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November 5, 2024

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Hydrogen Tax Credit Design is Key to Decarbonization

The Treasury Department must balance the need to grow the hydrogen industry with the need to ensure it is clean as it implements the 45v tax credit in the Inflation Reduction Act, experts said at a Resources for the Future event Monday.

While hydrogen production now is done with natural gas, which produces direct emissions, it can be done with electrolysis — using electricity to split the hydrogen atoms out of water. How clean that is depends on what is generating the electricity, said RFF Fellow Kevin Rennert.

Lawmakers were aware of the emissions issue and wrote in the statute that the 45v credit must take lifecycle emissions into account when it is being awarded, and how much credit projects get.

While the main strategy to cut emissions involves electrification, such as with motor vehicles and home heating, that does not work everywhere, said American Clean Power Association CEO Jason Grumet.

“There’s some big parts of our economy, both domestically and globally, that just don’t lend themselves to electrification: heavy industry, cement, steel, some heavy freight transport, aviation,” Grumet said. That’s been the missing piece, he added. “And so, here’s where green hydrogen kind of fits the bill.”

The industry doesn’t exist now. To ensure major commodities are produced cleanly, green hydrogen, or an alternative, needs to grow significantly in the coming decades. (See DOE Releases National Clean Hydrogen Strategy and Roadmap.)

Policymakers are worried that if they start putting a bunch of electrolyzers onto the grid without additional clean energy supplies, that would increase emissions overall, Grumet said.

To get around that, ACP supports requiring new electrolyzers to be supplied by new clean energy generation in their region. But the requirement to match hourly demand with renewable production would be phased in so any project that starts construction by the end of 2028 would only have to match annual demand, which is much more flexible and would allow the industry to grow, Grumet said.

To keep pace with the energy transition, about 10 million metric tons of clean hydrogen needs to be produced by 2030, and that would require 100 GW worth of electrolyzers, said Electric Hydrogen Vice President for Policy Paul Wilkins. That’s based on a utilization rate of about 60%, with hydrogen production ramping when renewable power is available and not running when it is not.

Without “temporal matching” with renewable production, the credits would go to simpler electrolyzers that can’t ramp production up and down easily and run as often as possible, helping to drive up peak demand and thus electric rates for other consumers.

“An electrolyzer that can’t ramp is more likely to be produced in China,” Wilkins said.

North America is expected to have 3 GW of hydrogen production running by next year. China will have 13 GW, dominated by less flexible production, which it can build at a third of the cost of what’s built in the West. Requiring temporal matching would ensure not only the molecules of hydrogen were clean, but also that the tax credits flowed to more technically advanced, American machinery.

“We need to make sure that we’re innovating incentivizing a flexible hydrogen production, storage and consumption system,” Wilkins said. “And the U.S. does innovation better than any other country in the world. If the U.S. incentivizes innovation, and if Treasury incentivizes innovation, we’re confident the U.S. industry is going to win. If Treasury incentivizes low tech, China does low tech at scale really well.”

The incentive in question is the IRA’s largest, totaling $450 per ton of CO2 abated when clean electricity production credits are included, and $300 per ton without them, said Rocky Mountain Institute Senior Associate Nathan Iyer. If designed well, it could help decarbonize major industries.

“It is all centered around one core question: How do you prove that the electricity that you are consuming is low carbon when you have a much dirtier grid?” Iyer said.

Using power with the grid’s average emissions would lead to hydrogen that produces about 20 kilograms of CO2 per ton, which is worse than producing with natural gas, and 30 to 60 times dirtier than electrolyzers would need to be to qualify for 45v, he added.

“As the largest credit, this will set a national precedent and could be a huge step forward if it’s durable and effective at reducing emissions in the real world,” Iyer said. “And while the structure of this credit forced this question for hydrogen first, this is not the last time that we will have this debate.”

The same subject of decarbonizing the grid while adding massive, new loads is going to be key to decarbonizing many parts of the economy, he added.

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ERCOT Technical Advisory Committee Briefs: July 25, 2023

ERCOT will ask its Board of Directors to approve a $329 million reliability project in the San Antonio area following an endorsement from stakeholders last week.

The Technical Advisory Committee approved the project as part of its combination ballot during its July 25 meeting, agreeing with staff’s recommendation that the project is critical to the ERCOT system’s reliability.

The project addresses thermal overloads in the San Antonio area and has been designated as a Tier 1 project because of its estimated capital costs of $100 million or more, thus requiring board approval. The board next meets Aug. 30-31.

CPS Energy, San Antonio’s municipal utility, submitted the project for the Regional Planning Group’s review in December. The staff-led RPG is the grid operator’s primary forum for discussion, input and comment on planning issues.

ERCOT staff studied five options for the project, shortlisting three. They determined the chosen option improves long-term load-serving capability and operational flexibility and provides an additional transfer path from South Texas into the San Antonio area.

The preferred option does lead to congestion on a line, but upgrading the line does not yield economic benefits, staff said, and it will not be included in the project.

The project involves building 50 miles of new double-circuit 345-kV lines and rebuilding an additional 25 miles of 345- and 138-kV lines. CPS expects to complete the project by June 2027.

RTC Stakeholder Group to Form

Now that work has resumed on real-time co-optimization (RTC), ERCOT wants to reconstitute the stakeholder group that produced seven nodal protocol revision requests (NPRRs) and two other changes to guide the ISO’s implementation of that market tool that procures energy and ancillary services every five minutes. (See ERCOT Technical Advisory Committee Briefs: Nov. 18, 2020.)

ERCOT’s Matt Mereness, who guided the RTC Task Force, will chair the proposed working group. A vice chair has not yet been identified. Work is to begin in September, with a targeted delivery of 2026.

The group will use the NPPRs to develop business requirements for RTC and single-model batteries. It also will review a state-of-charge concept for batteries. Staff are drafting a charter for the August TAC meeting.

The RTC Task Force was disbanded at the end of 2020 following completion of its work. The disastrous and deadly 2021 winter storm and the ensuring drain on staff postponed further work on RTC and batteries until recently.

Combo Ballot

TAC members approved a change to the Verifiable Cost Manual (VCMRR034) despite concerns from generators that it will create confusion over what can be included in the fuel adders. The revision provides that actual fuel purchases used to determine the reliability unit commitment guarantee will not be included when calculating fuel adders.

The measure passed 26-1, with Luminant casting an opposing vote and Calpine, ENGIE and Jupiter Power all abstaining.

The committee also considered a separate motion on NPRR1165, which would strengthen ERCOT’s market entry eligibility and continued participation requirements for qualified scheduling entities, congestion revenue right account holders and other counterparties. The measure passed 29-1, with only CPS Energy in opposition.

NPRR1165 would remove minimum capitalization requirements, require counterparties to post independent amounts, remove references to guarantors, clarify financial statement requirements and reference International Financial Reporting Standards rather than retired International Accounting Standards.

TAC’s combination ballot included three additional NPRRs, two revisions to the nodal operating guide (NOGRRs), another binding document request (OBDRR) and a change to the planning guide (PGRR). If approved by the board, these changes would:

    • NPRR1176, NOGRR252: revise the Energy Emergency Alert (EEA) procedures to require a declaration of EEA Level 3 when physical responsive capability (PRC) cannot be maintained above 1,500 MW and require ERCOT to shed firm load to recover 1,500 MW of reserves within 30 minutes. The NPRR also would modify the trigger levels for EEA Level 1 and EEA Level 2, change the trigger for ERCOT’s consideration of alternative transmission ratings or configurations from advisory to watch when PRC drops below 3,000 MW, and restore a frequency trigger for the EEA Level 3 declaration if the steady-state frequency drops below 59.8 Hz for any period of time.
    • NPRR1182: incorporate controllable load resources and energy storage resources (ESRs) into the constraint competitiveness test’s long-term and security-constrained economic dispatch (SCED) versions. Controllable load resources will not be mitigated but will be used to identify whether a market participant has market power in resolving a transmission constraint; other resources’ registration data will be used in the long-term CCT process, and real-time telemetry will be used in the SCED CCT process.
    • NPRR1183: revise rules for and make publicly available on ERCOT’s website general information documents that don’t include ERCOT critical energy infrastructure information (ECEII), remove a reference to the Freedom of Information Act from the ECEII’s definition and remove antiquated or duplicative language related to reliability must run.
    • NOGRR247: increase the under-frequency load shed (UFLS) program’s load-shed stages from three to five and change the transmission operator load-relief amounts to uniformly increment by 5% for each stage, add a UFLS minimum time delay of six cycles (0.1 seconds) and add 59.1 Hz to the list of UFLS stages, and revise the gray-box language from NOGRR226 to provide that the TO load value used to determine load at each frequency threshold will be the TO’s load at the time frequency reaches 59.5 Hz.
    • OBDRR047: clarify treatment of unused funds from previous emergency response service standard contract terms.
    • PGRR108: update language to reflect the current practice of posting regional transmission plan and geomagnetic disturbance (GMD) assessment plans and update data sets.
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MISO Wraps Incident-free June

MISO presided over routine operations in June, with an average 81-GW load and diminished wholesale prices.

Average load was down 3 GW compared to June 2022. MISO’s real-time locational marginal prices fell more dramatically, from about $75/MWh to $28/MWh year over year. Most of the drop was attributed to natural gas prices falling from about $8/MMBtu to $2/MMBtu within the year.

Average daily generation outages also were lower than last June, at about 38 GW instead of 41 GW. MISO operated with a fuel mix of 44% natural gas, 29% coal, 15% nuclear and 9% wind.

The grid operator realized a 3-GW solar peak June 20, when solar generation served 3% of total load at midday.

Heat arrived in the latter half of the month, forcing multiple rounds of conservative operations instructions and MISO’s 111-GW peak on the evening of June 29. The monthly peak was 10 GW short of last June’s peak.

MISO said it will internally review a more than 7% error in its load forecasting for June 29. The grid operator attributed the load estimate error to severe weather in the footprint’s central region that ultimately shaved 10-20 degrees from initial weather forecasts.

So far, summer hasn’t held any emergency procedures for the footprint. MISO managed to avoid a maximum generation emergency last week during a systemwide heatwave. (See MISO Preps for Heat Wave, Anticipates Annual Demand Peak.)

MISO ultimately issued two separate maximum generation alerts for its Midwest region two days before the expansive heatwave intensified July 27 and again July 28. Those followed MISO’s issuance of conservative operations instructions, a hot weather alert and a capacity advisory July 23.

The grid operator said July 25 that it was facing risks from above-normal temperatures and forced generation outages. It had warned that its forecasted high loads could have caused it to come within 500 MW of its operating obligations for July 27.

“With increased risk and uncertainty, it may be necessary for MISO to escalate further based on changing system conditions,” MISO said at the time.

MISO has a hot weather alert in effect for its South region through Aug. 4. Temperatures in the region are expected to be near 100 degrees.

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Whitmer EV Chargers Caught Up in Driveway Controversy

LANSING, Mich. – Gov. Gretchen Whitmer’s effort to install two electric vehicle chargers at the state’s Executive Residence have gotten caught up in a controversy over a driveway project at the house.

The state’s Administrative Board last week approved a slightly less than $1 million contract to build a new driveway and install the EV chargers at the residence in the Moore’s River Drive neighborhood — an upper-income neighborhood convenient to both the state Capitol and a large General Motors plant.

Ad Board actions generally are little noticed by the public, but once concrete started getting laid at the residence on July 28, the project gained controversy because it involves all taxpayer funds, and the contract was awarded with a no-bid contract.

Whitmer and her office have said adding the EV chargers is an effort at “leading by example,” as the state has taken major steps to be a leader in EV production and battery development.

But Rich Studley, the former chief executive of the Michigan Chamber of Commerce and a frequent critic of Whitmer, tweeted that the driveway and EV chargers are really an example of “greed.”

It isn’t the chargers themselves that are causing the controversy, but the whole nature of the project.

Michigan has two executive residences for the governor: the Lansing ranch-style house and a cottage on Mackinac Island. Michigan did not have a gubernatorial residence in Lansing until the 1963 Constitution required one, and the current residence was donated to the state. Then-Gov. George Romney was the first governor to live at the house.

While routine upkeep and maintenance of both residences is paid for by the state, major projects usually are financed through private donations. One of the most recent major renovations of the Lansing residence, done while U.S. Energy Secretary Jennifer Granholm was Michigan’s governor, was funded privately.

The new driveway must be commercial grade, twice as thick as most residential driveways, because the residence has a fair number of commercial and city vehicles — including garbage trucks to handle the building’s dumpsters — use the property. That accounts for much of the cost.

With the Legislature is on summer break, and controlled by Democrats, it’s unlikely there will be any attempt to block the project, which should be complete in August. Whether there will be an effort to refund the state for its cost through private donations has not yet been discussed, publicly at least.

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FERC Interconnection Rule Sets Penalties, Ends ‘Reasonable Efforts’ Standard

FERC’s long-awaited revamp of its generator interconnection procedures will make it more costly for developers to enter and leave queues and impose penalties on transmission providers that fail to complete studies on time.

Order 2023 (RM22-14) sets a 150-calendar day deadline for completing stability analyses, power flow analyses and short circuit analyses required to study complex clusters involving numerous interconnection requests.

FERC said the 150-day deadline gives transmission providers “sufficient time to perform these technical cluster studies while providing certainty about the timeline for the interconnection process.”

The commission cited reports filed by transmission providers that showed of the 2,179 interconnection studies completed in 2022, 68% were issued late and another 2,544 studies were still ongoing and past their deadlines as of the end of the year. All RTOs/ISOs except CAISO and 14 non-RTO/ISO transmission providers reported delayed studies for the year.

About 80% of transmission providers reported delayed studies in at least one of the past three years (2020-2022) and 57% had delayed studies in at least two, FERC said. The National Association of Regulatory Utility Commissioners complained to FERC that “nearly all transmission providers across the country, including many transmission providers that have implemented queue reforms, regularly fail to meet interconnection study deadlines.”

‘Reasonable Efforts’ Standard

Previously, the pro forma large generator interconnection procedures held transmission providers to a “reasonable efforts” standard for completing studies, defined as “actions that are timely and consistent with good utility practice and are substantially equivalent to those a party would use to protect its own interests.”

Transmission providers argued that many of the delays resulted from situations outside of their control, including large numbers of speculative interconnection requests, a shortage of qualified engineers, delayed data from interconnection customers and cascading restudies caused by withdrawals. MISO said most of its delays resulted from the need to wait for affected systems studies.

Some commenters warned that firm deadlines might lead transmission providers to prioritize speed over accuracy and the identification of the most efficient solutions. National Grid said it could result in later corrections to engineering requirements and cost estimates, causing more late-stage queue withdrawals.

The Edison Electric Institute and Eversource Energy complained that FERC’s Notice of Proposed Rulemaking (NOPR) failed to make the case for why reliance on good utility practice remains sufficient in other situations, but not for interconnection studies. New York’s Transmission Owners and Eversource said FERC should postpone penalties until it has allowed the other process changes to take effect.

But public interest and clean energy groups said the transmission providers were ignoring potential solutions, such as policy and process improvements and increasing spending on staff. Advanced Energy United (formerly Advanced Energy Economy) said accepting high interconnection queue volumes as a legitimate cause for delays would provide providers “a permanent free pass” to miss deadlines.

Losing Patience

FERC demonstrated little patience for the providers’ excuses.

“The reasonable efforts standard worsens current-day challenges, as it fails to ensure that transmission providers are keeping pace with the changing and complex dynamics of today’s interconnection queues,” the commission said. “Contrary to the assertions of some commenters, we believe that there are steps within transmission providers’ control, from deploying transmission providers’ resources to exploring administrative efficiencies and innovative study approaches, to better ensure timely processing of interconnection studies to remedy existing deficiencies.”

It noted that the order seeks to reduce speculative interconnection requests with stricter requirements for entering and remaining in the queue (site control requirements, commercial readiness deposits and withdrawal penalties) and also seeks to improve efficiency by switching to the first-ready, first-served cluster study process from the serial, first-come, first-served process.

The penalties, FERC said, “ensure that transmission providers are doing their part as well.”

Penalties

The NOPR proposed a penalty of $500 per business day that the study is late, but the commission said it was persuaded that was too low, noting that a study delayed by six months (126 business days) would result in a penalty of only $63,000. “We view such a penalty as insufficient considering that the purpose of the penalty is to incentivize timely study completion that may be achieved, for example, by hiring additional personnel or investing in new software,” FERC said.

Instead, it imposed per-day penalties of:

    • $1,000 for delays of cluster studies;
    • $2,000 for delays of cluster restudies;
    • $2,000 for delays of affected system studies, and
    • $2,500 for delays of facilities studies.

Penalties will be distributed to interconnection customers on a pro rata per interconnection request basis to offset their study costs.

As a concession to the transmission providers, FERC said it will not impose penalties until the third cluster study cycle (including any transitional cluster study cycle) after the effective date of the transmission provider’s compliance filing.

The commission also will waive penalties for studies submitted within a 10-business-day grace period and will allow a deadline extension of 30 business days by mutual agreement of the transmission provider and all affected interconnection customers. Penalties will be capped at 100% of the initial study deposits.

FERC rejected the NOPR’s proposed force majeure penalty exception, instead saying that transmission providers will be permitted to appeal penalties to the commission.

“Transmission providers may explain in any appeal to the commission any circumstances that caused the delay, including any events that qualify as force majeure, and the commission will consider such circumstances as part of its evaluation of whether good cause exists to grant relief,” FERC said.

RTOs and ISOs will be allowed to submit a Federal Power Act Section 205 filing to recover penalties from at-fault transmission providers.

“Non-RTO/ISO transmission providers and transmission-owning members of RTOs/ISOs may not recover study delay penalties through transmission rates,” FERC said. “… Because the at-fault transmission provider’s shareholders will pay the penalty, this prohibition addresses commenters’ concerns that study delay penalty costs will ultimately be borne by customers and ratepayers through increased transmission costs.”

Transmission providers will be required to make quarterly postings making public the penalties incurred from the previous quarter.

Other Studies Rejected

The commission rejected NOPR proposals for optional resource solicitation studies or optional informational interconnection studies and adopted a modified proposal to require evaluation of certain advanced transmission technologies. The commission said those changes “should reduce the burden on transmission providers as compared to that under the NOPR.”

The NOPR sought comment on whether state agencies required to develop a resource plan or conduct a resource solicitation process should be defined as a resource planning entity and be able to request initiation of an optional resource solicitation study.

But the commission concluded there was “insufficient evidence” to justify the optional resource solicitation study as a “generic solution” across all regions for coordinating state-level resource planning with the interconnection process, noting that many transmission providers do not have load-serving entities that conduct resource solicitations.

“We are also concerned that the particular ‘one size fits all’ approach proposed in the NOPR would create uncertainty regarding the cost and timing of interconnecting to the transmission system, because the proposed study would not result in useful network upgrade cost estimates.”

It said it agreed the proposal “would divert transmission provider resources and potentially lead to delays.”

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Petition Drive Seeks to Repeal Wash. Cap-and-trade Program

REDMOND, Wash. — A conservative group has begun a petition drive to eliminate Washington’s new cap-and-trade program.

The organization, Let’s Go Washington, is collecting signatures on a petition asking the state Legislature to repeal the program, which went into effect this year, holding its first auctions of carbon allowances in February and May. (See Washington Confirms $300M Take for 1st Cap-and-Trade Auction.)

The state’s fledgling program is taking a huge amount of political heat from state Republicans, who blame it for leaving Washington with the highest gasoline prices in the nation. They argue that oil companies running Washington’s five refineries are passing on the high cost of the allowances they must buy from the state or other entities in the market. (See Cap-and-trade Driving up Washington Gasoline Prices, Critics Say.)

“It’s such a scam.  It’s a hidden tax,” Brian Heywood, head of Let’s Go Washington, said Saturday at a festival for Republican political candidates in the Seattle suburb of Redmond.

Heywood contended that Gov. Jay Inslee and Democratic legislators downplayed the threat of rising gasoline prices that he thinks came about because of the cap-and trade auctions. When the Legislature passed the program in 2021, Inslee’s administration predicted gas prices would rise only a few pennies as a result.

“He lied to begin with,” Heywood said.

February’s allowance auction raised almost $300 million, which the Legislature appropriated for fiscal 2024, which began July 1. That money went into 188 individual allocations for solar farms, climate planning, pumped storage projects, developing a hydrogen industry, installing solar panels on buildings, constructing infrastructure for electric vehicles, developing hybrid fuel-electric ferries and other projects.

A May auction of allowances raised $557 million for fiscal 2025, while breaking a soft cap for allowance prices that triggered an additional auction of allowances from a reserve intended to rein in carbon prices. If allowance auction sales continue at their current rate, the Legislature could be looking at more than $2 billion in cap-and-trade revenue for fiscal 2025. (See Wash. Cap-and-Trade Auction Prices Break Soft Cap.)

“That means the money is going to boondoggles that Inslee wants for his friends,” Heywood said. He argued that cap-and-trade is intended to raise gasoline prices to force people to switch from gasoline to electric vehicles.

‘Climate Denialism’

Inslee spokesperson Mike Faulk noted that the petition on Let’s Go Washington’s website calls for repealing cap-and-trade “regardless of whether the resulting increased costs are imposed on fuel recipients or fuel suppliers.”

“Sounds like it has more to do with climate denialism than addressing consumers’ concerns about gas prices,” Faulk said.

Inslee has acknowledged that gasoline prices have risen higher than projected. “But it remains speculative to lay exclusive blame for price increases on” cap-and-trade, Faulk said. This month, the governor accused oil companies of using confusion around cap-and-trade to gouge Washington drivers and take excessive profits. Democratic legislative leaders intend to introduce a bill next year to require oil companies to provide greater transparency into their finances. (See Inslee Challenges Cap-and-trade Role in High Wash. Gas Prices.)

Faulk said a third of the cap-and-trade program’s revenue goes to communities overburdened by pollution and climate impacts, with an additional 10% directed to the state’s tribes. The rest goes to transitioning away from a carbon-based economy.

Let’s Go Washington must collect 324,516 valid signatures for its petition by Dec. 29 to submit to the Legislature in time for consideration during the 2024 session. If the Legislature decides not to act on the petition, the initiative would go to a public ballot in the next general election. Democrats have significant majorities in both the Washington House and Senate, meaning any successful petition likely would receive a chilly reception.

The liberal Northwest Progressive Institute said in January that Let’s Go Washington collected signatures for 11 initiatives in 2022 but did not collect enough to send any to the Legislature.

The cap-and-trade petition is part of a Let’s Go Washington package of six petitions, which includes one calling for repealing a new tax on people earning at least $250,000 in capital gains. The group’s other petitions seek to: forbid the imposition of any state or local income tax in Washington, which does not have such a tax; allow residents to opt out of the state’s long-term care insurance program; remove some restrictions on police pursuits; and allow students to opt out of certain surveys, assignments and sex education, as well as allow parents access to their children’s school records and instructional materials.

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NAESB Forum Chairs Push for Gas Reliability Organization

The chairs of the North American Energy Standards Board’s Gas-Electric Harmonization Forum suggested establishing a natural gas reliability organization similar to NERC in their foreword to the board’s report on the forum issued last week, calling this step a “more significant, structural solution that … would accelerate the harmonization of the natural gas and electric power industries to the benefit of the country.”

The chairs proposed the organization as a means of addressing some “profoundly disturbing” differences of opinion between representatives of the two industries, revealed during the forum, that may require FERC’s direct intervention to prevent conflicts that could endanger the nation’s energy supply.

“Excuses can no longer substitute for sound planning and judgment,” wrote co-chairs Robert Gee, Susan Tierney and Pat Wood III, all members of NAESB’s advisory council. “If voluntary measures fall short owing to staunch opposition by some, it is time for the national regulator to consider more direct measures to ensure that both industries under its purview perform in tandem to ensure energy reliability and assurance for our country.”

NAESB initiated the forum last year at the request of then-FERC Chairman Richard Glick and NERC CEO Jim Robb, who said the board is “uniquely positioned” to organize the dialogue between the gas and electric industries called for in their respective organizations’ joint report on the February 2021 winter storm. (See NAESB Confirms Gas-electric Forum in the Works.)

During 14 meetings over the past 11 months, the forum’s participants — which included representatives of 370 companies in the wholesale and retail natural gas and electric markets — developed 20 recommendations that were offered to members of both industries for comment. While some recommendations met with broad support, others provoked “widely divergent opinions.”

These controversial measures included recommendation 1: that FERC direct NAESB to revise its standards to make data on gas pipeline availability and scheduling available to grid operators. This proposal drew the support of 85% of wholesale electric voters, but only 46% of those from the wholesale gas sector.

Also unpopular among the gas wholesalers was recommendation 7, which encouraged relevant state authorities to engage with producers, marketers and intrastate pipeline operators to ensure their operations are fully functioning ahead of extreme weather events that could cause high demand for both gas and electricity. Just 41% of wholesale gas respondents supported this proposal, as opposed to 87% of their electric counterparts.

Recommendation 15 — which encouraged state regulators to consider informational posting requirements for intrastate pipelines to improve transparency, similar to FERC’s reporting and posting requirements for interstate pipelines — met with approval from just 57.5% of wholesale gas respondents, versus 91% from the wholesale electric industry. Even NAESB’s standards efforts met with debate, with recommendation 4 — related to an effort by the organization to update its base contract for natural gas to encourage weatherization — drawing support from only 51% of voters in the wholesale gas quadrant, but 91% of the wholesale electric quadrant.

The forum’s chairs noted that not all of the recommendations were so controversial; several measures discussed in the report drew support from more than 80% of respondents in both industries. These included recommendations to align the electric and gas scheduling timelines, adopt multiday unit commitment processes, and have state public utility commissions encourage gas and electric demand response programs and voluntary conservation public service announcements.

But the writers remained dismayed at the tepid response generated by so many of the measures, which they considered not “to be so burdensome … that they would engender strong opposition.” They suggested a more fundamental change might be needed to implement the needed coordination ahead of future severe weather events.

“With [a gas reliability] organization in place, we believe the balanced solutions discussed in this report would find home at an institutional forum empowered to more timely address these and other related matters on an ongoing basis,” the chairs wrote. “Pending its creation, however, the … recommendations should be expeditiously addressed on an individual basis. … Although our work on this project is completed, resolution of these issues is only beginning.”

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Transmission Spending Should be ‘Like Going to Costco’

Developing transmission in the West should involve a long-term, comprehensive plan instead of a localized piecemeal approach, speakers agreed at last week’s webinar of the Western States Transmission Initiative – an effort led by Gridworks and former FERC Chair Richard Glick for the Committee on Regional Electric Power Cooperation (CREPC).

The second in a three-part series, the webinar addressed the West’s transmission needs and barriers to transmission development.

Glick, now a senior fellow at Gridworks and head of his own consulting firm, moderated a panel discussion with Rob Gramlich, president of consultant Grid Strategies, and Kris Raper, vice president of strategic engagement and external affairs at WECC and a former member of the Idaho Public Utilities Commission.

Gramlich and Raper both said that the West needs better regional planning to maximize the value of transmission built and avoid wasteful spending.

“I think you can look at the numbers and say, ‘a purely reactive short-term, just-in-time transmission approach is the most expensive way to do transmission,’” Gramlich said. “And we really are in most of the country doing just-in-time transmission.”

Building transmission to ensure grid reliability in the short term is necessary, but “if we proactively plan, we can almost certainly find a cheaper way to build a future system,” he said.

“From a consumer perspective, I think we need to do everything we can to move to more efficient operation of the existing grid and then plan for future needs,” Gramlich said. “And then I think the most important cost containment is to do good planning that does good, solid, benefit-cost analysis of what are the benefits, what are the costs. Let’s look at the portfolio, not the specific projects alone. Let’s look at the regional efficiencies and get the economies of scope brought in to bear.”

“There’s been a lot of transmission investment in the country, but most of that is on local systems,” he added. “There’s been almost none on the large regional and interregional [scale] over the last decade.”

Raper said large amounts of up-front spending on transmission could be difficult to sell to consumers and state regulators concerned about rising costs. But she suggested using a simple analogy to explain why it makes sense.

“It’s like going to Costco to buy things,” Raper said. “If you go to the regular grocery store, you buy for the short-term generally. And per item, you’re probably going to spend a little more. But if you have the ability to go to Costco, are you spending more upfront when you go there? Yes, but it lasts you longer.”

“From the most simplistic standpoint of explaining to a consumer,” planners could say, “yes, it looks like a lot of money, but if we do it onesie-twosie, you’re actually spending more, because you don’t gain the efficiencies from buying at Costco,” she said.

Raper outlined WECC’s efforts to study Western transmission needs in the next 20 years and interregional transfer capabilities, as required by recent federal law. (See NERC FAC Approves Transfer Study Funding.)

A WECC four-part study process is underway to study transmission needs, including during extended periods of extreme heat and cold in the West. Four scenario studies could be finished this year, with the 20-year analysis to be completed in 2024.

“We are working to develop a process for building out our 20-year planning model,” Raper said. “We think it’ll be valuable both for longer term transmission planning and reliability assessments of the West, and also to meet evolving FERC expectations that have come out recently under proposed rules that are focused on improving regional transmission planning processes.”

As an impartial entity that oversees reliability across the entire Western Interconnection, WECC’s long-term transmission analysis may carry more weight with regulators in Western states, where views on the need for green energy and transmission development can vary widely.

“We’re excited about the growing dialogue regarding transmission needs,” Raper said. “We see the urgency as now, and we do believe that with our stakeholders, we’ve identified a way for WECC to fill an important void in the conversation, providing a high-level, interconnection-wide view of transmission needs.”

“All of this has been done with the objective of maintaining our independent voice of reliability, remaining policy-neutral and resource-agnostic and fitting within WECC’s delegated authority to perform reliability assessments for the Western Interconnection,” she said.

The first webinar in the WSTI series on July 20 dealt with transmission planning. The third and final webinar in the series on Aug. 16 will tackle cost allocation.

“I look forward to seeing you all again on Aug. 16 for a discussion of … who pays for transmission and how much do they pay,” Gridworks Director Kate Griffith said. “And perhaps we’ll get a little bit deeper into Kris’s analogy of spending our money at a transmission Costco instead of a fancy food store.”

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FERC Accepts Niagara’s Cost Recovery Plans, Orders Rate Proceeding

FERC on Friday approved Niagara Mohawk Power’s construction recovery requests for the Smart Path Connect project while partly accepting its rate schedule revisions.

The commission also ordered a proceeding to determine the justness of its proposed transmission service charges (ER23-973/ER23-974).

The National Grid subsidiary sought to recover all costs from the construction work in progress costs for the Smart Path project it is building alongside the New York Power Authority, as well as revise its RS15 mechanism and create a new RS18 requirement, which set rates for transmission service charges and establishes a Smart Path charge recovery standard, respectively.

FERC accepted Niagara’s Smart Path cost allocation plan and its request for construction cost incentives, as well as the RS18 proposal, but only partly accepted the proposed RS15 revisions.

Smart Path would rebuild roughly 100 miles of 230-kV transmission lines, replacing them with either 230-kV or 345-kV lines and upgrading associated substations, creating a continuous 345-kV path from northern New York to the downstate region to mitigate congestion. The project was designated a “priority transmission project” by the state’s Public Service Commission and was one of the key products to come out of the Climate Leadership and Community Protection Act.

FERC previously rejected Niagara’s Smart Path cost allocation and recovery plans, but the utility adjusted its proposal to create RS18, which sets a 10.3% return on equity and applies a capital structure that becomes possible if the RS15 revision to add a project-specific incremental formula rate to the mechanism is accepted as well. (See FERC Rejects Niagara Mohawk Tx Cost Formula, ROE Adders.) NYISO submitted these filings on behalf of Niagara.

Niagara also proposed a 20% ROE cost containment mechanism for when actual costs exceed the $481.9 million project cost cap.

The commission approved the utility’s RS18 proposal to allocate Smart Path’s costs on a statewide volumetric load-ratio share basis, noting that it “accepted a similar participant funding agreement allocating costs for local transmission projects needed to meet the CLCPA.”

FERC also accepted RS15 revisions that comply with Order 864, which required transmission providers to revise their formula rates to account for changes caused by the Tax Cuts and Jobs Act of 2017.

However, after finding that the part of the RS15 proposal related to the allocation of general plant and administrative expenses “raises issues of material fact that cannot be resolved based on the record before us,” the commission ordered hearing and settlement proceedings to address the matter.

Concurrence

Commissioner Mark Christie wrote a concurrence emphasizing that Friday’s order does not suggest that one state’s public policy costs can be forced onto consumers in another.

Christie wrote that “costs related to a public policy project — which the Smart Path Connect Project is — should be borne by the sponsoring state and not shifted to consumers in other states.”

“That is how democracy is supposed to work,” he added.

“There is nothing in the record in this matter to indicate that any of the costs of the transmission projects that will be built to implement New York’s public policies under the terms described in this proposal will be forced on consumers in other states,” he said.

“Any suggestion that this order can be read to permit shifting a state’s public policy costs to consumers in other states or to suggest that the consumers in other states benefit from those projects without the express agreement of those other states is incorrect and it is not the order I support here or would have supported here,” Christie concluded.

The proposals accepted by FERC became effective April 1. National Grid estimates Smart Path’s total capital cost will be $1.2 billion and its in-service date will be December 2025.

The company declined to comment on the ruling.

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ERCOT Demand Breaks 83 GW with Latest Record

ERCOT again saw load reach record levels Monday and Tuesday as searing heat continues to bake the already well-done region.

Average demand exceeded the 83 GW barrier for the first time when it hit 83.05 GW during the late afternoon Monday. Demand bettered that mark during three hourly intervals Tuesday, with a new high of 83.59 GW established during the hour ending at 5 p.m.

ERCOT has now bettered its previous record of 82.59 GW set July 18 eight times this week.

Solar resources are again carrying a heavy load for ERCOT during the afternoons, producing a near-record 13.35 GW of energy Monday. Solar set a new high July 28 when it peaked at 13.42 GW.

Batteries are also helping fill in the afternoon gap, exceeding 1,000 MW for the first time Monday.

Average hub prices settled as high as $3,148 Monday between 6:45 and 8 p.m., but they have remained in double digits for most of the time.

The Texas grid operator is projecting demand to peak above 83 GW for the rest of the week and to exceed 85 GW Aug. 7. Average demand has been above 80 GW for 70 hourly intervals this summer after reaching that mark just once last year.

The National Weather Service on Sunday issued an extreme heat warning for much of North Texas; temperatures in the Dallas area were expected to hit 107 degrees Fahrenheit Wednesday.

In far West Texas Sunday, temperatures only reached only 97 degrees in El Paso, ending a string of 44 straight days over 100. Austin, in Central Texas, has an active streak of 25 straight days over 100.