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November 15, 2024

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Vistra Bolstering its Zero-carbon Generation

Vistra (NYSE:VST) officials told the financial community Tuesday that they are excited about the company’s recent acquisition of Energy Harbor, which will more than double its zero-carbon generation currently online and that they expect to close by year-end.

“We’ve talked about closing this in the fourth quarter, and I think that is achievable. So far, so good,” CEO Jim Burke told financial analysts during the company’s first-quarter earnings call.

The Irving, Texas-based company announced in March it was purchasing Energy Harbor, a spinoff from FirstEnergy (NYSE:FE), for $3 billion and assuming $430 million in debt. The company plans to combine Energy Harbor’s nuclear plants and its retail business in the MISO and PJM footprints with its nuclear, retail, renewables and battery storage assets into a new subsidiary called Vistra Vision. (See Vistra Pays more than $3 Billion for Energy Harbor.)

Burke said the regulatory approval process is progressing well and that the key filings have been made. The deal must be approved by the U.S. Department of Justice, FERC and the Nuclear Regulatory Commission.

“We believe the NRC is working towards an early October approval,” he said. “To be on the six-month track for a license transfer, we think, is actually on the more efficient side of the scale.”

Should the transaction close, it will give Vistra about 7.8 GW of zero-carbon generation and make it the second largest operator of nuclear plants in the U.S., with six reactors producing more than 6.3 GW of power. The Energy Harbor platform would also increase the company’s retail customer count to about 5 million.

“I like our retail, and we like our integrated model,” Burke said.

Vistra will add another 350 MW of zero-carbon energy when it completes the third phase of its Moss Landing energy storage facility in California later this summer.

The company reported quarterly ongoing operations adjusted EBITDA of $771 million, compared to $1.19 billion for the same period last year. It uses adjusted EBITDA as a performance measure because, it says, outside analysis of its business is improved by visibility into both net income prepared in accordance with GAAP and adjusted EBITDA.

Vistra’s share price closed Tuesday at $24.60, a gain of $1.22 for the day.

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FERC Questions MISO Plan to Drop Renewables’ Ramp Eligibility

FERC last week told MISO to provide more details around its plan to exclude wind and solar generation from supplying ramping service.

The commission issued a May 5 deficiency letter asking the grid operator to explain by midyear its proposal to disqualify its dispatchable intermittent class of resources from providing ramping capability (ER23-1195).

MISO staff have said that its wind resources are ineffective at ramping because their output is often trapped behind transmission congestion. They said when that occurs, they are forced to curtail intermittent resources from supplying energy but clear them for ramp capability, even though they’re undeliverable. (See MISO Plans to Bar Intermittent Resources from Ramp Capability.)

FERC asked the RTO to describe any operational challenges it has encountered with ramping supply issues and explain why it intends to only block intermittent resources from providing ramp capability. The commission pointed out that energy storage and other resources “are similarly undeliverable” when MISO clears up their ramp capability behind the same transmission constraints.

The agency also said the grid operator should describe how its plan is not discriminatory, an indication it believes the proposal could discriminate among resource types.

FERC said MISO should calculate the percentage of non-deliverable ramping megawatts from its intermittent resource class and the proportion of intermittent and traditional generation that clears for ramping from behind transmission constraints. It asked whether the RTO would consider non-intermittent and intermittent generation “similarly situated” when they’re located behind an identical constraint.

FERC also responded to MISO’s narrative that solar resources experience about 90% less congestion because they tend to be closer to load and are less likely to be curtailed. The commission asked why the grid operator wants to uniformly prevent intermittent resources from ramp eligibility when solar resources face fewer transmission obstructions than wind resources. It asked for an explanation about why the blanket exclusion should be considered reasonable.

J.T. Smith, executive director of market operations, has told stakeholders that MISO understands the criticism of its filing. He said staff doesn’t plan to make a permanent change, but they want to put the issue on “hold for the near term.”

“Under the current market conditions, the complication versus the benefit doesn’t make sense,” he told stakeholders in March.  

Smith said MISO strives to make market participation available to all resources capable of providing services.

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Duke Energy Sees Earnings Fall on Warm Winter Weather

Warm weather in its service territories led to lower earnings for Duke Energy (NYSE:DUK) in the first quarter at $1.20/share, but CEO Lynn Good told investors Tuesday that the firm should make up for it this summer.

“These results reflect a 22-cent headwind from weather, with January and February ranking among the warmest winter months on record across our service territories,” Good said. “In fact, DEP [Duke Energy Progress] had its warmest January and February in the last 32 years.”

Duke is working to make up lost ground on ratings and reaffirmed its annual projections, given that its strongest quarter is coming up this summer.

The firm is working on a sale of its commercial renewable business, with separate sales for its utility-scale subsidiary and another for one that focuses on distributed generation.

“We are in the late stage of the process for both transactions, and we’ll look to update you in the near future,” Good said on a conference call Tuesday. “We continue to anticipate proceeds in the second half of the year.”

The firm took an impairment charge on the sale of its commercial business of $175 million in the first quarter, which follows a $1.3 billion impairment in the fourth quarter that was also related to the sale of its commercial renewables business. Asked about the second impairment, Good said that the firm is nearing the end of the process.

“I would say to you, though, that the estimated value that we see in this process remains within our planning assumptions,” she added. “So, there’s nothing here that I would point to as a surprise for us, as we’ve moved through the process.”

The firm is in discussion with “select bidders” and is nearing the end of the process, with Good saying her team is anxious to announce a deal and give the market more information once that is appropriate.

Duke is getting started on a major spending spree on transmission and distribution, investing $36 billion through mid-decade on its system.

“The grid is a critical part of our energy transition, and with more than 320,000 line-miles, we operate the largest transmission and distribution system in the nation,” Good said. “The foundation of our grid plan is focused on improving reliability and resiliency, preparing the grid for renewables and enabling electrification.”

The investments are aimed at addressing threats from storms and attacks on the grid, as well as improving Duke’s ability to restore power, she added. The company is allocating capital for self-optimizing grid technologies, targeted undergrounding, physical and cybersecurity upgrades, and upgrading lines and substations.

“Our investments are already making a difference as evidenced by our response to Hurricane Ian last fall, where we restored power in less than half the time of our Hurricane Irma restoration efforts in 2017,” Good said.

Duke has received approval for recovery mechanisms in place for that transmission investment in all its states, she added.

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NYISO Shares Details of Potential Long Island Tx Projects

Stakeholders at the NYISO Transmission Planning Advisory Subcommittee and Electric System Planning Working Group (TPAS/ESPWG) meeting Friday learned how the ISO assessed the seven transmission projects chosen from the Public Policy Transmission Need (PPTN) solicitation for Long Island.

The solicitation was issued in August 2020 after assessments showed that Long Island’s existing transmission system was not capable of exporting offshore wind power to the rest of New York at levels exceeding its native load. NYISO identified seven viable transmission projects out of 19 submissions that the ISO found could expand Long Island’s export capabilities by unclogging constraints across the island. (See “Long Island PPTN Report,” NYISO Previews Plan to Expedite Interconnection Queue.)

NYISO presented cost cap assessment results, projected performance and production costs, and potential economic benefits for the projects.

The ISO used three criteria to assess developers’ proposed project cost cap, which is the amount of money they can recover from customers for the construction and operation of their transmission project: developers’ profit motive, consumer risk exposure and uncertainty, and the expected project cost versus the developer’s cost cap.

Respectively, these criteria evaluate how well developers incentivize their projects to contain costs via their proposed cost cap; how effectively the cost cap protects consumers from cost overruns; and how divergent the developer’s cost cap is from one estimated by SECO, an independent market research consultancy.

Long Island OSW project cost estimates (NYISO) Content.jpgSummary of Long Island OSW project cost estimates and economic benefits | NYISO

 

For the first and second criteria, the results indicated that projects with hard caps — meaning little to no recovery of expenses incurred above the cap — were assessed better than those with soft caps, meaning incurred costs above the cap are shared between investors and customers. This means hard-capped projects tend to have lower risk profiles.

Conversely, results for the third criterion show projects with hard caps tended to have significantly different proposed costs than those estimated by SECO, while soft-cap projects were closer.

According to NYISO, the qualitative results should not be read as weighted scores indicating whether one transmission project scores higher or lower than another, as each criterion is not a “smoking gun,” but instead should be considered collectively to “give a global perspective that holistically” identifies how each project can best fit New York’s needs.

In its review of project impacts, NYISO also found potentially immense economic, environmental and grid reliability benefits over the next two decades. The projects could reduce future consumer costs, generate production savings across New York and enable up to $3 billion in avoided upstate solar capacity capital costs.

The ISO compared the potential production cost savings and avoided costs from building out either upstate solar or Long Island dispatchable emission-free resources (DEFRs) to the buildout costs projected by the developer and SECO.

As noted by stakeholders during the meeting, DEFRs do not exist at scale, but they represent a significant element of New York’s strategy for achieving its energy goals.

The results show that a project’s magnitude of savings and its benefits are closely correlated to the amount by which it increases Long Island’s import capability and reduces energy curtailment.

The ISO is targeting the TPAS/ESPWG meeting this Thursday to present and review the draft report. It will spend the rest of the month seeking stakeholder advisory votes on the report.

Queue Window Comments

Also at Friday’s TPAS/ESPWG meeting, NYISO shared stakeholder feedback and comments on its interconnection queue proposal, which emphasized stakeholders’ continued apprehension.

NYISO and stakeholders have been debating the proposed overhaul of the interconnection process, and the recent feedback highlighted both developers’ concerns about the lack of transparency on implementation and transmission owners’ calls for greater scrutiny on the requirements for projects seeking interconnection. (See NYISO Stakeholders Debate Proposed Interconnection Queue Overhaul.)

This debate was best captured during a discussion about the overlapping nature of projects in a queue window between Anne Reynolds, executive director of the Alliance for Clean Energy, and Doreen Saia, an attorney with Greenberg Traurig.

Class year interconnection study (NYISO) Content.jpgHistorical statistics on NYISO’s class year interconnection study | NYISO

 

Reynolds asked why some TOs appeared opposed to overlapping clusters of projects, saying, “This is somewhat fundamental to [NYISO’s] redesign proposal.”

Saia responded that they were not outright opposed to overlapping projects but thought it was important “to stay open with how we address concerns identified.”

“This whole effort feels like that old joke about, how do you eat an elephant? A bite at a time. And we have this enormous elephant in front of us, and we are trying to figure out how to digest it while also trying to turn it into a different kind of elephant,” she said.

Anthony Abate, lead energy market adviser with the New York Power Authority, concurred. “We’re eager to get into the details,” but “we are looking at the next number of months and saying, ‘Holy moly, there’s still a lot of details that need to be figured out.’”

NYISO will return to the TPAS later this quarter after refining its proposal based on solicited feedback and begin vetting tariff revisions.

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Illinois Regulators Hear from RTOs on Summer Readiness

The Illinois Commerce Commission questioned MISO and PJM officials on their respective RTOs’ preparations for summer Thursday, with commissioners concerned about the rapid retirement of traditional power plants and the lag in interconnecting new renewables.

Bob Kuzman(Illinois Commerce Commission) Content.jpgRobert Kuzman, MISO | Illinois Commerce Commission

Robert Kuzman, director of customer affairs for MISO’s Central Region, said the RTO’s meteorologists are not expecting this summer to be as hot overall as last year, but they are expecting June temperatures to be higher than normal, as happened last year.

Using data from previous summers, MISO is modeling wind speeds and the amount of wind generation available hour by hour during previous summer months because of the resource type’s growth in the region, said Kuzman. “Wind forecasting prepares us for changes in wind [power] output from hour to hour and day to day.”

The analysis showed that MISO has tended to have between 800 and 1,200 MW of error in day-ahead forecasting, he said. Solar generation, which is also growing in the region, poses another problem, as weather can also affect its electrical output.

Kuzman also noted that the RTO was forced to delay its first capacity auction under its new seasonal construct after FERC ordered it to rework a capacity value ratio. “So, us being really prepared for summer, until we get those results, that data is not quite there,” he said. (See MISO Unveils New Seasonal Auction Timeline, Ratio.)

ICC Chair Carrie Zalewski asked whether there have been any developments in the retirement of old power plants or availability of demand response.

Kuzman said aggregations of DR are beginning to occur in Zone 4, which includes Ameren Illinois’ service territory, and that the retirement “of some thermal resources” has been delayed.

Mike Bryson, senior vice president of operations for PJM, also noted that shutdowns of fossil plants are occurring at a faster rate than the buildout of wind and solar.

“The megawatts are in the queue. The projects are there. We got to get them out of the queue and get them built,” he said in a reference to the long lead time between applications and approvals of renewable power projects.

In response to a question from Commissioner Conrad Reddick about PJM shortening that lead time, Bryson said the “lag will improve yet continue.” He added that PJM is trying to slow down the closing of thermal plants while working “to get solar and wind projects out and built faster.”

Mike-Bryson-RTO-Insider-FI.jpgMike Bryson, PJM | © RTO Insider LLC

DR has worked when needed, Bryson added. “We going to look for opportunities to get more demand response as well.”

Dave Kolata, executive director of the Illinois Citizens Utility Board, also voiced concern that there are a lot of renewable projects stuck in planning queues.

“There are and there have been delays, and we absolutely need to work on that and make sure that all these projects that are ready to go actually get built,” he told the commission. “As fossil fuel resources … retire, we want to make sure that we have the resources there to replace them. I think there’s no doubt in our minds that that can be done. But clearly, we need to put the focus on that.”

He said the RTOs, particularly PJM, have not recognized that Illinois is committed to moving away from all fossil-fueled power plants to renewables.

“I think that the existing capacity construct is designed to build new combined cycle gas turbines,” he said. “And that’s not consistent with CEJA, and where the state is going,” he said in a reference to the state’s Climate and Equitable Jobs Act passed in 2021, committing the state to 100% clean power by 2045. (See Illinois Senate Passes Landmark Energy Transition Act.)

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Former Lordstown Motors CEO Sells Shares Before Dismal Q1 Earns

Electric vehicle manufacturer Lordstown Motors (NASDAQGS:RIDE) last week reported a first-quarter loss of nearly $172 million and warned investors of “substantial doubt regarding our ability to continue as a going concern.”

An ongoing dispute with its partner and major funder, Taiwanese-based Foxconn Technology Group, regarding additional investment in the company erupted just days before the release of the quarterly results, sending the company’s share price from 52 cents at the end of April to a low of 26 cents last week. The share price closed Monday at 37 cents. 

Throughout the quarter, former CEO Stephen Burns continued to sell his stock in the company, according to a document Lordstown filed with the Securities and Exchange Commission at the close of business Friday.

The filing reported Burns had sold off nearly 10 million shares during the quarter as the share price fell below $1 and now owns nearly 17 million shares, down from the 46 million shares he owned in 2020, when Lordstown merged with special-purpose acquisition company DiamondPeak Holdings to raise substantial new funding.

Burns resigned as CEO in June 2021 after an investigation revealed that he and other company executives lied about the number of preorders Lordstown had for its electric pickup truck.

In another SEC filing last week, Foxconn agreed that it cannot legally walk away from its current funding agreement with Lordstown as the automaker warned Foxconn was preparing to do. (See Lordstown Motors Warns of Bankruptcy in Contract Funding Feud.)

The dispute with Foxconn erupted after Nasdaq removed Lordstown from its main trading chart when the automaker’s share price fell below $1. The company has floated a plan to do a “reverse stock split” in hopes investors will approve it at the company’s annual meeting.

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PJM Hears from White House Official on Security

CAMBRIDGE, Md. — A top White House security official urged participants in PJM’s General Session to engage in closer collaboration with RTOs, infrastructure owners and law enforcement at all levels as cyber and physical security threats morph.

“We need to think about how in this changing environment we can enhance our resilience — not just on the grid, but other critical infrastructure sectors,” said Caitlin Durkovich, deputy homeland security adviser for resilience and response.

The growing prevalence of renewable resources on the grid and new transmission technologies will increase the use of networked devices on the grid, which Durkovich said will bring new capabilities but also potentially create vulnerabilities for attackers to exploit.

Part of expanding grid security at all levels will involve a “Madison Avenue campaign” to educate the public, critical communities in particular, about the infrastructure they rely on. By increasing people’s ability to be more self-sufficient, she said first responders can focus on the most important aspects of their response to an emergency, be it a security issue or related to the impacts of climate change.

“It is a remarkable engineering feat, especially as you think about the number of … dependencies and interdependencies,” Durkovich said of the electric grid. “I think we’re at a point where we have to do a better job of helping Americans understand … the increasing threats that we’re dealing with.”

The Biden administration is currently working on updating the 2013 Presidential Policy Directive 21, which defines the responsibilities of government agencies and private companies in maintaining the security of critical sectors, as well as creating bridges for collaboration. The 2021 cyberattack on Colonial Pipeline was an instructive moment for the Department of Homeland Security, which Durkovich said has been working to create new communications infrastructure to allow for tighter collaboration between infrastructure owners and law enforcement. (See Glick Touts Gas Pipeline Reliability Organization Before Congress.)

In addition to strengthening security guidelines, she recommended that companies reach out to state and local law enforcement to identify ways of collaborating. Many of those agencies have received federal security funding and are also in the process of expanding their own practices or creating new programs, which could benefit from knowledge about the infrastructure within their jurisdictions. Recent attacks on substations have also highlighted the need for enhancing physical security, and Durkovich recommended companies reach out to report any suspicious activity.

RTO Panelists Discuss Experiences

A panel of top officials from CAISO, MISO, ISO-NE, NYISO and SPP discussed their experiences navigating the clean energy transition and how they’ve addressed challenges that would be familiar to PJM stakeholders, including how to accredit burgeoning renewable energy, resource adequacy concerns, and the siting and cost allocation for the transmission needed to interconnect intermittent resources.

Melissa Seymour, MISO vice president of external affairs, said the RTO has seen a dramatic evolution from a fairly homogenous grid powered by dispatchable coal resources to a more balanced and diverse fleet. Looking at the projects that are expected to be built in the coming years, however, she said it’s likely to become dominated by resources with limited ability to be dispatched. The margin between the accredited capacity on MISO’s grid versus installed capacity is expanding, along with the number of unforeseen outages, which she said pose a growing reliability risk.

SPP Vice President of Engineering David Kelley said that as wind resources began to proliferate in the RTO, it didn’t require the generators be dispatchable, requiring significant retrofits years later. PJM stakeholders recently endorsed a proposal addressing renewable dispatch, providing more transparency and expanding existing wind rules to solar resources. (See “Renewable Dispatch,” PJM MRC Briefs: April 26, 2023.)

In New England, coal and oil generation have fallen from accounting for 40% of ISO-NE’s generation to single digits, though oil still accounted for nearly a third of the energy supplied during the December 2022 winter storm. Director of External Affairs Eric Johnson said natural gas now supplies about 45% of the RTO’s energy, but there is a disconnect between the short-term commitments wholesale powers markets utilize for generators and the long-term investments needed to support the fuel infrastructure for those resources.

Constructing adequate transmission to meet localized load is proving to be particularly difficult for NYISO. Vice President of Market Structures Rana Mukerji said there is limited transmission going into New York City and opposition upstate to building more to connect to more plentiful renewables.

MISO has sought to address transmission needs by implementing long-term planning using its Multi-Value Project system. It is planning four tranches of transmission, with the first round approved in July 2022 with 18 projects. (See MISO Finalizes Long-range Tx Cost Sharing Plan.)

Johnson said ISO-NE has also experienced many of those challenges, presenting roadblocks to clean energy projects proposed by individual states. The RTO is exploring what can be done to reconductor or otherwise improve lines in existing rights of way and has found that many constraints can be resolved while avoiding siting new projects.

Casey Roberts of the Sierra Club questioned how the RTOs plan to manage the transition to clean energy and retirement of fossil fuels. Mukerji said it will require long-term storage capability beyond four intervals, which is not currently available technologically or economically in many cases.

Kelley said the December storm showed the need for forecasting to go beyond drawing off historical data to find ways of evaluating needs during rarely seen conditions, such as a sharp temperature drop on a holiday. The RTO created an Uncertainty Response Team in 2018, incorporating experienced staff from several departments tasked with identifying new risks and solutions.

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Public Interest, Environmental Groups Urge Transparency at PJM

CAMBRIDGE, Md. — Consumer advocates, environmental groups and a Maryland lawmaker last week all urged PJM to become more transparent in its decision making.

Maryland legislators often find their energy policies are stymied at the RTO level and struggle to identify why, Lorig Charkoudian, a Democratic member of the state’s House of Delegates, said during a meeting of PJM’s Public Interest and Environmental Organizations User Group on May 3.

Charkoudian was sponsor of HB 1186, a bill that would require state utilities to submit annual reports detailing any recorded votes they make at an RTO and explain how each vote benefits the public interest. The bill passed the House 100-35 in March but was not brought to a vote before the Senate prior to conclusion of the legislative session and would require reintroduction for further consideration. (See Maryland Bill Would Require Utilities to Report Votes at PJM.)

Charkoudian said the complexity of PJM’s operations and decisions makes transparency doubly important, as many of her constituents don’t understand what the RTO is and how it impacts the legislation they have pressed their elected officials to enact.

“A lot of what I have to do is then explain to them how an RTO works, which is interesting to do in a community town hall,” she said.

States’ confidence in organized markets comes from the ability of RTOs to predict and forecast, making it difficult for Charkoudian to understand how PJM didn’t predict a future in which a high volume of renewable resources would enter the interconnection queue, requiring a faster pace of processing requests to keep up, she said.

As Maryland pursues stronger clean energy policies, including the passage of the Promoting Offshore Wind Energy Resources (POWER) Act (SB 781) last month, Charkoudian said closer collaboration with PJM will be necessary. (See Md. Legislature Sends POWER Act to Governor’s Desk.)

“Our overall experience with PJM is [that] we pass laws and those laws can’t be enacted because of PJM interconnection queues,” she said.

Tyson Slocum, director of Public Citizen’s Energy Program, said public confidence in PJM has been undermined by the RTO’s recent fast-track processes for generators attempting to lower capacity performance penalties, closed-door discussions about the Independent Market Monitor contract and Base Residual Auctions (BRAs) being rerun with minimal stakeholder feedback. (See “Capacity Performance Penalties,” PJM MRC Briefs: April 26, 2023)

“This creates a credibility problem with PJM, and when you lose credibility you start to lose confidence in the markets … and I’d say that’s where we are with PJM,” he said. “… The more light that is shown on your deliberations, it will relieve those questions about whether special interests are driving your decision making.”

PJM CEO Manu Asthana said the RTO holds more than 400 meetings each year, the vast majority of which are open to the public, and it publishes records of the votes taken at the Members Committee, broken down by how each sector and individual member voted.

“Transparency is important, [and] it does lead to credibility, and we think we are extremely transparent,” he said.

PJM Board of Managers member Charles Robinson said it’s critical that all stakeholders be able to engage with the board to promote transparency and accountability, though it may not be possible to always involve simultaneous access. He said the board plans to release a written summary of the feedback it has received on the possibility of a review of the Monitor contract.

Consumer Advocates Question Transmission, Capacity Costs

Gregory Poulos, of the Consumer Advocates of the PJM States (CAPS), said PJM must be more transparent about transmission costs, which have been steadily rising, according to his presentation, and are likely to go higher as transmission plays a major role in making renewable generation deliverable in efforts to meet states’ clean energy goals.

Following recent meetings of the Transmission Expansion Advisory Committee (TEAC), Poulos said he was rebuffed after reaching out to transmission owners that presented supplemental projects and asking how they developed estimated project costs and solution budgets. Given the lack of cost information being presented to the TEAC and the short timeframe for presenting solutions, there’s little opportunity for stakeholder engagement, he said.

“These are really self-approved projects, and that’s not to say if they’re good or bad. I don’t have the information to know if they’re good or bad,” he said.

T. David Wand, an attorney with the New Jersey Division of Rate Counsel, said the December 2022 winter storm demonstrated that generators may not be able to deliver the capacity they’ve been paid for, undermining the foundations of the capacity market.

“How do we ensure performance? Without performance, it’s hard to have confidence that the capacity market is serving its intended purpose,” he said.

Wand said that when the capacity performance (CP) structure was created to incentivize performance, the Rate Counsel and other advocates expressed concern that risk penalties would be built into capacity bids, a reality that has come to pass, costing consumers millions of dollars.

“Generators did not complain when they received these [capacity payments] and saw no penalties. It was always known that penalties would happen and excusals would not be allowed,” he said.

Asthana said CP includes significant penalties that provide an incentive to perform and credited the CP program with contributing to years without any significant issues in the PJM markets. Nonetheless, PJM can still make improvements, such as exploring whether gas resources are over-accredited for winter operations.

While those improvements are being considered, Asthana said, it’s important to not cause generators to retire prematurely.

Poulos questioned whether that way of thinking represents a shift in priorities — from guaranteeing reliability to a focus on reducing penalties to hold onto existing generation.

“Are we going from performance and reliability as the No. 1 issue and goal to [a situation in which] we have resources that are too big to fail even though they’re not performing,” he said.

Advocates Defend Monitor

Ankush Nayar, of the D.C. Office of the People’s Counsel, said some stakeholder factions are “clamoring” for changes to the Monitor contract. Those critics want to allow others to compete for the contract, currently held by Monitoring Analytics, and they seek greater access to the Monitor’s data. (See PJM Stakeholders Discuss Monitor Contract Review.)

Nayar said states have confidence in the way that Monitoring Analytics’ Joseph Bowring has performed as PJM’s IMM. Mandating data access could undermine the independence that allows Bowring to continue his work, while putting an auditor in place would be “overkill,” he said. Rather than issuing an RFP for new applicants, Nayar said he’d prefer to see the contract revised, to maintain continuity.

PJM board member David Mills said the board has “the utmost respect for Monitoring Analytics,” and that its proposed review of the contract doesn’t seek to reduce the independence or strength of the Monitor but instead seeks to address stakeholder comments and concerns.

Environmental Groups Seek More Renewable Development

Environmental groups pushed PJM to ensure that its markets and operations were structured to support the growth of clean energy, arguing that the grid operator has lagged behind other RTOs in the volume of wind and solar cleared in recent auctions.

Casey Roberts of the Sierra Club said PJM’s February report on resource retirements and load growth — the “4R” study — ignored the role played by capacity market signals and offered a lopsided perspective on how state policies impact resource adequacy by not noting the impact of incentives to increase the pace of renewable resource development. She said the report has been cited in proceedings seeking to delay the retirement of coal plants and referenced a May 1 letter from the PJM board stating that retirements unforeseen by the study have already been filed.

“In our view, retirement of facilities like that is a good thing … rather than raising false alarms of the need to slow down retirements,” she said.

Tom Rutigliano, of the Natural Resources Defense Council, said the issues identified in the 4R study are the same as those being addressed by stakeholder initiatives to improve the capacity market, which is where resource adequacy concerns should be focused. Rutigliano thinks capacity market price signals are being impacted by over-accreditation of gas resources that are not accounting for fuel supply issues.

“PJM probably has several gigawatts of phantom capacity from gas plants that can’t deliver. Fixing that is the first step to preventing excessive requirements,” Rutigliano said.

Asthana said PJM’s interconnection queue has been advancing significant volumes of renewables, including some projects that require minimal network upgrades. However, few of those have been completed over the past year due to issues such as siting and supply chain challenges.

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PJM CEO, Panelists Address Reliability During Annual Meeting

CAMBRIDGE, Md. — Opening PJM’s Annual Meeting on May 1, CEO Manu Asthana said organized markets and planning have continued to stand the test of time, but challenges lie ahead as stakeholders wrestle with a possible overhaul to the capacity market to address future resource adequacy concerns, in part sparked by the impact of the December 2022 winter storm.

“Just within PJM we estimate our markets … bring in $4 billion in value each year to customers and producers. I know there’s a lot of rhetoric lately about RTOs and organized markets, and I just want to say RTOs and organized markets are” efficient and transparent, Asthana told the Members Committee at the meeting.

Though this is not the first time PJM has experienced a major energy transition, pointing to the shift from coal to natural gas for generation, Asthana said the clean energy transition presents a new, global challenge that will require the RTO to continue to evolve.

The need to interconnect more renewable energy could be exacerbated by a significant number of generation retirements that are expected through 2030, Asthana said, referencing PJM’s February Resource Retirements, Replacements & Risks (4R) report, as reserve margins are expected to shrink because of electrification and data center load growth.

The winter storm, also known as “Elliott,” underlined many of those concerns, leading PJM’s Board of Managers to initiate a Critical Issue Fast Path (CIFP) process in February to gather stakeholder proposals for the board to consider later this year. That process is currently in the second of four phases. (See PJM Stakeholders Refine CIFP Capacity Market Proposals.)

Though the storm was within the studied conditions that could be expected within PJM, Asthana said it was concerning that emergency procedures were required to meet load during the storm, and it’s necessary to now think about what can be done differently to not get as close to the edge next time.

“The question is, did our Capacity Performance [CP] rules work as intended? … I think it’s important that we look at that and think about that,” he said.

Last year’s FERC approval of a new system for handling interconnection requests — allowing PJM to work through its queue backlog quicker — will go a long way toward navigating the transition, Asthana said. (See FERC Approves PJM Plan to Speed Interconnection Queue.)

“That complicated piece of work is a big deal for us. It is a big deal from a reliability perspective. It is a big deal from an energy transition perspective. It is a big deal from the perspective of helping our states and our members reach their energy transition goals,” he said.

PJM’s State Agreement Approach (SAA) has also proven itself to be a valuable tool for states to work with the RTO to meet their clean energy goals, he said. New Jersey received FERC approval for the cost allocation portion of its first SAA process to construct the transmission necessary to interconnect 7,500 MW of offshore wind. The state announced a second SAA process with the goal of developing 11 GW of offshore wind capacity by 2040. (See NJ BPU Backs Plan for 2nd Grid Upgrade Process with PJM.)

MC Chair David “Scarp” Scarpignato said Elliott was both an accomplishment for PJM and a struggle: The RTO kept the lights on while managing to provide aid to surrounding regions, but it laid bare unforeseen reliability issues. While a sudden emergency hasn’t occurred recently, it remains a real risk, and stakeholders must consider changes to price signals, a “circuit breaker” system for limiting extended periods of high pricing and the market seller offer cap, he said.

“Last year, the defining accomplishment or struggle for PJM at large was Elliott and how well our market reliability procedures and rules worked,” he said. “We, collectively, did keep the lights on.”

Panel Discusses Future Reliability Landscape

Independent Market Monitor Joe Bowring and PJM administrators shared how they’re working to maintain reliability through the clean energy transition through state, market, operations and planning initiatives.

Asim Haque, PJM vice president of state policy and member services, outlined the series of “Energy Transition in PJM” reports the RTO is publishing, detailing the challenges presented by the transition and possible solutions. The first iteration, “Reliability in PJM: Today and Tomorrow,” was released in March 2021, while the 4R study earlier this year was the most recent. He categorized the identified reliability concerns as immediate, largely pertaining to Elliott; near term, relating to resource adequacy in the latter portion of this decade; and upcoming, which includes essential reliability services.

“We do believe we are relatively well positioned today, but we are concerned this position may not hold for the not too distant future … so we feel some sense of urgency to act to maintain reliability,” Haque said.

In visiting state legislatures, he found that each have their own priorities but are all bound together by a desire for reliability. He recounted telling states that regardless of their individual goals, it is a reality that PJM’s interconnection queue is primarily composed of renewable resources, and planning the future of the grid will have to reflect that.

“The finding that most directly impacts reliability as we transition to greater renewable penetration is the conclusion that we will continue to need our thermal resources and the essential reliability services they provide in order to preserve reliability until a replacement technology for these resources is deployable at scale,” he said.

Senior Vice President of Operations Mike Bryson said there have been multiple retirements announced since the 4R study that weren’t anticipated during the document’s drafting, and some scenarios for this summer are showing operating reserve shortages this summer for the first time he can remember. The reliability-must-run (RMR) system is one potential area for improvement, as he believes there may be a more significant need for those contracts in the future.

Bowring said increasing reliance on RMR agreements could create an incentive to retire, and they should be used with caution. Bryson said they offer a benefit in allowing some flexibility in addressing policy retirements that could impact reliability, an area that cannot be met through market changes.

Ensuring the right types of reserve products and all necessary characteristics are being captured in offers and procured is critical to provide dispatchers assurance that when they call on resources, they will receive what has been committed, said Vice President of Market Design and Economics Adam Keech. The transition provides an opportunity to use markets to shape the grid of the future, focusing on flexibility and providing incentives as a proactive solution.

“Now is the time to use the markets proactively to send the right signal, so we attract the right resources we need,” he said.

Bowring said Elliott showed the flaws of having energy market incentives manifest in the capacity market and that extreme prices and penalties can have a destructive effect. He cautioned against creating new cost-of-service constructs as a reaction to the storm, saying that wouldn’t promote reliability; market solutions should be sought instead.

Vice President of Planning Ken Seiler said PJM is potentially on track to complete interconnection studies on projects with a nameplate capacity equal to resources expected to retire in the coming years, but much of that new generation is intermittent, which will push the RTO to change how it acts under various system conditions.

The first-come-first-serve interconnection model approved by FERC last year allows PJM to transfer the capacity interconnection rights of generators that complete the study process and receive an interconnection service agreement (ISA) but do not complete construction within a year. Seiler said PJM has seen a large number of projects that receive ISAs but haven’t entered construction.

Stakeholders Approve New Terms for 3 Board Members

The MC voted to reseat three board members whose terms expired: Jeanine Johnson, Margaret Loebl and Charles Robinson.

The committee also elected Vickie VanZandt to continue filling the remaining year left on the term previously held by Sarah Rogers, who retired in September 2022.

Johnson brings a background in cybersecurity and product design to the PJM board, to which she was elected in 2021, according to PJM’s biographies of the candidates. She was shortlisted as Entrepreneur of the Year by the Women in IT Awards for co-founding a company commercializing a product to create drinking water.

Loebl has held officer positions in finance at several companies, most recently serving as executive vice president and CFO at AgroFresh Solutions, and has worked with the board of companies on acquisitions, strategy, controls infrastructure and risk management, according to her biography. She was elected to the board in 2020.

First elected in 2011, Robinson serves as general counsel for the Regents of the University of California and was previously general counsel for CAISO. He has also served as a senior attorney for several companies, including Packard Bell and Raychem Corp.

President of VanZandt Electric Transmission Consulting, VanZandt was appointed to the board in 2022. She previously served as the senior vice president and chief engineer of transmission services for the Bonneville Power Administration and served on the ISO-NE Board of Directors.

States Argue Board Didn’t Consult Membership on Auction Delay

The MC voted to approve the minutes of its special meeting held April 4, but five states objected to them because they stated that PJM provided an update on the Base Residual Auction schedule and consulted with membership on delaying upcoming auctions.

The board is required to consult with stakeholders prior to making any Federal Powers Act Section 205 filing under the RTO’s tariff. PJM made a Section 205 filing to delay future auctions following the meeting on April 11 (ER23-1609).

“The board members weren’t present to have that discussion, so it was kind of a misrepresentation of what that meeting would entail,” said Gregory Poulos, of the Consumer Advocates of the PJM States. He added that the objecting states didn’t believe that it constituted an adequate consultation.

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PJM MRC Endorses Proposal to Reduce Performance Penalties

The Markets and Reliability Committee on Thursday endorsed a proposal to reduce penalties for generators that don’t meet their capacity obligations during performance assessment intervals (PAIs).

The package, made by American Municipal Power, redefines the penalty rate and the stop loss limit — the maximum a generator can be penalized in a year — to both be based on the Base Residual Auction (BRA) clearing price. It would also reduce the circumstances under which PJM can declare a PAI.

Both the penalty rate ($3,177/MWh) and stop loss ($142,952/MW-year) are currently based on the net cost of new entry (CONE). AMP’s proposal would reduce them to $394/MWh and $17,744/MW-year, respectively. The change would be effective through the 2024/25 delivery year. (See “Capacity Performance Penalties,” PJM MRC Briefs: April 26, 2023.)

The AMP proposal was one of three before the MRC during a May 4 special meeting, with LS Power and the Independent Market Monitor also making presentations. The subject was brought before the MRC by LS Power through the quick fix process, allowing the issue charge and problem statement to be considered simultaneously with the proposed rule changes. The Members Committee is set to consider endorsement of the AMP solution on May 11.

The LS Power proposal retained the $3,177/MWh status quo PAI charge rate but set the stop loss limit to twice the BRA clearing price, or $23,659/MW-year. All three proposals included the same PAI trigger.

Monitor Joe Bowring said LS Power’s proposal would result in the annual limit being reached very quickly, defeating the purpose of the penalties. The IMM’s proposal used the same penalty rate as AMP and the same stop-loss formula as LS Power. It did not receive a vote because AMP’s plan was approved.

According to the sector-weighted vote report, the Electric Distribution sector unanimously opposed the LS Power proposal, which was voted on first, but gave full support to the AMP solution. The Transmission Owner and End Use Customers sectors also gave majority opposition to the LS Power package and supported AMP.

During a May 1 special MRC meeting, LS Power’s Marji Philips said her company’s proposal was a compromise between PJM’s desire to have a higher penalty rate and the goal of many stakeholders of limiting when PAIs can be called and lowering the annual penalty cap. Philips said she would support any of the three options over the status quo, arguing that generators wouldn’t invest in PJM if they were subject to a penalty rate that could wipe out years of capacity market revenues.

PJM General Counsel Chris O’Hara said the RTO strongly preferred the LS Power proposal, largely because it has the highest penalty rate of the three.

“We feel that from an economic perspective and from a legal challenge perspective that if we are going to do something for these two years, we are much more comfortable leaving the penalty rate where it is,” he said during the May 4 meeting.

Reviewing penalty claims from the December 2022 winter storm, he said the capacity performance construct appears to have properly incentivized many generators to make investments to support their capacity obligations. In many cases, circumstances out of generators’ control impacted their ability to perform, he added, saying it makes a case for reducing the stop loss limit.

American Electric Power’s Brock Ondayko said a filing at FERC seeking to modify the stop loss limit would likely run into challenges that it constitutes retroactive ratemaking. He said generators expected to overperform their capacity obligation may have made offers based on the assumption that they were likely to receive a certain amount in bonuses in a year.

Vitol’s Jason Barker said reducing the penalty rate or stop loss limit effectively shifts the performance risk from a financial risk faced by generators to a reliability risk across PJM. Rather than a separate process addressing penalties for upcoming delivery years, he encouraged stakeholders to vote against all three and instead seek a solution through the ongoing critical issues fast path (CIFP) process. If an interim solution were to go forward, he said one limited to just modifying the PAI trigger would be preferable. (See PJM Stakeholders Refine CIFP Capacity Market Proposals.)