased funding, streamlined incentive programs, more proofs of concept, easily accessible technical assistance and a better-structured retrofit market.

Stakeholders offered some other suggestions:

    • Combining incentives offered through different agencies would help facilitate a project, but that is often impossible because the agencies do not coordinate with each other, or because the funding streams cannot be combined.
    • A new tax credit, abatement and/or exemption would be impactful, helping ease the financial weight of the work.
    • Utility cost breaks or monetized emission reductions would provide something that lenders could underwrite to.
    • Pairing public health care dollars with energy efficiency funding would monetize the health co-benefits of electrification.
    • Creating a form of secondary debt for electrification would sidestep the difficult prospect of financing such projects through the primary debt on the property.
    • On-bill financing for electrification or efficiency upgrades would be helpful, extending the repayment period and eliminating the need for upfront capital without competing with other debt.
    • A single entity or consortium could seek a single bid for multiple properties and ease the deficit of expertise that many of the owners of those properties have.
    • Larger financial institutions could meet their net-zero commitments by reducing the cost of capital.

The report was emphatic on this last point: “Stakeholders strongly emphasized that no matter how many incentives are offered, subsidies are provided or other funding levers are pulled, until the largest financial institutions begin putting their weight behind electrification, mass scale cannot be achieved.”

Along with their concerns and criticism, the stakeholders provided some positive reviews. They unanimously praised the state’s Climate Friendly Homes Fund, for example. The $250 million state initiative is intended to retrofit at least 10,000 units of multifamily housing in economically disadvantaged communities, and in so doing create a template for wider-scale work, establish best practices, demonstrate the feasibility of electrification and spread awareness of the need to electrify.

Another effort is the Clean Heat for All Challenge, designed to install low-cost, low-power heat-pump technology in New York City Housing Authority buildings. The cost of rewiring the authority’s 2,000-plus buildings for higher-voltage solutions would be staggering.

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MISO Welcomes Former Ford Exec to Board

The MISO Board of Directors next year will boast a former Ford Motor Co. executive after a vote of the RTO’s membership. 

Jeff Lemmer, former vice president and CIO at Ford, will begin a three-year term beginning Jan. 1, 2024. (See “Members to Vote on Whether to Place Former Ford Exec on Board,” MISO Board of Directors Briefs: Sept. 14, 2023.) 

Lemmer retired from Ford in 2020. While with the automaker, he managed an annual $2 billion budget and oversaw IT services for its global operations.  

Current Director Jody Davids will leave the board at the end of the year; she decided against seeking re-election after rounding out her first term.  

MISO members did re-elect Directors Robert Lurie and Theresa Wise to their second and third terms, respectively. Board members are limited to serving three, three-year terms. 

“Directors Lurie and Wise have proven to be instrumental in our continued success, and Director Lemmer brings a new perspective that will aid in our work to solve complex grid challenges,” MISO CEO John Bear said in a press release. “Our board represents a diverse group of leaders within and adjacent to the electric power industry, which provides us with a broad cross-section of experience.” 

MISO’s Nominating Committee — comprising two members and three directors — advanced Lemmer and the two incumbents for consideration in September after conducting interviews. Voting isn’t based on a choice between candidates but whether a nominated candidate can secure a majority of votes in support from the MISO membership in a monthlong electronic poll. 

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New Jersey Moves to Embrace Geothermal Heat Pumps

After years of largely overlooking geothermal, New Jersey has launched an effort proponents hope will better integrate the energy source into the state’s renewables portfolio.

The state Board of Public Utilities (BPU) on Sept. 14 began setting up a pilot project to help develop geothermal energy projects, boost consumer education and outreach about the technology and prepare a workforce ready to build such projects.

Under a board-approved Memorandum of Understanding, the BPU will work with the New Jersey Department of Environmental protection (DEP) to develop the pilot with the New Jersey Corporation for Advanced Technology (NJCAT), which helps verify technology and develop and grow energy and environmental technology-based businesses.

Proponents say the geothermal agreement could stimulate interest in the energy source, which has remained on the back burner even as the state in recent years has developed solar power aggressively and put together a program to harness wind through turbines to be located off the New Jersey shore.

In the past two decades, state help for geothermal projects has ranged from incentives of thousands of dollars that could cover most of a project cost to just a few hundred dollars that barely covered the cost of the paperwork, said Jim Thomas, owner of Thomas Geothermal Engineering of Tabernacle, N.J.

“Fifteen or 20 years ago, there was some hope that geothermal would be big,” Thomas said. But lately, “New Jersey has not had any record with geothermal,” he said, expressing optimism the latest initiative could reverse the pattern.

“It’s a huge task,” he said. “I’m glad that the state is finally reaching out for people like us to maybe help them do this. So it could turn out to be a watershed moment.”

Tapping Underground Temperatures

The renewed focus on geothermal energy comes amid a vigorous push by New Jersey to cut building emissions, the state’s second largest emissions source, mainly by shifting heat and hot water systems away from fossil fuel energy to electricity. In one initiative, the BPU in June released a $50-million-a-year, three-year plan to cut building carbon emissions by prioritizing a shift from delivered fossil fuels to electric heat pumps. (See NJ BPU Outlines $150M Building Decarbonization Plan.)

Geothermal heat pumps, also known as ground source heat pumps, harness the stable temperature of the ground soil deep below the surface — usually between 50 and 59 degrees Fahrenheit — to cool a building when the temperature of the air outside is high and warm it when the air temperature is low.

Some projects rely on a closed “loop” system, with a pipe that connects to a heat collector or system of underground pipes, tapping the ground temperature to warm or cool the fluid, depending on what’s needed. The heat or coolness is then extracted and used to heat or cool air or water, which is distributed around a building to alter its temperature. Other projects use an open-loop system, drawing water from a water source — such as ground water — and pumping it through the piping system and into the building before returning it to the source.

NJCAT suggests New Jersey focus only on closed loop rather than open-loop geothermal heat pump systems, in order to protect groundwater.

Interest in the technology is growing in other states, too, especially New York. Speakers at the packed NY-GEO Conference in May said the interest in geothermal has been helped by federal and local government promotion of the technology and the availability of tax credits in the recently enacted Inflation Reduction Act (IRA). (See Geothermal Heat Pump Industry Flush with Potential.)

The state on Sept. 21 enacted a law that would make it easier to pursue geothermal projects by loosening the regulations that govern closed-loop boreholes. (See NY Seeks to Unlock Geothermal Potential for Buildings.)

Short Term Pain, Long Term Gain

In New Jersey, despite the relatively modest recent support for geothermal projects, there are 3,400 geothermal heat pump systems in operation, 1,400 of which use a closed loop and 1,900 of which use the open loop system, according to the DEP.

The first major geothermal project in the state was at Stockton University in South Jersey, Thomas said. The now-30-year-old project heats and cools the campus with a system of 400 heat exchange wells containing plastic pipes drilled to a depth of 425 feet and connected. Water flows through pipes and the heat or cold — depending on the time of year — is extracted and piped into the buildings.

The most prominent project using geothermal techniques underway in the state is at Princeton University, which is developing a “geo-exchange” it calls a “thermal piggy bank” and describes as one of the largest in the world. The project, which consists of two systems that heat and cool campus buildings, is key to the college’s goal of reaching zero emissions by 2046 and is designed to store energy created in seasonal patterns rather than discarding it.

The project uses similar technique to a geothermal system, but rather than simply extracting heat from the ground and not returning it, as a geothermal system does, the geo-exchange stores heat energy in the ground and takes it out later.

“During summers, we take heat out of buildings and store it in the ground using geo-exchange bores to slightly warm the rock below campus,” according to a recent explanation by the college facilities department. “During winters, we use the same geo-exchange bores and warmed rock as a heat source for our buildings.”

Cost, Space Challenges

Ravi Patraju, associate executive director for NJCAT, said the organization believes geothermal heat pump systems can help the state reach its goal of cutting carbon emissions to 80% of their 2006 levels by 2050.

“We realized that with the current methods of heating and cooling residential and commercial buildings, that would not be achieved at all,” he said.

The state has in the past focused more on air-source heat pumps, which use the outdoor ambient temperature for heating and cooling, he said. Installers say a geothermal heat pump for a 2,000-square-foot home can cost between $15,000 and $38,000, double the price of a conventional HVAC system.

But air-source heat pumps are less efficient for heating and cooling, especially when the outdoor air reaches very low temperatures in the winter and very high temperatures in the summer, Patraju said. Air-source pumps use much more energy than geothermal heat pumps and so would pressure the state’s energy grid more, he added.

Geothermal heat pump systems, “if designed and installed properly, not only will it solve the space heating and cooling (problem), but also … pretty much give you the domestic hot water that you need,” he said.

The challenge, however, is getting a widespread buy-in for heating systems that are cost-efficient in the long run but require a greater upfront investment than a fossil fuel heating system, Thomas said.

“The difficulty becomes basically, you need to put pipe in the ground to exchange heat, which has meant you need to get a driller, and that’s a whole big deal,” he said. “It could easily add $15,000 to the cost of installation. … You could pick up a gas furnace for as little as $1,500.”

New Jersey in the past offered incentives of up to 80% of a project, which has been dramatically reduced, and even when projects were financially viable, the state lacked a support network of tradesmen, particularly drillers, to do the work, he said.

Another challenging issue, Thomas said, is the large amount of space needed to get drilling equipment into a house and where to put in bore holes. One solution under discussion, which would become more viable the more geothermal energy is embraced, is to have a shared loop, called a thermal energy network, he said.

“So you would not own the loop,” he said. “The loop would be owned by the utility, they would bill you monthly like they would for gas or electric, based on the amount of BTUs that you transfer.”

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PJM OC Briefs: Nov. 2, 2023

Stakeholders Endorse Winter Weekly Reserve Target

VALLEY FORGE, Pa. — The PJM Operating Committee on Nov. 2 endorsed the RTO’s recommended winter weekly reserve target (WWRT) for the upcoming season. 

The figure is used to coordinate outages over the winter to mitigate load and forced outage uncertainty. (See “PJM Presents Recommended Winter Weekly Reserve Target Values,” PJM OC Briefs: Oct. 5, 2023.) 

PJM’s Patricio Rocha Garrido said the study recommended values of 28% for December, 30% for January and 25% for February. All three months would have higher targets than last year’s study, which had 21% for December, 27% for January and 23% for February. 

The higher values are because of changes to the modeling of forced outages over the winter and the inclusion of data from December 2022’s Winter Storm Elliott and the 2014 polar vortex. PJM historically had not included the polar vortex data because of a belief it would not reflect conditions the grid was likely to experience again, but it revised that practice following Elliott. 

The WWRT is one of three components of the annual Reserve Requirement Study. The other two, the installed reserve margin and forecast pool requirement, were endorsed by the Markets and Reliability Committee during its Oct. 25 meeting. 

PJM Presents Operations Assessment Task Force 2023 Report

PJM’s Thinzar Aung presented the results of the Operations Assessment Task Force’s 2023 winter study, which found the RTO would have a reserve margin of about 17 GW under the conditions normally studied but would be short nearly 5 GW if the specific conditions during the December 2022 winter storm were to occur again. 

No reliability issues were found for the base case under the preliminary 50/50 peak load analysis, although some re-dispatching and switching would be required because of local thermal or voltage violations. 

A total of 181.1 GW of capacity is expected to be available in the study, with a 90/10 diversified peak load of 141.4 GW. 

The single largest gas/electric contingency would reduce available generation by 4.8 GW, the study found. Paired with 16.7 GW of generation outages assumed in the analysis, 5 GW of exports and 7.2 GW of demand response, that leaves a 16.8-GW reserve margin. 

The low wind and solar scenario would reduce generation by 4 GW, leaving a 17.6-GW margin. 

The Elliott scenario increases the generation outages to 46 GW, reduces demand response to 2.4 GW and assumes a net interchange of 2.8 GW in imports. In such a scenario, PJM would be short 4.8 GW of generation. 

PJM’s Chris Pilong said the Elliott scenario was designed to replicate the worst conditions seen during the storm. (See PJM Recounts Emergency Conditions, Actions in Elliott Report.) 

“It underscores the need to be prepared and, from a generation perspective, do everything we can to chip away at that 46,000 MW of outages,” he said. 

Quick-fix Manual Changes to Transmission Facility Cut-in Process Approved

Stakeholders endorsed a quick-fix proposal to allow PJM to delay energization of a line with a cut-in ticket if the transmission owner has not submitted evidence that all required critical tasks have been completed and the data verified by the RTO. The quick-fix process allows an issue charge and proposed manual changes to be voted on side-by-side. 

If the required data have not been received and verified by PJM by 11 a.m. on the day prior to the requested energization date, and extending the outage would not pose reliability concerns, the RTO will delay the in-service date by one day, which can be continued if the data continue to remain unavailable. PJM’s Dean Manno said it takes staff about one day to verify the data. 

Manno said critical tasks include submitting parameters such as ratings, impedance, telemetry for tie-lines and monitored priority. 

The changes are expected to be brought to the MRC for an endorsement vote Nov. 15. 

Generation Winterization Requirements Endorsed

The committee endorsed revisions to Manual 14D: Generator Operational Requirements, which include a requirement for resources to prepare for winter conditions and expanded the winterization checklist. 

Part of the manual’s periodic review, the revisions also include several administrative and clarifying changes. 

The checklist now prompts generation owners to assess safety hazards posed by snow and ice accumulation on wind and solar facilities, inspect commodities and resources that may be used in severe winter weather, and consider adding a “freeze protection operator” staff member to inspect critical equipment. 

PJM’s Vince Stefanowicz said generators can substitute PJM’s checklist for a comparable list of their own. 

Clarifying Revisions to Manual 10 Endorsed

The committee endorsed revisions to Manual 10 that would clarify that generators entering outages or their availability into eDART should report their full nameplate capability unless physically derated. 

Stefanowicz said physical derates are permanent changes to a resource that reduce its maximum output, such as components being taken offline that reduce output without the expectation of replacing them. 

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DOE to Cut Costs of Building Decarb with $30M BENEFIT Program

The U.S. Department of Energy on Nov. 6 opened a $30 million funding opportunity aimed at developing new technologies to help decarbonize the country’s building stock by improving efficiency and cutting costs of building retrofits.

Rolling out one of its trademark acronyms, DOE announced the Building Energy Efficiency Frontiers & Innovation Technologies (BENEFIT) program, which will support research, development and demonstration of new technologies for HVAC equipment, roof and attic improvements, and behind-the-meter energy management.

“The [funding opportunity announcement (FOA)] has the joint priority of making buildings more resilient [and] providing benefits to grid operators during periods of peak electricity demand and building occupants during grid outages and extreme weather events,” according to DOE. “Technologies developed in this FOA may also increase the viability and deployment of renewable energy technologies at scale by avoiding common triggers for costly upgrades, such as the need to trench new wiring to homes or increase the capacity of transformers or electrical load centers.”

While DOE has been regularly funding such R&D initiatives since 2014, according to the announcement, this year’s FOA is targeted at supporting the department’s eighth and last Earthshot, the Affordable Home Energy Shot, which Energy Secretary Jennifer Granholm launched in October at an affordable housing community in Chicago.

The goal of the initiative is to develop “next-gen” building energy-efficiency technologies that can reduce the cost of home upgrades for affordable housing by at least 50% while also reducing energy bills by 20% within a decade, Granholm said.

Those savings could be especially important for decarbonizing the “50 million single-family, multifamily and manufactured homes rented or owned by households earning less than 80% of the area median income,” DOE said.

“It’s hard to retrofit older homes,” Granholm said. “It’s older wiring, older lighting. So, one of the strategies is to look at the building envelope ― the roof, the walls ― how do you insulate those and insulate them in a way that doesn’t necessarily disturb the homeowner and cause them to have to move out?”

One possible solution would be insulation panels that can be attached to the outside of a home, which might also have “smart” wiring to connect to home appliances for demand management programs, Granholm said.

The Energy Shot — as well as the BENEFIT funding — is “about bringing down the price of all of these retrofits and installations to reduce the overall cost of energy on a month-to-month basis,” she said.

‘Pièce de Resistance’

According to DOE, residential and commercial buildings together are “the single-largest energy consuming sector of the U.S. economy.” In 2022, buildings represented 40% of total energy consumption, 74% of electricity use and 35% of energy-related carbon dioxide emissions.

Further, DOE said, “about one-third of the energy consumed in buildings is wasted, an estimated annual cost to American families and businesses of $150 billion.” Households that spend more of their disposable income on energy also are more likely to fall behind on their utility payments, the department said.

To cut the emissions, waste and utility bills, the BENEFIT FOA sets out four R&D priorities:

    • HVAC and water-heating technologies with “improved materials, components, equipment design and engineering, lower-cost manufacturing processes and easier installation.”
    • Technologies for affordable, scalable roof and attic retrofits, with a focus on energy efficiency.
    • Technologies that provide “novel approaches to maintain essential loads during blackouts and add power capacity to buildings without the need for major infrastructure upgrades.”
    • Commercial lighting upgrades, especially for commercial buildings and schools.

The FOA lays out the obstacles in developing new technologies. For example, upgrading space and water heating in commercial buildings, the announcement says, “can present complex challenges, including, but not limited to, replacing and retrofitting hydronic systems, designing solutions that overcome space constraints, addressing water heating temperature requirements, cost, contractor training for new technologies and managing occupant disruption.”

Hydronic systems provide heating and cooling via circulating water.

DOE is encouraging organizations interested in the funding to form teams, including community groups. Initial concept letters are due Dec. 18, with full applications to follow March 5, 2024. The expected date for award announcements is June 25, 2024.

Speaking in Chicago, Granholm said that as the eighth and last Earthshot, the Affordable Home Shot is the “pièce de resistance” of the program. “All of the rest have led to it.”

“To me, it’s all about the word ‘all’ — the great three-letter word,” she said. “No matter where you live — whether you live in Englewood or you live in a newly renovated home on a tree-lined street in Evanston — no matter what the size of your wallet, you should be able to have access to affordable and reliable power.”

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APS IRP Envisions Increased Renewables, Natural Gas

Arizona Public Service has filed a 15-year resource plan that lays out a strategy for meeting increasing demand and replacing capacity lost from its coal plant exit.

The plan calls for investment in “hydrogen-capable” natural gas generation, which will serve as a backup for wind and solar resources and maintain reliability.

The Palo Verde nuclear plant, which APS co-owns and operates, also will help manage costs and strengthen reliability, APS said.

Renewables will grow from 16% of APS’ energy mix to 43% in 2038, according to the integrated resource plan filed last week with the Arizona Corporation Commission (ACC).

“The immediate path ahead is clear: continued investment in affordable renewable technologies, utility-scale battery energy storage and additional hydrogen-capable natural gas facilities to provide necessary peaking and overnight load support,” APS said in its IRP.

Now that the IRP has been filed, stakeholders will have an opportunity to comment and APS will have a chance to respond before the ACC reviews the plan.

Four Corners Exit

In the plan, APS promises to exit by 2031 from the coal-fired Four Corners plant, which it operates and partly owns. APS plans to no longer have ownership in the facility by 2031, the company said in an email.

Environmental groups have called for an earlier exit from Four Corners, pointing to projections of significant cost savings from a 2028 closure.

But APS said an earlier exit creates “too significant a risk to customers at this time,” given obstacles to new resource development.

“APS does not support the early exit from Four Corners due to the grid reliability risks associated with the transition to newer, nascent technologies and increasingly limited excess capacity across the Western U.S. region,” the plan said.

The company said it will continue to study the feasibility of leaving Four Corners before 2031 as conditions change.

The IRP also has been criticized for its reliance on fossil fuels. Although coal disappears from APS’ portfolio after 2031, gas and oil hover at around 20% of the energy mix through 2038.

Alex Routhier, the Arizona clean energy manager at Western Resource Advocates, said APS must do more to speed its clean energy transition.

“We commend APS’ pledge to double its renewable energy resources by 2030, but its plan contains significant flaws,” Routhier said in a statement.

WRA said utilities must reduce their carbon emissions 80% from 2005 baseline levels by 2030 to be aligned with science-based climate goals.

APS projects its greenhouse gas emissions will fall from 9.3 million metric tons in 2023 to 6.7 million metric tons in 2038. Emissions in 2038 will be reduced 60% compared to 2005 baseline levels.

APS has pledged to be 100% carbon-free by 2050.

Growth Forecast

APS projects its customers will need about 14,820 MW of electricity in 2038, compared with the company’s 9,400 MW of total energy resources this year.

Contributing to the expected load growth are data centers and large industrial customers, which are attracted by the dry climate and low risk of natural disasters, APS said. Other factors are a growing population and electric vehicle adoption: APS expects more than 1 million EVs in its service territory by 2037.

Increased demand is projected to be 12,997 GWh for new data centers, 3,406 GWh for EVs and 657 GWh for residential customers.

To help meet the growing demand, APS plans to add more than 6,000 MW of solar and wind power, coupled with battery storage, by 2027.

The plan also calls for natural gas peaking resources, which could be built at existing coal plants, saving money by reusing existing infrastructure.

APS is planning about 1,800 MW of additional natural gas resources through 2038, partly offset by the retirement of around 300 MW of aging facilities.

Battery Storage, Microgrids

APS said it plans to invest heavily in battery storage, which will allow it to take advantage of low-priced excess solar generation from throughout the region. At times, APS said, market participants will even pay APS to take excess solar energy.

Still, the company said it’s planning a “responsible integration of this nascent technology” and is capping battery storage at 3 GW through 2027.

“APS will continually evaluate this cap as more industry experience is gained,” the IRP stated.

Microgrids are another strategy in the IRP. They’re expected to provide about 800 MW of capacity by 2038.

APS said it could partner on microgrids with large customers, such as data centers or factories.

“Since utility-integrated microgrids are dispatchable, they provide resource adequacy critical for reliability and resiliency,” APS said.

But if customers decide not to partner with APS on microgrids, the company likely would seek more natural gas resources.

Western Market Impacts

APS joined CAISO’s Western Energy Imbalance Market (WEIM) in 2016, a move that so far has saved $375 million. APS also has been involved in development of CAISO’s Extended Day-Ahead Market (EDAM) and SPP’s competing Markets+.

“The creation of a day-ahead market can enable additional benefits for customers, and it is critical that these markets have independent governance and that all participating entities operate on an equal footing,” APS said.

The company said it expects to commit to one of the day-ahead programs after FERC approves tariffs for each.

For now, APS isn’t including day-ahead market participation in the IRP’s quantitative analysis.

“As potential day-ahead market structures become more certain, APS will be able to estimate the cost impacts in future IRPs from different programs and options,” the company said.

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PJM PC/TEAC Briefs: Oct. 31, 2023

Planning Committee

Stakeholders Endorse Changes to 300-MW Load Loss Criteria

VALLEY FORGE, Pa. — The Planning Committee endorsed revisions to Manual 14B to specify that the 300-MW load loss to be considered in transmission contingency analyses applies only to losses affecting a large number of customers.  

PJM’s Stan Sliwa said the change is meant to address the growth of data centers and other large load customers, which can cause a single large customer to surpass the 300-MW threshold in PJM’s reliability planning criteria.  

The proposed manual changes specify the requirement applied to load loss “impacting numerous customers” and states that the limit is not applicable to “contingencies impacting several customers that aggregate to 300 MW or higher.” 

The proposal also would grant PJM discretion to permit load loss above 300 MW on a case-by-case basis, which PJM Director of Operations Planning Dave Souder said is meant to build on the goal of targeting outages affecting a large area. 

Transmission Expansion Advisory Committee

Two Generation Deactivations Being Studied

PJM is conducting reliability analysis of two generators that have filed deactivation notifications: the 844-MW H.A. Wagner generator, owned by Talen, and the 180-MW Warrior Run Unit 1, owned by AES.  

PJM’s Perry Ng said a preliminary analysis found the retirement of the Wagner plant, which can run on coal, natural gas, and oil, would cause reliability violations. Talen has requested to take the plant offline on June 1, 2025,  

The study assumed the continued operation of Talen’s 1,295-MW Brandon Shores coal plant, whose scheduled retirement is expected to require $786 million in transmission upgrades. (See “Brandon Shores Deactivation to Require $786M in Grid Upgrades,” PJM PC/TEAC Briefs: June 6, 2023.) Both generators are sited in the Baltimore Gas and Electric transmission zone. 

The Warrior Run retirement is not expected to prompt any reliability concerns, Ng said. He said the completed analysis of the 4-MW Trent generator deactivation request found no issues. 

Supplemental Projects

FirstEnergy has revised its proposed solution to replace an aging transformer at its Homer City North 345/230-kV substation because the equipment won’t be available for over a year beyond the desired in-service date in December 2023 due to backlogged procurement schedules. The original $6.6 million project would replace the transformer with a new unit rated at 691/854 MVA and install an auxiliary 230/23-kV transformer; the new proposal would use a higher rated 913/1,147-MVA transformer and drop the auxiliary component. 

Commonwealth Edison presented a $24.1 million project to replace a 345/138-kV autotransformer and capacitor bank at its Des Plaines substation, where mechanical issues have caused the transformer to be taken out of service periodically. The project has an in-service date of Dec. 31, 2025.  

PECO presented a $18.2 million project to rebuild two 96-year-old lines nearing their end of life: the 2.5-mile Plymouth Meeting-Flint 230-kV double circuit line and the Plymouth Meeting-Upper Merion 230-kV double circuit line. The Plymouth Meeting-Flint project has an estimated cost of $18.2 million, while the Plymouth Meeting-Upper Merion work has a $29.2 million cost. The projects also involve upgrades at the three substations. 

Public Service Enterprise Group presented a $105.1 million project to build a greenfield 69/13-kV substation, named Harlingen, in Hillsborough, N.J., to address rising loads at its Sunnymeade and Mount Rose substations. The substation would be cut into the Bennetts Lane-Montgomery 69-kV line and the Montgomery-Customer Sub 69-kV line. The work also includes the addition of a second 230/69-kV transformer at the Bennetts Lane substation and modifications to the buses at that facility. 

Dominion has updated a $55 million project to interconnect a new substation, Germanna, to serve a data center complex in Culpeper County, Va., with a projected 124-MW load. The substation would be cut into the Cirrus-Gordonsville 230-kV line, with an in-service date of April 16, 2026. 

AEP presented a $116.7 million project to rebuild 19 miles of its Marysville-Hyatt double circuit 345-kV line due to aging infrastructure, concerns of core corrosion and difficulty finding replacement parts. The utility stated it has about 570 miles of “paper expanded/air expanded” line rated at 345-kV in its footprint which will need replacement over the next 20 years. The Marysville-Tangy line has experienced two “permanent” and three “momentary” outages. 

AEP also presented a need for a serving a new 1,500-MW data center customer in New Carlisle, Ind., with a requested in-service date of Dec. 15, 2026. 

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Texas PUC OKs Smaller Budget, Admin Fee Increases for ERCOT

Texas regulators last week rejected ERCOT’s proposed budget and administration fee increase, agreeing instead to a more incremental growth in its revenues. 

The Public Utility Commission cut a little over $31 million from the grid operator’s original biennial budget request that was approved by its Board of Directors in June. It also set ERCOT’s administration fee at 63 cents/MWh, 11.2% lower than its first ask of 71 cents/MWh. That still is a 13.5% increase over the current admin fee of 55.5 cents/MWh. It goes into effect Jan. 1 (38533). 

ERCOT now will work with budgets of $405.7 million and $414.3 million to cover operating expenses, project spending and debt-service obligations over the next two years. It originally requested $424.03 million and $426.99 million for 2024 and 2025, respectively. 

“It is important for ERCOT to look out into the future to have stability. … I don’t like rate shock,” Commissioner Will McAdams said during the Nov. 2 open meeting. He decried the magnitude of ERCOT’s financial requests during the PUC’s previous open meeting in October. (See ERCOT Defends Admin Fee Increase Before PUC.) 

ERCOT had offered to revise the budget to $414.7 million and $416.6 million over the next two years and the admin fee to 69 cents/MWh, taking advantage of a positive $36.2 million variance identified since the June board meeting. But it wasn’t enough. (See “F&A Proposes Revised Budget,” ERCOT Board, IMM Debate Ancillary Service Costs.) 

The commission linked its approval of the budget to ERCOT’s ability to meet performance measures suggested by Commissioner Lori Cobos. They include: 

    • Delivering a value of lost load study associated with a reliability standard’s development in the first quarter of 2024. 
    • Implementing the dispatchable reliability reserve service ancillary product “as expeditiously as possible” and aligning it with the real-time co-optimization plus battery project (RTC+B). (See “TAC Tables DRRS Revision, to Discuss Options with PUC,” ERCOT Technical Advisory Committee Briefs: Oct. 24, 2023.) 
    • Implementing the performance credit mechanism market design and aligning it with RTC+B as well. 

The commission also directed ERCOT to provide it with quarterly progress reports on meeting the performance measures and an annual report related to the key performance indicators in the grid operator’s August budget submission. 

After the first admin fee increase since 2016, it will not be taken up again until 2026. ERCOT CEO Pablo Vegas said this will provide staff a stable environment as they work with stakeholders to reshape the market. 

“We are operating one of the most complex systems in the world, and arguably the most complicated in the United States right now,” Vegas said. 

Commissioner Jimmy Glotfelty urged ERCOT to “become more efficient” in reducing costs. “Too many across-the-board salary increases; too many across-the-board bonuses,” he said, pointing to $23.2 million of proposed incentives. 

ERCOT’s plan to increase its staff from 843 to more than 1,000 was met with objections from the PUC and several stakeholders commenting in the docket. The grid operator said it needs the staff to fight legal challenges dating back to the February 2021 winter storm and to respond to a nearly 300% increase in legislation introduced since the storm. The latter will require more public affairs personnel and office space near the state Capitol, ERCOT has said. 

Vegas said a 1,000-person headcount is typical of other grid operators. SPP, which manages transmission across a 14-state footprint — its western expansion will add at least four more — requested 707 employees in its 2024 budget request that was approved last month. 

Reacting to ERCOT’s plans for additional office space and more public affairs personnel, state Sen. José Menéndez (D) said, somewhat sarcastically, “Quite frankly, I will be happy to share office space with ERCOT instead of a multimillion-dollar increase to my constituents.” 

Monitor to Stay Independent

The PUC also accepted staff revisions to the request for proposals for the 2024-2027 market monitoring contract after receiving pushback from lawmakers and some stakeholders. 

The proposed “electric market monitor” position will remain the “independent market monitor,” signaling the Monitor’s independence from ERCOT. State Sen. Charles Schwertner (R), the architect behind most recent market legislation, filed a letter with the commission saying the original RFP’s language implied the Monitor no longer is “truly independent” (55222). (See ERCOT Monitor’s Name Change Raises Legislative Concerns.) 

PUC’s Barksdale English | Admin Monitor

“Hearing the concerns that have been expressed in public, I recognize the specific words I put in [the contract] are misleading. I want to walk those back,” said Barksdale English, director of compliance and enforcement for the PUC. 

The revised RFP also removes language requiring the Monitor to notify the commission before speaking publicly and clarifies that the contract’s termination is to be discussed and voted on in a public forum. 

Potomac Economics, which has served as ERCOT’s IMM since 2006, is the only organization that has responded to the RFP. Responses were due Oct. 30, and the contract begins Jan. 1. 

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PJM MIC Briefs: Nov. 1, 2023

VALLEY FORGE, Pa. — Generators that plan to come online by the start of the 2025/26 delivery year will have until Dec. 12 to notify PJM of their intent to participate in the Base Residual Auction (BRA) for that year, slated for June 2024.

PJM’s Pete Langbein told the Market Implementation Committee Nov. 1 that resources that do not notify the RTO by Dec. 12 will not be permitted to participate in the BRA; those that do will be required ultimately to enter an offer.

The requirement is one of several prospective changes to the capacity market that PJM has filed at FERC following the Critical Issue Fast Path (CIFP) process that concluded in October; if the filing is not approved, the notification process will be the same as in past years, with no firm requirements. (See PJM Files Capacity Market Revamp with FERC.)

Langbein said that if a planned resource notifies PJM it will be participating in the auction, any capacity it does not offer cannot be used in that delivery year, including through Incremental Auctions (IAs). He gave the example of a generator that could offer 100 MW into the auction entering in 80 MW. That resource would not be able to offer the remaining 20 MW into subsequent IAs for that delivery year.

An information session will be held Nov. 8 to go over the template that generation owners will be asked to submit to PJM to make the notification. Questions can be submitted to rpm_hotline@pjm.com.

Manual Revisions for New Performance Assessment Interval Triggers Endorsed

The MIC endorsed conforming revisions to Manuals 11 and 18, which sets the capacity market rules, to codify changes to the triggers initiating a performance assessment interval (PAI).

The changes were approved by the Members Committee in May and signed off on by FERC on July 28. (See FERC Approves PJM Change to Emergency Triggers.)

Generators with a capacity commitment are required to meet or exceed their obligation during a PAI or face penalties, which in the case of the December 2022 winter storm amounted to about $1.8 billion.

The changes would set two conditions for triggering a PAI, with the first requiring a primary reserve shortage paired with any one of the following: a voltage reduction warning and reduction of noncritical plant load; manual load dump warning; maximum generation emergency action; or curtailment of nonessential building load.

The second condition requires a deploy-all-resources action, manual load dump action, voltage-reduction action or load-shed directive.

The MC approval of the trigger changes also included modifications to the penalty structure that generators are subject to, but PJM’s Board of Managers included only the trigger changes in the FERC filing. Changes to the penalty structure are included in the CIFP proposal submitted to the commission Oct. 13. (See PJM Board Rejects Lowering Capacity Performance Penalties.)

Stakeholders Endorse Issue Charge on DR Energy Market Parameters

The MIC endorsed an issue charge to explore creating new parameters that demand response resources can enter into the energy market. (See “Voltus Withdraws Issue Charge on DR Offer Parameters” PJM MIC Briefs: Sept 6, 2023.)

Voltus Vice President of Energy Markets Emily Orvis said DR generators lack equivalents to some of the parameters thermal generators can include in their offers, namely maximum run times and minimum times between deployments. Adding those parameters would be particularly beneficial for consumers who can shift building heating and cooling away from peak grid periods, she said. While that energy use could be deferred, temperatures would need to be regulated after some time and a recovery period might be needed before load could be curtailed again.

Resources can offer themselves into the market for specific times of day, but that must be manually done each day and is not flexible. If a resource can be available for only two hours, it would have to choose two hours ahead of time and mark itself as available. Orvis said creating a new parameter would give PJM dispatchers flexibility to call on short-duration DR resources when they would be most economical.

Much of Wednesday’s discussion focused on educating stakeholders on how any changes to energy-only DR resources could affect accrediting corresponding capacity resources under the effective load-carrying capability (ELCC) methodology.

Langbein said economic DR participating in the energy market is treated as a separate resource from load management in the capacity market, and the parameters of one would not affect the other.

Calpine’s David “Scarp” Scarpignato pushed for discussion of any potential interactions with ELCC accreditation to be included as an educational item to check for unintended consequences.

Independent Market Monitor Joe Bowring argued the issue charge should allow for changes to the capacity rules for DR if any interactions are identified during the education process and said market rules should reflect differences between resources.

“The issue is to ensure that any such demand-side resource with limited response times should not be allowed to be a capacity resource because the proposed limits are not consistent with the obligations of demand-side capacity resources,” Bowring said.

Orvis said her priority is to keep the discussion focused on changes to the energy market side, but she acceded to adding education on ELCC interactions to the in-scope portion of the issue charge.

EE Resources Concerned About Issue Charge on Market Participation

PJM presented a first read of a problem statement and issue charge to consider how energy-efficiency resources participate in the capacity market.

Langbein said EE was introduced to the capacity market about a decade ago without any subsequent consideration of how it is functioning, and staff feel it could use a fresh set of eyes.

The work timeline was set at nine months, with the idea that if changes are identified that could be implemented quickly, they could be made in time for the 2025/26 BRA. Langbein said staff aren’t trying to rush any changes and if stakeholders desire more time, the work could continue longer.

Several EE market participants expressed concern about the wide range of the issue charge and urged PJM to include more clarity on the scope. They also sought assurance there would be adequate time for any changes to be understood by all stakeholders and for them to make necessary changes to their offers for the next capacity auction.

Luke Fishback of Affirmed Energy said setting the scope of the issue charge to be so broad makes it difficult for EE market participants to evaluate where the discussion may go and how it may affect their operations, creating a chilling effect. He suggested a phased approach would be preferable to allow any changes that can be made ahead of the auction to be considered while minimizing market disruption before more substantial changes.

“Let’s give adequate time and space for the exercise of evaluating a resource and, in the near term, make sure that market participants can make investments that support their class of resources,” he said.

The problem statement says PJM’s capacity market has seen significant changes since EE was introduced. EE clearing the capacity auction has grown from 78.1 MW in DY 2011/12 to 7,668.7 MW in the 2024/25 BRA, making up about 5% of the capacity procured.

The issue charge would “evaluate EE participation and consider opportunities to eliminate ambiguity regarding what qualifies as an EE resource and ensure the energy saving attributed to the EE resource is nonbiased, accurate and reasonably consistent across providers” and make any changes toward those ends.

Other Committee Business

Stakeholders endorsed an addition to Manual 11, which relates to energy and ancillary services market operations, to define the amount of energy intermittent resources with a capacity commitment are obligated to enter into the day-ahead market. Resources should enter either the larger of their economic maximum value or their expected output based on hourly forecasts. Resources could use PJM’s forecast to estimate their availability or substitute their own forecast so long as it has a higher confidence interval.

The committee also endorsed a quick-fix solution brought by PJM seeking to revise references and typos in Manual 11. The quick-fix process allows an issue charge and solution to be voted on concurrently.