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August 13, 2024

Ohio Legislators Raise Concerns About Cost Impact of Illinois’ CEJA

Ohio lawmakers are raising concerns about how Illinois’ Climate and Equitable Jobs Act (CEJA) will impact their state’s ratepayers after PJM last year found that power plant retirements stemming from the law could require $2 billion in new transmission to maintain reliability.

Ohio House Public Utilities Committee Chair Dick Stein (R) and Senate Energy and Utility Committee Chair Bill Reineke (R), along with 10 other colleagues, sent a letter to PJM’s Board of Managers last month saying that while the RTO’s markets have done well for the state in the past, they were worried that could be changing.

“We are becoming increasingly concerned that the actions of PJM, FERC and other PJM states may jeopardize the successful, competitive market model that Ohio has nurtured,” the letter said. “We appreciate that PJM has brought concerns related to generation retirements and looming reliability challenges to our attention. Needless to say, we are quite concerned about reports that the PJM region is on the precipice of power shortages that could lead to blackouts for our consumers that need electricity.” (See PJM Chief: Retirements Need to Slow down.)

The legislators said those looming reliability issues are exacerbated by CEJA provisions that mandate closure of fossil fuel plants, which requires the phaseout of coal and natural gas units by specified dates starting in 2030, with the last plants to shut down in 2045. The law requires the Illinois government to collaborate with PJM and MISO starting in 2025 to analyze the impact of its provisions on reliability.

PJM has released a “very initial snapshot” of what the retirements could mean, including increased east-to-west power flows and up to $2 billion in transmission upgrades. That analysis did not include any of the new generation that CEJA incentives are expected to bring online. (See Illinois Climate Bill Could Force $2B in Tx Upgrades, PJM Says.)

A table from PJM showing the RTO’s initial estimates of what transmission upgrades might be required to reliably retire the power plants in Illinois impacted by CEJA. | PJM

Stein met with PJM after sending the letter, to which the RTO said in a statement it would formally respond soon.

“The loss of affordable and reliable coal and oil energy generation and the implementation of 100% renewables could potentially put a strain on the energy grid,” Stein said in a statement after the meeting. “Ohioans should not be burdened by cost increases that are caused by the policy choices of other states.”

The $2 billion is very preliminary, and now is the time for PJM, and the experts on the grid that it employs, to look into the issue more formally, former Illinois Commerce Commissioner Erin O’Connell Diaz said in an interview.

“It’s appropriate that the legislators of Ohio are concerned about it because there are a lot of costs that can flow out of different types of legislation,” said O’Connell-Diaz, who now runs consulting company FutureFWD.

While plant retirements generally create some new transmission costs, she said, ratepayers in Illinois and other states with similar clean energy policies are going to be paying to bring on clean energy, which will produce cheap power for the grid that Ohio will benefit from in the form of lower prices. The RTOs can quantify those kinds of benefits going forward as well, she said.

‘Shark-infested Waters’

The Natural Resources Defense Council supported CEJA, as it has similar laws in other states. Tom Rutigliano, of NRDC’s Sustainable FERC Project, argued that the Ohio legislators were mostly concerned about attacking renewables, but he also called for more coordination from the RTO.

“This letter is more focused on partisan, anti-renewable jabs than meaningful transmission or reliability solutions,” Rutigliano said in a statement.  “Ohio officials’ efforts would be better directed toward following Illinois’s lead and working on collaborative, forward-looking reliability solutions, rather than attempting to close off their borders to clean, affordable energy. The request for further studies from PJM would be a distraction from what is needed to support a successful energy transition. Ultimately, this letter is a reminder that states need clear leadership, proactive planning and coordination from PJM.”

Former FERC Commissioner Tony Clark, a senior adviser at Wilkinson Barker Knauer, said such disputes among states have regularly come up and are likely to continue, especially in regions like PJM with varying energy policies. It is not ultimately feasible to isolate the impact of one state’s policies in regional markets, whether it is generation or (outside of the State Agreement Approach) transmission, he said.

“FERC has to allocate those costs based on court precedent with cost-causers and cost-payers being ‘roughly commensurate,’” Clark said. He said PJM’s strong minimum offer price rule (MOPR) represented “an attempt to try to isolate some of those costs, but the commission has backed off from that in recent years. It is, I think, taking a path where effectively the capacity markets are likely to wither a bit in terms of their revenue streams, and they seem to be more focused on trying to get more and more out of the energy and ancillary service markets. But even in those, you’re going to have spillover effects from any sort of market [or] public policy intervention in one state; it’s very hard to isolate it from others in an integrated market.”

If FERC had tried to keep the MOPR in place, states with strong clean energy policies would have pulled out of PJM and other markets, which put the federal regulator in a no-win situation in terms of market integrity, he added.

PJM states have been at odds over other issues in the past.  A dispute over cost allocation more than a decade ago led to the “roughly commensurate” court precedent Clark cited. O’Connell-Diaz said she hoped for compromise on the dispute because any litigation would take years to resolve, and the industry needs to be focused on the reliable transition to a cleaner grid.

“But again, you put the overlay of the politics on it, and it’s shark-infested waters, isn’t it?” O’Connell-Diaz said. “And so, again, I go back to we really need to kind of wipe that away. You know, utility regulatory bodies should really have to be above all that that pressure. They need to be able to think clearly without any kind of political connotations.”

However, that is not an easy thing to do today, she added.

Ex-BOEM Director Lefton to Lead OSW Development for RWE

Former BOEM Director Amanda Lefton will lead RWE’s offshore wind development effort on the East Coast.

RWE announced the appointment Monday. The move will place her in charge of one of the largest projects of its kind in the United States: Community Offshore Wind, a collaboration with National Grid Ventures that has a potential output of over 3 GW.

Lefton was appointed director of the U.S. Bureau of Ocean Energy Management in early 2021, shortly after President Biden’s inauguration. She previously was first assistant secretary for energy and the environment for New York, a role that placed her at the center of that state’s climate protection efforts.

In January 2023, Lefton resigned as BOEM chief to become senior policy director of energy and climate at law firm Foley Hoag. Elizabeth Klein was named BOEM director upon Lefton’s departure.

As measured by installed capacity, RWE is the world’s second-largest offshore wind developer, behind Ørsted. All 19 of the facilities RWE now operates are outside U.S. waters, but it is working to develop wind farms off the east and west coasts of the United States.

In early 2022, RWE and National Grid Ventures successfully bid $1.1 billion for lease area OCS-A 0539, which is south of New York and east of New Jersey in the New York Bight. Expected operation date is 2030 for what the partners now call Community Offshore Wind.

In late 2022, RWE won a BOEM lease 28 miles off the coast of California with a $158 million bid that will allow it to develop up to 1.6 GW of floating wind. It projects completion sometime in the mid-2030s.

Community Offshore Wind is now awaiting word on whether it will be awarded a contract in New York’s 2022 offshore wind solicitation. The partners submitted multiple versions of their plan with a variety of price tags and power output ratings. As specified in the solicitation, they outlined ways they would help New York build an offshore wind industry.

RWE has previously developed onshore wind projects in New York state.

Lefton led BOEM at a critical time for the U.S. offshore wind sector, as President Biden set a 2030 goal of 30 GW of capacity and backed up the vision with policy. Installed capacity in U.S. waters was just 42 MW at that point, however, and there was little onshore infrastructure or domestic supply chain to support a radical expansion.

During her two years at BOEM’s helm, the agency greenlighted the nation’s first two utility-scale offshore wind projects, held three lease auctions, began review of 10 projects and advanced exploration of the Oregon and Central Atlantic coasts, the Gulf of Maine and the Gulf of Mexico for potential offshore wind development.

RWE in a news release Monday lauded Lefton’s stakeholder collaboration and all-of-government approach toward clearing the many obstacles to offshore development. Lefton in turn lauded RWE’s conception-to-completion track record in project development.

When she left BOEM for the private sector in January, the Department of Interior’s chief of staff said: “BOEM is at the epicenter of the Department’s work to create good-paying union jobs in the offshore energy sector, support a reliable domestic supply chain and meet the moment for a clean energy economy. Amanda has been a driving force of this effort, and we are grateful for her vision, commitment and service to this country.”

Sam Eaton, CEO of RWE Offshore Wind Holdings, made a similar point Monday: “Amanda has successfully created significant momentum for the offshore wind industry in the U.S. Her know-how navigating all levels of government has resulted in the approval and now construction of the nation’s first two offshore wind projects.”

DOE Awards $207M in Grid Resilience Investments

The Department of Energy on Thursday announced the latest recipients of federal grant money intended to modernize the U.S. power grid against natural disasters caused by climate change, awarding $207.6 million to nine states and three tribal nations.

The grants are part of the $5 billion allocated to grid-hardening projects under the bipartisan Infrastructure Investment and Jobs Act (IIJA), which passed in 2021. Half of the spending is earmarked for state, territory, and tribal governments, to be distributed over the next five years. (See Bipartisan Infrastructure Bill Offers Funding for Grid, EVs.)

The nine states and three tribes announced on Thursday comprise the third cohort of recipients to be unveiled since the grants began earlier this year. Applications for the 2022 and 2023 fiscal years closed May 31 for state and territory governments; tribal governments have until Aug. 31 to submit their applications for the year.

Among the states included in Thursday’s announcement were California and Texas, the largest beneficiaries under the program so far with $67.5 million and $60.6 million awarded respectively. According to their fact sheets, California’s goals for the funding include reducing the frequency and duration of power outages in the state, advancing California’s clean energy goals and creating clean-energy jobs. Texas plans to use the money to identify gaps in grid resilience and improve weather-related resilience in critical infrastructure facilities.

Other recipients include:

    • Kansas — $13.3 million;
    • Kentucky — $11.1 million;
    • Maine — $4.4 million;
    • Michigan — $14.9 million;
    • Minnesota — $11.9 million;
    • Oregon — $19.9 million; and
    • Rhode Island — $3.4 million.

In addition, three Native American tribes — the Metlakatla Indian Community and the Native Village of Eagle in Alaska, and the Standing Rock Sioux Tribe of North and South Dakota — will receive a total of $622,000.

In all, the program has chosen 20 states, eight tribes, and the District of Columbia to receive $324 million so far this year. Eligibility is decided based on five factors: population, area, probability of disruptive events, severity of events and expenditure on mitigation efforts.

State and tribal governments must provide a 15% match to the federal allocation; entities receiving sub-awards from the grant recipient generally must provide a 100% match, although smaller utilities may match as little as one-third.

“Renewable energy has helped many parts of the country withstand a crippling heat dome, and the [administration’s] agenda will increase the amount of clean power sources available on the nation’s grid,” said Energy Secretary Jennifer Granholm. “DOE is excited to announce a continued stream of funding aimed at strengthening America’s workforce and preparing the nation for a more resilient, clean energy future. These grants will help modernize the electric grid to reduce impacts of extreme weather and natural disasters while enhancing power sector reliability.”

DOE’s resilience investments form just part of the expenditures planned for the U.S. grid under the IIJA. The Biden administration plans to invest more than $15 billion under its Building a Better Grid initiative launched last year, including the grid resilience program, a $2.5 billion program to upgrade transmission lines, the $10.5 billion Grid Resilience and Innovation Partnerships program to support national resilience projects and the $760 million Transmission Siting and Economic Development Grants program. (See DOE Opens Applications for $6B in Grid Funding.)

FERC Approves Smaller Fine for BP After 5th Circuit Decision

FERC on Friday approved a new settlement with BP America over allegations that it manipulated interstate natural gas prices in 2008 after an appeals court found the regulator exceeded its authority in an earlier penalty order (IN13-15).

BP agreed to pay a $10.75 million civil penalty and will not seek the return of an additional $250,295 in disgorgement that it had already paid. Initially, FERC had assessed a civil penalty of $20.16 million, which the firm appealed to the 5th U.S. Circuit Court of Appeals.

The firm already paid that earlier fine, plus interest, under protest, so the deal effectively means FERC will not oppose BP seeking to reclaim $13.6 million through a suit in the U.S. Court of Federal Claims, or any other forum with jurisdiction.

The case involved natural gas prices in the Houston Ship Channel in the days following Hurricane Ike in 2008, when BP allegedly traded next-day, fixed-price natural gas to artificially depress them to benefit positions it held.

The 5th Circuit found in a decision in October that some of the transactions FERC was seeking fines for were intrastate trades, over which the court said it does not have jurisdiction. The new order limits the fines to the 18 transactions the court said were under FERC’s authority to regulate.

FERC affirmed its finding that BP engaged in market manipulation but limited that finding pursuant to the court’s order. The commission had argued that it was able to seek fines on any natural gas transaction, including intrastate gas deals, that affects the prices it regulates under the Natural Gas Act, but the court rejected that claim.

“The commission cannot exercise its jurisdiction merely because a manipulative scheme may affect the prices of interstate natural gas trades,” the court said.

BP stipulated to the facts set forth in the deal and acknowledged that the 5th Circuit upheld FERC’s findings of manipulation when it came to the 18 jurisdictional transactions.

FERC’s Office of Enforcement started investigating BP after Ike during the period of Sept. 18 to Nov. 30, 2008, when it sought to determine whether the firm’s trades were intentionally trying to depress Platts’ Gas Daily index prices at the Houston Ship Channel to benefit bigger, financial spread positions BP held that settled off index prices.

The index positions BP held paid off when Houston Ship Channel natural gas was lower than the Henry Hub prices in Louisiana, which was the case when Ike hit and caused prices to plunge. Then the firm “engaged in a glut of physical sales” at the ship channel to keep the index profits rolling in for weeks after the hurricane hit, the court said.

DC Circuit Sides with NYISO on Solar Interconnection Dispute

Hecate Energy lost a court appeal to have FERC review its petition that NYISO had charged it an unreasonable rate for upgrade costs to connect a solar power plant near the New York state capitol to the grid (21-1192).

A majority of a three-judge panel of the D.C. Circuit Court of Appeals on Friday ruled against the renewable energy developer and disagreed with its argument that NYISO’s filed tariff with FERC was not detailed enough.

Hecate said it was surprised when NYISO charged it $10 million to interconnect a proposed solar facility in New York and initially challenged the decision with FERC after it was unwilling to pay for these upgrades.

FERC rejected Hecate’s argument that it was not given enough notice that six non-jurisdictional projects could be included in NYISO’s final bill for interconnection. FERC later affirmed its decision, denying Hecate’s rehearing request.

In response, Hecate filed two petitions for review with the court. The first was filed after FERC did not act on Hecate’s petition for a rehearing and the second was filed after FERC did address the request.

The court sided with FERC, however, finding NYISO’s tariff detailed enough and that it gives fair notice that non-jurisdictional projects could be included in interconnection studies.

The court also noted that Hecate’s contention that “FERC’s reading of the tariff cannot be squared with other tariff provisions” is lost since the generator did not make the argument to FERC on rehearing.

Hecate can raise its argument on appeal if it has “reasonable ground[s],” the opinion added.

Circuit Judge Justin Walker’s opinion included a quirky footnote for curious readers noting that Hecate is pronounced as “HEK-a-tee” like the Greek goddess of magic, not “HEK-ut,” like the ruler of the witches in Shakespeare’s “Macbeth.”

Kentucky Power Denied Winter Storm Cost Recovery, Fines Possible

Kentucky regulators last month rejected Kentucky Power’s request to recoup $11.5 million in fuel costs incurred during the December 2022 winter storm, while also raising the prospect of penalizing the utility for its performance during the event.

Falling temperatures Dec. 23 caused a spike in demand among the utility’s 163,000 customers in eastern Kentucky, forcing the company to import high-priced power from PJM. By the time the storm passed on Dec. 25, the utility had exceeded what it could recover for fuel and power costs through the non-Fuel Adjustment Clause (FAC) in its tariff.

In its request to the state Public Service Commission, the utility sought to establish a regulatory asset for recovery under a law approved in March that permits utilities to seek PSC approval to “finance extraordinary or other deferred costs” through securitization.

In denying the request, the PSC said Kentucky Power had not taken steps to procure adequate capacity, had failed to demonstrate that outages at its two generators were reasonable and had not proved its costs were properly incurred.

On the capacity issue, the commission pointed out that the utility let a contract with American Electric Power’s (AEP) Rockport Power Plant expire in December without procuring replacement capacity, eliminating a key hedge against wholesale power price fluctuations and shifting risk to consumers.

“Kentucky Power took no action to address its capacity shortfall in regards to energy capabilities, including entering into agreements that could hedge against market power prices. The Commission concludes, as further explained below, that Kentucky Power has not met its burden in this matter, and therefore the request should be denied,” the order said.

Facing Penalties

Along with denying the requested recovery, the commission issued a second order requiring Kentucky Power to show cause as to why it should not be subject to penalties for violating a state law that requires a utility to provide “adequate, efficient and reasonable service” to customers. The second order said the utility could be assessed penalties up to $2,500 per occurrence and per party.

The commission also argued that the utility had not shown that outages at its 1,560-MW coal-fired Mitchell and 295-MW gas-fired Big Sandy generators were reasonable. In response to a data request from the commission, the company said the Big Sandy generator was offline due to repairs that took longer than anticipated to complete, while Mitchell was operating at reduced capacity for reasons largely unrelated to the storm.

The commission additionally questioned the use of the new securitization law.

“Kentucky Power’s request would alter the recovery mechanism for non-FAC eligible purchased power costs and is not an appropriate use of deferral accounting,” the order said. “The existence of securitization legislation does not preempt the commission’s broad authority related to regulatory assets and is not sufficient justification to defer expenses. In fact, securitization is only available for expenses for which deferral accounting has already been approved by the commission. Thus, it does not impact the commission’s decision on whether to grant deferrals.”

In a joint protest, the Kentucky Industrial Utility Customers and the Attorney General’s Office of Rate Intervention argued that Kentucky Power’s request was contrary to the FAC regulations and would preempt the six-month review of the clause — components of which both companies are protesting — and an administrative case investigating the FAC. The protest also posited that purchased power costs should be recovered through a base rate filing, rather than the FAC.

In an email to RTO Insider, Kentucky Power spokesperson Sarah Nusbaum said the company disagrees with the commission’s findings, arguing that purchasing power during Winter Storm Elliott was more affordable than a long-term contract and that the company’s decisions maintained reliability.

“Generation resources are selected based on least-cost principles, and it was less expensive to purchase energy when needed as compared to a long-term purchase power agreement,” Nusbaum said. “Regarding the penalty statute, we do respectfully disagree that the penalty statute is implicated here. We kept the lights on during a record storm and did not willfully violate any Kentucky law, regulation or KPSC order.”

Nusbaum said allowing the company to issue securitization bonds would have reduced carrying costs for the storm expenses and effectively reduced the interest rate compared with recovering those expenses through base rates. The company included securitization bonds in its June 29 base rate filing — along with other strategies for deferring the expenses — with the aim of reducing the immediate impact on ratepayers’ bills.

“Securitization was not the only method we used to reduce rate impact in this case,” Nusbaum said. “Kentucky Power is seeking a lower return-on-equity than was recommended by our expert witness, not proposing to increase depreciation rates, and extending the life of existing meters rather than replacing them with new meters. Additionally, several low-income benefits are proposed in this case, including an optional seasonal tariff to help reduce winter bills, an expansion of the company’s energy assistance program, and a solar garden program that directly benefits low-income customers.”

Utilities in Several States Petition Commissions for Cost Recovery

Several other utilities also are seeking approval to recover costs for expenses related to Winter Storm Elliott.

AEP spokesperson Scott Blake said the Public Service Company of Oklahoma and Appalachian Power in Virginia and West Virginia have filed to recover fuel costs, as well as costs for CCR and ELG work and other storm work.

In Kentucky, Kentucky Utilities and Louisville Gas and Electric received PSC approval for establishing a regulatory asset to recover costs related to a March 3 windstorm that caused nearly 400,000 customer outages. According to the utility’s filing, the storm resulted in around $83 million in operating, maintenance and capital costs. Total operating and maintenance costs are around $23.2 million, of which $7.8 million are included in base rates.

Though the filing sought to create a regulatory asset, it did not include securitization. The commission’s order found that the storm caused damage for which costs could not be reasonably anticipated.

“The commission finds that with regard to KU/LG&E’s request for authorization to establish deferral accounting for the repair and restoration of the Major Storm Event, the costs to repair the damaged assets are extraordinary and nonrecurring and could not have been reasonably anticipated or included in KU/LG&E’s planning,” the April 5 order said.

Gates, Musk Discuss Clean Energy Innovation for Starstruck EEI Audience

AUSTIN, Texas — Two of the world’s richest men, who are using their billions to help the clean energy transition, drew gawkers and rubberneckers in the halls of the JW Marriott Austin hotel’s event space during Edison Electric Institute’s annual conference last month.

Bill Gates and Elon Musk each filled the main ballroom with their respective keynotes. Gates, dapper in a business casual blazer, needed little prodding to share his thoughts on a clean energy future. Musk, wearing a fashionable outfit that included an open zipper across his chest and cowboy boots, was a man of fewer words, but big thoughts.

Gates showed up the day before his appearance. Trailed by a camera crew, he slipped into the conference’s networking center, which doubled as a trade show. It wasn’t long before Gates was surrounded by scores of observers as he made the first of several stops to the booths.

“Hey, Bill Gates is over there,” whispered one EEI staffer to another.

Bill Gates visits with a staffer from Antora Energy, one of his Breakthrough Energy projects. | © RTO Insider LLC

His first stop was at Antora Energy, a startup that uses thermal batteries to store renewable energy in carbon blocks that are then heated to 2,700 degrees Fahrenheit. The energy is discharged as zero-emission heat and/or power.

Antora is just one of more than 110 clean energy technologies that Gates’ Breakthrough Energy has invested in, about a dozen of which set up booths at the conference. The organization, founded by Gates in 2015, is working to accelerate innovation in sustainable energy and other technologies to reduce greenhouse gas emissions and reach a goal of net-zero emissions by 2050.

“Great ideas are just the beginning,” Gates explains on Breakthrough’s website. “We need a plan — and the willingness to do the hard work — so we can get on track over the next decade.”

“The key playbook of Breakthrough Energy has been to drive innovation and to drive policies for innovation,” Gates said from EEI’s main stage. “When we got this thing started in 2015, I didn’t know if we would find the innovative ideas. We raised several billion dollars, and amazingly, mostly here in the United States, we found phenomenal entrepreneurs and scientists together applying [for investment]. And so in any area of emissions, we now see the path to get there with execution, particularly on the green grid, which will be two and a half times the size of what we have today because of massive electrification.

“Massive electrification is daunting, but you can see that there is a path, a path that doesn’t involve saying to people, ‘OK, you now have to pay a lot more money for all your goods, including electricity,’” he said.

Asked by Ameren’s executive chairman, Warner Baxter, why he has such a rosy view that the 2050 net-zero goal will be reached, Gates pointed simply to civilization.

“The modern economy is about energy intensification. Crude oil and natural gas are magical things. The energy density there has allowed us to transform life in this very dramatic way,” Gates said. “The idea that now we have this goal, that by 2050 will basically replace all those cement plants, steel plants, coal plants — there’s no equivalent thing, even if you take the work that was done during World War II.”

He said the multidecade effort will have to be coordinated to make it work. That includes the “incredibly complex” task of designing a new electric grid.

“Many people, when they look at the climate problem, they’re like, ‘OK, what can we do to make a little bit of progress?’ But as you look at it, you’d say, “Oh, no, I need to get all the way to zero,’” he said. “You have to do the very hard things, and you have to do it not just in the rich countries but also in middle-income countries that now account for the bulk of the [world’s] nations. We have a lot of work to do to get to that in a very short period of time.

“We’re no longer able to say, ‘OK, in the near term, it’s business as usual,’ and then that payment comes later. We are now in the time period where the rate of renewable build and the rate of transmission permitting is completely inadequate to this goal. And yet, people have worked with us to lead on this.”

While obviously a fan of renewable energy, Gates said individual states’ incentives for generation and transmission projects will make it difficult to ensure reliability as more renewables are integrated onto the grid.

“If a huge part [of generation] is renewable energy — offshore wind, onshore wind, solar — then you’ll have parts of the United States where they will not be able to generate enough energy,” he said. “And so the idea that this has been done overwhelmingly at the state level — here’s a load; here’s [a] generator that’s fairly near that load — that paradigm does not work to get to zero emissions.”

Musk: Demand to Triple by 2045

Musk focuses much of his energy on electric vehicles, batteries and solar panels. That is, when he’s not exploring space, boring tunnels underground or attempting to manage his social media company.

Elon Musk | © RTO Insider LLC

He rose to fame and riches with Tesla, which dominates the EV market. Its massive Austin Gigafactory —driving past the 2,500-acre facility at the nearby state highway’s speed limit takes about 45 seconds — produces 5,000 Model Ys a week. Globally, more than 440,000 EVs rolled off Tesla production lines during the first quarter of this year.

Just before Musk’s appearance at EEI, Tesla announced it was partnering with Ford and General Motors and sharing charging infrastructure. Electrify America, the country’s largest fast-charging network for other EVs, has said it will incorporate Tesla’s charging standard into its stations as part of its commitment to “broaden charging solutions.”

“I think opening up the chargers is morally right, and it was something that will help power sustainability,” Musk told his audience. “We’re really trying to do everything here. We will support all electric vehicles on equal footing. We’re not advocating for special treatment of Tesla. We’re trying to clear a path for sustainability.”

However, Musk said, if the U.S. is to achieve a sustainable future, his back-of-the-envelope projections indicate electricity demand will triple by 2045.

“Everything is going to be electric,” he told his EEI audience. “I don’t know what your plans are for future electricity demand, but it’s going to be much higher than you think. You should start to plan now. We’re trying to work to a sustainable energy future, and it’s going to take many technology solutions to get there.

“I think this is good news for everyone who produces electricity, but it entails a tremendous amount of work ahead,” Musk added.

The key is the three pillars of a sustainable energy future, he said. They are sustainable power generation like solar, wind, hydro and nuclear; stationary batteries; and electric transportation.

“Once we have those three pillars in place, we’ll have a sustainable future for as long as the sun shines and the wind blows,” Musk said. “It will very much be a joint effort. The utilities have the wires; they’re the distributors of electricity. It’s hard work to actually put that generation in place and transport it to where it gets used, but we have to take advantage of the valleys of power production.”

Of course, he pushed Tesla Energy’s Powerwall as part of the equation. The sleek rechargeable lithium-ion residential battery stores solar energy for self-consumption, time-of-use load shifting and backup power. Aggregated together, they can be even more beneficial to the grid, Musk said.

“You’re operating collectively and helping to stabilize and preserve everything. The Powerwall battery pack is a helpful part of solving the energy problem because there’s a lot of neighborhoods where it’s hard to get incremental power to that neighborhood because you need more substations and you need more wires. Local storage helps alleviate some very boring situations where it’s just so frustratingly difficult to get more power to that neighborhood. It’s really a big deal and really helpful because obviously, it’s battery at scale, and it pumps electricity. We can do electricity better.”

California Makes $150M Available for Zero-emission School Buses

The California Air Resources Board (CARB) is now taking applications for $150 million in state funding to help public school districts buy zero-emission buses and related infrastructure.

In announcing the funding round on Friday, the agency said recipients can get up to $395,000 to replace fossil fuel-powered buses with zero-emission models, as well as $100,000 per bus to acquire and install necessary charging equipment. Winners of the awards are required to scrap an old bus for every new vehicle purchased.

This marks the second year CARB is making money available under the state’s Hybrid and Zero-Emission Truck and Bus Voucher Incentive Project (HVIP) Public School Bus Set-Aside program, which last year helped 81 school districts buy 300 zero-emission buses, according to CARB.

“Zero-emission school buses play a key role in California’s efforts to achieve carbon neutrality [by] 2045 and help protect children who are particularly vulnerable to the health impacts from diesel exhaust,” the agency said in a statement.

CARB is partnering with the California Energy Commission’s Energy Infrastructure Incentives for Zero-Emission Commercial Vehicles Project (EnergIIZE) to help fund the charging infrastructure, which can include vehicle-to-grid (V2G) hook-ups that allow bus batteries to transmit energy back to the electricity grid to meet peak demand. California’s largest utility, Pacific Gas and Electric, last year received regulatory approval to establish the nation’s first V2G export rates for commercial electric vehicles, including school buses. (See PG&E to Offer Nation’s First V2G Export Rate.)

According to the U.S. Department of Energy, the average price of a large “Type D” electric school bus is $400,000, compared with $200,000-$250,000 for an equivalent diesel bus. Charger costs can range from $596 per port for a low-power dual-port Level 1 station to $140,000 for a 350-kW single-port DC fast charger. School districts expect to see significant savings from lower fuel and maintenance costs for electric buses.

This HVIP set-aside funding will be available to public school districts, public charter schools, joint power authorities, county offices of education and the California Department of Education’s Division of State Special Schools. Applicants must be in small- or medium-sized air districts — the state entities responsible for regional air quality planning and monitoring.

“The program prioritizes applicants located in low-income and disadvantaged communities in small and medium air districts that have historically had limited access to funding for investments in zero-emission transportation,” CARB said.

CARB will accept applications for the program until Sept. 29. Applicants must submit a letter of intent, a copy of the vehicle registrations for the buses they intend to replace and “preliminary information regarding existing and planned charging infrastructure.”

Entergy Regulators Mount Challenge to MISO South Cost Allocation

State regulators from MISO South have publicly opposed a “postage stamp” cost allocation design, potentially setting the stage for a showdown between them and RTO planners preparing a third portfolio of long-range transmission projects.

The Entergy Regional State Committee (E-RSC) on June 30 adopted a resolution denouncing any use of postage stamp rates — in which costs are allocated across an entire footprint based on transmission customers’ load-ratio shares — to pay for the third of four iterations of MISO’s long-range transmission planning (LRTP).

Last month, MISO suggested eschewing a total subregional postage stamp design in favor of a half-subregional, half-zonal cost-sharing plan as it prepares to assemble a third LRTP portfolio that concentrates for the first time on the MISO South region. (See MISO Suggests Changing Cost Allocation for South Projects.)

But the E-RSC — which comprises the public utility commissions of Texas, Arkansas, Mississippi and Louisiana, as well as the New Orleans City Council, each of which regulates entities in one of the five cost allocation zones in MISO South — said any use of a postage stamp allocation is unacceptable. It called for “cost-causation and beneficiary-pays principles” and said parties who “receive negligible or negative benefits” should not owe anything.

For the third cycle of LRTP, “not all retail jurisdictions and loads are likely to be equal cost causers and beneficiaries,” the E-RSC said. A postage stamp design will “not align LRTP-related costs with the expected beneficiaries.” MISO should consider assigning costs to interconnecting generators that will benefit from LRTP lines through reduced network upgrade costs, it said.

The resolution called upon MISO to develop an allocation that metes out costs “based only on accurate, objective, measurable, quantifiable, non-duplicative, forward-looking and replicable metrics that are supported by data” to protect consumers. MISO’s design should be shaped by benefit ideas from MISO South regulators and stakeholders, and each LRTP project should be able to pass a benefit-cost analysis on a stand-alone basis, as opposed to sizing up benefits from a portfolio perspective, it said.

MISO did not say whether the E-RSC’s resolution will influence its cost allocation proposal. Via spokesperson Brandon Morris, the RTO said it appreciates the E-RSC’s feedback and is reviewing its resolution.

“We are committed to working with our stakeholders to develop a cost allocation solution for tranche 3 that balances the different needs of our subregions,” Morris said in a statement to RTO Insider.

In May, leadership of the Organization of MISO States said the RTO’s allocation proposal for its South subregion sparked several questions and a need to understand MISO’s end goal. State regulatory staffs said it was unclear whether the 50/50 allocation will completely replace MISO’s subregional postage stamp rate going forward and whether the RTO is planning to use the design on the fourth LRTP portfolio.

At the time, multiple representatives from MISO state regulatory bodies also said they remain interested in adding a generator-pays component to LRTP cost allocation.

Moniz Calls for ‘Substantial Effort’ on Bioenergy with Carbon Capture

To achieve its net-zero targets by 2050, the United States will need a major deployment of bioenergy paired with carbon capture and storage (BECCS), with a goal of sequestering 500 million metric tons (MMT) of carbon dioxide per year, according to a new report from the Energy Futures Initiative (EFI).

Ethanol from corn and biodiesel from cooking oil are the most common forms of bioenergy, but the report sees wider options for feedstock, such as agricultural waste or trees and underbrush culled for forestry management. It also stakes out a claim for BECCS as a carbon-negative technology, taking more carbon out of the atmosphere than it emits, which could “counterbalance residual emissions from difficult-to-decarbonize sectors of the economy.”

“We know there are voices that would prefer other pathways toward very deep decarbonization,” said Ernest Moniz, former U.S. secretary of energy and EFI’s CEO. “But the reality is ― in our view, has been consistently ― that we need all [technologies] because the fight … for every damn tenth of a degree is really important.”

Speaking at a recent launch event for the report, Moniz cited figures from the United Nations International Panel on Climate Change, projecting that carbon dioxide removal technologies will need to cut global emissions by 6 gigatons per year by midcentury to keep climate change to 1.5 or 2 degrees Celsius. About half of that total could come from BECCS, Moniz said.

“And to put that in context, that 6 gigatons … is larger than the total U.S. emissions today of carbon dioxide,” he said. “So, this is not for the faint of heart. We’re going to need a very, very substantial effort.”

A gigaton is one billion tons, and the most recent figures from the Environmental Protection Agency, for 2021, peg U.S. CO2 emissions at 5.58 MMT.

The EFI report outlines what that substantial effort might look like, from setting ambitious goals, to expanding sources of biomass, to enacting supportive federal policies, such as tax incentives and changes to the Farm Bill now being debated in Congress. Last amended and reauthorized in 2018, the Farm Bill is updated every five years.

EFI recommends the 2023 update include increased funding for BECCS research and the inclusion of BECCS in existing programs, such as the Advanced Biofuels Payment Program, which provides financial support for biofuels not based on corn.

The report also sees a major opportunity to increase BECCS feedstocks through forest management, harvesting fast-growing trees and other plants that can result in “overstocked” forestlands and increased risk of wildfires. Citing a study from Yale University and the University of California, Berkeley, the report estimates “that between 265 million and 1 billion bone-dry tons (BDT) of biomass overstock are in wildfire prone counties in five Western states alone (California, Idaho, Nevada, Oregon and Washington).”

A bone-dry ton is a measure of wood with zero moisture content.

“BECCS creates a value proposition for more active forest wildfire management by providing a market for this overstocked biomass,” the report says. Job creation and economic development for rural communities would be another strong selling point, the report says.

But federal regulations strictly limit the use of forest biomass harvested from federal lands for biofuel production, the report says. For example, biofuels made from biomass harvested from federal forests do not qualify for EPA’s Renewable Fuel Standard. The EFI report recommends that exclusion be lifted.

Neutral or Negative?

With the world’s hottest days on record grabbing headlines, Moniz’s call for all-of-the-above climate action is timely and undeniable, but like carbon capture itself, BECCS raises skepticism and a lot of questions among environment groups.

EFI’s basic argument for BECCS begins with its claim that bioenergy is essentially carbon neutral — that is, the CO2 naturally sequestered in wood or other organic matter via photosynthesis offsets the carbon emitted when that feedstock is burned or otherwise processed to produce biofuels or other energy. Storing those emissions underground or sequestering them by other means makes them, at least potentially, carbon negative, said Joseph S. Hezir, EFI’s executive vice president.

“Depending on where you want to start the cycle, you could either have the carbon intake up front and then release [it] later or the release now and then capture or recapture later,” Hezir said in an interview with NetZero Insider.

EFI also notes that biomass already is the largest source of renewable energy in the U.S., based on figures from the International Energy Agency (IEA), which include its use in ethanol and other biofuels. Biomass is more widely used for heat and power generation in Europe, but it accounts for only 1.3% of power generation in the U.S, according to the U.S. Energy Information Administration.

An analysis from the National Resources Defense Council (NRDC) disputes the carbon neutrality of bioenergy, arguing such calculations leave out emissions associated with the full supply chain of procuring and transporting biomass.

“Far from being carbon negative, the lifecycle of this approach to BECCS generates about 80% as much carbon as comes out of a coal plant smokestack per megawatt-hour. This is because a large fraction of the total emissions occur off-site,” according to an NRDC issue brief.

Echoing NRDC, a Sierra Club analysis says, “The process of vegetation capturing CO2 from the atmosphere is carbon negative. Transporting those plants and refining, capturing and storing CO2 is not. For BECCS to be carbon negative, all of the above would have to be done with renewable energy.”

NRDC also raises concerns that widespread deployment of BECCS “would tax global ecological limits, threaten public health and cost a fortune.”

Food vs. Fuel

The EFI report acknowledges the carbon accounting, land use and economic obstacles BECCS will have to overcome and calls for “responsible” development of the technology.

One of the report’s key priorities is the development of “science-based, transparent guidelines for estimating … [greenhouse gas] emissions contributions from BECCS,” while also noting the challenges of building consensus and confidence for such guidelines. For example, given the wide range of bioenergy feedstocks, developing science-based carbon accounting will be complicated, Hezir said.

Tracking CO2 emissions is “different for crops than it is for forestry,” he said. “Forestry is … particularly challenging because forests sometimes are managed at a very macro level, where you might be planting in one area and harvesting in another, and then the question is how [do] you look at that whole landscape?”

Similarly, carbon accounting for agriculture will have to take into account fertilizers, irrigation and harvesting, Hezir said.

Roger Ballentine, president of Green Strategies, an industry consultant, said carbon accounting for BECCS should look at what the technology delivers “on a systemic basis,” rather than using a lifecycle analysis of individual BECCS facilities or feedstocks.

“What’s the decarbonization impact of providing [different] funding streams?” Ballentine said during a panel at the launch event. “You have energy production. You have carbon dioxide removal. You may have wildfire mitigation and waste management. So how do these opportunities and some of the challenges … compare to other pathways, especially carbon dioxide removal?”

The land use issue is another major challenge, pitting food production against “energy crops” used for fuel, said Virginia H. Dale, a corporate fellow at Oak Ridge National Laboratory. But, she said, “The U.S. has a large amount of nonfood crops, waste and forest residues that can provide biomass for this expanded BECCS deployment. … More than 300 million tons of biomass are readily available from currently unused agriculture and forestry waste, as well as including municipal waste. …

“We need to recognize that food and bioenergy … don’t need to compete for land. They could be integrated together to provide an appropriate resource for both of these if managed collectively. One thing we can do is develop flex crops, that is … resources that can be used for fuels as well as food, so that when there’s a food need, they can be adapted to that.”

Compared to direct air capture technologies, the economics of BECCS also requires a systemic approach that includes its potential to provide firm, dispatchable power to the electric power grid, said Sasha Mackler, executive director of the Energy Program at the Bipartisan Policy Center.

Direct air capture’s business model is simpler, he said. “You need to have a technology system that can effectively and efficiently capture carbon. We really have one product you’re selling: carbon removal.”

Widespread deployment of BECCS will require monetizing multiple value streams, such as power production, carbon removal and forest management for wildfire prevention, which will in turn depend on figuring out the carbon accounting, Mackler said.

“For product developers to actually get to the work of building out this business, they need to have clarity on what they’re able to monetize,” he said.

Ballentine also noted that the Inflation Reduction Act’s generous tax credits for carbon capture — up to $180/ton for direct air capture — do not specifically incentivize carbon-negative technologies. Further, he said, expanding biomass supply “doesn’t do you any good if there’s not demand.”

Will There be Demand?

Besides monetization, applications that build demand for BECCS could be the biggest roadblock to widespread deployment.

While supporting carbon removal technologies in general, the IEA cautions they should not be used as “an alternative to cutting emissions or an excuse for delayed action. But they can be part of the portfolio of technologies and measures needed in a comprehensive response to climate change.”

Hezir sees near-term applications for biofuels like renewable natural gas and sustainable aviation fuels, both areas where emerging demand exists among well-established industries, in this case, utilities and airlines. For example, the Renewable Natural Gas Coalition, an industry trade group, counts major utilities such as Consolidated Edison, National Grid, Dominion Energy, and Pacific Gas and Electric among its members.

Longer term, the EFI report sees much potential for BECCS, but also uncertainties that will require new policies and investments. “We’re now at a stage where we actually need to deploy more pilot projects, collect data and get more learning,” Hezir said. “Then use that to grow the industry.”