The Federal Highway Administration (FHWA) on Friday approved the environmental assessment for New York City’s proposed congestion pricing plan, setting up the Big Apple to be the nation’s first city to implement a tolling program.
The city’s proposed Central Business District Tolling Program (CBDTP) would electronically charge motorists entering Manhattan below 60th Street, with the goal of both reducing city pollution and generating revenue to fund improvements to the Metropolitan Transportation Authority (MTA). (See NYC Traffic Congestion Pricing Aims to Tackle Climate, Enflames Emotions.) Tolls would be placed on vehicles entering or staying in the city’s Central Business District, excluding main throughways like the Franklin D. Roosevelt East River Drive or the Battery Park Underpass.
Daily vehicle entry into Manhattan | NYC DOT
The FHWA’s issuance of a Letter of Legal Sufficiency indicated that its environmental review found no significant impact on the surrounding metropolitan area. There will be a 30-day period for public comment on the EA before the city can move ahead.
Final congestion prices will be based on future recommendations from the six-person Traffic Mobility Review Board, but fares during peak traffic hours for passenger cars could be as high as $23 and $82 for trucks.
The MTA estimates that the CBDTP will generate up to $1 billion annually; significantly reduce traffic into Manhattan and city pollution by up to 12%; increase public transportation usage; save pedestrian lives by decreasing vehicle travel speeds; and not hurt disadvantaged communities, as residents making less than $60,000 would be exempt.
Although the CBDTP would be first of its kind in the U.S., similar efforts have been successfully implemented in cities around the world, such as Stockholm, London and Singapore.
Reaction Depends on Geography
The news was met with mixed reactions, based mostly on where in the metro area they came from.
New Jersey Gov. Phil Murphy was among the most forceful voices disapproving of the decision.
“Today’s decision by the U.S. Department of Transportation to allow New York’s congestion pricing plan to move forward is unfair and ill advised” and “undercuts some of the [Biden] administration’s own long-term goals,” the governor said in a statement. He added that his administration is “closely assessing all legal options.”
U.S. Reps. Nicole Malliotakis (R-N.Y.), whose district covers Staten Island and South Brooklyn, and Josh Gottheimer (D-N.J.), whose district covers the entire northern New Jersey-New York border, recently created the bipartisan Congressional Anti-Congestion Tax Caucus to combat the CBDTP.
Gottheimer said the caucus would “stand up for hardworking New Jersey and New York drivers who will soon face the MTA’s $23/day cash-grabbing congestion tax.” Malliotakis said “congestion pricing would shift vehicle traffic from higher-income, more urbanized areas to lower-income, more vulnerable communities.”
In a statement Friday, Gottheimer said, “The fight is just beginning.”
Rep. Anthony D’Esposito (R-N.Y.), who represents parts of Long Island, also expressed discomfort with the news, tweeting that the “congestion plan is a tax on hardworking New Yorkers who commute into New York City” and is “the wrong decision.”
Meanwhile, multiple outlets quoted a spokesperson for New York Gov. Kathy Hochul as saying her administration “is committed to implementing congestion pricing to reduce traffic, improve air quality and support our public transit system.”
“The finding of legal sufficiency is a critical step that will allow our environmental assessment to be publicly available for anyone to read, and we will continue to work with our partners to move congestion pricing forward,” Hochul said.
New York Mayor Eric Adams also expressed support, tweeting that the CBDTP “is about more than reducing traffic” and will “invest in our transit system and clean up the air in the most polluted communities.”
In a statement to NetZero Insider, Brooklyn Borough President Antonio Reynoso said, “So long as we do it right, congestion pricing will be a win-win-win for our economy, environment and people.”
Visualization of New York’s current unequal toll rates | Regional Plan Association
“Our next priority as we move forward with this landmark program is ensuring that we equalize tolls in a way that safeguards against toll-shopping and the overburdening of surrounding communities with traffic and pollution.”
Multiple Democratic members of the U.S. House of Representatives whose districts cover the city also support the plan, including Ritchie Torres (South Bronx), Jerry Nadler (central Manhattan) and Dan Goldman (Lower Manhattan and western Brooklyn).
SCHENECTADY, N.Y. — On a March morning, a dozen of the estimated 200,000 new workers needed for New York’s energy transition inch their way up poles with no power lines at the top.
Down below, electric utility veterans coach their young charges through a learning process in which competence builds confidence.
Bore into the poles with power drills. Assemble the hardware. Rig a hoist for whatever is too heavy to carry up. Hang the cross-arms.
Look down — and get very comfortable with that view.
In a few years’ time, these trainees will be journeyman lineworkers, qualified to climb poles alone and reconnect wires sending thousands of volts of electricity to the community below them, an energy source intended to increasingly replace the use of fossil fuels for everyday functions such as driving, space heating and industrial processes.
But today, they work with exactly zero kilovolts. They won’t even get to the top of the poles.
“This is only their seventh day in school, so we really only go up about halfway,” one of the instructors tells a visitor.
And so it goes — a few people at a time, one day at a time, for years at a time.
At that pace, with unemployment low and the skilled trades already in high demand, assembling an army of workers to carry out the clean energy transition seems a daunting proposition.
The fact that it is happening in so many places at once helps.
Slow and Steady
The U.S. is expected to create millions of jobs if most aspects of everyday life are electrified and the means of generating that electricity transitions away from fossil fuels, as envisioned by many federal, state and local leaders.
The World Resources Institute projects that a transition to clean energy will translate into a net increase of 2.3 million U.S. jobs from 2020 to 2035, along with 5.7 million additional jobs if the country creates a robust domestic manufacturing sector to supply the transition.
New York has one of the most aggressive climate protection roadmaps in the country, and its Climate Action Council estimates the transition to clean energy resources will create up to 211,000 jobs through 2030 while eliminating 22,000 others.
By the time it hits its 2050 target date for carbon neutrality, New York expects to see 269,000 new positions in four primary sectors closely affected by the transition: electricity, fuels, buildings and transportation.
Many of those will not be highly skilled jobs, and some of the highly skilled jobs will not require skills specific to a particular type of clean energy. Nor will the transition happen all at once.
But given the number of skilled workers needed and the learning curve for the jobs, efforts already are underway to ramp up existing recruitment and training.
Career Ladder
During that morning in late March, one cluster of students was taking the first steps in a multiyear process to become fully qualified line workers at National Grid’s training facility in Schenectady.
Another cluster, already in their second year, was working to progress further along that career path, erecting a new pole a hundred yards away.
The little school has big neighbors that have had a prominent role in the design and manufacture of the power grid: General Electric’s original main factory campus and its world research headquarters each stand about two miles away in opposite directions.
The students and teachers at the National Grid facility are where the rubber meets the road, keeping power flowing to all the heat pumps and EV chargers being installed across New York.
Twice in March, the trainees and their mentors had mobilized to restore electricity to tens of thousands of customers as late-winter snowstorms socked the region.
More than five years of classroom training and field experience is mandated before a lineworker is fully qualified to work without supervision on lines carrying up to 69,000 volts.
The reason is simple: They need to get it exactly right.
In the least-bad scenario, a mistake can lead to a blackout. In the worst case, someone is injured or killed.
A second-year apprentice line worker replaces a pole at National Grid’s eastern New York training facility in Schenectady in March 2023. | NYPA
The school is run by a mix of National Grid managers, veterans of the trade working under contract and master electricians with IBEW Local 97.
One of the contract trainers is Bruce Selby, who retired after a long career as a National Grid lineman and now teaches a related course at a nearby community college.
The most frequent barrier for green trainees is not concern about potentially lethal voltages but fear of heights. Selby has several strategies to get the students up the pole and comfortable. One of them usually works.
“Everyone starts at the same level,” Selby said. “No one accelerates over another one. That builds a camaraderie — we all rise together. It’s all baby steps, so everyone gets comfortable at every level. And at every level we talk, so we ease our fears. I’ll climb right up there with them, because they’ll see, ‘If this old guy can do it, I can do it.’
“As we climb and they become proficient at it and competent, they become confident.”
He added: “Doesn’t work for everybody — some people mentally turn off at 10 feet.”
The frightened trainee may say they’re OK, but Selby can tell if they are not.
“How their body position is, that tells me a lot. If they’re going like this around the pole” — he bear-hugs an imaginary utility pole — “that’s a height thing. They’ll be real good, [then] 5, 6, 10 feet, all of the sudden we see that.”
One-on-one coaching can overcome that fear. If it does not, the trainee must find another specialty, but not necessarily another employer. National Grid will train them for other jobs.
Not one of the 35,500 miles of gas lines the utility maintains is up in the air, for example.
Evolving Needs
The New York Power Authority (NYPA) has an apprenticeship program like those operated by National Grid and other utilities, with a gradual increase of qualifications built through classroom learning, lab training and supervised field work.
And NYPA too has a high washout rate due to fear of heights.
“It’s not for everybody. There’s no shame in not being able to go up 100 feet and lean back in a working strap,” said Bill Senior, a regional manager and senior vice president.
“That’s not a comfortable feeling.”
Management and union jointly decide if a trainee is not fit for the line job, Senior said.
Fortunately for those who do wash out, NYPA also needs people who will work with both feet on the ground, as a growing number of small-scale distributed clean energy resources supplement large central power plants.
New York Power Authority line worker Derrek Spencer, left, and apprentice line worker Spencer Beckwith replace an insulator on a NYPA line near Syracuse. | NYPA
“There’ll be some need for technicians because we are putting a lot of substations online,” Senior said. “In upstate New York, I see more need for electricians and electronic and relay techs to man these substations.”
NYPA Chief Operating Officer Joe Kessler said the nature of the energy transition is altering the planning and strategy utilities have traditionally used.
With their much smaller sizes and lower capacity factors, new renewable assets require much more planning, construction and maintenance than conventional generation, Kessler said.
The supply chain for material is more worrisome right now than the supply of potential employees, he said, but the competition for employees with certain skillsets is becoming keen.
Planning, analysis and compliance are areas of particular concern, as they underpin much of the energy transition.
“That competency is in short supply,” Kessler said. “Everybody’s competing against each other for that particular competency. We can’t be successful and Bill’s team can’t be successful unless those people are around to support them as well.”
Workforce Challenges
New York policy makers are aware of the need to find more people to do the work, and workforce development has been a central part of planning to implement the state’s landmark Climate Leadership and Community Protection Act of 2019.
However, some complicating factors arise.
The U.S. labor force participation rate — the percentage of the working-age population that is working or actively seeking work — peaked at 67.3% in early 2000 and gradually declined to 63.3% by February 2020, on the eve of the pandemic, according to the St. Louis Federal Reserve Bank.
In February 2023, it stood at 62.6% nationally but just 60.6% in New York.
Worse, the U.S. Census Bureau estimates New York’s population declined by 2.6% from 2020 to 2022 — or more than a half-million people, the most by number and percentage of any state. (The nation’s population grew an estimated 0.6% over the same period.)
As a result, New York’s February unemployment rate — the percentage of people not employed but actively seeking employment — was only 4.5% statewide, and well below 4% for large swaths of the state outside New York City.
In this environment, state officials planning the energy transition predict a net need in just seven years for 189,000 new workers for everything from erecting wind turbines and rewiring buildings to driving trucks between job sites and keeping track of the accounting for it all.
Essential to accomplishing this will be reaching out to the population of New Yorkers who are unemployed or underemployed. That dovetails neatly with a central theme in the state’s energy transition roadmap: Extending job training and apprenticeships to disadvantaged communities, where unemployment is higher and the jobs that do exist are often low-skill or low-wage.
Lifting Communities
NYPA has an assortment of workforce development tools, and its Environmental Justice Program specifically targets historically disadvantaged students for career exposure.
NYPA also is a founding sponsor of the Northland Workforce Training Center, where 60% of the nearly 900 students are non-white, roughly the same percentage as the population of Buffalo, where it is based.
There is a deliberate effort to recruit students of color, said Northland CEO Stephen Tucker, who noted that people of color are under-represented in the skilled trades and production work, and women even more so, “despite those careers offering family-sustaining wages and pathways to the middle class.”
“We’re located in east Buffalo; we’re right in the community. So our strategy is to have a very aggressive outreach and awareness campaign,” Tucker said.
“We have a team of people who go out to schools, the churches, the community centers, the various festivals. They’re raising awareness that these careers exist, because the majority of people don’t know that you can be an electrician and make $100,000 a year or eventually own your own business.”
New York Power Authority engineers, planners and trainees walk a NYPA transmission line near Utica. | NYPA
The staff is continually reminded of the challenges facing young adults in the surrounding communities — transportation, childcare, housing, mental health — and continually works to get them over those hurdles.
“We embed the delivery of intense wraparound services with the delivery of technical training,” Tucker said.
“We try to mitigate most of the traditional barriers that will keep people from enrolling in and completing post-secondary education. Because of that we’ve been able to achieve higher-than-average completion rates for community colleges.”
Northland occupies a repurposed circa-1911 machine-and-tool works in a neighborhood that is quintessentially Rust Belt — older middle-class housing stock on small lots surrounding former industrial sites. The crumbling Curtiss-Wright engine factory stands just a hundred yards from Northland, vacant since the 1990s.
But Northland is envisioned as a catalyst for change, a metaphoric full circle that is training young people for the high-tech blue-collar jobs of tomorrow amid the ruins of the blue-collar landscape of yesterday.
“They were in the DNA of Buffalo. But the factories closed, and the jobs dried up,” Tucker said. “This area was dormant for about 25 or 30 years.”
Graduates of Northland’s two-year Electrical Construction and Maintenance program are qualified for entry-level jobs or advanced training.
“They’ll be ready to enroll in an apprenticeship but not start at the beginning,” Tucker said. “They’ll have two years of education behind him. They could test into year two of an apprenticeship program. Or they could go right to work in industry or as a residential electrician.”
Next up for Northland is a curriculum to meet the needs of the energy transition.
“Moving forward, we are planning to launch a clean energy technology lab,” Tucker said, with training in battery storage, microgrid technology, renewable natural gas, EVs, EV chargers and building maintenance.
“We hope to have that deployed within the next year or so.”
Recruitment Strategy
Melanie Littlejohn, National Grid vice president of customer and community engagement, said the company cannot follow a one-size-fits-all strategy in recruiting for everyday operation — let alone for the energy transition. The utility’s three regions — upstate and downstate New York and Massachusetts — are only a few hours apart but different in many ways, from weather to terrain to economy.
“Our initial focus is really on how are we building awareness that these positions exist in the first place, and what are they, and how do you see your talents tied to them,” she said.
To build a workforce pipeline, the utility partners with an array of agencies, including high school vocational programs, two-year colleges, four-year colleges and educational opportunity centers.
New York’s two-year colleges design some of their career skills programs in partnership with industry, creating a clear path to employment.
“Junior colleges are so critically important to this part of this work,” Littlejohn said.
The lineworkers training in Schenectady are just one sliver of the utility’s personnel needs.
Littlejohn speaks of “the power behind the switch” — all the financial personnel, engineers, control room operators, analysts, and others who also keep the utility running, without ever climbing a pole.
Matthew Barnett, National Grid’s vice president of New York electric operations, said the utility cannot predict the numbers and skillsets it will need as the energy transition progresses, so it is running a series of five- and 10-year scenarios to have plans ready as the picture comes into clearer focus.
It is a more proactive stance to anticipated needs, as opposed to a reactive strategy based on existing needs.
The vast number of public, private and commercial EV chargers expected to be installed in the next decade is a perfect example.
“We’re looking at how do we need to build at the right pace to stay in front of the customer need, so we’re not the barrier,” Barnett said.
“This won’t all be done by hiring on National Grid personnel; we have contractor partnerships out there,” he said.
Making The Grade
The term “linemen” may sound archaic in the inclusive modern era, but almost all lineworkers are men.
Niagara Mohawk hired Patty Orr as apparently the first female line worker in the nation more than 40 years ago and its corporate successor, National Grid, has hired only about a half-dozen since.
Women are welcome and encouraged to apply, but not many do. It is a physically challenging job.
The tools for managing those demands have improved over the years and made the job safer, but a lineman still needs to be able to manipulate a 100-pound wire by hand while leaning out of a bucket or hanging from a harness.
Keith Kilgallon, senior instructor in Schenectady, said there are two places where most student dropouts happen: Right at the beginning, if they cannot deal with heights, and about two years in, when they start having to lift wires into position.
The handful of women who have come through the Schenectady school have done very well, he said. All but one possessed or developed the requisite confidence, strength and competence to graduate. But very few have applied.
There is a bit of mirth here and there at the training facility — the simulated city street where apprentice gas workers learn how to fix leaks and put out fires is named “Leak Lane.”
But the curriculum and instruction are as serious as the subject would suggest.
Kilgallon hoisted the door of an oversized garage to reveal a jungle of wires, transformers and switches right at eye level. There’s little elbow room and zero margin for error.
“We actually do energize this up to 5,000 volts,” he said. “If you close something that doesn’t phase out in the field, you’re going to cause an enormous outage. You have to synchronize the feeders together. So we can simulate how to synchronize the feeders in here, on primary voltage and secondary voltage.”
Students are forbidden to be inside without an instructor, or to outnumber the instructor by more than 5-1.
But with proper oversight, it is a great place to learn, Kilgallon said.
“I’ve only been here 20 years, and now we’re getting to be the old guys! I can remember going through climbing school; it seems like only yesterday. … It’s pretty much a mentoring program or an apprenticeship program, where somebody is really talking you and walking you through it,” he said.
On the opposite end of the career ladder is Landon Marks, three years out of high school. He enrolled in the Electrical Construction and Maintenance program at Hudson Valley Community College, then went to work for National Grid in November 2022.
For the first six months, Marks is a probationary employee and “helper,” authorized to control traffic, load trucks, watch and learn — but not to work with any live wires.
Marks is comfortable with heights, having completed climbing school at the college.
“So, I already have free-climbed and certified in all that before, but now that I’m a National Grid employee I have to do it again,” he said. “I’m not going to say I lacked fear when I started, but you get used to trusting your equipment.”
The fear of falling fades behind respect for electricity, a clarity of purpose and focus that comes with proximity to deadly voltages.
“You don’t even realize you’re on the pole anymore,” Marks said.
He quotes Selby, who was his instructor at the college as well: “Climbing is like the transportation to the job. The job’s at the top of the pole, the climbing shouldn’t be the job.”
Marks plans to make a career as a lineman, just like his father, Ronnie Marks, who still works for National Grid out of Troy.
Electricity looks like a growth field for decades to come, he said. “One hundred percent.”
WASHINGTON ― President Biden may not agree with all the provisions of Sen. Joe Manchin’s (D-W.Va.) bill to accelerate permitting of energy and transmission projects, but he will support it “to start serious bipartisan negotiations in the Senate,” according to White House Senior Adviser John Podesta.
“The President doesn’t love everything in the bill, but we support it,” Podesta told a small audience Wednesday at the Bipartisan Policy Center. “That’s what compromise means, and it will take compromise by everybody to get this done.”
Podesta was acting as advance man for a new fact sheet from the White House outlining Biden’s top priorities for “permitting reform,” as the issue is commonly referred to. Describing current permitting delays and bottlenecks as “pervasive at every level of government,” Podesta said, “We got so good at stopping projects that we forgot how to build things in America.”
Permitting for projects he had worked on during the administration of former president Barack Obama had still not been approved when he returned to government last year, Podesta said. “That’s unacceptable.”
While highlighting administration actions — such as Tuesday’s release of proposals for designating National Interest Electric Transmission Corridors — deeper and more basic changes will require congressional action, he said. (See DOE Rolls out New Process for Designating Key Transmission Corridors.)
In his summary of top-line points in the fact sheet, Podesta put speeding up interconnection at the head of the list. A recent report from the Lawrence Berkeley National Laboratory found more than 2,000 GW of wind, solar and storage sitting in interconnection queues across the country.
“We’ve got to get more clean energy capacity connected to the grid,” he said. “Legislation needs to expedite the connection of generation or storage that impacts more than one transmission system, and it needs to allow clean energy project developers to pay the cost of interconnection upfront.”
On interstate transmission, the administration wants permitting to be faster, more efficient and predictable. “A key part of this is allowing developers to allocate project costs to customers that benefit from the new transmission,” Podesta said.
To prevent power outages during extreme weather events, the administration wants to expand energy transfers between grid operators. Congress should give FERC the authority “to set a minimum level of transfer capability between regional grids — and should require the consideration of multiple benefits, including economic, operational, and environmental, when making transmission decisions,” he said.
In addition, “Congress should give FERC clear authority to issue permits for interstate transmission lines … and to include carbon dioxide and hydrogen infrastructure in designated energy corridors,” Podesta said.
Other priorities set out in the administration fact sheet include:
Improved permitting of clean energy projects on public lands through the use of programmatic environmental reviews, which cover specific areas or regions. Such reviews could “allow environmental review work to be re-used for multiple projects — by authorizing agencies to impose a fee on project sponsors to cover costs associated with a programmatic review upon which their project relies.” These reviews could then be used for up to five years or longer to expedite permitting of projects in the programmatic review area.
Expanded use of categorical exclusions for clean energy projects. About 95% of projects on federal land get these exclusions, meaning they do not require an environmental review under the National Environmental Policy Act (NEPA).
Development of “an automated, joint electronic permit application for federal agencies,” along with “automated workflow tools that are compatible with existing agency dashboards” and can track a project’s progress from application to approval.
Improved community engagement. The White House wants federal agencies to each have a dedicated chief community engagement officer who will oversee engagement efforts across permitting processes. Agencies would also establish community engagement funds to help local and tribal entities who might not have the resources or expertise to engage in federal permitting processes. Fees from project developers could be used to contribute to these funds.
Modernized mining laws. The law governing mining on federal lands was signed in 1872 by President Ulysses S. Grant and has remained largely unchanged since then, Podesta said. While the administration has yet to develop detailed proposals, the fact sheet calls for reforms that “set a global standard for responsible mineral development and … increase coordination, transparency and communication between federal agencies, and provide greater certainty for project sponsors for responsible domestic mining and extraction.”
‘No More Climate Denial’
The administration’s focus on permitting appears strategically timed as Congress gears up for action on the issue. House Republicans have tied permitting reform to the increasingly tense debt ceiling negotiations, with the inclusion of their energy bill, H.R. 1, in the debt ceiling package they passed April 26. Permitting reform provisions in that bill were almost exclusively focused on streamlining permitting and removing other obstacles to the development of fossil fuel projects. (See GOP Energy Bill Passes House, Heads for Hostile Senate.)
Podesta slammed the debt ceiling bill, saying it be “would be catastrophic for our economy, our energy security and our national security. They are proposing to endanger the health of Americans [and] undo our clean energy progress as ransom for not triggering a catastrophic default,” he said.
Any chance for bipartisan action on permitting now lies in the Senate, where the issue is on the agendas of both the Energy and Natural Resources (ENR) Committee, chaired by Manchin, and the Environment and Public Works (EPW) Committee.
At EPW’s recent hearing on permitting, both Chair Tom Carper (D-Del.) and Ranking Member Shelley Moore Capito (R-W.Va.) called for a “regular order” of hearings and bipartisan negotiations on the issue. (See Permitting Delays, Inflation Put Double Whammy on IIJA and IRA.)
Manchin and ENR have a hearing on permitting on Thursday, when bills from both Manchin and Ranking Member Sen. John Barrasso (R-Wyo.) will likely be on the table.
Manchin has reintroduced the Building American Energy Security Act, which failed to gain a majority vote in the previous Congress, but continues to have Biden’s support. While Manchin and the White House have had a falling out over implementation of the Inflation Reduction Act’s electric vehicle tax credits, permitting may allow some rebuilding of the relationship, with Podesta praising the senator’s “leadership and commitment to this issue in particular.”
The bill sets a two-year limit on environmental impact reviews for major projects and one year for projects needing a lower-level environmental assessment. It also calls for the White House to identify a list of 25 high-priority energy infrastructure projects, to be updated periodically, and expedite permitting on them.
Similar to H.R. 1, Barrasso’s Spur Permitting of Underdeveloped Resources Act has a strong focus on promoting oil and gas leasing. The bill would require the Secretary of the Interior to immediately resume quarterly onshore oil and gas lease sales and “offer no less than 25% of all nominated parcels in each field office at every quarterly sale.”
It also calls for no fewer than 11 offshore oil and gas lease sales in the Gulf of Mexico and offshore Alaska over the next five years.
Capito’s permitting reform effort is the tongue-twisting Revitalizing the Economy by Simplifying Timelines and Assuring Regulatory Transparency Act, which is chiefly aimed at undercutting NEPA and the Clean Water and Clean Air acts. For example, it proposes a two-year time limit for environmental impact reviews under NEPA, but if the deadline is not met, a project would be considered to have met the requirements of the law.
By comparison, in Manchin’s bill, if an agency misses a permitting deadline, project developers could seek a court order “directing agencies to finish the review.”
With Republicans’ focus on fossil fuels and Biden’s on clean energy, common ground may be hard to find. Podesta sees possibilities for compromise on both sides’ proposals for limiting the time allowed for environmental reviews and other efforts to simplify the permitting process.
“There’s room for discussion on those core common elements,” he said. “But the one thing I think we’re going to insist on is no more climate denial; no more looking the other way. No more you can’t analyze the climate effects of a project. No more we need to ensure that we’re only looking at the cost benefits over a short period of time because if we look over the horizon, we might find that the world is changing a little faster than we thought.”
“Right now, we’re in the midst of a climate crisis, one that demands that we build, build, build clean energy,” Podesta said. “Here’s the bottom line: If we can’t build some new things in a few backyards, the climate crisis will destroy everyone’s backyards, along with the livelihoods, communities, wildlife and biodiversity we all want to protect.”
The Massachusetts Energy Facilities Siting Board determined Wednesday that it lacks jurisdiction over battery energy storage systems (BESS).
The decision is potentially a significant setback for two BESS proposals with a combined rating of 400 MW. Approval by the state siting board would have trumped local zoning rules that block construction.
Instead, the siting board referred the BESS proposals to the state Department of Public Utilities for decision on whether to exempt them from zoning regulations.
Cranberry Point Energy LLC is proposing a 150-MW/300-MWh BESS in Carver with a new substation and a new switching station to be owned by Eversource (NYSE:ES).
Medway Grid LLC is proposing a 250-MW/500-MWh BESS in Medway with a new substation and an interconnection to an existing Eversource substation.
Together, the two BESS facilities would have provided 40% of the state’s Dec. 31, 2025, target of 1,000 MW of installed energy storage.
Wednesday’s decision notes that the state legislature did not include BESS technology in the legislation that created the siting board’s predecessor in 1973, nor when it restructured the statutes in 1997.
BESS was not a significant form of electrical infrastructure at either point. The legislature has imposed BESS directives elsewhere since then, but not in the siting statutes, the decision noted.
The decisions rendered Wednesday resolve dockets that have been pending since August 2021 and February 2022. But the attorney for the developers, Andrew Kaplan, said that the matter dates back to Jan. 4, 2019, when Cranberry Point petitioned the siting board for a jurisdictional determination.
Kaplan said in written comments last week that the siting board initially issued 86 requests for information, the last of which Cranberry responded to on April 26, 2019. Over the next four years, more than 450 other requests for information or records followed, he said, along with six days of hearings.
On April 26, 2023, the siting board issued the tentative decisions on Cranberry Point and Medway Grid that it finalized Wednesday.
Kaplan wrote that by taking so long to determine it lacked jurisdiction over BESS, the siting board was putting his clients up against a deadline that could cost them tens of millions of dollars in penalties.
In 2021, ISO-NE selected the two BESS projects in its 15th Forward Capacity Auction to help meet its capacity needs in eastern Massachusetts, Kaplan wrote.
He told NetZero Insider Thursday that the two projects are contractually obligated to be online by June 1, 2024, and that it will take about a year to build them, so they need a greenlight in the next few weeks.
Kaplan said that may still be possible, as DPU does not need to repeat the extensive review the siting board undertook. “The record is well-established. I do not think they need to reopen and have six or nine months of a new regulatory process.”
He welcomed the effort to streamline and standardize siting regulations planned by the new administration of Gov. Maura Healy to smooth the way for her ambitious clean energy agenda.
“The EFSB is guided in its work by the siting board statute,” Energy and Environmental Affairs spokesperson Danielle Burney told NetZero Insider on Wednesday. “As the case before the board today demonstrates, that statute was designed for a different time when the power system was based on large fossil fuel power plants owned by utilities. Today, we live in a different world. This is why EEA Secretary Rebecca Tepper established a commission on permitting and siting to assess and address the jurisdiction around building large amounts of renewables in an equitable manner. It is critical that we as a state review our regulatory scheme to ensure we can site the renewables that we need to meet our energy and climate goals.”
The BESS proposal before the siting board turned to semantics at times. Wednesday’s decision noted and rejected arguments that by transforming chemical energy to electrical energy, batteries generate rather than just store power. (A citation to the Merriam Webster 1981 New Collegiate Dictionary definition of “transform” was included.)
For its part, ISO-NE views BESS and other forms of energy storage as all of the above: Storage can function as generation or demand response, and developers can choose what markets (energy, capacity, ancillary services) they participate in.
And the RTO is seeking to further expand the role of storage. In December, it askedFERC to approve tariff revisions to allow storage facilities to be planned and operated as transmission-only assets.
An ISO-NE spokesperson said Wednesday that FERC has not yet ruled on the request.
The California Air Resources Board on Wednesday took one of its first steps toward a potential statewide ban on sales of new natural gas-powered space and water heaters for residential and commercial buildings.
CARB hosted a public workshop to explain the rationale for zero-emission appliance standards and to gather feedback on the process for developing a regulation. The agency hasn’t yet released a proposed appliance regulation, and it could be months or years before it does so.
Wednesday’s session was the first in a series of public workshops expected to continue into 2024. Under a proposed timeline, CARB would consider a draft regulation in 2025, with a compliance date expected in 2030.
“Zero-emission appliance standards provide an opportunity for substantial emission reduction to help meet climate and air quality targets,” CARB Executive Officer Steven Cliff said during the workshop.
Cliff noted that a move toward zero-emission appliances is a strategy in the climate change scoping plan that CARB adopted last year. And the agency’s 2022 State Implementation Plan, which tells the U.S. EPA how California plans to meet air quality standards, sets a 2025 target date for the board to consider zero-emission standards for space and water heaters. (See Calif. Moves to Ban Natural Gas-powered Heaters.)
As now envisioned, the regulation wouldn’t require replacement of gas heaters in existing buildings. But all new space and water heaters sold in California, either for new construction or to replace appliances in existing buildings, would need to be zero-emission.
CARB staff said they’ll also explore zero-emission requirements for other uses such as cooking and clothes drying.
Cliff said that CARB is working with other agencies and will monitor policies that would support zero-emission appliance standards. Those might include incentive programs, electric rate design, grid readiness and workforce development.
Impact on Seniors, Rural Areas
More than 160 people attended the virtual workshop. Some asked whether the impact on fixed-income seniors would be considered.
Dana Waters, CARB’s staff lead for developing zero-emission appliance standards, said the agency is working “to really understand all the potential adverse impacts of our potential regulation on many vulnerable groups, including fixed-income seniors,” as well as ways to minimize those impacts.
Others wanted to know whether the regulation would cover rural areas that use propane appliances. Waters said that’s something CARB will evaluate.
Another issue is whether manufacturers will be able to meet demand for zero-emission appliances, which are expected to be largely electric heat pump devices, when the regulation takes effect. Waters said CARB welcomes comments from manufacturers on potential supply chain problems.
One workshop participant asked about the impact of the 9th U.S. Circuit Court of Appeals ruling on the city of Berkeley’s effective ban on natural gas in new buildings. (See Impact of Berkeley Gas Ruling Debated.) Waters said CARB is watching the case, in which Berkeley might request a rehearing.
“CARB’s regulation, which would apply to emissions, not natural gas infrastructure, is still in the concept stage,” Waters said.
Air District Weighs In
More than 70 cities and counties in California have requirements for new construction to be all-electric, although many also include exceptions, such as for commercial cooking.
The Bay Area Air Quality Management District in March adopted requirements for new space and water heaters to emit zero nitrogen oxides (NOx). In theory, natural gas appliances could meet the zero-NOx standard, but no such appliances are currently available, the air district said.
The appliance standards will be phased in from 2027 to 2031, starting with water heaters in 2027.
The South Coast Air Quality Management District is also committed to zero-NOx appliance standards, Cliff said.
Greg Nudd, deputy air pollution control officer for the Bay Area air district, said during the workshop that public health is the focus of the district’s appliance regulations. Exposure to nitrogen oxides may cause coughing, wheezing, asthma and greater susceptibility to respiratory infections, according to the air district.
Nudd said the district received hundreds of comments on its appliance rules. Concerns included high upfront costs, long waits for utility upgrades and interconnections, electric reliability and labor availability.
The air district has convened a work group to help address the challenges, he said.
“California’s showing the rest of the world that this can be done, and it can be done in an equitable way,” Nudd said.
The Environmental Protection Agency on Thursday announced proposed rules aimed at reducing carbon dioxide emissions from coal- and gas-fired power plants by requiring them to use carbon capture and sequestration and co-firing of hydrogen.
The massive, 681-page document represents the Biden administration’s attempt to succeed where the Obama EPA’s Clean Power Plan failed, and would repeal the Trump-era Affordable Clean Energy (ACE) rule.
Like those proposals, EPA is issuing its latest rulemaking under Section 111 of the Clean Air Act for both new and existing plants and the Supreme Court’s 2007 ruling in Massachusetts v. EPA that CO2 is a pollutant.
But unlike the CPP, which required states to each meet individually set emission-reduction targets, the new rule would set nationwide standards on plants based on whether they are new or existing, their fuel type, frequency of usage, capacity and how long they plan to operate.
“The proposed new source performance standards and emission guidelines reflect the application of the best system of emission reduction (BSER) that — taking into account costs, energy requirements and other statutory factors — is adequately demonstrated for the purpose of improving the emissions performance of the covered electric generating units,” the agency said in a factsheet.
Carbon capture and sequestration (CCS) would be considered the BSER for most new baseload combustion turbines, existing coal-fired plants that intend to keep operating after 2040 and existing large, frequently operated CTs. EPA cited new tax credits for CCS in the Inflation Reduction Act as a basis for its determination that the technology is the BSER that “taking into account costs, energy requirements, and other statutory factors, is adequately demonstrated.”
For new peaking units, defined as CTs with capacity factors of less than 20%, the BSER would be switching to lower-emitting fuels, such as coal switching to gas.
EPA proposed two pathways for baseload units: using CCS to capture 90% of GHG emissions by 2035 and the co-firing of 30% (by volume) low-GHG hydrogen by 2032, increasing to 96% by 2038.
“The EPA recognizes that, since it promulgated the ACE rule, the costs of CCS have decreased due to technology advancements as well as new policies including the expansion of the Internal Revenue Code section 45Q tax credit for CCS in the Inflation Reduction Act, and the costs of natural gas co-firing have decreased as well, due in large part to a decrease in the difference between coal and natural gas prices,” the proposal says.
“The proposed limits and guidelines would require ambitious reductions in carbon pollution based on proven and cost-effective control technologies that can be directly applied to power plants,” EPA Administrator Michael Regan told reporters during a conference call Wednesday. The proposal “is also designed to give the power sector continued flexibility with respect to its operations and choice of generating resources that facilitate long-term planning during this dynamic period for the sector.”
In response to a reporter’s question about possible legal challenges, Regan said the proposal “does not implicate the concerns addressed by the Supreme Court decision in West Virginia v. EPA,” in which the court ruled against the CPP. (See Supreme Court Rejects EPA Generation Shifting.) “This has limiting guidelines that follow EPA’s traditional approach under the Clean Air Act to cut and control pollution from stationary sources. So, we feel really good that we’re within those bounds.”
Several reporters asked whether the rules were aggressive enough to meet President Biden’s goal of net-zero emissions for the electricity industry by 2035 and the U.S.’ 2030 commitment under the international Paris Agreement on climate change.
The 2035 goal “has been the North Star that’s guided policy as we’ve worked to modernize the grid; to accelerate innovation on clean energy technologies; to build out our capabilities here in the United States to manufacture clean energy technologies,” National Climate Adviser Ali Zaidi said. “We are driving a transformation that will help us absolutely meet the president’s goal, and this [proposal] reinforces and harnesses that trajectory for public health benefits.”
“When you look at what’s in this rule and what’s been proposed, we are absolutely in line with the president’s goal,” Regan said. “The options that are available to the power sector in this rule … would allow for these facilities to take advantage of technologies that really lock in and secure that glide path that the president has laid out.”
With regards to the Paris target, Zaidi said, “The president has positioned us to meet the nationally determined contribution through the totality of his climate and clean energy agenda. The United States will meet its goal of reducing emissions by 50 to 52% by 2030 relative to 2005 levels. Every action that we take … firms up our … path to achieve that goal.”
Cybersecurity firm Dragos, a partner of the Electricity Information Sharing and Analysis Center (E-ISAC), this week suffered a cyber breach that exposed customer information, E-ISAC CEO Manny Cancel revealed at a meeting of NERC’s Technology and Security Committee on Wednesday.
Cancel assured listeners that none of the E-ISAC’s data was compromised in the breach. However, he said that “out of an abundance of caution” the E-ISAC had disabled Dragos’ access to its network for the time being.
The organization has partnered with Dragos to share information about threat analytics and indicators of compromise through the firm’s Neighborhood Keeper threat intelligence system. (See E-ISAC Joins Dragos for Data Sharing Initiative.) In addition, Dragos helps analyze data submitted through the E-ISAC’s Cybersecurity Risk Information Sharing Program.
Access Gained Through New Employee Account
The intrusion occurred on May 8, Dragos said in a blog post Wednesday. The firm did not name the group responsible for the attack but said the perpetrator was a “known cybercriminal group” that typically tries to install ransomware on target systems. Cancel said the attackers are “suspected to be a foreign … ransomware service that is probably backed by a nation-state.”
According to a timeline put together by Dragos, the attack began when hackers compromised the personal email address of a recent hire in the company’s sales team. The employee had not started work yet and had not finished the onboarding process or set up two-factor authentication for their employee account.
Once the attackers had access to the employee’s email, they accomplished the initial steps in the onboarding. This gave the group access to sales department resources and the Dragos contract management system. One of the documents the attackers accessed was a report including IP addresses associated with a customer. Dragos did not identify this client but said it had reached out to notify them.
Attempts to access other Dragos systems, including messaging, finance, employee recognition and marketing, were blocked by the firm’s automated internal security processes over the initial eight hours after the intrusion. The group was also unsuccessful in escalating their user privileges, accomplishing lateral movement into other systems, and in making changes to the company’s infrastructure.
Dragos remained unaware of the attackers’ presence until the following morning, about 16 hours after the intruders logged in to the employee’s account. At that point a member of the executive team read an email that the attackers had sent five hours earlier, attempting to extort the company to avoid public disclosure of the incident.
The attackers also sent text messages to members of the company’s leadership; some of these messages contained references to family members and contacts, demonstrating that the hackers had researched their targets thoroughly. Executives also received messages at their personal accounts, though Dragos decided “that the best response was to not engage with the criminals.”
Intruders Likely Intended Ransomware Attack
In its analysis, Dragos theorized that the attackers had planned to install ransomware on the company’s system, but switched their goal to extortion after they were unable to access a valuable target. After receiving the threatening emails, the company’s security staff identified the compromised account, revoked all of its sessions, and cut off its access to company resources.
Dragos said the attackers sent this message, and others like it, to the company’s executives, trying to extort money in exchange for their silence about the security breach. | Dragos
Dragos listed several lessons learned from the incident. First, the company added a verification step to the onboarding process to ensure the same technique could not be used again. It is also considering expanding its use of multistep access approval because of its usefulness in blocking the intruders’ access attempts.
“The data that was lost and likely to be made public because we chose not to pay the extortion is regrettable,” Dragos said in the statement. “However, it is our hope that highlighting the methods of the adversary will help others consider additional defenses against these approaches so that they do not become a victim to similar efforts.”
Dragos CEO Robert Lee tweeted Wednesday afternoon that he was “proud of [Dragos’] security team” and that the company hoped sharing the story would “help other organizations prepare.” Dragos tweeted the knowledge that security companies can suffer breaches would help to “destigmatize security events” while making other organizations take the threat seriously.
As for the initial phishing target who served as the attackers’ entry into the company’s network, Lee tweeted that they “will absolutely be one of our valued employees (when they get their accounts back). We don’t blame victims at Dragos and no one else should either.”
Cancel praised Dragos for informing the E-ISAC of the compromise immediately and encouraged entities to read the “sobering” report. He reminded attendees that “the ERO is a target” and that they should pay attention to security alerts, even when they seem overwhelming.
“It’s easy to get desensitized to [those] alerts, but don’t let that happen,” Cancel said. “Every alert requires people looking and taking action. And that’s something that we [will] continue.”
Vanguard’s request for another three-year extension of its blanket authorization to procure utility securities went into effect “by operation of law” May 8 as FERC’s commissioners apparently split 2-2 on the application (EC19-57).
Republican Commissioners James Danly and Mark Christie released a joint statement May 9 expressing concern that Vanguard’s utility holdings, which have grown from $5 trillion in 2019 to $6.7 trillion in late 2022, could undermine competition.
“Horizontal shareholding, or common shareholding between horizontal competitors, could reduce incentives to compete in a given product market. This is especially so in concentrated markets,” Danly and Christie said. They said the commission had not developed a sufficient record to determine whether Vanguard’s advisory subsidiaries and 34 affiliated investment companies were abiding by promises not to exert control over the utilities.
The two had previously objected to a 2022 FERC order, which extended a 2019 ruling allowing Vanguard to acquire up to 20% of the outstanding voting securities of a public utility in aggregate, and up to 10% by a single fund.
FERC Chair Willie Phillips and Commissioner Allison Clements, both Democrats, had not issued a statement on Vanguard’s filing as of late Wednesday.
GOP AGs Protest
While Danly and Christie cited competitive concerns, a group of Republican state attorneys general had challenged Vanguard’s petition on the grounds that the investment manager was seeking to pressure utilities to adopt environmental, social and governance (ESG) investing policies. (See Red State AGs Challenge Vanguard Climate Activism.)
The attorneys general made similar allegations in a filing Wednesday opposing BlackRock’s (NYSE:BLK) request for a similar investment authorization (EC16-77-002). The filing came as the House Oversight and Accountability Committee held a hearing on ESG issues, where Utah Attorney General Sean Reyes said the committee should ensure that FERC is preventing “asset managers who collectively own significant percentages of utilities’ stock [from] improperly influencing the operations of those utilities.”
The state AGs’ BlackRock filing comes after FERC already granted the investment firm an extension last year, but it asks the commission to audit whether the firm continues to be a passive investor. They point to its signing onto “activist crusades” such as Climate Action 100+ and Net Zero Asset Managers Initiative.
CA100+ and NZAM have called for achieving net zero greenhouse gas emissions by 2050. Vanguard left NZAM after the AGs’ protest over its application last year.
“This is yet another example of radical leftists trying to circumvent the will of the American people in order to implement their draconian mandates,” Indiana Attorney General Todd Rokita said in a statement. “The restrictions these elitists are trying to impose on energy companies and utilities would never win approval at the ballot box.”
‘Enormous Accumulation’
Danly and Christie said “the enormous accumulation of such assets enables Vanguard to vote large percentages of publicly traded companies’ shares. The commission has had a long history of scrutinizing corporate structures that allow for the common ownership of, or influence upon, public utilities. Vanguard’s application raises a number of issues that demand commission scrutiny because Vanguard may be able to exercise profound control over the utilities whose securities it holds, including the potential to influence decisions of the utility management that could have serious effects on the reliability of power service and rates for customers.”
FERC should consider whether blanket exemptions for firms with such massive investments in the utility sector are consistent with the public interest, they said.
They noted that Vanguard told the commission that it is abiding by the conditions in the 2022 order and its “own investment guidelines” that preclude it “from acquiring or holding securities with the effect or for the purpose of exercising control or management” of utilities.
“These guidelines, however, do not appear in the record, so their sufficiency in this respect cannot be assessed,” the commissioners wrote. “Further, Vanguard states that each Vanguard advised fund has ‘proxy voting procedures and guidelines adopted by each fund’s board.’ These proxy voting procedures and guidelines are also missing from the record.
“Vanguard’s failure to include material upon which its application is predicated hampers the commission’s ability to assess the independence of the advisors or examine how much control or oversight Vanguard actually retains,” they added.
Public Citizen Energy Program Director Tyson Slocum said in an interview May 10 that the ESG issues were a distraction from the real issue of horizontal market power from firms like BlackRock and Vanguard.
“We raised substantive issues about the commission’s current, ‘check the box’ exercise for blanket waivers for certain fund managers,” Slocum said. “The commission needs to perform some basic analysis given the size of BlackRock, Vanguard and these types of entities. These are no longer small players. They have sort of radically redefined equity ownership in stocks.”
Public Citizen filed a protest last year arguing that BlackRock’s impact on horizontal competition warranted more attention from the commission. That argument convinced Christie and Clements, who both filed comments on the April 2022 order urging more scrutiny going forward. (See BlackRock Decision Unearths FERC Wariness of Investor Influence on Utilities.)
“As these types of entities increasingly emerge as material investors across public utilities, it is important for the commission to consider whether its analysis in considering these blanket authorizations remains sufficient to ensure that transactions made under the blanket authorizations are within the public interest, including that they do not have an adverse effect on wholesale rates,” Clements said then.
Slocum said FERC has an obligation under Section 203 of the Federal Power Act to review investment firms’ impact on horizontal competition. That is especially important given that FERC’s main method of regulating the industry in recent decades has depended on competition, which could be limited due to horizontal market power.
BlackRock, which directly owns energy infrastructure such as oil storage facilities and a natural gas plant in Georgia, is not just investing passively in utilities. The issue is worthy of FERC’s increased attention, but the ESG talk amounts to a “political stunt,” said Slocum.
If anything, it makes sense for utilities, and even companies focused on extracting fossil fuels, to plan around potential climate liabilities going forward, said Slocum.
“This woke capitalism nonsense by these wildly uninformed attorney generals just makes them look silly and stupid,” Slocum said. “There’s nothing woke about BlackRock or Vanguard.”
Plug Power (NASDAQ:PLUG) is building fuel cells for stationary generation and electric vehicles, large electrolyzers to produce hydrogen, and industrial-sized green hydrogen production factories in the U.S. and Europe to get ahead of the expected massive switch to hydrogen as a fuel.
The New York-based company on Tuesday posted a first-quarter net loss of $206.6 million (35 cents/share) on revenues of $210 million, but ended the quarter with $1.6 billion in cash.
Once a manufacturer only of small fuel cells for warehouse forklifts, Plug Power now says it is “focused on building a global green hydrogen ecosystem,”
The company has built a large hydrogen generation facility in Georgia in less than a year and is about to begin construction on a plant in Louisiana while negotiating to build a third in Texas, it said in an investor letter issued before the start of a call with analysts.
Plug Power’s plans for electrolyzer sales appear equally ambitious.
“Deliveries into our 2-GW backlog in 2023 range across large-scale projects and 1- to 5-MW containerized solutions,” the investor letter continued. “Meaningful traction with our containerized 5-MW electrolyzer system continues in both the U.S. and Europe, including multiple repeat orders.
“We are also at the final stages of negotiating large-scale project opportunities in the U.S., Europe and Asia-Pacific representing potential bookings over 1 GW.”
Plug also noted that its “Gigafactory” in Rochester, N.Y., is “on track” to produce 100 MW of electrolyzers per month by the middle of the second quarter.
In the face of the quarterly loss, the investor letter presented a “blue sky” future.
“Plug’s speed of execution in our first-of-its-kind green hydrogen plants and commercialized fuel cell products remain unmatched. Our learnings from this journey continue to be invaluable as the company engages in multiple significant business activities, many of which are approaching inflection points.
“With an expected $10 trillion addressable market by 2050 and multibillion-dollar opportunities in the near term across our various product lines, Plug remains fully committed to executing on our strategic priorities in three key business units.”
Plug’s share price fell by nearly 14% to $8.01 over the day Tuesday, on a trading volume of more than 53 million shares, significantly higher than the average volume of 18.6 million.
RTOs and ISOs should reconsider the practice of relying on single clearing price mechanisms in organized electricity markets, FERC Commissioner Mark Christie argued in an Energy Law Journal article published Monday.
Use of a single clearing price (SCP) means that every resource dispatched is paid as much as the last unit needed to meet demand, which has the highest price among them.
“As a result, sellers that have offered to sell at prices lower than the clearing price, including those offering at zero or even below zero due to out-of-market subsidies, still receive the highest clearing price,” Christie wrote. “As consumers’ power bills continue to rise, however, both the EU and UK are reconsidering whether the continued use of SCP mechanisms is in the best interests of hard-pressed consumers and whether changes to pricing structures need to be made to give consumers the full potential cost savings available from low to zero marginal cost resources.”
The European Union is looking into the issue because the single clearing price means that many of the savings associated with renewables that deliver at very low to below-zero marginal cost do not flow through to consumers. That makes it a timely discussion to have in the U.S., Christie said.
RTO capacity markets also clear at a single price, and Christie said they have bigger problems that are in need of more immediate reforms.
“These constructs are critically important not only because of their impact on the costs consumers pay for power resources, but on the reliability of the power grid itself,” the article said. “Indeed, it is past time to reconsider whether such constructs, certainly those in the large, multistate RTOs, are still capable of performing the important duties expected of them.”
In creating capacity markets, RTOs conceded that investors need certainty on future revenues and that energy market revenues were not sufficient to encourage investment in capital intensive generation.
“The creation of these markets also destroys any argument that deregulation was all about shifting investment risk for generation assets from consumers to investors,” Christie said. “It never was, certainly not where capacity markets were established to provide the ‘missing money’ to investors.”
The capacity markets differ by region, but they all pay a single clearing price, which is at best zonal and thus far less granular than the locational marginal prices used in energy markets. And the forward nature of the markets involves assuming what load will be in the future, and some guesswork around supply as well.
“Those operating the capacity markets are speculating on future supply and demand just as integrated resource planners in vertically integrated utilities are speculating,” the article said. “Both are engaging in an administrative planning exercise.”
Capacity markets are facing more immediate problems, but Christie does not want to limit the reconsideration to them.
“While acknowledging that there are serious arguments in favor of continued use of the LMP mechanism in certain markets, the article asserts that such arguments should not prevent an open-minded consideration of equally serious arguments made against continued use of single clearing price mechanisms in U.S. power markets, including the practical question whether LMP itself, which may be effective in some scenarios, can continue to deliver what it promises under today’s conditions,” the article said.
Beyond ‘Textbook’ Theory
Reassessing single clearing price mechanisms will require reconsideration of the assumptions that drove restructuring of the industry in the 1990s and early 2000s and whether they still apply to present conditions.
Restructuring was driven by a sense among policy makers that generation was no longer a natural monopoly, largely because of the development of efficient and low-cost natural gas-fired resources. FERC and some states both pushed the change, and while transmission remained a monopoly, its control was handed over to ISO/RTOs that took over the planning role from utilities.
The transfer of control of transmission development made it harder for states to regulate what was happening in that area, which was common beforehand with integrated resource plans (IRPs).
“Overseeing the IRP process had long been one of the states’ most effective tools for ensuring just and reasonable retail rates and reliable service, the two chief goals of state utility regulation,” the article said. “The IRP process enabled state regulators to balance the need for one type of proposed resource, be it generation, transmission, distributed energy or demand-side, against other alternatives, potentially of lower cost.”
The main defense of single clearing price is that the field of economics treats electricity as a commodity, and all commodities are priced that way, but “textbook” theory is not enough to justify its continued use alone, Christie said.
“Even the most ardent advocates of RTO markets admit that certain public policies, especially subsidies, that have been widely adopted since the advent of those markets, are antithetical to their efficient operation,” the article said. “So any serious reconsideration of single clearing price mechanisms cannot be confined to textbook economic theory, but must take into account how public policies have distorted the pricing mechanisms in RTO power markets that use marginal costs to determine outcomes and how these policies are likely to continue to do so.”
Any re-examination of such a fundamental construct of organized electricity markets requires a full comparison to alternatives, Christie said.
“That is because choosing public policies alwaysinvolves tradeoffs, and any criticism of one policy must consider criticisms of alternative policies,” he added. “So any serious reconsideration of single clearing price mechanisms in U.S. power markets must evaluate just as critically the alternatives and their advantages and disadvantages.”
Daily vehicle entry into Manhattan | NYC DOT
Visualization of New York’s current unequal toll rates | Regional Plan Association
