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November 14, 2024

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Wash. Looks to Sell 11M Allowances in 2nd Cap-and-Trade Auction

Washington is aiming to auction off enough cap-and-trade credits Wednesday to cover more than 11 million metric tons of carbon emissions. 

The state’s Department of Ecology plans to auction 11.035 million allowances, with each entitling the holder to emit 1 metric ton of carbon. Of that amount, 8.585 million credits will go into effect this calendar year and another 2.45 million in 2026.

This will be the state’s second quarterly auction since the cap-and-trade law went into effect in January.  The results of Wednesday’s auction will be announced on June 7.

The first auction held on Feb. 28 sold all 6,185,222 allowances at $48.50 each to raise almost $300 million for the state’s coffers. (See Washington Confirms $300M Take for Cap-and-Trade Auction.) In April, the state legislature divided that $300 million into 188 appropriations for solar farms, climate planning, pumped storage projects, developing a hydrogen industry, installing solar on buildings, constructing infrastructure for electric vehicles, producing hybrid fuel-electric ferries and tackling other projects.

Revenue from the Wednesday auction will be appropriated in the legislature’s spring 2024 session, along with proceeds from auctions in August and November, and February 2024. In January, the Ecology Department made preliminary estimates that the auctions would raise $484 million in cap-and-trade revenue in fiscal 2023 and $957 million in fiscal 2024. (See Washington Estimates $1.5B in Cap-and-Trade Revenue Through 2024.)  

If today’s auction raises more than the Feb 28 auction, the state will be on its way to exceed its preliminary estimates.

The minimum bidding price is $22.20 per credit, the same as on Feb. 28. The allowances will be sold in bundles of 1,000 credits.

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California Bill to Speed Transmission Development Passes State Senate

A bill to accelerate the development of new transmission lines in California passed the state Senate Tuesday on a vote of 36-0 and is now headed for the lower house.

Senate Bill 619 would expand the authority of the California Energy Commission (CEC) by extending the agency’s existing “opt-in” permitting process to include new transmission lines that require a capital investment of at least $250 million over five years — although many such projects would still be excluded.

While not part of Gov. Gavin Newsom’s recently introduced legislative package to expedite the development of clean energy resources through looser permitting, SB 619 falls in line with the governor’s efforts, which last week took on a new sense of urgency. (See Newsom Stresses Role of Permitting in Calif. Energy Transition.)

“California’s efforts to build the clean energy supply of the future will fall flat if we rely on the grid of the past,” bill sponsor Sen. Steve Padilla (D) said in a statement Tuesday. “We must act now, to approve new projects and expand our transmission capacity. The state needs to triple the size of our grid over the next decade, and we are falling behind every single day.”

The CEC’s opt-in process is the product of a 2022 law (AB 205) that authorized the agency to create a new certification and permitting program that allows developers of non-emitting energy resources and related facilities — including transmission — to optionally seek approval from the CEC instead of a local permitting authority.

To be eligible for the process, a project must qualify under California’s Environmental Leadership Development Project program, which entails stringent environmental and labor provisions. SB 619 would expand the CEC permitting process to also include point-to-point transmission lines that function as more than just tie-ins for generating or storage resources.

‘Substantial Delays’

Under current California law, developers of point-to-point lines are prohibited from beginning construction before obtaining a certificate of public convenience and necessity (CPCN) from the California Public Utilities Commission — or, in the case of publicly owned utilities (POUs), a permit from a local authority.

The CPUC’s CPCN process includes both an environmental review under the California Environmental Quality Act (CEQA) and an evaluation of project need and costs. Critics — including Padilla — have blamed that process for the lack of needed new transmission in California.

“Despite the overwhelming need to expand our electrical grid, the California Public Utilities Commission has not authorized a new transmission project in over a decade,” the senator’s office said in its statement. “The current process requires multiple agencies, duplicative analyses, and permitting processes that take years to complete and create unnecessary cost overruns and substantial delays.”

SB 619 would allow a subset of transmission developers to circumvent those processes by opting into CEC review. But even if it passes, the bill might have a limited role in spurring construction of new transmission. That’s because it explicitly states that it will not contravene the CPUC’s oversight over transmission lines proposed by any utility falling under CPUC jurisdiction, which includes Pacific Gas and Electric, Southern California Edison and San Diego Gas & Electric — the investor-owned utilities that serve more than half the state.

“The supporters of this bill acknowledge this limitation and recognize that additional work would be needed to make any changes to the existing CPUC’s authority related to permitting transmission projects,” said a bill analysis provided to senators before the floor vote. “Instead, this bill would capture a more limited set of transmission projects, those serving publicly-owned utilities (POUs), which would otherwise be permitted by local governments.”

According to the analysis, bill supporters include Clean Air Task Force, Clean Power Campaign, 350 Humboldt: Grassroots Climate Action, Elders Climate Action and San Diego Community Power.

“SB 619 is a much-needed reform to expedite approvals of badly needed new transmission, to expand solar, wind, and batteries, and enhance affordability and reliability,” V. John White, legislative director for Clean Power Campaign, said in a statement after Tuesday’s vote.

The Senate’s advancement of SB 619 could herald the passage of similar bills from Newsom’s legislative package. Those include proposals to streamline judicial review of certain clean energy and transportation projects by requiring that challenges under the CEQA be resolved within 270 days and a related measure to streamline procedures for the preparation of the public record for court review of CEQA challenges.

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FERC Accepts MISO’s Pledge for Annual Capacity Ratio Calculation

FERC on Tuesday accepted a MISO tariff revision that promises an annual update of unforced capacity-to-intermediate seasonal accredited capacity ratio the RTO uses to determine supply ahead of its capacity auction (ER23-1223).

The ratio disrupted MISO’s first seasonal capacity auctions and delayed the opening of its offer window by about a month. (See 1st MISO Seasonal Auctions Yield Adequate Supply.)

FERC said the grid operator’s pledge to calculate the ratio on an annual basis is reasonable and “provides greater notice to market participants regarding the timing” of its calculation.

“We expect that the schedule MISO develops with its stakeholders will incorporate sufficient time to work with market participants to validate and confirm [seasonal accredited capacity] values before finalizing the ratio,” the commission said. “We encourage MISO to continue working with its stakeholders to improve its processes from lessons learned.”

The grid operator’s calculation of the systemwide ratio in December produced an incorrect value. A computer error that counted previously excused maintenance outages against some planning resources undervalued their contributions.

This year, MISO and its Independent Market Monitor decided against reworking the ratio ahead of the spring capacity auction. They reasoned that the oversight wouldn’t harm reliability, there wasn’t enough time to rerun numbers, and market participants had already relied on the inaccurate ratio to enter bilateral supply contracts outside of the voluntary auction.

However, FERC found MISO in violation of its tariff and issued a show-cause order that had staff rehashing the calculation and delaying its first seasonal capacity auctions. (See FERC Terminates MISO Show-cause Order.)

After the ordeal, the grid operator updated its tariff to state that it will calculate the ratio on a standardized timeline, despite the determination requiring multiple rounds of market participants’ data submission and staff’s review and confirmation. MISO said its pledge to run the ratio annually is part of its lessons learned in moving to a seasonal capacity environment. It didn’t specify when it plans to publish the ratio, saying it will settle on dates with stakeholders and include them in a business practice manual.

Commissioner James Danly said in a partial dissent that MISO should commit to a more specific timeline in its tariff and name dates.

“Given that there is so much at stake in the inputs to the Planning Resource Auction (PRA), the date of the annual establishment of the systemwide … ratio for each planning year is fundamental to the mechanics of the market,” he wrote. “This ratio ultimately informs load serving entities and resources of their accredited capacity in advance of the [PRA]. While there could be debate on this, I believe that the rule of reason compels us to require the date’s inclusion in the tariff rather than the business practice manual.”

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Personnel, Meeting Costs Drive 2024 ERO Budget Hikes

With the North American electric grid experiencing “an alarming increase in reliability, resilience and security risks” — particularly cybersecurity, climate change and the evolving resource mix — NERC and the regional entities plan to raise their budgets and assessments by more than 10% in 2024.

NERC last week posted for industry comment its draft 2024 business plan and budget, along with those of the REs and the Western Interconnection Regional Advisory Body (WIRAB). Every document anticipates a budget increase of about 8% except WIRAB’s, which projects a decrease of $52,028, or 5.9%, from 2023; WIRAB’s assessment is still to grow by 1.6%, or $10,772. The overall ERO Enterprise budget is to grow by $25.2 million in 2024 to $275.4 million, while the collective assessments are to rise by 12.1%, from $214.1 million to $240.1 million.

Lion’s Share to NERC

As always, NERC’s budget is by far the largest contributor to the increase, at $110.6 million, up 9.5% from 2023. Personnel expenses account for the majority of NERC’s planned spending, at $64.4 million, up 11% from the prior year.

NERC plans to add 11.3 full-time equivalent (FTE) positions in 2024. The new employees are to be spread among the ERO’s departments, with the biggest increase of 2.59 FTEs in the Electricity Information Sharing and Analysis Center (E-ISAC). The new personnel will contribute to the E-ISAC’s “analytical capabilities [and] membership support,” along with expansion and enhancement of the Cybersecurity Risk Information Sharing Program, NERC said.

An additional 2.27 FTEs are to be added in the corporate services division, to support NERC’s cloud computing efforts and system administration, along with the publications team, while one open position is to be eliminated and filled with a contractor. Two positions are expected to be created to help with reliability standards development and technical expertise support, and the event analysis and situation awareness departments are to add one position each.

Additional growth in the personnel budget comes from increasing costs of salaries, health insurance and other benefits. NERC’s budget assumes a weighted average salary increase of 5.5%.

Meetings and travel costs are expected to rise 8.3% from 2023 levels, to $3.4 million. NERC said this increase “marks the return to pre-pandemic levels” of activity, though the ERO is also working to de-emphasize in-person meetings — in part to reduce expenses — with the most recent Board of Trustees and Member Representative Committee meetings following a hybrid format. (See NERC Board of Trustees/MRC Briefs: May 10-11, 2023.)

NERC’s operating expenses are to grow by 11.6% to $40.3 million due to additional contractor, consultant and software costs.

RE Budgets Set for Growth

WECC is projecting the largest budget of the REs, with $35.4 million expected in 2024, up $3.6 million from the year before. ReliabilityFirst is next with $31.3 million, a 12% increase, and SERC Reliability close behind at $31 million, up 10% from 2023. The Midwest Reliability Organization is to grow by $1.8 million to $24.9 million — the smallest increase of any RE — with the Northeast Power Coordinating Council rising 13.7% to $23.2 million and the Texas Reliability Entity projecting the smallest budget, at $19.2 million (up 8% from 2023).

2023-2024 ERO Assesments (NERC) Alt FI.jpgERO Enterprise assessments for 2023 (dark purple) and 2024 (light purple). | NERC

 

Like NERC, many of the REs’ budgets are driven by growing personnel, technology and travel costs. All entities reported they plan to add personnel, ranging from two FTEs in the case of MRO to the 12 estimated by NPCC. Meetings and travel are expected to increase for all REs except MRO, despite the entity planning to cohost the GridSecCon security conference next year.

Comments on the draft business plans and budgets are due by June 23.

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Carbon-capture Plant Coming Back into Service

The Petra Nova carbon-capture facility’s owner has told ERCOT that it plans to bring the plant out of mothballs and into year-round service in June.

Japanese oil and gas company JX Nippon filed a notification May 28 with the grid operator that it intends to bring the world’s largest carbon-capture plant back June 28. The plant has been shut down since 2020, during the height of the COVID-19 pandemic and in the face of slumping oil prices. (See NRG to Mothball Petra Nova CCS Plant.)

Petra Nova has a summer capacity of 71 MW and was retrofitted at a cost of $1 billion to capture carbon from one of the nearby W.A. Parish Generating Station’s coal-fired units. NRG Energy, which operates Parish, must complete repairs on the unit Petra Nova is connected to before it can return to service.

NRG and JX were partners in the carbon-capture project. JX bought NRG’s 50% stake for $3.6 million and closed the deal shortly after Congress passed the Inflation Reduction Act last August. The legislation includes a significant increase for the carbon-capture tax credit.

Petra Nova went online in December 2016. It sequestered more than 3.9 million tons of carbon dioxide in three years, despite frequent outages.

Also last week, Calpine said four gas units at its Deer Park Energy Center near Houston will be converted from generation resources to settlement-only, transmission self-generators as of Oct. 27. The resources each have a summer seasonal rating of 190 MW.

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NextEra Gets Final OK for Kansas-Missouri Tx Line

The Kansas Corporation Commission (KCC) last week granted a siting permit for NextEra Energy (NYSE:NEE) Transmission (NEET) Southwest’s preferred route for the Wolf Creek-Blackberry 94-mile, 345-kV project, clearing the way for construction to begin.

The KCC said in a May 24 order that NEET Southwest had “met the requirements” for the siting permit, subject to an alternative reroute, micro siting — i.e., minor modifications to the route and infrastructure placement — and other small modifications agreed upon with a landowner (23-NETE-585-STG).

“The [c]ommission finds that the method that NEET Southwest used to select its route and the route proposed by NEET Southwest are reasonable and that the siting permit requested by NEET Southwest complies with all statutory requirements and should be granted,” the KCC wrote. It said the project “is needed and will have a beneficial effect on customers by lowering overall energy costs, removing inefficiency, relieving transmission congestion, and improving the reliability of the transmission system.”

The agency last August issued NEET Southwest a limited certificate of convenience and necessity as a transmission-owning utility for the 94-mile, single-circuit project, which will run from the Wolf Creek Generating Station in Kansas southeast into Missouri. In December, the Missouri Public Service Commission granted Southwest a CCN for the project’s nine-mile portion in Missouri. (See “Missouri PSC Grants CCN for NextEra Project,” MISO, SPP Fall Short in 5th Try for Interregional Projects.)

The project has received pushback from landowners and other critics who say the power will be shipped out of state. Florida-based NextEra is already in county district court litigation over its utility status in Kansas. The company expects the project to be in service by the end of 2024, barring any legal setbacks.

SPP granted the competitive project in 2021 to NEET Southwest over six other bids. The NextEra Energy subsidiary estimated the project will cost $85.2 million. (See “Expert Panel Awards Competitive Project to NextEra Energy Transmission,” SPP Board of Directors/Members Committee Briefs: Oct. 26, 2021.)

Commissioner Andrew French, who sits on SPP’s Regional State Committee comprised of state regulators, joined KCC Chair Susan Duffy in the 2-1 decision. The commission noted a need for SPP to allow state involvement earlier in projects’ design process and said it intended to investigate the principles and priorities for future siting dockets.

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PJM Urges FERC to Deny Winter Storm Complaints

PJM on Friday issued its first official responses to an onslaught of complaints at FERC from generators over Capacity Performance charges during the cold snap over the holidays, arguing that they knew what risks they were facing when they took capacity payments.

The winter storm led to many nonperformance charges Dec. 23 and 24, which have led to 12 separate complaints filed at FERC. PJM responded to seven of those Friday.

The storm, also known as “Elliott,” led to outages in neighboring grids and nearly did in PJM, though its operators were able to keep the lights on despite the nonperformance of many generators.

“These failures could have had life-and-death consequences had events played out differently,” the RTO said. “As it was, PJM operators preserved reliability while contending with unprecedented difficulties and uncertainties that were exacerbated by complainants’ nonperformance. In short, the lights stayed on despite extremely stressed conditions brought about by capacity resources failing to meet their obligations.”

PJM filed responses Friday to the “Nautilus Entities” (EL23-53); generators in the ComEd zone (EL23-54); a coalition of capacity resources including Competitive Power Ventures and Talen Energy (EL23-55); Lee County Generating Station (EL23-57); Sun Energy (EL23-58); Lincoln Generating Station (EL23-59); and Parkway Generation Keys (EL23-60), though comments came in to all 12 dockets.

The only ways generators can avoid nonperformance charges during emergency events are if they are on a planned outage approved by PJM or the RTO did not schedule them. CP holds resources with restrictive operating limits to the same standards as those without them. Natural gas generators are responsible for procuring natural gas deliveries despite pipeline outages.

“Capacity market sellers should assume that their resources will be needed, at a minimum, any time the PJM region is under a declared emergency for capacity shortages,” PJM said. “If capacity market sellers need to purchase natural gas and self-schedule to ensure that their capacity resources can be available when needed, then sellers of gas-fueled capacity resources should engage in such forward-looking behavior.”

PJM argued that the generators’ failure to perform cannot be excused by claiming the grid operator’s actions were invalid, by asserting there was no emergency or by arguing that their performance was not actually needed to address that emergency.

“Complainants urge the commission to become the Monday morning quarterback and super-operator of the grid, which are both roles the commission has been careful to avoid in the past,” PJM said. “The regulatory process will rapidly unwind with perpetual litigation, and reliability will be undermined, should the commission choose to disregard the real-time flexibility regional transmission organizations must have to manage emergencies and to substitute its judgment with the luxury of perfect hindsight.”

Some of the complaints criticized PJM for helping neighbors that were shedding load; siding with those arguments would chill cooperation between neighboring systems in future emergencies, the RTO argued.

The group of generators in ComEd’s territory argued that their islanded section of PJM lacked any real emergency, but the RTO said they do not get to determine when emergencies exist. PJM declares emergencies, and the 6,110 MW of generation in northern Illinois the generators failed to provide represents 21.5% of the reserves it was relying on during the storm, it said.

“PJM recognizes that there remain valid issues associated with the lack of synchronization between the natural gas nomination cycles and the real-time nature of electric system dispatch,” the RTO said. “This lack of synchronization is not new and existed at the time these unit owners submitted their bids into the capacity Base Residual Auction.”

One of the recommendations from FERC and NERC’s joint report on the February 2021 winter storm that knocked out power in Texas and surrounding states was to improve electric-gas coordination. The North American Energy Standards Board has been assigned that work.

Concerns over electric-gas coordination are national in scope, and FERC should not try to resolve them via proceedings on one winter reliability event in the Eastern Interconnection, PJM said.

Other Parties Weigh In

Sierra Club filed a response to several of the complaints, noting that they arose from the first application of the CP rules, which are also the subject of stakeholder proceedings looking into future changes. The organization said it is important to remember that a central objective of the rules was to get generators to change their behavior and investment decisions in ways that would improve reliability.

“Taking on a capacity obligation in PJM — in exchange for hundreds of millions of dollars in revenue — is not and should not be a risk-free enterprise,” Sierra said. “For the Capacity Performance system to work, suppliers must be held to the rules they agreed to when taking on and accepting payments for capacity obligations.”

Sierra had some sympathy with one of the complainants: SunEnergy1, a solar farm that wants relief going forward to excuse solar from the risk of nonperformance when the resource has little availability — and is paid less to reflect that. But natural gas generators should not be excused from the penalties because of “the inflexible gas supply arrangements” they prefer to make.

“Where penalties cannot drive better performance, a resource’s nonperformance should not incur penalties,” Sierra said. “In contrast, penalties should apply where resources can take steps to improve performance, such as weatherizing equipment or procuring gas in order to fulfil their capacity obligations — as the commission concluded after considerable discussion back in 2015.”

Constellation Energy Generation argued that FERC should dismiss the complaints because customers in PJM pay billions per year to ensure generator availability and the suppliers who failed to show up during Elliott knew what they were risking before the storm.

“PJM’s tariff is clear, unambiguous and strict: Penalties are mandatory when a CP resource fails to meet performance expectations during an emergency action declared by PJM,” Constellation said. “The exceptions are intentionally narrow.”

While generators face risks, they are allowed to include them in their capacity offers, along with the costs of investments to mitigate them. Generators also have the option to only participate in the energy market and avoid CP entirely.

“With full knowledge of the risks and obligations of accepting a capacity commitment, complainants bid into the capacity auction, received capacity commitments and cashed checks from ratepayers,” Constellation said. “But when their capacity was needed, they failed to deliver. Now they don’t want to pay the resulting penalties.”

Vistra told FERC that the markets performed as designed during Elliott, with some generators underperforming and others overperforming, while PJM maintained reliability.

“The complaints invite the commission to second-guess PJM’s operational decisions during emergency conditions and/or disrupt the market outcomes designed to flow from those decisions pursuant to the filed rate,” the company said. “Vistra respectfully submits that both invitations are perilous and, to maintain both the integrity of the market and the proper incentives needed for system reliability, the commission should view the complaints with skepticism.”

Even if FERC sides with the complaints, it should affirm the continued validity of the CP rules, Vistra said.

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Debt Ceiling Bill Provides ‘Mini-deal’ on Permitting

The debt ceiling compromise hammered out between President Joe Biden and House Speaker Kevin McCarthy (R-Calif.) would cut the time allowed for reviews under the National Environmental Policy Act (NEPA) to two years for a full environmental impact study and one year for a less intensive environmental assessment.

The main text of the Fiscal Responsibility Act (FRA), released Sunday, would raise the debt limit through Jan. 1, 2025; claw back some federal funding, such as billions in unused COVID-19 funding; and cap federal spending at current levels through 2024.

But 27 pages of the 99-page bill are focused on streamlining and accelerating permitting, including the designation of a single lead federal agency for such reviews and an expansion of the use of “categorical exclusions,” or waivers that would exempt projects from NEPA evaluations.

Speaking at press conference on Sunday, McCarthy called these changes “transformational.”

NEPA “hasn’t been reformed in 40 years,” McCarthy said. “It’s a frustration with people all across this country, on both sides of the aisle. [It] doesn’t matter if you want to build a road [or] you want to build a renewable energy project. That all gets stopped and studied for years. It’s a frustration. That’s millions of dollars wasted. That is all changing now so we can build again in America. We can make America strong. We [can] compete with other countries.”

Rep. Garret Graves (R-La.), one of the chief GOP negotiators, described the bill’s NEPA provisions as “shrinking the scope” of federal environmental reviews.

“NEPA has grown to just study all these things that don’t have anything to do with the environment, which I would argue … has worked against the protection of the environment,” Graves said during the Sunday press conference. “So, we’re trying to refocus the scope back on that, on the environmental impacts, and making sure we get the best environmental outcomes.”

But the White House framed the permitting provisions as a win for the key climate provisions of the Inflation Reduction Act, which the Republicans’ original debt ceiling package, the Limit, Save, Grow Act (H.R. 2811), had sought to roll back.

“We secured measures that will harness government efficiencies to accelerate construction projects across the country,” a White House official said during a background press call Sunday. “Specifically, the agreement includes measures aimed at boosting the coordination, predictability and certainty associated with federal agency decision-making. …

“And the agreement, importantly, makes these changes without curtailing the substantive scope of the NEPA statute,” the official said. “It doesn’t cut down the statute of limitations, as was proposed in [the GOP bill], or impose barriers to standing, or taking away injunctive relief or other judicial remedies.”

Republican proposals for changes to NEPA could have cut the window for judicial challenges from six years to as little as 60 days.

Both Biden and McCarthy emphasized that the bill is the result of negotiations in which neither side got everything they wanted. McCarthy also stressed that once the text of the bill was released, the House of Representatives would not vote on it for 72 hours to give lawmakers and the public time to review it.

Amid grumblings on both sides that concessions in the bill are too deep, questions remain on whether Republican and Democratic leaders in the House and Senate will be able to rally the votes they will need to get it to the president’s desk. Biden urged lawmakers in both houses to pass it, and McCarthy expressed confidence that the majority of Republicans would fall in line and vote for the bill.

NEPA Reviews

With Graves as a key GOP negotiator, the FRA’s permitting provisions incorporate many but not all the provisions from his Building U.S. Infrastructure through Limited Delays & Efficient Reviews Act, originally introduced in 2021.

In addition to the time limits on environmental reviews, the FRA would set a limit of 150 pages for EISes and 300 pages for projects of “extraordinary complexity … not including any citations or appendices.” EAs would be similarly limited to 75 pages, plus citations and appendices.

It would also require the designation of a lead federal agency to coordinate and set a schedule for any environmental review. And state, local or tribal agencies could be enlisted as co-lead or cooperating agencies.

If a lead agency did not produce an environmental review within mandated deadlines, the bill would allow a deadline extension, “in consultation with the applicant … that provides only so much additional time as is necessary to complete such environmental impact statement or environmental assessment.”

The bill specifies that the scope of such reviews should focus on “reasonably foreseeable environmental effects of the proposed agency action [or] any reasonably foreseeable adverse environmental effects which cannot be avoided should the proposal be implemented.” A “reasonable range of alternatives” would have to be examined, including negative environmental impacts arising from not completing the project.

It would also expand the use of categorical exclusions by allowing one federal agency to use the categorial exclusion that another agency has issued for a specific project. It would allow the use of “programmatic environmental” reviews, which cover a specific region or corridor in which one or more projects are located. The programmatic review can be used in the permitting of individual projects in the area covered by the review for up to five years or longer, “unless there are substantial new circumstances or information about the significance of adverse effects that bear on the analysis.”

The bill does not define what “reasonably foreseeable” environmental impacts are, and as noted by White House officials, it would not cut back the current six-year time frame for legal challenges to a NEPA environmental review.

More Changes in Offing?

In a major win for Sen. Joe Manchin (D-W.Va.), the bill calls for expedited completion of the embattled Mountain Valley natural gas pipeline (MVP), a provision also included in his permitting bill, the Building American Energy Security Act.

The FRA would declare the 303-mile project “in the national interest” and order the secretary of the Army to complete any final permitting on the pipeline within 21 days of the enactment of the law.

It would also prohibit any further litigation on the project, save for challenges to this provision itself, which could only be heard by the D.C. Circuit Court of Appeals.

This limit raises a question on whether passage of the FRA would retroactively nullify Friday’s decision from the D.C. Circuit overturning FERC’s decision to not perform a new EA of the pipeline. The decision requires FERC to perform the study but does not stop construction on the pipeline, which is 94% complete. (See related story, DC Circuit Partly Vacates FERC Gas Pipeline Approval.)

In a statement released Sunday, Manchin claimed credit for securing the Mountain Valley provisions. “I am pleased Speaker McCarthy and his leadership team see the tremendous value in completing the MVP to increase domestic energy production and drive down costs across America and especially in West Virginia,” he said. “I am proud to have fought for this critical project and to have secured the bipartisan support necessary to get it across the finish line.”

For transmission advocates, the FRA would authorize an “Interregional Transfer Capability Determination Study.” It would task NERC with completing this study in 18 months, looking at current transfer capabilities between “neighboring transmission planning regions” and making recommendations for “prudent additions to transfer capability” to improve reliability. The completed study would be submitted to FERC, which would have another year, plus a public comment period, to finalize and submit the report to Congress.

Rob Gramlich, president of Grid Strategies, an industry consulting firm, said the FRA contained little of significance to accelerate the permitting and construction of interregional transmission. The study could “raise a lot of people’s awareness about the benefits of transmission connecting regional grids,” Gramlich said. “But there’s still some debate about the details, like why does it take 2.5 years” for NERC and FERC to complete the report.

He also noted that FERC is already studying interregional transfers and recently ended a comment period following a technical conference on the subject. In general, stakeholders support the concept of expanding interregional transfer capability on the grid but differ on how to get there. (See Minimum Transfer Capability Between Regions Debated at FERC.)

The FRA would authorize another study to explore “the potential for online and digital technologies to address delays in reviews and improve public access.” Such an “e-NEPA” portal would allow developers to submit and track the progress of permitting applications online and allow federal agencies to collaborate and edit documents in real time. The bill would appropriate $500,000 for the study, which the White House’s Council on Environmental Quality would conduct and submit to Congress in a year.

The bill’s inclusion of energy storage projects in the FAST-41 process provides another small win for clean energy advocates. Originally set up under the Fixing America’s Surface Transportation Act in 2015 and expanded by the Infrastructure Investment and Jobs Act, FAST-41 allows for expedited permitting of certain infrastructure projects and already has an online dashboard for tracking projects. The White House official said that while some of the FRA’s provisions streamlining permitting do overlap with FAST-41, the processes are different.

Industry consultants ClearView Energy Partners characterized the FRA’s permitting provisions as a “mini-deal” that will “not make the holistic changes Republicans laid out in multiple recent proposals or transmission reforms sought by Democrats.”

The question now is whether the modest nature of the provisions will “mean more reforms [are] in the offing.”

“A reopening of debate looks more likely than actual finalization, but we expect lawmakers to try,” ClearView said. Prior to the deal, the Senate committees on Energy and Natural Resources and on Environment and Public Works had each committed to working on bipartisan permitting bills.

However, ClearView said, “the FRA mini-deal is more likely to undercut momentum for such efforts than to stoke it.”

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Overheard at NECPUC 75th Annual Symposium

STOWE, Vt. — Transmission planning, equitable energy siting, and making the most of billions in federal funding were among the key topics as regulators, industry members, and energy experts gathered at Stowe Mountain Resort for the New England Conference of Public Utilities Commissioners’ (NECPUC) 75th annual symposium last week.

“We can have a better, more efficient permitting process without compromising environmental or social justice values,” said U.S. Sen. Peter Welch (D-Vt.), opening the conference as legislators in Washington continued their negotiations over permitting rules amid debt ceiling talks. “A lot of environmentalists really want to accelerate the timeline when it comes to clean energy projects … that’s one area where I think there’s some potential for us to make some progress.”

Welch said that building clean energy projects at the local level will be a far more difficult task than drafting federal legislation. But he expressed hope that successful projects early on could help build broader support for additional infrastructure.

“It’s not a one-size-fits all deal that we have here,” Welch said, citing the need to balance affordability, clean energy and reliability. “You guys have your work cut out.”

A Focus on Equity

Using the clean energy transition to address historical environmental injustice was a recurring theme in many of the symposium’s panels and discussions. 

“I see energy as the Trojan horse to usher in equity,” said Shalanda Baker, director of the Office of Economic Impact and Diversity at the U.S. Department of Energy. Baker spoke about how she grew up living with energy insecurity and how low-income families are frequently forced to choose between energy, food and medicine.  

“It’s a matter of life and death for so many households,” Baker said.

Peter Welch 2023-05-24 (RTO Insdier LLC) Alt FI.jpgU.S. Sen. Peter Welch (D-Vt.) | © RTO Insider LLC

 

Baker urged better engagement with environmental justice communities and said states should look at different energy models, including community ownership programs. She called on regulators to work to right the wrongs of historical energy siting, where the greatest burdens of infrastructure have typically fallen on low-income neighborhoods and communities of color.

While frontline communities have dealt with increased pollution from energy infrastructure, they often simultaneously spend a larger portion of their income on energy bills, are often more susceptible to climate impacts such as extreme heat, and have the least access to clean energy programs related to rooftop solar, storage and energy efficiency, Baker told the symposium.

“These are not accidents; we’ve made these choices as policymakers,” Baker said. “As you are engaging utilities on how they are siting facilities, we have to think about this through the social lens. … If we’re not careful and vigilant, we will replicate that inequality.”

David Cash, EPA’s New England regional administrator, also emphasized the role regulatory agencies have historically played in perpetuating legacies of environmental harm.

“There is a moment now unlike any other moment that I’ve lived through, unlike any other I think that most of you have lived through,” Cash said. “And part of that has to go hand-in-hand with environmental justice and equity. If you look at how our current system is … Black children have asthma rates that are twice as high as white children. Two-thirds of fossil fuel plants in the country are located in low-income and Black and brown communities. That’s how the fossil fuel system has been set up, and it’s partly due to agencies like mine, EPA, [which have] permitted those fossil fuel facilities for the last five decades.”

Transmission Planning

With clean energy projects making up the vast majority of New England’s interconnection queue, “we have to go from a reliability-driven planning process to a clean energy integration process, where transmission is used to reduce total costs, not just add costs,” said Johannes Pfeifenberger, a principal at the Brattle Group. He said that transmission could cut customer rates by reducing generation integration costs and bringing cheaper resources to the grid.

On interconnection, Pfeifenberger said that New England is in a better place than most of the country but said that more needs to be done to meet the region’s ambitious clean energy standards.

“Planning is so important: We should already know where we want to connect the 9 GW of offshore wind that are already committed to by the states; we should know where we interconnect the next 20 GW of wind; we should know how to get 5 GW of onshore wind from Northern Maine to the rest of New England,” Pfeifenberger said.

Pfeifenberger cited the “connect and manage” interconnection process used by Texas and the U.K., where projects are connected to the grid quicker — potentially reducing the interconnection process by several years — but face increased risks of curtailment and congestion.

“We don’t have any congestion on the grid right now,” Pfeifenberger said. “That tells us we can put a lot more energy on it. We want to accept some congestion, as it’s cost effective.”

Robert Ethier, vice president of system planning at ISO-NE, responded that “interconnecting people as quickly as possible comes with its consequences,” saying it is important to ensure that the grid can handle additional resources.

“Just getting people interconnected is not the only metric we need to worry about,” Ethier said. “There’s a balance that needs to be struck there.”

Ethier highlighted the potential of grouping projects together in areas with lots of interconnection to help speed up the process, as well as moving from a first-come, first-served process to a first-ready, first-served process.

Using Federal Funding

Speakers throughout the conference emphasized the importance of states making the most of the federal funds available through the Inflation Reduction Act and the Infrastructure Investment and Jobs Act.

Cash noted that EPA has about $100 billion to distribute to states, communities and companies for climate investments and programs. He said that while state utility regulators will not receive this funding themselves, they will play an essential role in “creating the regulatory landscape — the rules — that will allow that federal funding to be doubled, tripled, or quadrupled [by] private sector investment.”

Hank Webster, deputy commissioner for energy at the Connecticut Department of Energy and Environmental Protection, highlighted the $1.25 billion hydrogen hub application submitted by a coalition of Northeast states, companies, and organizations as a means to address winter grid reliability. (See Vermont Joins Northeast Clean Hydrogen Hub.)

“That’s a really exciting opportunity to take a big step forward,” Webster said. “These are all generational investments that are necessary and are going to transform our energy systems.”

Webster also spoke about some of the difficulties that states are facing in obtaining the new federal funding.

“Some of the challenges that we have are quick turnarounds between the notice of funding availability to when applications have to be in and all that, particularly on some of the bigger items like transmission planning,” Webster said.

Webster added that figuring out how to limit impacts of supply chain costs, high interest rates, and geopolitical risks will be essential for making the most of the funding. He also advocated for additional flexibility on the income eligibility requirements on some of the funding opportunities, saying that states should be allowed to use more granular population data when available.

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ERCOT Technical Advisory Committee Briefs: May 23, 2023

New Ancillary Service Products Target System Reliability

ERCOT staff last week delivered their first annual settlement report on firm fuel supply service (FFSS), an ancillary service that was added in the wake of the February 2021 winter storm.

Settlement analyst Maggie Shanks told the Technical Advisory Committee on May 23 that ERCOT designated 19 generation resources as primary FFSS resources during the Nov. 15-March 15 obligation period at a clearing price of $6.19/MW-hour, or $18,000/MW. The grid operator procured 2,940.5 MW of FFSS capacity at a cost of $52,839,535.

An additional $4,768,842 will be added for fuel replacement costs during the two winter watches ERCOT issued in December. The total cost will be reduced by clawing back an estimated standby fee of more than $25 million. The clawback settlements began in May and will end in September. Fuel replacement costs will be settled July 31-Aug. 1.

Clawback charges are assessed to FFSS resources that do not meet 90% availability in their availability plan during a winter weather watch’s hours or if they fail to come online and stay there during an FFSS deployment because of nonfuel-related issues.

ERCOT assessed clawback charges for 90 days for seven FFSS resources that did not reflect their availability. Another resource received a clawback charge for 15 days under the second scenario.

The Texas Public Utility Commission directed ERCOT to develop the FFSS product after the Legislature passed a bill in 2021 requiring ancillary or reliability services that address reliability during extreme cold weather conditions. The service is procured through a request-for-proposals process before the obligation period begins.

The grid operator is adding another new ancillary product in June with ERCOT contingency reserve service (ECRS), or capacity that can be sustained at a specified level for two consecutive hours. It is meant to be deployed to restore frequency within 10 minutes of a significant deviation; to compensate for intra-hour net load forecast uncertainty when large amounts of online thermal ramping capability are not available; or when limited capacity is available for dispatch.

ECRS is also a result of the PUC’s directive to offer more reliability services.

Matt Mereness, senior director of market operations and implementation, said staff have been holding weekly meetings and workshops to prepare market participants. The service will become operational June 10, when telemetry will begin including ECRS values at 12:01 a.m.

Mereness also said staff are re-evaluating the scope, cost and schedule for the real-time co-optimization (RTC) project, which has been on hold since the 2021 winter storm. Staff are still eyeing a potential midyear restart for the program; it would expand ERCOT’s real-time market by clearing energy and ancillary services every five minutes, as most other grid operators already do.

ERCOT leadership has said RTC’s reliability benefits in addressing future operational challenges make the tool a strategic priority.

ERCOT Compromises on FFSS Product

TAC members endorsed a nodal protocol revision request (NPRR1167) intended to improve the new FFSS product, but not before accepting staff’s suggestion to remove language disqualifying or decertifying resources from the firm-fuel program. That language will be brought back to the committee as a separate NPRR.

ERCOT staff and stakeholders disagreed over the types of performance failures that would start the disqualification process, with some stakeholders saying the failure must be related to a fuel-related issue. Staff said they want to be able to address a situation where there are multiple instances of the unit not being able to run, regardless of the reasons.

ERCOT had filed comments proposing to remove references to fuel-related issues that would disqualify or decertify a resource from FFSS participation for “repeated instances of the specified performance failures.” Removing the fuel-related limit is appropriate, staff said, because “FFSS is a high-reliability product.”

“Given that the ERCOT board has a tendency to support ERCOT staff on issues, I would hate for this to be a lost opportunity here at TAC,” said Eric Goff, who represents residential consumers. “I think it would be good if we can find some sort of middle ground on this issue.”

After a sidebar discussion, staff agreed to accept the NPRR as approved by the Protocol Revision Subcommittee on May 10 and bring back the decertification language in another revision request.

Generators supported the PRS-approved language and the proposed future NPRR, saying ERCOT’s suggestions make performance issues too financially unfavorable.

The NPRR includes:

  • a requirement in the availability plan’s definition that plan updates be made within 60 minutes after the change in availability when a resource submits the plan after a change;
  • more detailed direction to incorporating an alternate generation resource that may be designated as an FFSS resource;
  • another requirement that ERCOT post an FFSS offer’s disclosure report after each procurement period;
  • clarified language regarding procedures for communication between ERCOT and qualified scheduling entities (QSEs) when restocking fuel post-FFSS deployment; and
  • moving the obligation to test prospective FFSS resources before the procurement process.

Another Reliability Tool for ERCOT

TAC overcame concerns about “optics” in approving a revision request (NPRR1143) that allows ERCOT to give charging instructions to energy storage resources during a Level 3 energy emergency alert.

“This NPRR is not a fall-on-the-sword issue for us, but we feel strongly that the optics of charging and allowing charging of batteries in an EEA Level 3 when you have involuntary load shed is horrendous,” said Mark Dreyfus, who represents the city of Eastland and other municipalities in the consumer segment.

“I understand people’s concerns about the optics … but I think at the end of the day, failing to give ERCOT as many reliability tools as they can have is probably a bigger risk,” countered NextEra Energy Resources’ John Ritch. “The optics could cut either way, right? People are concerned about the optics of load being shed while batteries are charging, right? There’s an alternative scenario where frequency was healthy for a while and batteries weren’t charged, and then there’s a subsequent event where batteries would have been useful and more load is lost, right?”

“I think at the end of the day, the guiding objective here should be to give ERCOT the broadest number of reliability tools that they can have,” Ritch added.

The NPRR was amended to include comments from ERCOT clarifying language that has since been added to the protocols by NPRR1002.

The measure passed 22-1 with six abstentions. South Texas Electric Cooperative (STEC) cast the lone dissenting vote, saying charging a battery when firm load shed is occurring is “unacceptable.”

“At the end of the day, we have members to serve, and it is of the highest importance to us to ensure that they have the power they need so they can survive,” said Clif Lange, STEC’s general manager and TAC’s chair. “Some might call it an optics issue, but we believe it is a public welfare issue.”

Fuel-cost Discussion Tabled

The committee tabled NPRR1177, which requires resources to file exceptional fuel costs that include contractual and pipeline-mandated costs. The NPRR avoids the risk of real-time mitigation that results in unrecoverable financial losses and improves ERCOT’s and the Independent Market Monitor’s ability to verify these costs.

TAC scheduled a June 5 webinar to further discuss the measure.

The move came after the consumer segment filed comments May 22 proposing a 2027 sunset to ensure the measure is replaced with a permanent solution and created three additional guardrails: requiring QSEs to complete an attestation that the forward-fuel contract costs are known and actual; allowing ERCOT to prohibit a QSE or resource from using the functionality if they submit offers that exceed their costs; and directing the grid operator to develop standardized fuel contract language.

ERCOT staff asked for more time to review the comments that were submitted the day before, saying they believe additional guardrails are needed but that some of the changes need to be clarified.

Constellation Energy Generation’s Andy Nguyen, who drafted and filed the NPRR in April, said he would have “heartburn” over the delay and offered to provide desktop edits.

“The current protocols do not have a cost recovery mechanism for mitigation losses,” Nguyen said.

Credit Group’s Leadership Approved

TAC’s combination ballot, passed unanimously with one abstention, endorsed the Credit Finance Sub Group’s leadership. Austin Energy’s Brenden Sager will serve as chair, and NRG Energy’s Loretto Martin will serve as vice chair; both ran unopposed.

The group was created this year, replacing the Credit Working Group. It comprises credit professionals responsible for ensuring that appropriate procedures are implemented to mitigate credit risk in ERCOT in a “fair and equitable” manner.

The combo ballot included five NPRRs, two revisions to the Nodal Operating Guide (NOGRRs) and a single change to the Retail Market Guide (RMGRR) that, if approved by the board, would:

  • NPRR1161, NOGRR246: clarify that intermittent renewable resources that remain synchronized to ERCOT, but are unable to provide reactive power when not providing real power, do not have to notify ERCOT other than their real-time telemetered status.
  • NPRR1166: change the expiration date for DC ties’ schedule information protected status from 60 days after the applicable operating day to the date on which ERCOT files the report with the PUC, as required by transmission export rates’ rules related to energy imports and exports over the ties.
  • NPRR1168: change the Texas standard electronic transaction (Texas SET) to “Establish/Change/Delete CSA Request” and add new sections to the protocols related to administering requests to change end dates for active continuous service agreements (CSAs).
  • NPRR1169: expand the qualifications for generation resource that may be an FFSS resource or an alternate.
  • NPRR1178: clarify and update expectations for resources providing ECRS.
  • NOGRR253: align the guide’s language regarding ECRS and nonspin with NPRR1178’s proposed revisions and NPRR1096’s proposed protocol language. The NOGRR would also clarify that ERCOT may manually deploy load resources, other than controllable load resources that are providing ECRS or responsive reserve, to maintain a minimum 500 MW of physical responsive capability reserves on dispatchable resources to balance demand with supply while maintaining stable grid frequency for smaller disturbances.
  • RMGRR172: update the Texas SET transaction’s name to “Establish/Change/Delete CSA Request” and add new sections to the guide that describe how to cancel a pending CSA through MarkeTrak.