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November 5, 2024

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Mass. Energy Facilities Siting Board Punts on Energy Storage

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 asked FERC 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.

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California Considers Zero-emission Appliance Rules

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.

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EPA Proposes New Emissions Standards for Power Plants

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.”

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Cancel: Dragos Breach Did Not Compromise E-ISAC

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.

Security Breach Text Message (Dragos) Content.jpgDragos 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.”

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Vanguard Wins Investment Extension in Split Decision at FERC

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.”

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Fuel Cell, Electrolyzer Maker Plug Power Reports Q1 Loss

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. 

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FERC’s Christie Calls for Reassessment of Single Clearing Price

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 always involves 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.”

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DOE Awards $26M to Clean Energy Technology Projects

The U.S. Department of Energy on Wednesday announced it is funding eight projects across 13 states and Puerto Rico to demonstrate how solar, wind, storage and other clean energy resources can support grid reliability and efficiency.

DOE will allocate $26 million in Infrastructure Investment and Jobs Act funding through its Solar and Wind Grid Services and Reliability Demonstration Funding Program, which is designed to demonstrate the reliable operation of energy systems that have up to 100% of their power contribution from solar, wind and battery storage resources.

The projects being awarded deploy “innovative” clean energy technologies at 15 sites “to build and support a resilient grid that automatically adjusts to changing demands,” according to the department. They will support the administration’s “efforts to accelerate a decarbonized grid, expand the adoption of affordable clean energy and strengthen America’s energy security while combating the climate crisis,” it said.

Research teams comprising utilities, laboratories, universities and industry will test how wind and solar plants can more reliably transmit electricity and protect against disruptions to high-voltage power lines. The projects will also monitor and test controls that allow the grid to restore power quickly and efficiently after blackouts.

“As threats and climate risks to America’s energy infrastructure continue to evolve, DOE is laser-focused on ensuring our power grid is strong and reliable as it incorporates a historic level of renewable resources,” Energy Secretary Jennifer Granholm said in a statement. “Today’s announcement will help build a resilient grid that the American people can trust to deliver reliable, affordable, clean electricity to their homes and businesses.”

A recent study by DOE’s National Renewable Energy Laboratory’ found that wind and solar energy could provide as much as 80% of generation on a grid run by 100% clean electricity. Achieving those levels would require rapid and sustained growth in installed solar and wind generation capacity, it said, with nuclear energy helping to make up the difference.

The study modeled four scenarios that deployed new clean energy technologies at an unprecedented scale and rate to achieve 100% clean electricity by 2035. Wind and solar energy would provide 60 to 80% of generation in the least-cost electricity mix in 2035; overall generation capacity would grow to roughly three times the 2020 level by 2035, including a combined 2 TW of wind and solar.

The selected projects and awards are:

  • Consolidated Edison’s initiative to demonstrate transmission protection strategies in New York and Virginia that reduce outages as the grid moves to inverter-based generation. If successful, the project will demonstrate to the transmission system protection, operation and planning industries that the grid can operate safely and reliably with any mix of energy sources, including 100% inverter-based resource (IBR) generation. ($3 million)
  • an Electric Power Research Institute project with multiple balancing authorities and utilities to demonstrate grid services capabilities in Michigan, Nebraska, Texas, New Mexico and California. ($3.4 million)
  • General Electric Renewable Energy’s project demonstrating grid-forming inverters at the Great Pathfinder wind plant in Iowa. ($3.5 million)
  • a National Renewable Energy Laboratory project in Hawaii that aims to further the understanding of the grid’s behavior in response to faults in scenarios with high IBR levels. ($2 million)
  • Pacific Gas and Electric’s development of an automated analysis tool for utility engineers to address rapid changes in the electric grid, such as increased solar generation. ($2.5 million)
  • Portland General Electric’s demonstration of grid-forming inverters at the Wheatridge Renewable Energy Facility in Oregon, North America’s first energy center to combine wind, solar and energy storage systems in one location. ($4.5 million)
  • the University of Illinois at Chicago’s project in Illinois and Puerto Rico using an innovative modeling, protection and control framework to ensure the bulk power system’s reliable operation with 100% IBR generation, as they have much different fault characteristics than traditional synchronous generators. ($3 million)
  • Veritone’s project designed to boost confidence in renewable power by using the company’s artificial intelligence-powered distributed energy resource management system (iDERMS) technology in New Mexico. ($3.9 million)

DOE and its applicants will go through a negotiation process before any funding is issued. The department could cancel negotiations and rescind the selection for any reason during that time.

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ISO-NE Plans 2025 Launch for Day-Ahead Ancillary Services Initiative

MARLBOROUGH, Mass. — ISO-NE is targeting March 2025 for the launch of its Day-Ahead Ancillary Services Initiative (DASI) and predicting that its increased energy market costs will be offset by capacity market savings.

ISO-NE analyst Ben Ewing and economist Andrew Withers presented the RTO’s analysis of DASI’s impact to the Markets Committee on May 9.

DASI’s revised market design is intended to procure and price the ancillary services needed for a reliable next‐day operating plan with increasing renewable penetration.

DASI will cover any gaps when the day‐ahead market’s physical energy supply awards are below the RTO’s forecast real‐time load. It also will procure day-ahead flexible response services to ensure the system can recover from sudden generation losses and respond quickly to fluctuations in net load. (See ISO-NE Outlines More of Plans for Capacity Accreditation, DA Ancillary Services.)   

“With DASI, these reliability requirements will be satisfied within the clearing of the day-ahead market (DAM),” the RTO said.

Ewing said the RTO had been considering a launch between December 2024 and March 31, 2025, but settled on March 1 because of stakeholders’ desire to gain experience with the design before the winter, which has a higher potential for stressed conditions. If the deadline is met, the final procurement period for the Forward Reserve Market (FRM) will be Oct. 1, 2024 to Feb. 28, 2025.

Stakeholder votes on the proposal are expected in July and August.

Impact Assessment

Withers said DASI is estimated to increase energy and ancillary services (E&AS) costs by $100 million (1.1%) annually, with a commensurate reduction in capacity costs.

The elimination of 10-minute non-spinning reserve (TMNSR) and 30-minute operating reserve (TMOR) credits with the FRM sunset is expected to reduce E&AS costs and revenues.

Eliminating the FRM’s failure to reserve and failure to activate penalties will increase E&AS costs and revenues. The RTO’s analysis did not quantify potential changes to real-time (RT) costs, which are expected to be small relative to the change in FRM payments and would be difficult to estimate.

Energy Cost Rise (ISO-NE) Content.jpgBased on an analysis of 2019-2021 data, ISO-NE expects energy and ancillary services costs to increase by about $100 million (1.1%) annually from the Day-Ahead Ancillary Services Initiative (DASI). The RTO expects the increase to be largely offset by reduced capacity costs. | ISO-NE

For the 2019–2021 study period used by the RTO, eliminating the FRM is expected to reduce E&AS costs by $26.4 million annually.

Under DASI, suppliers of DA energy and ancillary services will receive payments for a new DAM constraint, the forecast energy requirement (FER) and new DAM products: energy imbalance reserve and flexible response services (FRS), including day-ahead 10-minute spinning reserve, day-ahead 10-minute non-spinning reserve and day-ahead 30-minute operating reserve.

The RTO projects will reduce DA net commitment period compensation (NCPC) uplift payments by $9.1 million (74%), to between $2.6 million and $3.7 million annually.

ISO-NE expects to consider changes to NCPC rules from DASI next year. “These rules have not yet been assessed or designed,” the RTO said.

Capacity Costs

Withers said the RTO expects the $100 million E&AS increase to be “roughly” offset by reduced capacity costs in the long run, reflecting the reduced “missing money” that resources need to recover.

“In the short run, however, predicting changes to capacity costs is more difficult,” the RTO said.

The RTO also said that the effects of DASI on E&AS revenues would vary based on resource types, which could impact which resources are impacted by capacity clearing prices, as well as lead to changes in net cost of new entry.

Tariff Changes

The proposed tariff changes borrow from those in the Energy Security Improvements (ESI) proposal in 2020. FERC rejected the ESI proposal in October 2020, saying it would add substantial costs “without meaningfully improving fuel security” (ER20-1567). (See FERC Rejects ESI Proposal from ISO-NE.)

The RTO said the new DASI mitigation rules included in the tariff changes “reflect the most significant tariff redline additions to those introduced with ESI.”

These included updates to day-ahead ancillary services (DA A/S) offer requirements, format and strike price determination, and FRS and FER constraint demand quantity specifications.

Mitigation

Parviz Alivand, senior economist for ISO-NE, presented on mitigation enhancements proposed by the RTO, noting that “closeout and certain avoidable input costs associated with DA A/S are not explicitly addressed by current tariff provisions.” 

The RTO is looking for stakeholder feedback on mitigation-related cost recovery, which it is requesting by May 19. Alivand said the RTO would publish the tariff language for stakeholders before the June meeting of the Markets Committee.

The FERC filing process for recovery of losses would remain unchanged.

Alivand said ISO-NE opposes mandating that participants net real-time market profits against DA A/S losses.

“A participant that expects to make a cost recovery claim related to DA A/S mitigation would have incentive to raise its RT offers to show smaller RT profits,” Alivand said.

The RTO did not rule out netting profits and losses between different DA energy and DA A/S products, saying that this should be reviewed on a case-by-case basis.

“It is possible that DA A/S mitigation increases the DA energy profits, suggesting netting is appropriate, or that DA A/S mitigation decreases, or does not change the DA energy profits, suggesting netting is not appropriate,” Alivand said.

IMM Analysis

Economist Michael Redlinger and supervisor Jacob Grindal of ISO-NE’s Internal Market Monitor presented their analysis of the DASI mitigation design, saying the Monitor supports the conduct and impact framework for mitigation proposed by the RTO.

“The proposed conduct and impact approach is intended to balance the risks of under-mitigation and over-mitigation,” Redlinger said. “The conduct and impact test thresholds appear reasonable, but it will be important to monitor the appropriateness of the thresholds over time and make adjustments if necessary.”

Consultation will be a key aspect in aligning the expected costs of participants and the IMM reference level and the conduct thresholds. To update reference levels for a market participant, the participant would need to provide the Monitor with detailed cost data backing up the change.

Redlinger also stressed the importance of consultation between generators and the IMM over justifications for physical withholding. He said that detailed consultation could help prevent — but not preclude — a participant from being referred for withholding.

Next Steps

The Markets Committee will consider any design changes to the RTO’s proposal at its meeting in June.

The RTO hopes to have a Markets Committee vote on its proposal and any proposed stakeholder amendments in July, with a Participants Committee vote in August.

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DOE Rolls out New Process for Designating Key Transmission Corridors

The U.S. Department of Energy wants to accelerate permitting and financing for transmission projects currently under development by designating their proposed routes as National Interest Electric Transmission Corridors (NIETCs).

DOE was given the authority to identify these corridors in the Infrastructure Investment and Jobs Act, and on Tuesday, Maria Robinson, director of the Grid Deployment Office, announced the department’s plan to implement that authority via a new “applicant-driven” and “route-specific” process.

Releasing a combined notice of intent and request for information on the new process, Robinson said DOE’s top priority, at least to start, will be on identifying NIETCs (pronounced “nit-cees”) for projects that are already being planned, even if they have not been permitted or financed.

“We’re looking to unlock critical federal investments and regulatory and permitting tools to spur urgent transmission investments needed in specific regions to improve reliability and resilience, as well as reduce consumer costs,” she said during a media briefing. “This approach to selecting corridors will focus on specific needs and targeted geographic locations and seeks to identify transmission corridors that help to ensure targeted and effective relief for American communities from life-threatening electric outages.”

Projects located within a NIETC would be able to tap into $2.5 billion in funding for public-private partnerships made available in the IIJA. The Inflation Reduction Act adds another $2 billion to the pot from its transmission financing loan program, Robinson said.

A NIETC designation “can also allow … FERC to grant permits within a [corridor] border in certain circumstances where states cannot or have not issued those permits after more than one year,” she said, referring to the commission’s “backstop” permitting authority established in the IIJA.

FERC issued a Notice of Proposed Rulemaking on its backstop permitting authority in December, with an extended comment period that ends on May 17 (RM22-7). (See FERC Moves to Implement New Backstop Transmission Siting Authority.)

The NOI lays out proposed guidelines for the potential applicants who will drive the process and the “route-specific” projects they will propose for NIETC designation.

Potential applicants will have “progressed beyond the preliminary concept and … begun actively routing the project and engaging in community and landowner outreach, land surveys or initiation of environmental compliance work,” the NOI says. “However, no particular stage of development is required for an applicant to seek potential designation.”

DOE’s definition of “route-specific” is particularly broad. Applicants will have to document how their projects balance “the need to ensure that the potential route is defined with sufficient specificity to allow for meaningful evaluation of the potential energy and environmental impacts of one or more transmission projects along that route, while also sufficient in size and scope to construct, maintain and safely operate one or more transmission projects in accordance with applicable regulatory requirements and reliability standards and accommodate routine route changes that often occur when siting and permitting infrastructure.”

Advocates Optimistic

The long list of the information an applicant would have to provide to get a NIETC designation includes the geographic boundaries and rationale for those boundaries; how the project would address existing or future transmission needs; and the “economic growth and vitality in the corridor or end markets served.”

Information on environmental impacts will need to be detailed enough for DOE to complete an environmental review under the National Environmental Policy Act (NEPA). That covers everything from “potential adverse effects to cultural and historic resources” to “known or potential impacts” to the U.S. aviation and marine transportation systems, and to a project’s proposed use of previously disturbed lands.

The RFI seeks feedback on the NIETC guidelines, the structure of the application and designation process and how the impacts of any proposed route should be evaluated. It asks if the information requests outlined in the NOI might be “overly burdensome on respondents” but also if additional information should be included in applications.

Rob Gramlich, founder and president of industry consultants Grid Strategies, expects DOE will get a significant number of applications when it releases a request for proposals, possibly in the fall.

“It’s exciting to see this process finally, formally introduced,” Gramlich said in an interview with RTO Insider. “Transmission proponents have been recommending this type of process for a number of years. The department has suggested informally over the years that it would be open to applications for designation, but it’s never really had a formal process like it has introduced today.”

Christina Hayes, executive director of Americans for a Clean Energy Grid, agreed. Advocates have been waiting for DOE to develop a NIETC designation process “that really is consistent with how these [transmission] projects are developed,” she said.

The NOI and RFI released Tuesday will be published in the Federal Register in the next four or five days, triggering a 45-day comment period, according to DOE. The department has also scheduled a public webinar on the proposed guidelines for May 17.

The History of NIETCs

The draft National Transmission Needs Study published in February documented huge gaps between existing lines and what will be needed to reach President Joe Biden’s goal of a decarbonized grid by 2035.

A 2022 study from the National Renewable Energy Laboratory estimated that U.S. transmission capacity would have to grow 1.3 to 2.9 times by 2035. A 2021 study from Princeton University said a 60% increase in transmission may be needed by 2030, followed by a threefold increase by 2050.

DOE was first authorized to designate NIETCs by the Energy Policy Act of 2005, according to a department fact sheet. Following a study of grid congestion and constraints, DOE designated two broad NIETCs in 2007. The Mid-Atlantic corridor included counties in Ohio, West Virginia, Pennsylvania, New York, Maryland and Virginia, and all of New Jersey, Delaware and D.C. The Southwest Area corridor covered areas in California and Arizona.

Recalling that effort, Gramlich said it was too broad. “Those were big, brawny corridors that looked like big blobs and Magic Marker lines across the country, which got everybody anywhere near the paths concerned about whether there’s going to be a transmission line in their front yard,” he said.

The applicant-driven approach “is much more surgical … focused on the actual route that’s likely to be used rather than, you know, 100 hypothetical routes that aren’t likely to be used,” Gramlich said.

Hayes was also optimistic that DOE has refocused “its efforts on how to deploy the transmission that’s needed for a transition to cleaner energy [and] electrification and to respond to extreme weather. … They’re focusing on where cost-effective, well planned transmission would be sited and [looking] at the corridors around those projects.”

DOE’s Robinson stressed that while a “NIETC designation can identify a specific corridor where transmission projects are needed, it does not establish a preference for a specific transmission project or cluster of projects that may be located within a designated corridor.”

The National Transmission Needs Study, which DOE aims to finalize this summer, will also be factored into NIETC designations, Robinson said. One of the study’s key findings is that new transmission that connects the country’s major electrical interconnection areas — East, West, Midwest and Texas — will provide the most value, especially during extreme weather events.

Keeping the Train on the Tracks

One of the IIJA’s more critical and controversial provisions gives FERC backstop siting authority, long desired by transmission developers and proponents but opposed by both red and blue states.

To qualify for this “backstop” permitting, a project has to be located in a NIETC. FERC can approve the project if it has been denied by state or local regulators, if they have taken no action for a year, or if they have conditioned approval on requirements that would either make a project financially unfeasible or unable to relieve congestion or other constraints on a line.

The NOPR issued in December would provide a “pre-application” process that a developer could begin before delays or denial of a permit reaches the one-year mark. It would also set up a 90-day period for a state to respond to a request for a backstop approval.

Hayes sees FERC’s backstop authority as an essential piece of the process for promoting transmission development. “We’re really excited to see how they are seeking to work with states by providing that extra 90 days after the one year for states to explain what they’re doing,” she said, while also setting up the pre-application filing process.

“They’re being really thoughtful about how to keep the train on the tracks while being mindful of allowing a process for the states,” she said. “DOE and FERC are thinking about ways to work together to move forward in a way that’s consistent with the statute, consistent with the need for thorough, legally durable environmental reviews, but also making sure that we’re able to deploy the kind of transmission that we need to meet our reliability goals, our electrification goals and our need for cost-effective planning.”