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November 11, 2024

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Long-term Optimism Meets Short-term Concern at Offshore WINDPOWER 2023

BOSTON — With construction underway for the country’s first large offshore wind projects, government, nonprofit and industry representatives from across the U.S. came here to discuss the industry’s progress and prospects for the American Clean Power Association’s Offshore WINDPOWER conference.

The slogan for the conference (“STEEL IN THE WATER. PEOPLE AT WORK.”) — which was featured prominently on the merchandise, the pre-conference trailer video, and screens and posters throughout the convention center — invoked this major first step forward for the industry.

There was great uncertainty about when the next wave of steel will hit the water on the East Coast and the people these projects will employ will get to work. The developers for Massachusetts’ Commonwealth Wind and SouthCoast Wind projects backed out of their power purchase agreements in recent months: Avangrid reached an agreement at the start of this month to exit the PPAs for its Park City Wind project in Connecticut; Rhode Island’s electric distribution company rejected the only bid from its last solicitation; and four New York projects under active development are in limbo as they seek better terms for their contracts.

While developers can rebid projects that have canceled their PPAs at future auctions, the question remains whether they can find a price that states and utilities deem acceptable to pass on to ratepayers. But speakers at the conference argued that it was only a matter of when, not if.

At a panel featuring state legislators from Massachusetts and California, Massachusetts Rep. Jeff Roy (D-Franklin), co-chair of the Joint Telecommunications, Utilities and Energy Committee, urged developers to send in strong bids for the state’s solicitation and boasted about “the most robust wind in the entire contiguous United States right here off the coast of Massachusetts.”

At the same time, Roy said, the state will be faced with difficult questions around “how much are we willing to spend” when the project bids are due at the end of January.

Supply Chain, Interest Rates and Inflation

“It’s easy to focus on the doom and gloom of the moment right now,” Sam Huntington, director of climate and sustainability at S&P Global, said at a panel on global economics and offshore wind. “There’s still a lot of room for optimism. … There’s just a tremendous commitment to this.”

The industry has been hit with “a perfect storm of supply chain snarls,” Huntington said.

Walt Musial, a principal engineer at the National Renewable Energy Laboratory, said cost pressures from high interest rates and expensive commodities like steel should subside in the coming years. However, “there’s still going to be this issue around supply chain deficits and the inability of suppliers to meet demands.”

As countries and developers across the world all look to scale up offshore wind at the same time, the panelists expressed worry that delays could push the next round of projects back into the 2030s.

In the long term, Musial said he remains confident about the industry, calling it a “cornerstone” of New England’s future electricity supply.

“With climate change as a background, we have to do this,” he said.

Søren Lassen, head of offshore wind research for Wood Mackenzie, called the supply chain issues the industry’s “greatest challenge.” He said the combined issues of supply chain constraints, high interest rates and inflation hit the nation’s industry right as it was trying to make the jump from a small, subsidized industry to the commercial scale.

Lassen said these setbacks could put national and statewide clean energy commitments in jeopardy: An August report by his firm found governments across the world (excluding China) would need to invest about $100 billion in the supply chain by 2026 to meet their 2030 offshore wind goals. (See Report Quantifies OSW Supply Chain Constraints.)

“We don’t think that’s feasible, to be frank,” Lassen said.

Supply chain constraints could also be the limiting factor for the size of offshore wind turbines, which have increased rapidly in recent years. While Huntington said that larger turbines could be the key to lower costs in the long term, Musial cautioned that further increases in blade sizes will only put additional stress on the existing supply chains.

Musial said that industry should “double down” on 15-MW turbines to flatten the learning curve and bring costs down.

For context, Vineyard Wind 1 is being constructed with 13-MW turbines, while Vestas has been testing its 15-MW prototype this year, and General Electric is developing an 18-MW prototype.

“Any attempt to go larger than [15 MW] will just delay progress,” Musial said.

On a panel about installation vessels, Graham Tyson of Crowley Wind Services said that the increase in turbine size is an obstacle to investing in new vessels.

Tyson said investors need “a good eight to 10 years of life out of each turbine class” to justify investment in a new vessel, and either overbuilding or underbuilding the size of the ship poses significant risks.

“You want to know that there’s work for it,” Tyson said.

From left: Sam Huntington, S&P Global; Walt Musial, National Renewable Energy Laboratory; Søren Lassen, Wood Mackenzie; Jennifer McDermott, Associated Press | © RTO Insider LLC

Federal Support Needed

Speakers throughout the conference called for more federal support for states and developers to help overcome the industry’s recent struggles.

“States cannot do this alone,” said Catherine Klinger Kutcher, director of the New Jersey Governor’s Office of Climate Action and the Green Economy, adding that the state remains committed to offshore wind.

In mid-September, the governors of Connecticut, Maryland, Massachusetts, New Jersey, New York and Rhode Island signed a joint letter asking President Joe Biden for additional federal help for the industry. (See Northeast Governors Ask Feds to Assist OSW Industry.)

“Without federal action, offshore wind deployment in the U.S. is at serious risk of stalling because states’ ratepayers may be unable to absorb these significant new costs alone,” the governors wrote, citing the cost pressures of inflation, lingering supply chain disruptions and Russia’s invasion of Ukraine.

The governors asked Biden for updated guidance on the available clean energy tax credits, a new revenue sharing program for offshore wind leases and a streamlined clean energy permitting process.

In her keynote speech to the conference, Massachusetts Gov. Maura Healey (D) emphasized the importance of federal support, calling for additional resources while applauding the steps that the Biden administration has already taken.

“We can only control so much as states,” Healey said. “We need all parts of the federal administration to work with us to understand that this is our moment.”

Others expressed concern about the effects a new president — presumably Donald Trump, whose name was often implied but infrequently mentioned by speakers — could have on the industry and clean energy efforts more broadly.

Stakeholders should make the best possible use of the Inflation Reduction Act, said Damian Bednarz, managing director of Attentive Energy. “We cannot take any of this for granted,” he said.

SouthCoast CEO Francis Slingsby said stakeholders must specifically push to expedite clean energy permitting processes under the current administration and “make hay while the sun shines.”

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PJM PC/TEAC Briefs: Oct. 3, 2023

Stakeholders Endorse Reserve Requirement Study Values

VALLEY FORGE, Pa. — The Planning Committee endorsed the installed reserve margin (IRM) and forecast pool requirement (FPR) values PJM recommended in the 2023 Reserve Requirement Study (RRS), which calls for an increase in procured capacity for the 2027/28 delivery year (DY). (See “First Read of 2023 Reserve Requirement Study,” PJM PC/TEAC Briefs: Sept. 5, 2023.)

The IRM, which sets the targeted capacity level above expected loads, would rise from 14.7% for the 2026/27 DY in the 2022 study to 17.6% for the 2027/28 DY. The FPR, which includes forced outage rates, also would increase from 9.18% to 11.65% for the corresponding DYs. The figures are slated to be considered by the Markets and Reliability Committee (MRC) and Members Committee (MC) next month, followed by the Board of Managers in December.

This year’s RRS included a few differences from past analyses, including a second methodology for setting the IRM and FPR using the hourly loss-of-load modeling developed for effective load-carrying capability (ELCC) studies. PJM also included data from the 2014 polar vortex and the December 2022 winter storm, reversing a historical practice to not include the polar vortex data in the study’s modeling based on the impact of Winter Storm Elliott.

PJM’s Patricio Rocha Garrido said the main drivers for the recommended reserve margin increase are higher uncertainty in peak load forecasts and the higher forced outage rates in the winter owing to extreme weather. Shifting to hourly modeling of peak loads, separate from the ELCC analysis, also contributed to the higher margins.

Minimal coincidence between the PJM peak load period and the “world” peak — which is defined as MISO, NYISO, TVA and VACAR — more than doubled the capacity benefit of ties (CBOT) value to 2.2% from 1% in the 2022 study. To reduce volatility, PJM elected to average the CBOT values from 2017-22 and use that figure, which landed at 1.5%, instead.

The load model, which included data from 2013-19, contributed to a 2.1 percentage point increase in the IRM, while the winter peak week caused a 1.1 percentage point increase. The values were slightly lower for the FPR drivers. The 1.5% CBOT contributed to a 0.5 percentage point decline in the IRM value and 0.58 percentage point decrease in the FPR.

The hourly approach resulted in higher recommended values — an IRM of 18.3% for the 2027/28 DY and a 12.31% FPR — with much of the difference from the PRISM values arising from the load model. PJM ran both models for this year’s RRS analysis, but it plans to shift to using the hourly approach only in the long term.

During an August Resource Adequacy Analysis Subcommittee meeting, James Wilson, a consultant to state consumer advocates, calculated the recommended values would constitute an approximate 3,700-MW increase in the summer reserve margin.

More Extensive Guidelines for Load Forecast Adjustment Endorsed

Stakeholders endorsed a PJM quick fix proposal to increase the granularity of the data included in load forecasting requests, as well as how far out it should seek to adjust future load estimates. The quick fix pathway allows a problem statement and issue charge to be brought concurrent with a proposed solution. (See “PJM Presents Quick Fix on Load Forecast Guidelines,” PJM PC/TEAC Briefs: Sept. 5, 2023.)

Under the proposal, load forecast adjustments would need to include a 15-year forecast and the granularity of the load history electric distribution companies (EDCs) and load serving entities (LSEs) are asked to provide would be increased to hourly. If no load history exists, the adjustment request should include the “expected hourly behavior of load.”

Requests would be required to come with a public document detailing how the forecast adjustment was calculated. Also, the process of assessing adjustments would begin earlier, with the Load Analysis Subcommittee (LAS) initiating its work in September and October under the proposal.

PJM’s Molly Mooney said the proposal is focused on data center loads, which are difficult to capture in the RTO’s existing processes, which rely on federal labor data that doesn’t match up well with the electrically intensive data industry. Data center developments also tend to have a short period between their initial requests to interconnect and their in-service date, making advanced forecasting more critical.

Wilson said the proposed language doesn’t make it clear that PJM is seeking only to add the amount of the forecast above the embedded amount and not double count loads already captured in the existing analysis. He encouraged PJM to hire a consultant with the expertise to do a 15-year forecast of data center loads, rather than leaving it up to EDCs and LSEs to report their own expectations and data.

PJM has made some modifications to the proposed Manual 19 revisions since the proposal’s first read in September, specifying that when the RTO conducts annual information requests about significant shifts in load from electric distribution companies (EDCs), it is seeking information about changes within their service areas. The new language also states that any documentation of EDCs’ or LSEs’ internal financial or planning forecasts supplied to PJM will be confidential.

First Read of Periodic Review of Manuals 19 and 14B

PJM presented a first read of several revisions to Manuals 19 and 14B resulting from the documents’ periodic review.

Revisions to Manual 19 added information reflecting the change to hourly peak load modeling in the load forecast and sought to clarify the procedure when forecasting price-responsive demand.

The changes to Manual 14B are intended to clarify that the 300 MW load loss criteria — which is meant to address load loss impacting a large number of customers — would be expanded to specify that it covers numerous customers, rather than single large-load customers such as data centers. PJM also would be granted the ability to review instances of the rule case by case. The criteria is a consideration when modeling outages in the Regional Transmission Expansion Plan (RTEP).

Both sets of manual changes are set to be considered for endorsement by the PC at its Oct. 31 meeting.

Transmission Expansion Advisory Committee

AEP Proposes $216 Million in Transmission to Support New Steel Mill

American Electric Power (AEP) proposed a $215.8 million project to construct several 345-kV lines and a new substation to serve a new industrial customer with an estimated 450 MW load near Apple Grove, W.Va.

In the first phase of the project, two new 345-kV lines would be cut into the Sporn–Tri-State line to run to a new Mercers Bottom 345-kV substation. The customer would be served by two single-circuit 345-kV feeds around 0.75 miles from Mercers Bottom, as well as a 138-kV line that would be cut into the Apple Grove–South Point line. The total phase one cost is estimated at $70.8 million with an estimated in-service date of Dec. 15, 2025, to meet the customer’s request to interconnect by the end of 2025.

Phase two would focus on meeting the customer’s short circuit strength needs under N-1 contingencies and would involve constructing an additional 26-mile 345-kV line from Sporn to Mercers Bottom, accompanied by an additional circuit breaker at Sporn. The projected in-service date for phase two is Dec. 15, 2029.

AEP said the industrial customer is a steel mill planned in the region, but it could not provide further detail at this time. Nucor is planning to construct a $3.1 billion electric arc furnace steel mill in Apple Grove with power supplied by a new Appalachian Power substation, according to an announcement from U.S. Sen. Joe Manchin (D).

Other Supplemental Projects:

    • Commonwealth Edison (ComEd) proposed a $149 million rebuild of its 26.4-mile Kincaid–Pana (Ameren) line, saying 56-year-old wood poles and components are at their end of life and have sustained woodpecker damage. The line also suffered outages when crossarms broke under clear weather conditions. The project, still in the conceptual phase, has an estimated in-service date of Dec. 31, 2026.
    • ComEd also proposed a $264 million project to replace a 345-kV straight bus with a gas insulated substation with 34 circuit breakers in a breaker and half configuration. The utility stated that 14 breakers are deteriorating and a failure of one could cause an outage on seven 345-kV lines and two autotransformers. The project is in the conceptual phase with an estimated in-service date of Dec. 31, 2028.
    • Dominion submitted needs for two new 230-kV substations, World Gate and Mercator, in Fairfax County, Va., to serve data centers with loads exceeding 100 MW. The needs have a targeted in-service date of June 1, 2027.
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Overheard at GCPA’s Annual Fall Conference

AUSTIN, Texas — The Gulf Coast Power Association welcomed a record 829 attendees to its 38th annual Fall Conference, smashing the previous high of 766. They gathered Oct. 2-4 for discussions and vignettes on virtual power plants, resource adequacy, new technologies, grid resiliency, energy efficiency and demand response.

Stoic Energy’s Doug Lewin, introduced as “a man who has commandeered a cultlike following for his insight and passion for clean power and efficient solutions for greater reliability and resiliency” and a “voice of many too nervous to speak,” keynoted the conference’s second day and its focus on energy efficiency and residential demand response.

Stoic Energy’s Doug Lewin keynotes GCPA Fall Conference’s second day. | © RTO Insider LLC

That has been Lewin’s north star since the disastrous 2021 winter storm that nearly brought down the ERCOT grid. A prolific user of the social network formerly known as Twitter, he has consistently espoused efficiency and residential demand response as answers to ERCOT’s difficulties in meeting soaring demand.

Armed with charts, graphs, news clips and data to bolster his point, Lewin asked, “How do we create a highly reliable grid at the least possible cost that will provide abundant and cheap power to as many people as possible?

“Texas has been focused on reliability for a while now, but affordability is also a key part piece of the puzzle,” he added. “Texas ranks last in energy burden, with nearly one out of every two Texans struggling to pay their electric bills. This needs attention and hopefully, each of us also agrees the solution must include creating a grid as clean as possible. Balancing reliability, affordability and sustainability … will create good-paying jobs, profits and wealth creation, tax base and economic growth. We stand to gain a huge share of investment wealth if we can show the world how to build a reliable, affordable and sustainable grid, and especially [if] we can center that grid on customers and strategies that empower them.”

Three-month-old Sloan Margaret Bunch, daughter of Jupiter Power’s Caitlin Smith and EDF Trading’s Kevin Bunch, takes in her first GCPA conference. | © RTO Insider LLC

The key, Lewin said, is shaving high loads by creating flexible demand where residential consumers can use less electricity when it’s scarce and more when it’s abundant.

“And they’ll get paid for it,” he said. “No more [ERCOT] conservation calls, which is nothing but a euphemism for uncompensated demand response.”

Lewin had an ally in Octopus Energy CEO Michael Lee. His electric retailer has more than 5 million customers in nine countries and says they can access affordable power during the transition to clean energy.

“As a load-serving entity, my ERCOT bill reflects when people use power, so we need to really shift away from thinking about megawatts,” he said. “We need to really think about customers. We have the opportunity of a lifetime to consumerize electricity. We should get creative and say how do we take costs out of the system and reward people for doing so. You have to consumerize it. You have to make it approachable.”

VPPs No Longer the ‘New Kid’

The pre-conference workshop on virtual power plants, “New Kid on the Block: Virtual Power Plants in ERCOT,” may have been a misleading title, its keynoter said.

“Distributed energy resources (DERs) that go into this concept of a virtual power plant are already here. It is not actually a new kid on the block. It is one of the oldest forms of how we supply power to ourselves,” Arushi Sharma Frank, senior counsel and U.S. energy markets policy lead for Tesla, said.

“The entire grid was distributed before we actually chose to centralize it, so we are actually going kind of back in time and forward [in] time at the same time,” she said. “The reason that these things are all showing up in droves without any particular market design or incentive to get them there is because people value losing load at a much higher dollar number than what the grid thinks they value.”

Frank vice-chaired an ERCOT pilot project that spent a year studying aggregated DERs and resulted in two VPPs qualified to provide dispatchable power to the state’s grid. Eight aggregations (ADERs), totaling 7.2 MW, participated in the pilot project. Two ADERs using Tesla Electric Powerwall storage systems have completed required testing and could provide energy and ancillary services through the third quarter. (See Texas Public Utility Commission Briefs: Aug. 24, 2023.)

Eric Goff, Goff Policy | © RTO Insider LLC

As a consultant experienced with the “labyrinth of ERCOT systems,” Eric Goff was asked by Texas Public Utility Commissioner Will McAdams about the project’s operability.

“The fastest way to commercialize something new, the quicker you can actually make it happen,” Goff responded. “There are so many chicken-and-egg problems that having a laboratory to get things starting to commercialize was the fastest path forward. Now, that said, the pilot nomenclature and size can scare away some investment, so the sooner we can move towards permanent rules, the sooner we can get even more investment and even more participants on this program.”

That may not be easy. Aaron Berndt, head of energy industry partnerships for Google, said the main barrier to entry in ERCOT’s competitive market is the competitive market.

Aaron Berndt, Google | © RTO Insider LLC

“It really is as simple as either [a] state or the utility saying, ‘We have got to come up with ways to fill this gap,’ and looking at my list of options to get there. If they’re in a state where it’s in their best interest to drive energy efficiency and demand response, they can just pile it up into big numbers to scale their program,” he said. “You could be scaling Texas energy efficiency programs and just make it easier for retailers to leverage the energy efficiency incentives and stats and use those to enroll them into their demand response program. Then they definitely have the ability to dispatch in a competitive market.”

McAdams offered his own counterpart: “$5,000 a is a hell of an incentive,” he said, referencing ERCOT’s systemwide cap price of $5,000/MWh during scarce operating conditions. “That’s every reason in the world where a consumer that has the means and capability and wherewithal, or even an apartment building, that wants to install the capability to avail themselves of this market.

“This is actually providing them a healthy return on investment. I want to get us past the stage where there are all these assertions that we were going to Californiaize the ADERs. We are all in this together … if we can solve the question of how to pay for system upgrades equitably as a systemwide cost, that goes hand in glove with this conversation about bringing more and more of these capabilities to market.”

Vegas Gives ERCOT an ‘A’ This Summer

Oncor Energy’s Brian Lloyd again displayed his off-beat skills in moderating panels when he opened a conversation with ERCOT CEO Pablo Vegas and MISO CEO John Bear by asking, “So, how was your summer?”

“It was a mix of ups and downs,” Vegas said, acknowledging 10 peak-demand records, multiple voluntary conservation calls, and one energy emergency alert. “Overall, I’m really thankful for the way the summer turned out. It was a great way to learn the capabilities of the organization. I am optimistic looking ahead, that summer should hopefully get a little bit easier.”

MISO’s John Bear (l), ERCOT’s Pablo Vegas discuss the challenges their grids face. | © RTO Insider LLC

“I was asked a couple times what kind of grade I would give the performance,” he added. “I said, ‘Probably an A,’ and they’re like, ‘An A? How can you give an A with conservation calls and emergency conditions?’ I would say, ‘When you’re tested as hard as we were this summer and you pass it, you’ve got to give it an A.’”

Later turning to Bear, Lloyd asked, “Got any plans for the winter?”

Bear responded that he wouldn’t be hosting a holiday party, as he did last year for about 100 people on Christmas Eve. He said he spent the party sequestered in his study as Winter Storm Elliott swept through the Midwest.

“We talk a lot about summers, but the summer is a lot easier than the winter now, for all kinds of reasons and challenges we’re getting into as we get under our reserve margins,” Bear said. “So, how … we figure out the balance between the summer and the winter from the transmission and generation standpoint is going to be really important.

“We’re talking a lot about electrification like that’s the miracle that happens in 2030, right? There may be some slope in that curve, right? There’s a lot of manufacturing and offshoring and things like that going on that we hear about, but where are the assets that are going to provide that energy that businesses need?”

Vegas said the winter season is a “growing risk” for ERCOT, despite its status as a summer-peaking grid, but that the grid operator is taking steps to improve reliability.

“The winter peak is growing and getting closer to the summer peaks as there’s more electrification or conversion from gas to electric heating. Since Winter Storm Uri [in 2021], the whole mindset around the winter has really changed in Texas,” he said. “The weatherization program is fantastic … It has been effective, and it was proven to help significantly during Winter Storm Elliott. We have to prioritize where we’re investing our resources so that we can partner with the generator community and work together to make sure the resources are going to be reliable.”

State Rep Offers Advice

Texas state Rep. Todd Hunter (R), chair of the powerful State Affairs Committee, complimented the state’s electric sector for its response to the 2021 winter storm. Or “Snowcane Uri,” as he refers to the deadly event that sent temperatures below freezing in all 254 Texas counties.

“That’s rare. We can point the finger, blame everybody. What came out of it? Some new, developing legislation and communication,” he said.

GCPA

Texas Rep. Todd Hunter | © RTO Insider LLC

Much of that legislation came through Hunter’s committee this year. He encouraged the audience to stop by his office and visit or keep him updated on the latest developments in the sector.

Citing one of the state’s transmission and distribution utilities, Hunter said, “They send me all sorts of texts, which is important for me to know. I’m talking to legislators and I’m talking to other people, so we have a flow of information. Legislators rely on me because that’s how I roll. When I know ya, I hear ya.”

Hunter, who prefers to wear only black and speaks in a country drawl, implored his audience to stay engaged with state lawmakers.

“The more you talk to us, the more we can help you. Most people don’t know what you do. They don’t know what a megawatt is. It sounds like a new burger from Whataburger,” he said. “We need power, water and labor. The economy is evolving and growing. We need laws that make sense.”

He pointed to the Harbor Bridge Project in his hometown, Corpus Christi — which he managed to mention 14 times — as a sign of Texas’ booming economy. The new bridge will enable more LNG exports from the city’s harbor. When complete, it will also be the tallest structure in South Texas and the longest cable stay bridge in the US.

“When you see this area, it’s like the unveiling of a portrait,” Hunter said. “Giant demand is coming. Whether you’re hydrogen or batteries, we already have stack-ups of different businesses coming into the area. That’s happening across Texas. Electricity is big.”

GCPA’s Casey to Retire

Saying he was both “proud and sad,” MD Energy Consulting’s Mark Dreyfus and the GCPA’s board president told attendees that Kim Casey has notified the directors she intends to retire next year.

“She entered this position with a passion for GCPA and she will depart us with that passion intact. I think that’s the best possible outcome for all of us,” Dreyfus said. As Casey stood uncomfortably next to him, he said, “Kim will be with us until June 1, so there will be plenty of time to honor and further embarrass her.”

GCPA

Kim Casey, GCPA | © RTO Insider LLC

“I’ve been coming to GCPA since 1996. I’ve not missed one single conference since then, so it’s been a pleasure to be part of this and to bring all of you together and it’s meant a lot to me,” Casey said after receiving a standing ovation. “Thank you to the board for your support and thanks to all of you.”

Casey was selected as GCPA’s fourth executive director in 2019, bringing more than 30 years of industry experience with her. Under her leadership, the organization survived the COVID-19 pandemic and now has more members than ever in its 40-year history.

Dreyfus said the board will conduct an open hiring process to find Casey’s replacement, with applications accepted through Nov. 15. The organization hopes to announce her successor during its annual spring conference, he said.

“We know that there are many talented participants in GCPA who have a passion for this organization and a great Rolodex, who may be interested in taking a different role,” Dreyfus said.

Octopus Energy’s Lee Honored

Michael Lee, Octopus Energy | © RTO Insider LLC

The GCPA honored Octopus Energy’s Lee with its annual emPOWERing Young Professionals award, which recognizes industry individuals under 40 years old who provide leadership and contribute to the success of their employer, the power market and the development of other industry professionals.

Lee has worked on some of the earliest energy storage projects and spent more than a decade in the renewables space. A Harvard graduate, he launched Evolve Energy, an energy retailer that focused on real-time index pricing paired with load-shaping automation software and later was acquired by Octopus, now valued at $5 billion. GCPA cited his use of technology to create “demand-centric solutions” for a more resilient grid.

“I would encourage everyone to think that this is not just an empowering young professional award, but also, as an industry, how do we empower disruptors?” Lee said. “We can continue doing what we’re doing and make things more expensive and what I think is probably less reliable, or we could do something new. We have incumbents who have established business models and the status quo. But we have disruptors that can do stuff faster, better and cheaper nipping at the heels. So how do we as an industry empower the disruptors?”

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CREPC-WIRAB Conference Tackles Western Market Developments

SEATTLE — The Western electricity sector is at a “pivotal point in a lot of different ways,” Southern California Edison CEO Steven Powell said last week at a biannual conference of the region’s utility regulators and state energy officials.

Powell’s take on the sector was shared by many attending the joint fall meeting of the Committee for Regional Electric Power Cooperation and Western Interconnection Regional Advisory Body (CREPC-WIRAB) on the city’s waterfront. He was speaking Wednesday on a panel exploring the potential benefits of a more organized electricity market in the West, as well as the issues arising from the competition between CAISO’s Extended Day-Ahead Market (EDAM) and SPP’s Markets+ for future participants.

The outcome of that contest will set the course for the development of an RTO in the West, or two RTOs split by a seam, many in the sector think.

Powell said his utility “strongly believes that we should all be fighting for and working for getting to a single market in the West.”

“That is what is going to drive the most benefits broadly for customers and support the environment the best,” he said. He also acknowledged the challenges of getting the entire region on board for one market because of continued concerns about the lack of independence in CAISO’s governance.

Powell’s view had a lot of sympathizers in the audience, including the handful of utility commissioners who this summer proposed the West-Wide Governance Pathway Initiative, an effort to create an independently governed entity that would underpin a West-wide RTO that pointedly includes California and also contract with CAISO for market services. (See Stakeholders: Pathway Initiative Offers ‘Fresh Look’ at Western Market.)

The single-market perspective found support Friday from participants on a separate panel covering the challenges large energy customers face in procuring energy in a region fractured into 38 balancing authority areas.

Peter Ewen, regulatory strategy lead at Freeport-McMoRan — the largest copper producer in the U.S. — said his company spends $400 million to $500 million a year on electricity to power its Arizona mining operations, equal to about half the outlay of one of the largest utilities in that state.

Freeport-McMoRan operates a division to procure wholesale electricity and, like others who trade power in the West, has seen liquidity dry up in regional bilateral markets over the past five years. Ewen said the company can more cost-effectively obtain power for its operations in South America, where organized markets predominate, than in the Western Interconnection.

The company doesn’t have a “particular point of view” on whether CAISO or SPP should be the dominant market operator in the West, Ewen said. “We do think that one balancing authority as opposed to two is the best solution, but two is certainly better than 38.

“We do also see that a full RTO to provides all of kinds of benefits for the challenges that we’re seeing. … Stopping with a day-ahead market would be stopping short,” he added.

Sharing the panel with Ewen was Jordan Weiszhaar, program manager for data center energy cloud operations at Microsoft. Weiszhaar said much of the talk around organized Western markets is about reliability; she wanted to focus on how a market could encourage economic development.

“What we’re realizing is that what drove growth — economic development — over the last 10 years is going to be very different than what is driving the growth over the next 10 years. And how it’s going to be different is how it interacts with electricity — and I’m not just talking about [growth in] data centers,” she said, pointing to the increasing electrification of transportation and buildings.

In the face of that growth, Weiszhaar said, Microsoft is seeking to expand its data center operations, looking to reliably offer its customers critical services while still meeting its 2030 carbon-free energy target.

“In terms of what our largest challenges are in growing in the West … we are in such a large growth stage right now, we’re going wherever we can find capacity available on the grid,” Weiszhaar said, what Microsoft calls its “energy-first” expansion strategy.

Finding where that capacity will be in the future is especially difficult in the West’s fractured landscape of dozens of balancing authorities, where some planners can under-prepare for load growth.

“From our perspective, we can have fewer organized markets, where we have transparent price signals that show where loads are coming online, but also where the economic development has an opportunity to build … We’re going to have a much more efficient system to take advantage of the [economic development] opportunity coming in,” she said.

From left: Brian George, Google; Peter Ewen, Freeport-McMoRan; Jordan Weiszhaar, Microsoft; and Washington UTC Commissioner Milt Doumit | © RTO Insider LLC

Commissioner Perspectives

Speaking on the markets panel Wednesday, Western Area Power Administration CEO Tracey LeBeau said her federal agency has been exploring RTOs for about 20 years.

“There’s several that almost came together and then fell apart at the last moment,” she said.

LeBeau said WAPA’s eastern customers have differed from those farther west in their desire to jump into a full RTO without taking incremental steps such as participating in something like CAISO’s real-time Western Energy Imbalance Market. In 2015, WAPA’s Upper Great Plains-East Region joined SPP. In September, the agency issued a decision authorizing its Colorado River Storage Project, Upper Great Plains and Rocky Mountain regions to join SPP’s RTO West. (See WAPA, Basin Electric Commit to SPP’s RTO West.)

“Eight years of experience working in that [RTO] context has been very, very successful,” LeBeau said.

She noted that WAPA’s Desert Southwest Region (DSW) this year joined the WEIM and has found prices there to be lower than in the region’s diminishing bilateral market. The agency continues to study the potential for DSW to join a day-ahead market and RTO in the future. She said some of the main drivers for considering deeper market participation include the need for WAPA’s Western customers to hit renewable targets, the retirement of dispatchable generation and the impact of drought on generating resources.

Nevada Public Utilities Commissioner Tammy Cordova pointed out that her state’s Senate Bill 448 requires NV Energy to join an RTO by 2030, although the law doesn’t make it clear whether EDAM or Markets+ would satisfy the requirement.

“We need to really get engaged really fast and figure out what this means in terms of joining an RTO,” she said.

One the biggest challenges for her commission, she said, is to identify what benefits it should be assessing related to joining a day-ahead market or RTO, including those related to rates, reliability and economic development — the last of which could include the potential to sell solar output to other states.

New Mexico Public Regulation Commissioner Gabriel Aguilera brought the market conversation around to the group that utility commissions are charged with protecting: ratepayers.

“The economic, reliability and environmental benefits that we all brag about are only theoretical unless and until we design and implement a market that works for customers,” Aguilera said.

“A market needs transparency, proper oversight, competition, level playing field, good management [and] respect for state and federal policies,” he continued. “All of these elements create the customer benefits that we’re seeing. So in trying to maximize these benefits, as you’re making these decisions to design the market, think about ratepayers.”

A signatory to the Pathways Initiative proposal, Aguilera warned about the impact to ratepayers of dividing the West into multiple markets, saying, “The broadest possible energy market or RTO also offers New Mexico entities a chance to avoid creating or exacerbating significant seams that would result in new costs and burdens that will be borne for decades to come.

“Seams costs between markets are not a one-time thing but are ongoing indefinitely, incurring costs for utilities and customers and raising policy headaches for states for the foreseeable future,” he said.

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PJM OC Briefs: Oct. 5, 2023

Generators Cite Reasons for Low Synch Reserve Response Rate

VALLEY FORGE, Pa. — PJM presented feedback it received from synchronized reserve resources that have come up short in their response to reserve deployments since October 2022, when PJM implemented a market overhaul that was followed by a drop in reserve response rates. (See Synchronized Reserve Pricing Falls in PJM Markets After Overhaul.)

Resources responding to outreach from PJM and the Independent Market Monitor attributed portions of their shortfall to delayed, insufficient or incorrect action at their market operation centers. Factors included missing an all-call signal; not understanding how to respond to a spin event; and incorrect parameters, such as ramp rate, being reported in Markets Gateway.

Some generation owners said they had been operating under the Intelligent Reserve Deployment (IRD) rules that PJM had proposed, but which ultimately were rejected by FERC in August 2022. The IRD proposal would have included a level of reserves being requested from generators; however, the status quo requires that resources provide their full reserve obligation unless directed to do otherwise.

PJM sought to address the diminished response rate by increasing the synchronized reserve requirement by 30% in May, overriding a Markets and Reliability Committee (MRC) vote that rejected the increase. It also proposed to create the Reserve Certainty Senior Task Force to discuss changes to several components of the reserve market and how it operates. The task force has its first meeting on Oct. 10. (See “PJM Issue Charge on Reserve Certainty Approved,” PJM MRC/MC Briefs: Sept. 20, 2023.)

The RTO has published an FAQ and guidance for synchronized reserve resources to improve resource owners’ understanding of how the market functions and their obligations during a spin event.

PJM’s Melissa Pilong told the OC that close to 100 resources responded to the outreach, accounting for approximately 75% of the shortfall by megawatts over the past year. She said PJM’s goal is to find solutions that can allow the reliability requirement to be reduced back to 100% of the single largest contingency.

Stakeholders Endorse Outage Coordination Manual Revisions

The OC endorsed conforming revisions to Manual 38 to codify the outage coordination package the committee approved in June. (See PJM OC Briefs: June 8, 2023.)

The package adds coordination between utilities and PJM to identify potential extended outages, evaluate their impact and expand the outage information released by the RTO. The manual language will be considered by the MRC during its Oct. 25 meeting.

A competing proposal from the Monitor, which received 17% support in June, sought to increase transparency about late outages and impacts on transmission congestion.

PJM Proposes Quick Fix for Transmission Cut-in Process

PJM presented a quick fix proposal to allow the RTO to delay the end time of a cut-in ticket by one day if information regarding one of the “critical cut-in tasks” has not been supplied and extending the outage is not expected to pose reliability concerns. PJM will coordinate with the transmission owner to obtain the missing information prior to the line being energized.

The quick fix process allowed PJM to bring a problem statement and issue charge concurrently with a proposed solution. The OC is set to vote on the proposal Nov. 2, followed by the MRC on Nov. 15. If approved, the change would be effective upon MRC endorsement.

PJM’s Dean Manno told the OC that a one-day delay is being sought as review of the information can be done in that time once it’s received.

PJM Presents Recommended Winter Weekly Reserve Target Values

PJM’s Patricio Rocha-Garrido presented the recommended winter weekly reserve targets (WWRT) values for the 2023/24 winter, which call for a higher level of reserves for each month compared with last winter. The WWRT is used to inform the scheduling of planned outages during the winter to minimize the potential for maintenance to cause a higher loss of load expectation.

The recommended maximum monthly available reserves figure is 28% for December, 30% for January and 25% for February. The values for last winter were 21% for December, 27% for January and 23% for February.

Garrido said this year’s analysis included a higher forced outage rate in the historical data owing to inclusion of extreme weather during the 2014 polar vortex and the December 2022 winter storm. PJM historically had not included the polar vortex data in its analysis, but reversed that based on its experience during Winter Storm Elliott.

The WWRT is one of the three values produced through the annual Reserve Requirement Study. The Planning Committee voted on Tuesday to endorse PJM’s recommended installed reserve margin (IRM) and forecast pool requirement figures, both of which would increase the reserves PJM aims to procure for the 2027/28 delivery year. (See “First Read of 2023 RRS Values,” PJM MRC/MC Briefs: Sept. 20, 2023.)

Quick Fix for Public Conservation Request Guidelines Proposed

PJM proposed changes to its public notifications seeking reductions in electric consumption during emergency conditions to specify that the request is being made of all consumers, not just residential load, and to aim to better integrate the notification process into other emergency procedures. Additional ways that consumers can conserve energy also are included in the proposed language.

The proposed manual revisions also detail PJM’s reporting requirements to the Department of Energy, NERC and RF or SERC when a conservation request is made.

The revisions will be considered by the OC and MRC during their November meetings.

Periodic Review Revisions to Several Manuals Discussed

    • Stakeholders endorsed revisions to Manual 3A intended to clarify PJM’s quarterly data collection process for identifying outages that don’t yet have a network model ticket. The language also aims to clarify definitions of monitored priorities.
    • Revisions to Manual 3 seek to add detail around the documentation of stability limits and would add references to generation interconnection agreements when discussing interconnection service agreements.
    • The periodic review of Manual 10 led to recommended revisions clarifying that, when reporting outages in eDART, non-capacity resources should report their full nameplate capability unless physically derated.
    • PJM proposed revisions to Manual 14D requiring that all generation resources prepare for cold weather operations and expanded the guidance it provides for its cold weather checklist. The recommendations for combustion turbine operators encourage proactive action to avoid unexpected icing that could occur due to proximity to sources of warm, moist air such as rivers or cooling tower plumes. The proposal also includes recommendations for ensuring de-icing capabilities are prepared for wind turbines, liquid-cooled inverters have anti-freezing capabilities and designating a “freeze protection operator” to plan preventative measures for critical equipment.
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MISO Explains How August Max Gen Event Didn’t Trigger Emergency Pricing

CARMEL, Ind. — MISO last week expounded on why its late August maximum generation emergency wasn’t met with prices dictated by its emergency offer floors.

The RTO shared more of the data it collected on the event during its Oct. 3-5 Markets Week. Over those meetings, stakeholders warned the low prices could discourage market participants from voluntary actions to manage dire circumstances.

MISO dipped into its emergency procedures Aug. 24 to activate emergency pricing. Its early morning analysis showed that footprint-wide capacity would fall about 2.8 GW short of demand by the day’s peak. (See MISO: Could Have Employed Wait-and-see Approach for August Emergency.)

Although MISO enacted its second emergency offer floor at $1,411.74/MWh in this case, it ultimately didn’t use the threshold in locational marginal prices, MISO staff said. Aside from a brief spike to about $1,300/MWh around 5:20 p.m. ET, extended locational marginal prices mostly stayed below $200/MWh.

When MISO applies an emergency offer floor, it doesn’t automatically mean MISO will set locational marginal prices on emergency pricing. MISO’s pricing engine can run optimizations that dodge emergency pricing when emergency resources are readied but ultimately unnecessary to ease system strain.

Some stakeholders said members need more visibility into MISO’s price formation to know in real time when emergency pricing is being used. They said emergency resources are expensive to bring online and were forced to take relatively low locational marginal pricing Aug. 24.

On Aug. 24, MISO said it “consistently” imported power from Manitoba Hydro and PJM with a maximum value of nearly 8.5 GW. It also said market participants voluntarily self-scheduled up to 3 GW of load modifying resources in the afternoon peak hours, even though MISO didn’t order them.

Market participants’ amount of self-scheduled load-modifying resources Aug. 24 | MISO

Travis Stewart, representing the Coalition of Midwest Power Producers, said the nonemergency pricing over Aug. 24 will make market participants think twice about making themselves available in future emergency conditions.

“I think you’re hitting at the heart of the conversation we’re going to be having: what effect these voluntary actions have and what they should be compensated,” MISO’s Tim Aliff said during an Oct. 5 Market Subcommittee meeting.

MISO Independent Market Monitor David Patton said he doesn’t agree with creating an expectation that voluntary load reductions made ahead of an event should receive emergency pricing. He said MISO should put out its best information available, leaving LMRs to “make their own decision on what prices will be.”

“Even when we forecast conditions to be tight, there’s a possibility that prices might not go that high,” Patton said.

Patton said he’d like to see MISO commit turbines with 30-minute startup times closer to when they’re needed, not several hours ahead of time. MISO committed about 25 GW of combustion turbines in its day-ahead market for Aug. 24. In addition, it sent dispatch instructions in real time to another 1.5 GW of small combustion turbines to manage risk.

But Patton did say he respected MISO’s decision to cancel generation commitments when it became clear they were unnecessary.

“We haven’t seen MISO cancelling commitments at this rate ever. It saved customers about $1.6 million” in revenue sufficiency guarantee payments, Patton said.

MidAmerican Energy Co.’s Dennis Kimm said committing gas units “just in time” in the summer makes sense because gas operators are prepared. However, he said that philosophy shouldn’t apply to stressful operations in the winter. He said gas units should be committed ahead of time in the colder months to make sure they can secure fuel supplies.

“We knew this day was not going to be pretty,” MISO’s John Harmon said at an Oct. 3 Reliability Subcommittee. He said a pre-dawn load check registered higher than forecasted and MISO at the time was expecting an additional 3 GW of generation losses and derates over the day.

By midmorning, however, MISO’s in-house meteorologist noticed an isentropic lift weather pattern that had clouds covering major load centers and dampening demand.

A day earlier, MISO’s 125 GW of actual peak demand fell short of its 128-GW forecast.

Harmon said MISO dealt with heat-related system stressors for the majority of August.

“This part of August was the fifth heat wave, heat dome, heat spell of the summer,” Harmon said, adding that MISO operators until then had prepared for and tracked heat for much of the summer.

MISO merges 10 separate weather forecasts to predict conditions. Harmon said MISO wasn’t the only grid operator to encounter load forecasting challenges that day.

“Things changed in a fascinating way that generated a lot of questions,” Harmon said. He said accurately predicting cloud cover over load centers in the footprint like Detroit, Minneapolis and New Orleans remains difficult.

“We did what we could to cancel some of those starts due to the drastic change in our reserve margin,” Harmon said.

Harmon said conditions improved throughout the day and the emergency declaration lured in more imports, so MISO didn’t need to dispatch emergency capacity. Harmon said obligations were met by non-emergency resources in MISO’s pricing engine despite the emergency offer floor.

DTE Energy’s Mike Samson said MISO may be declaring emergencies too early and might want to wait until later in the operating day when it becomes clear actions are necessary.

Harmon said the other side of that argument is, “if you knew it, why didn’t you tell us?” But he said MISO could have more conversations on how best to approach early warnings.

Aliff said MISO has become more proactive over the years as emergency conditions emerge.

“I’ve been at MISO 22 years, and I remember the days at MISO where we made declarations minutes before an event,” he said.

Aliff said all told, MISO followed the procedures outlined in its tariff, which directs MISO to declare an emergency if it foresees a “significant operating reserve shortage” in its real-time reliability assessment commitment.

Harmon said MISO is investigating how wind forecasts, expected imports and voluntary load reductions can evolve going into an event. He said MISO is looking for ways to improve and takes stakeholders’ views seriously after these events.

MISO has taken to commemorating extreme weather emergencies with “flair” pins on lanyards for MISO staff. Harmon predicted the late August event might earn him a new pin in the shape of a thermometer bulb.

Relatedly, MISO continues working on what it deems its “uncertainty management” project to better quantify system unknowns. As part of that, MISO is building a new risk prediction model that will allow MISO to use a dynamic reserve requirement based on a daily risk profile.

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MISO Defers Unpopular Capacity Accreditation Filing, Remains Committed to Design

CARMEL, Ind. — MISO said it will push back a contentious filing for a new, marginal approach to capacity accreditation into early next year.

MISO originally was trying to file for FERC permission for the new accreditation by year’s end. But persistent stakeholder opposition means the RTO will wait and hold more public discussions to sell stakeholders on its proposal.

MISO maintains a direct loss-of-load-style accreditation will directly link generators’ accreditation to their contribution during risky periods.

The direct loss of load approach is set to replace MISO’s current use of unforced capacity values in accreditation and will be based on a combination of individual past performance and a class average performance during risky hours for different types of generation. Most MISO resources will see their capacity values decrease under the new method. (See MISO Strengthens Resolve on Marginal Capacity Accreditation, Stakeholders Displeased.)

MISO hopes to use the new accreditation by the 2028/29 planning year.

Speaking during an Oct. 4 Resource Adequacy Subcommittee, MISO’s Davey Lopez said MISO now will use an expanded set of hours in the accreditation beyond the loss of load hours MISO’s annual study produces. The grid operator also will use all the hours when generation supply comes within 3% of load to base accreditation values on.

Lopez said that even using the expanded set of sample hours, the direct-loss-of-load-expectation accreditation will naturally produce more volatile accredited values year over year. But he also said the accreditation will solve some of the “disconnect” between capacity values and actual generator performance in the system’s riskiest periods.

Still, stakeholders continue to push MISO to use even more sample hours in the accreditation process, insisting the 3% margin expansion produces an accreditation that uses too few hours. However, Lopez said MISO will not increase the 3% reserve margin threshold further. He said including hours where MISO comes within 5% or 10% of load would defeat the purpose of what MISO’s accreditation is trying to accomplish.

“You would continue to further deviate from where the risk in the model is. You’re effectively approaching [unforced capacity] at that point,” Lopez said.

Stakeholders continue to call MISO’s class average accreditation values mysterious and said understanding how MISO arrived at them is difficult.

“I don’t know how any members will meet their fiduciary responsibility ensuring their customers and their shareholders that they’re going to get the value they need,” Customized Energy Solutions’ David Sapper said.

MidAmerican Energy’s Dehn Stevens requested MISO delay its planned implementation beyond 2028. He predicted the “shock of resource planners not being able to get new resources online” would offset accreditation losses and pointed out that regulatory approvals for new generation are lengthy.

MISO Independent Market Monitor David Patton recently said a marginal accreditation style is necessary to reflect the diminishing reliability value of intermittent renewables as more are added to the system. He said MISO could have as much as 30 GW of solar power in its fleet by 2030.

“I recognize that marginal accreditation is extremely unpopular, particularly with the environmental community because it results in lower accreditation for most intermittent renewables. But it also would result in lower accreditation for other types of units,” Patton explained at a Gulf Coast Power Association Virtual Forum on Sept 15.

Notably, MISO’s gas unit class average accreditation drops from the current 84% accreditation in winter to 70% and from 88% in spring to 72% under the new accreditation. Coal unit class average accreditation also drops similarly in winter and spring.

Patton said as MISO’s reliability risk shifts to wintertime in the coming years, MISO could dole out smaller capacity values to gas units in winter to reflect gas pipeline issues and the reliability issues that play out when gas-only units have difficulties securing nonfirm gas.

He said the new accreditation will be applied to all resources in a “non-discriminatory fashion.”

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NEPOOL Participants Committee Briefs: Oct. 5, 2023

Energy market value was up $14 million in September compared to August as natural gas prices increased by 18%, ISO-NE COO Vamsi Chadalavada told the NEPOOL Participants Committee (PC) on Thursday. Market value remained low relative to 2022 and was down $368 million from September 2022.

Between 5 and 6 p.m. Sept. 7, the system hit its highest peak load so far this year, at about 24,000 MW. No emergency procedures were triggered by the event.

Annual Work Plan

Chadalavada also detailed ISO-NE’s 2024 annual work plan, outlining some of their major initiatives for the coming year.

He said the RTO’s “anchor projects” for the year will be:

Concerning the changes for transmission investments, Chadalavada said the process will work to allow for more public policy investments that anticipate load growth and resource development.

“The process would enable conversion of longer-term public policy transmission studies, like the 2050 Transmission Study Solutions, into developable projects,” Chadalavada said. He added that stakeholder discussions are expected to begin in the fourth quarter of this year, with a potential FERC filing at some point in the first half of 2024.

New Gas Reliability Study

ISO-NE said the Northeast Power Coordinating Council is proposing a Northeast gas reliability study, which will focus on the ability of the gas network to support the grid. The study will look at the dynamic response of the gas system, including whether the system will be able to support the ramping that will be needed in the future.

“In a future grid, the electricity supply and demand will be much more dynamic, and the study is expected to look at how the gas system reacts to that variability coming from the electric system,” a spokesperson for ISO-NE told RTO Insider in an email.

ISO-NE CEO Gordon van Welie told the PC that NYISO and the Northeast Gas Association likely will be involved, along with Richard Levitan of Levitan & Associates.

The study will model the loss of certain resource types, as well as the performance of the gas system under extreme weather events, van Welie said.

ISO-NE Budget Passes

The committee voted to support ISO-NE’s proposed 2024 operating budget and capital budget, as well as the 2024 NESCOE budget.

ISO-NE has requested a 21.5% increase in the overall budget for the coming year, which the RTO has said will help prepare for the energy transition and retain the workforce. (See ISO-NE Proposes 21.5% Budget Increase for 2024.)

The budget includes a placeholder for a position focused on environmental policy and community engagement, following the requests from all non-New Hampshire New England states for an executive-level environmental justice position. (See States Call for an Executive-level EJ Position at ISO-NE.)

“A successful clean energy transition cannot happen without community engagement and a meaningful role for EJ communities in helping to shape decisions that impact wholesale power and transmission rates and affect how the benefits and burdens of our electric system are apportioned,” the states wrote in their request for the position.

Donald Kreis, New Hampshire’s consumer advocate, declined to sign the request. In a letter to the editor of the Keene Sentinel, Kreis wrote, “the money would be better spent on a position or two that would help the region’s ratepayer advocates rein in runaway spending on transmission projects … and blunt the eternal efforts by generation owners to jigger the ISO New England wholesale market rules to enrich electricity magnates, unfairly, at ratepayer expense.”

NEPOOL Requests Extra Time for Order 2023

On Monday prior to the meeting, NEPOOL requested a 45-day extension on FERC Order 2023 to allow for more stakeholder input (RM22-14).

“With compliance filings due on December 5, 2023, there is insufficient time for proposed revisions to be adequately presented by ISO-NE, fully reviewed and discussed by the Transmission Committee, and voted on by the NEPOOL Participants Committee,” NEPOOL wrote. “If the commission does not grant the requested extension, ISO-NE and the commission will lose the benefit of informed discussion through a complete stakeholder process and the opportunity to refine the compliance package before the filing deadline.”

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Transmission Expansion Runs into an Old Debate: Planning vs. Markets

Hardly a week passes without some organization releasing a study touting the benefits of a huge and rapid expansion of the transmission grid.

Indeed, the idea that the grid needs a rapid expansion to tap renewable resources and decarbonize is an article of faith in the power industry. But opposition to it is not limited to climate-science doubters and fossil fuel interests. (See Counterflow: Big Transmission — Still Not the Right Stuff.)

Both PJM Independent Market Monitor Joe Bowring and Potomac Economics President David Patton, whose firm provides market monitoring for four ISOs and RTOs, have pushed back on the need to rapidly expand the grid.

“Obviously, I’m an economist, and I believe in energy markets,” Patton said. “And the thing about transmission when you’re planning, and then building transmission and guaranteeing cost recovery, is, it’s all happening outside the market.”

While both energy economists agreed that the transmission and distribution systems require central planning, they said it is far from a perfect process and can interfere with cheaper solutions produced by the markets.

Monitoring Analytics President Joe Bowring | © RTO Insider LLC

“One of the tensions that’s always existed in the PJM market from the very beginning is the tension between competitive generation and non-competitive transmission,” Bowring said. “Generation and transmission do compete at the margin. Transmission can replace generation and vice versa.”

The market monitors are not alone in this position. Vistra Energy, which owns 37,000 MW of generation and serves millions of customers over other firms’ wires, has said the same thing. Vistra told FERC in comments on its still-pending regional planning Notice of Proposed Rulemaking (RM21-17) that the idea that all renewables should be located in resource-rich areas is “too simplistic.”

“It may be more efficient to locate a new resource in a less resource-rich area where interconnection costs are lower,” Vistra said. “The net levelized margin of the resource — including environmental attribute revenues, wholesale market revenue, land cost and net network upgrade costs — will drive efficient development. Ignoring the network upgrade costs ignores a potentially important part of the project economics picture and thus risks increasing overall costs to ratepayers.”

While Vistra has an interest in protecting its fossil fuel generation’s market share, it is not averse to the clean transition. This year, it purchased Energy Harbor’s three nuclear plants, giving it 3,400 MW of carbon-free generation. (See Vistra Pays More than $3 Billion for Energy Harbor.)

FERC Transmission Planning NOPR

FERC’s planning NOPR does not direct the agency to build out all the transmission possible, said Grid Strategies President Rob Gramlich, who has long advocated for grid expansion to address climate change.

“It says: Do an analysis that evaluates the trade-off between one approach that has a lot of remote cheap generation with transmission lines, and another option, that’s more local generation with less spending on transmission — and find the sweet spot between those,” Gramlich said.

Rob Gramlich, Grid Strategies | © RTO Insider LLC

Bowring does not sound so different when it comes to planning, saying it needs to be done centrally and rationally, accounting for the locations of load growth and the locations of generation. Where he splits with Gramlich is on how much the cost of interconnecting new resources should be socialized. Bowring says making developers pay for their interconnection gives them the incentive to locate in the right place, rather than requiring customers to subsidize their choice of location.

Burying our heads in the sand about the realities of the future resource mix and adding transmission in small increments will only increase the costs of the networked grid needed to ensure a technologically and regionally diverse portfolio that ensures reliable service 8,760 hours a year, Gramlich said.

“We just have to get away from this system of planning and network through the interconnection process. That doesn’t work in any network in any part of our economy,” he said.

CAISO’s proposal to plan around zones with available transmission capacity now, or under construction — where some areas will be cheaper for interconnection customers than others — is a good example of how things should work, Gramlich said. (See CAISO Proposal Seeks to Address Interconnection Backlog.)

As a supporter of markets, Bowring has doubts about central planning generally, noting that PJM’s regional process has gotten it wrong in the past. He cites the example of the Potomac Appalachian Transmission Highline (PATH).

The $2.1 billion, 765-kV “coal by wire” PATH project was approved by PJM in 2007 to run from a coal generator in St. Albans, W.Va., to New Market in Frederick County, Md. By 2011, however, PJM said the need for the line had moved several years beyond 2015 because of reduced load growth following the Great Recession. After ordering transmission owners to suspend work on the line pending a more complete analysis of all upgrades in its regional transmission plan, the PJM Board of Managers terminated it in 2012.

“Reality keeps changing. We don’t know what the technology is going to look like 20 years from now,” Bowring said. “Do we really want to spend billions of dollars right now on transmission lines based on assumptions about what the technology is going to look like and the level and location of loads?”

Gramlich rejects the notion that the grid would be overbuilt by utilities zealously seeking to expand their rate bases. He said utilities lack the incentives to construct the kind of large regional and interregional lines that may be subject to competition, instead favoring local facilities they can build with little oversight.

In many cases, utilities will look at major transmission as bringing in low-cost, cheaper generation that is going to compete with their own and they will try to actively block its development, he added.

PJM has seen a lot of spending on local transmission projects in recent years, a fact that has come up repeatedly in the debate around FERC’s proposed reforms to planning and cost allocation. In September, the Ohio Consumers’ Counsel filed a complaint with FERC that said utilities in that state alone have planned for $6 billion in local projects since 2017.

No Regrets?

One idea the two market monitors pushed back against was that rarely is a transmission line built that winds up being regretted. While any transmission will be used when it is built and lead to lower congestion on the system, sometimes it is not the best choice.

“The goal is not just to eliminate congestion, it’s to eliminate congestion that has costs higher than the cost of building transmission to eliminate it,” Patton said. “And in some cases, there are other solutions that are much cheaper than transmission that the markets will facilitate.”

MISO IMM David Patton | © RTO Insider LLC

Storage, for instance, can deal with congestion either by co-locating with renewable energy or by being built by itself elsewhere on the grid. And while storage might be the best option, overzealous transmission construction outside the market could cause battery developers to abandon such projects, Patton said.

Bowring does not think congestion is a useful metric to justify building transmission, a point his firm, Monitoring Analytics, has made in its state of the market reports. Congestion is ephemeral and locational, and it changes all the time, Bowring said.

“Congestion is not a reason to build transmission,” Bowring added. “Congestion is just the difference between what load pays and generation receives. … So, congestion is zero sum already; it’s not really a metric for anything. If the [financial transmission rights] market worked as intended, load would be repaid 100% of congestion.”

Former FERC Chair Richard Glick said some of the leadership at ISO/RTOs is on board with expanding the grid, noting that MISO CEO John Bear has been advocating for years for transmission expansion to connect renewables. The queues are dominated by renewable energy projects, or hybrid projects where renewables are paired with storage. (See LBNL: Interconnection Queues Grew 40% in 2022.)

“When someone like John Bear from MISO says we desperately need this transmission buildout to keep the lights on, I believe him,” Glick said. “You don’t want to overbuild. But I would say that the consequences of underbuilding are a lot worse than the consequences of overbuilding.”

MISO is home to some of the best wind in the country, but those resources are far from major cities. In contrast, the renewables in PJM tend to be closer to load and therefore require less incremental transmission than in other regions of the country, Bowring said. The one exception to that in PJM is offshore wind.

“I don’t understand why anyone believes that copper plating PJM, or any area, is the solution to adding renewables,” Bowring said.

California used to think it could rely largely on in-state renewable energy to meet its policy goals. But while there are plenty of resources that will continue to be connected locally, policymakers have moved on from that narrow view as the share of renewables has grown, Gramlich said.

“If you do the math, it turns out that Idaho wind and Wyoming wind, and Salton Sea geothermal, New Mexico solar and wind — those complement the resources we have in state. And if you take into account the value of those, and the cost of transmission, it turns out, those are beneficial for California consumers,” Gramlich said. “So, then CPUC has directed utilities to buy power from those areas and the California ISO is tasked with figuring out the transmission to those areas. That’s the way to do it. In MISO, it’s a similar analytical exercise.”

That way of thinking is not isolated to California. Vermont PUC Commissioner Riley Allen, who sits on the FERC-State Task Force on transmission, said in an interview that while local issues like job creation are important, getting the best, most efficient mix of resources should guide transmission planning.

“The economics favor locating capacity and resources where it is inexpensive, and exploiting those opportunities sensibly, while recognizing that these resources are also going to be weather dependent and … using the grid as a mechanism that helps to ensure that no one location is dependent on resources from just one area, it adds an element of diversity that is hard to achieve otherwise,” he said.

While adding renewables to the grid will require some transmission, Patton argued that economics should guide its development more than a centralized plan.

“If we get more and more renewables, and they cause more and more congestion, we should continue to evaluate transmission the same way, which is, you know, is it cost effective to build transmission?” Patton said. “And when the answer is yes, we should build it and then the answer is no, or there’s some lower cost solution, we should not build it.”

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Counterflow: More Stuff That Ain’t So

The misinformation in our industry is pervasive. Daily headlines are loaded with stuff from reports, studies and news releases that just ain’t so.

Let me give an example of a recent Moody’s report on transmission.[1] (See Moody’s: Permitting Process Holding Transmission Back, Risking Reliability.)

Moody’s bases its case for investment in transmission in part on aged infrastructure causing reliability and other problems. Let’s check out its claims.

Transmission Outage Events

Exhibit 1 from its report is reprinted here, with Moody’s saying that transmission outage events have more than doubled between 2009-2014 and 2015-2021.

Citing NERC data, Moody’s claimed transmission outage events ‘have increased dramatically since 2014 primarily due to an increase in extreme weather.’ | Moody’s

This is not valid analysis. Starting in 2015, NERC expanded the facilities subject to reporting from 200 kV and above, to 100 kV and above.[2] The number of facilities (elements) subject to reporting increased from 7,098 to 23,835, and the number of subject circuit miles increased from 181,427 to 454,316.[3] So the increase in reported outages has everything to do with a larger number of subject facilities and circuit miles, and nothing to do with transmission system reliability.

NERC provides the trend in transmission system reliability in the chart reprinted here, saying that: “The Bulk Electric System (BES) transmission system continues to demonstrate significantly improved reliability for the fifth year in a row.”[4]

Congestion

Congestion is the additional cost of dispatching higher cost generation due to a transmission constraint. Moody’s says that congestion costs in the Mid-Atlantic region surged from $528.7 million in 2020 to $995.3 million in 2021, surpassing “energy costs.”

NERC reported that transmission system reliability, as measured by overall transmission outage severity (TOS), has improved continuously over the past five years. | NERC

The increase in congestion costs from 2020 to 2021 had everything to do with increases in fossil fuel costs (energy clearing prices increased from $21.77/MWh to $39.78/MWh largely due to higher fuel and emission costs)[5] — nothing to do with transmission system inadequacies.

As for the claim that congestion costs of $995.3 million exceeded energy costs, energy costs were $30.5 billion in 2021.[6] So congestion costs were a minor 3% of energy costs, hardly more than energy costs. And customers were shielded against much of those relatively minor congestion costs through financial transmission rights.[7]

Moody’s sources its invalid congestion claims to DOE’s draft “National Transmission Needs Study,” so let me address a couple more misjudgments that appear there.[8] DOE says the “transmission constraint shadow price” almost doubled from 2020 to 2021. This simply reflects higher fuel prices. How do we know that? Because the frequency of transmission constraints actually declined from 117,867 to 102,529.[9]

Then DOE says that in 2021 the “transmission price component” was more than the “capacity price component” for the first time since 2007, which isn’t exactly true, but in any event would suggest transmission system spending is going up – a non sequitur for any claim of growing transmission inadequacy.

Transmission Facilities’ Life Expectancy

Moody’s says that transmission lines and transformers are mostly beyond their life expectancies.

Regarding its claim that transmission lines have a life expectancy of 50 years, the reality for transmission lines is 80+ years[10] to “essentially forever.”[11]

Regarding its claim that transformers have a life expectancy of 25 years, the cited authority states that this is based on continuous loading at the rated (maximum) capacity,[12] which simply does not happen. The reality is that transformers on average last much longer than that.[13]

BTW, the most important reliability element for transformers is that we maintain an inventory available to replace transformers as failures occur. (Hint to RTOs and TOs: Any transformers retired before failure should be kept in reserve for this purpose.)

Texas

Moody’s is right about one thing: Interregional transmission ties into Texas would have avoided vast costs and outages during Winter Storm Uri (not to mention saved lives).

But as I have written before, that problem has to do with Texas’ self-imposed isolation because of its (groundless) concern about losing Texas’ independence.[14] Nothing to do with transmission system inadequacies.

Bottom Line

We should keep the current condition of the transmission system — which is generally sound — separate from the need to expand the system for the energy transition. I’ve had a few thoughts on the latter for anyone interested.[15]

Columnist Steve Huntoon, principal of Energy Counsel LLP, and a former president of the Energy Bar Association, has been practicing energy law for more than 30 years.

[1] https://www.moodys.com/research/Regulated-Electric-and-Gas-Utilities-US-Transmission-investment-opportunities-abound-Sector-In-Depth–PBC_1377533.

[2] https://www.energy.gov/oe/articles/annual-us-transmission-data-review-2015, page 3 and footnote 6.

[3] https://www.nerc.com/pa/RAPA/tads/SiteAssets/TADS_Dashboard_Supporting_Data.xlsx, columns under “Inventory Counts.”

[4] https://www.nerc.com/pa/RAPA/PA/Performance%20Analysis%20DL/NERC_SOR_2023_Overview.pdf, page 11.

[5] https://www.monitoringanalytics.com/reports/PJM_State_of_the_Market/2021/2021-som-pjm-vol1.pdf, page 1.

[6] https://www.monitoringanalytics.com/reports/PJM_State_of_the_Market/2021/2021-som-pjm-vol1.pdf, page 18, Table 8.

[7] https://www.monitoringanalytics.com/reports/PJM_State_of_the_Market/2021/2021-som-pjm-vol1.pdf, page 72.

[8] https://www.energy.gov/sites/default/files/2023-02/022423-DRAFTNeedsStudyforPublicComment.pdf, page 64.

[9] https://www.monitoringanalytics.com/reports/PJM_State_of_the_Market/2021/2021-som-pjm-sec3.pdf, page 175, Table 3-54.

[10] https://www.xcelenergy.com/staticfiles/xe/Corporate/Corporate%20PDFs/OverheadVsUnderground_FactSheet.pdf

[11] https://engineering.mit.edu/engage/ask-an-engineer/how-do-electricity-transmission-lines-withstand-a-lifetime-of-exposure-to-the-elements/; https://www.tdworld.com/intelligent-undergrounding/article/21215620/overhead-or-underground-transmission-that-is-still-the-question.

[12] https://www.electricaltechnology.org/2019/12/average-life-expectancy-transformer.html

[13] https://teamuis.com/2021/01/07/how-long-does-a-power-transformer-last-forever/

[14] https://www.energy-counsel.com/docs/a-modest-proposal.pdf

[15] https://energy-counsel.com/wp-content/uploads/2023/02/Big-Transmision-Still-Not-the-Right-Stuff.pdf; https://energy-counsel.com/wp-content/uploads/2022/04/Stop-the-Insanity.pdf.