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September 28, 2024

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CAISO Approves Day-ahead Market for Western EIM

FOLSOM, Calif. — The CAISO Board of Governors and the Western Energy Imbalance Market Governing Body on Wednesday approved a plan to incorporate a day-ahead market into the Western EIM, calling it a milestone in regional grid integration.

“Today holds the promise for a new West, an opportunity for a new beginning in expanded markets and increased regional coordination,” WEIM Governing Body Chair Robert Kondziolka said in opening remarks. “The decision items at today’s meeting, if approved, are groundbreaking and profound.”

CAISO WEIM Panel 2023-02-01 (RTO Insider LLC) FI.jpgFrom left: WEIM Governing Body member John Precott, CAISO Board of Governors Chair Mary Leslie, WEIM Governing Body Chair Robert Kondziolka, and CAISO Governor Ashutosh Bhagwat listened to public comments on EDAM. | © RTO Insider LLC

 

The extended day-ahead market (EDAM) proposal passed with unanimous votes from both governing bodies, which met in-person together for the first time since the pandemic began three years ago to exercise their joint authority over the WEIM.  

After years of planning and stakeholder meetings, the EDAM promises to greatly expand the amount of electricity traded in the sprawling WEIM, which will cover nearly 80% of load in the Western Interconnection once three new members join this year. The market now deals only with real-time transactions, yet it has generated $3.4 billion in benefits for its members since it went live in late 2014.

Real-time trades are only a small part of the electricity market. Day-ahead transactions represent a far larger share. Transactions in both timeframes limit curtailment of renewable resources, such as California’s abundant midday solar power, and allow for purchases of less expensive electricity during times of tight supply.  

A study prepared for CAISO by Energy Strategies found that the EDAM could generate $1.2 billion a year in benefits, or 60% of the savings of a West-wide RTO, if it encompassed the entire U.S. portion of the Western Interconnection.

The West, with its 39 balancing authorities in states divided by geographic and political differences, is pursuing several major regionalization efforts, any of which could eventually establish the first Western RTO. In addition to EDAM, the Western Power Pool is awaiting FERC approval to launch its Western Resource Adequacy Program, and SPP is planning its own day-ahead market and a Western version of its Eastern RTO.

CAISO must also win FERC approval for the EDAM, which it hopes to start operating in 2024 or 2025.

‘Important New Step’

PacifiCorp, a founding member of the WEIM, became the first entity to commit to join the EDAM in December. Others are expected to follow. The WEIM now has 19 members in all Western states, except for Colorado, and stretches from the Mexican border into British Columbia.

Key provisions of the EDAM design include a resource sufficiency evaluation intended to ensure participants can meet their internal demand for electricity before engaging in the day-ahead market — a means of preventing members from “leaning” on the market for supply. The final EDAM plan includes a tiered structure of financial penalties for failing to meet the test.

“The day-ahead RSE evaluates, across the next day 24-hour horizon, whether each balancing area’s supply offered into the day-ahead market is sufficient to meet its next day forecasted load, imbalance reserve obligation, and self-provisioned ancillary service obligations,” a CAISO staff memo to the boards said. “This includes functionality to allow each balancing authority to evaluate on an advisory basis its progress toward meeting the final RSE so they may take steps to cure any anticipated insufficiencies prior to the execution of the day-ahead market.”

It also includes a provision that market participants make their internal transmission available for EDAM transfers.

“The availability of transmission, both internal to the system and across interfaces between balancing areas in EDAM, is foundational to optimizing unit commitment in the day-ahead market and to identifying robust energy transfers across the EDAM footprint,” the memo says.

Balancing authorities in the EDAM will retain control of their resource and transmission planning.

A separate decision on EDAM governance approved a plan developed by the WEIM’s Governance Review Committee that adopts the WEIM’s joint authority model for the EDAM while broadening the scope of that authority as well as the WEIM Governing Body’s solo authority over certain matters.

The governance plan was developed during many hours of stakeholder meetings and was broadly supported.  

A third decision related to the WEIM and EDAM refined the ISO’s controversial wheel-through limits, which it enacted in 2021 as a temporary measure to promote in-state reliability during summer heat waves. A number of out-of-state WEIM members opposed the limits. (See FERC OKs CAISO Wheel-through Restrictions.)

Under its new plan, the ISO will calculate available transfer capability (ATC) to determine how much it needs and how much it can make available to others.

“In calculating the ATC, the ISO would set aside transmission capacity for forecasted or estimated native load needs, including load growth, and establish a transmission reliability margin (TRM) to account for different elements of uncertainty,” a staff memo said. “Management further proposes a process through which wheel through customers can request and access limited ATC that may be available on the intertie. The process requires them to demonstrate they have a firm power supply contract to serve external load or a contract conditioned on their ability to obtain ATC.”

Some stakeholders continued to take issue with the plan, saying it undermines open-access transmission principles,  the memo noted. CAISO staff said the “proposed design provides a reasonable bridge between the Open Access Transmission Tariff (OATT) framework and the current ISO market structure.”

Regarding EDAM, stakeholder comments were broadly supportive, though some came with caveats about details to be worked out later.

Stakeholder comments were broadly supportive, though some came with caveats about details to be worked out later.

A coalition of 26 entities from across the West — including major utilities, environmental groups and trade organizations — expressed written support for the plan while acknowledging there is more to do.

“The undersigned entities support Board and Governing Body approval of the EDAM Final Proposal,” the joint letter said. “To be sure, all the work is not yet done, and some entities will still need to conduct their own assessments of whether and when they might expect to join the EDAM, and seek regulatory approvals if applicable.

“There will be significant implementation and market mechanics to be worked through, and the potential EDAM entities will also have to reflect the new market in their own Open Access Transmission Tariffs under which they provide service to their transmission customers,” it said. “But the basics on governance, resource sufficiency, transmission access and revenue attribution, and greenhouse gas rules enable the start of an important new step in regional market evolution.”

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Hochul Proposes Expanded Clean Energy Role for NYPA

New York Gov. Kathy Hochul is proposing a significant expansion of the role of the nation’s largest state-owned utility.

In her budget presentation Wednesday, Hochul called for legislative authorization for the New York Power Authority to develop, own and operate renewable energy projects, and to provide bill credits from those projects to residents of disadvantaged communities.

The governor’s proposal would also require NYPA to propose a plan to phase out its small-scale gas-fired peaker plants by 2035, except when needed to support emergency services or reliability. And NYPA would also be able to fund training programs for prospective workers in the renewable energy field.

The proposal would not, however, compel NYPA to plan, design, develop, finance, construct, own, operate, maintain or improve renewable generation. It would merely allow NYPA to do so, alone or in partnership.

The concept Hochul is proposing is not new: A similar measure, the New York State Build Public Renewables Act (BPRA), was approved by the New York State Senate in 2022 but never advanced to a vote in the State Assembly.

Initial reaction to her proposal was underwhelming Wednesday, with some dubbing it “BPRA Lite.”

Public Power NY criticized it for omitting some of the more progressive aspects of the BPRA, such as its provisions for union labor and a just transition, and for pushing back the 2030 peaker retirement it stipulated.

“Furthermore, the governor’s proposal omits nearly all of the democratization elements found in BPRA,” Public Power NY said in a news release. “NYPA’s resources must be used to build as much renewable energy as it takes to protect our climate and safeguard our future, especially for disadvantaged communities on the frontlines of pollution and the climate crisis. This means ensuring a true mandate for NYPA to actually build renewables when the state is falling behind, not just reviewing our lack of progress.”

Gavin Donohue, president of the Independent Power Producers of New York, said he needs to further analyze the proposal, but on its face, it seems unnecessary.

The private sector is capable and willing to develop renewable power in New York, he said. “NYPA is not in a position to be more effective in building these projects.”

The Alliance for Clean Energy New York, which advocates for rapid adoption of renewables and represents companies in that sector, said it is opposed to the plan for several reasons, most of them boiling down to its focus. Executive Director Anne Reynolds said would do nothing to address the transmission constraints, onerous permitting process, non-standardized taxation and slow, expensive interconnection process that slow down renewable energy construction in New York.

“A better approach,” she said, “would be to harness NYPA’s resources and expertise to invest in the transmission system to unbottle opportunities to site wind and solar energy projects and open up new areas for projects, in addition to making other improvements to the investment landscape in New York.”

But as Public Power NY noted in its news release, Hochul’s proposal may be only an initial draft.

The executive budget proposed early in the year by the governor is one of the opening moves in New York’s budget process. Private negotiations between the governor and top legislative leaders; backroom lobbying by stakeholders; and campaigns to public popular support for (or opposition to) various provisions follow.

At the end of closed-door negotiations, near the April 1 start of the state’s fiscal year, the budget that emerges is different from the governor’s executive proposal, sometimes significantly. It is rushed through a vote in the two houses by the two leaders who negotiated it with the governor. Policy matters and other non-spending measures are sometimes wrapped into the budget measure to ensure quick passage.

In her memorandum of support for the NYPA proposal, Hochul said it is a necessary part of her budget plan because it will assist the state in meeting its goals under the Climate Leadership and Community Protection Act, the roadmap for the state’s clean energy transition.

Also in Hochul’s executive budget is an extension of NYPA’s authority to procure and sell power. It would extend the sunset date of Public Authorities Law from June 30, 2024, to June 30, 2044. Again, she writes, doing this will help the state meet its climate goals.

With 16 generating facilities and more than 1,400 circuit miles of transmission lines, NYPA calls itself the nation’s largest state power organization. The American Public Power Association ranks NYPA as the nation’s largest public power system by net generation as of 2020, narrowly higher than Arizona’s Salt River Project, and second-highest behind SRP by megawatt-hour sales.

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GM to Invest $650M in Controversial Nev. Lithium Project

General Motors plans to invest $650 million in Lithium Americas’ proposed lithium mine in northern Nevada — funding that depends on the resolution of a lawsuit environmentalists filed against the project.

GM and Lithium Americas announced the deal on Tuesday, calling it the largest-ever investment by an automaker to produce raw materials for batteries.

Thacker Pass, in Humboldt County, Nevada, is thought to be the largest lithium resource in the U.S. Lithium from the mine could be enough to produce up to 1 million electric vehicles per year, Lithium Americas said.

“It’s a landmark transaction, and it certainly won’t be the last major supply chain announcement for GM,” CEO Mary Barra said during an earnings call Tuesday.

But environmental groups are challenging the Thacker Pass project in court, saying the Bureau of Land Management broke federal law in approving an operations plan for the mine in January 2021. Plaintiffs include Western Watersheds Project, Wildlands Defense, Great Basin Resource Watch, and Basin and Range Watch, as well as tribes and a Thacker Pass area rancher.

The environmental groups said in a statement that environmental review of the project was fast-tracked under the Trump Administration “despite the enormous environmental impact to the nearly 18,000 acres of public land that would be affected by the operation.”

“The reckless permitting of the Thacker Pass lithium mine sets a bad precedent for the energy transition,” said John Hadder, director of Great Basin Resource Watch.

BLM has denied the suit’s allegations. Lithium Americas said the project has been designed to avoid environmentally sensitive terrain.

The parties presented oral arguments in U.S. District Court in Nevada on Jan. 5. They’re now awaiting a decision from Judge Miranda Du.

Two Funding Phases

Under GM’s agreement with Lithium Americas, funding from the automaker will be split into two phases. An initial $320 million investment is conditioned on a federal court ruling that does not overturn the BLM’s record of decision approving the plan. GM expects to release the first phase of funding by the end of this year.

In a second funding phase, GM will provide $330 million after Lithium Americas splits its U.S. and Argentine businesses into separate companies.

Through the agreement, GM would become a Lithium Americas shareholder and have exclusive access to Phase 1 lithium production at Thacker Pass.

Construction at Thacker Pass is scheduled to start later this year, with lithium production expected in the second half of 2026.

Other Lithium Sources

GM said it would use lithium carbonate from Thacker Pass in its Ultium battery cells. The automaker is launching a broad portfolio of vehicles using the Ultium platform, including the GMC Hummer EV pickup and SUV, Cadillac Lyriq and Chevrolet Silverado EV.

But General Motors isn’t focusing solely on Thacker Pass for a domestic lithium supply.

The automaker is also a strategic investor in Controlled Thermal Resources, a company working on extracting lithium from geothermal brine near the Salton Sea in Southern California. In 2021, GM announced a multi-million investment in CTR that will give the automaker first rights to lithium from the first stage of CTR’s Hell’s Kitchen lithium and power project. (See GM Invests Big in Calif. ‘Near Zero’ Lithium Project.)

Last year, GM and CTR expanded their collaboration to extend delivery of lithium hydroxide beyond 10 years. CTR is now recovering lithium from its Hell’s Kitchen optimization plant, the company announced last month.

Other lithium projects are making progress in Nevada.

Last month, the Department of Energy announced a $700 million conditional loan offer to Ioneer for the company’s proposed Rhyolite Ridge lithium-boron project in Esmeralda County. Funding would be through DOE’s Advanced Technology Vehicles Manufacturing (ATVM) loan program. (See Nev. Lithium Project Close to Securing $700M DOE Loan.)

The Rhyolite Ridge project is still in the permitting process; lithium production is expected to start in 2026.

Lithium Americas has applied to DOE for funding under the ATVM program for its Thacker Pass project. The loan would provide “a significant portion” of initial capital costs for the first phase of Thacker Pass, the company said.

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When is A MWh Not A MWh?

Anthony Clark (Wilkinson Barker Knauer) FI.jpgTony Clark | Wilkinson Barker Knauer

The energy policy hive is having a healthy discussion of late taking up a question we raised 18 months ago. (See Is Decarbonization an ‘Existential’ Challenge for RTOs?) Can the single marginal price construct in ISO markets continue to work effectively given important changes to generation technologies?

ISOs and proponents of the status quo have risen to defend the single locational marginal price (LMP), at least when applied in energy and related ancillary service markets. They assure that reform and expansion of the construct is possible to meet new challenges, and they quickly dismiss any notion of a fundamental rethinking. Their arguments extolling LMP are not wrong; they’re misplaced.

And they’re the same arguments raised since LMP was introduced. Indeed, a recent report, prepared by Professors William Hogan and Scott Harvey for the NYISO, walks step by step through more than 30 years of LMP history to conclude that:

economic theory and extensive practical experience demonstrate why the real-time locational marginal price is the only real-time pricing system that supports an efficient wholesale electricity market.

Vince-Duane (PJM) Content.jpgVince Duane | PJM

In comments this month to FERC and in reply to our prior writings, PJM’s market monitor endorses Hogan and Harvey’s recent paper. Much of the paper and comments in support simply recite (once again) the benefits that LMP offers as an efficient mechanism to dispatch, balance and schedule generation resources, price transmission congestion and reveal locational incentives and signals. We don’t disagree.

LMP is great — let’s get that out of the way. Our criticism is not with LMP in theory. Instead, we’re seeking a dispassionate assessment of how LMP is actually performing today and its prospects for success in the future. Since its inception, the single marginal price market for energy has delivered on much of its promise, although only a zealot would deny its limitations, as evidenced by what our initial paper calls those “compensating fixes” (typically complex, imperfect and contentious) that tinker with or supplement LMP prices depending on circumstance. But can this delicate construct effectively manage a transforming grid?

Our writings pose several questions, most ignored in rebuttal, suggesting why past performance might not be indicative of future results. But on one point we seem to be talking past each other.  

Electricity today is physically injected onto the grid by an array of generating and storage technologies having disparate operating attributes. These injections vary in character from one another (not to mention they’re poles apart from “virtual injections” offered by financial traders and demand response providers). Although these various injections each present a different profile to the system operator charged with keeping the lights on, from a market settlement perspective all are regarded as equal and paid the same. As the physical and virtual supply stack further evolves, can we continue to treat these injections as sufficiently homogenous in character to justify a single market, with a single clearing price paid to all?  As we have said previously, the only thing fungible (or in the parlance of economists, “perfectly substitutable”) when it comes to electricity is the electron itself. But no buyer, including particularly the system operator, is buying mere electrons. The megawatt-hour is in fact a highly bundled product with varying operational attributes such as its constancy (or variability) over time, its ramping and load following attributes, its stability and inertia properties, its on-demand availability/dispatchability, etc. All these properties, in the right balance, are critically important to the operator in maintaining system reliability.

Some dismiss the question of megawatt-hour fungibility or substitutability as an empty formalism. And if we insisted on perfect fungibility, we’d agree with the characterization. Although treating electricity in LMP markets as fungible has always been a problematic exercise in applying “compensating fixes,” it’s been workable enough to unlock much of the benefit summarized by Hogan, Harvey and others. But make no mistake, the very basis underpinning the law of single price is a presumption of commoditization.

Here lies the problem. The debate isn’t about the merits of LMP.  It’s about whether the penetration of new and transforming supply-side technologies (and demand response resources) permits us to continue to hold to a necessary predicate underlying LMP.   

The following statement to RTO Insider from Professor Severin Borenstein, board member at CAISO, illustrates the communication gap:

The idea that everybody gets paid a uniform price is how commodity markets work, not just for electricity — for natural gas, for gold, for oats, for everything. There’s a market price, and people will get paid that market price because they’re selling a homogeneous good.

Similarly, Hogan and Harvey’s paper includes the oft-repeated admonition about the 1970s-era misadventure in pricing “new” and “old” oil differently. These responses miss the point. Of course, commodities should transact at a uniform price — assuming they are commodities, which is to say essentially homogenous like oil, gold, oats or anything else meeting the definition of a commodity. But equally, a market that pays the same price for different things has a problem.

Presuming we can treat equally all injected megawatt-hours regardless of the unique operational attributes associated with these injections deserves scrutiny considering changing technologies. Comments filed recently with FERC in Docket No. AD21-10 by Professor Leigh Tesfatsion offer the same, but expanded, explanation for why electricity is not like oil, gold and oats and thus why:

all attempts to justify the (day-ahead/real-time market) two-settlement system (based on LMP pricing) by means of the efficiency and optimality properties of competitive commodity spot markets (based on competitive marginal cost = marginal benefit pricing) are conceptually unsupportable.

As the legion of rulemakings pending before FERC attest, there’s no shortage of argument and opinion about the type of institutions/structures, electricity market design and transmission policy we need to facilitate grid transformation. Which is why it’s puzzling to see the intellectual architects and master builders of the current ISO structure avoid engaging on this question of electricity as a commodity. Yes, the consequences that follow from finding that a bedrock presumption no longer holds will be profound and provoke a wholesale rethinking. Here again we say read Professor Tesfatsion’s comments where she explains — ironically given how economists largely populate the field of electricity market design — that we might be ignoring the dictum of “sunk costs as sunk.” Her comments introduce the “Ptolemaic Epicycle Conundrum,” drawing on history’s long and difficult road in accepting a Copernican sun-centric solar system by thinkers (and institutions) invested in Ptolemy’s earth-centric system.  This conundrum arises once we’ve all invested heavily in a certain model and layered on fix after fix as problems present, only to arrive at a sad place where “the correction of the fundamental conceptual inconsistencies in the core design principles is persistently deemed to be too costly to correct.”

So, let’s challenge the leading lights of energy economics and academia to prove that single clearing price LMP energy markets have not become “too big to fail.” Let’s examine the many ways electricity is being injected onto the grid today and the different operational attributes attendant to these injections, to ask whether a bedrock principle that directs us to pay all injections the same marginal price (varying potentially only by location) continues to hold.  Answering this question is what we’re looking for from these folks — rather than a rote repetition of LMP benefits.

Former FERC commissioner Tony Clark, a senior adviser at Wilkinson Barker Knauer, has represented several vertically integrated utilities in matters regarding utility deregulation and has authored several papers critiquing retail restructuring of the electric utility industry. 

Vincent Duane, the former SVP for law, compliance and external relations for PJM, is principal of Copper Monarch, which provides advice on electricity market design, governance and strategy for system operators and companies that work with them. He also is a senior adviser to Market Reform, an international consultancy.

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PJM CIR Cap Unlikely to End Accreditation Dispute

PJM members’ vote last week to limit resources’ capacity interconnection rights is not likely to end the dispute over how the RTO accredits intermittent resources.

Economist Roy Shanker, who filed a FERC complaint on Nov. 30, said Monday that members’ vote to change the rules was insufficient (EL23-13).

Shanker’s complaint alleged that PJM has been improperly permitting energy above renewable resources’ capacity interconnection rights (CIRs) to be entered into the Reliability Pricing Model (RPM) auctions as capacity, a practice he says is in violation of the RTO’s Reliability Assurance Agreement (RAA) and the interconnection service agreement (ISA) for each generator.

The result of the alleged over-accreditation, Shanker said, is diminished reliability, load overpaying for “phantom capacity” that does not meet reliability standards, artificial reduction of capacity prices for other resources; and inefficient economic decisions from market participants acting on potentially inaccurate information.

In response, PJM on Jan. 17 argued that the complaint stems from a mischaracterization of its standard ISA, which states that “to the extent that any portion of the customer facility described in section 1.0 is not a capacity resource with capacity interconnection rights, such portion of the customer facility shall be an energy resource.”

PJM said Shanker attempted to link this language to its accreditation of unforced capacity (UCAP), where no connection exists. Instead, it says the section is “a simple acknowledgement that a device is physically capable of providing energy above its CIR value, up to its maximum facility output level.”

Roy-Shanker-(RTO-Insider-LLC)-FI.jpgRoy Shanker | © RTO Insider LLC

Pointing to FERC’s 2021 approval of its effective load-carrying capability (ELCC) construct, PJM argued that the protest constitutes a “collateral attack” on the commission’s past ruling and called it to be rejected as an “attempt to revive arguments rejected in prior proceedings.” (See FERC Accepts PJM ELCC Tariff Revisions.)

PJM also said Shanker did not demonstrate that the complaint is in response to an injury and that, as such, he lacks standing.

Shanker argued that FERC’s order accepting the ELCC methodology was partly based on testimony in which PJM presented “incomplete and misleading” information about ISA provisions, as well as the difference between test conditions and normal transmission relating to accreditation. He also said FERC’s approval of the accreditation methodology was never codified into PJM’s governing documents.

He noted that in its order accepting the ELCC construct, FERC wrote that PJM had stated that it will account for “historically binding transmission constraints by considering each variable resource’s historic performance, including instances of curtailment due to transmission constraints.” This has not been the case, he argued, writing that when defining CIR levels and deliverability requirements, PJM does not look at dispatch, system operation and the relative price of resources.

“PJM previously presented incomplete information to the commission in terms of the underlying facts related to this issue in material ways. When this is recognized, the entire prior conclusions of the commission become ‘flipped,’ and it becomes clear that output from an energy resource (defined as effectively ‘not capacity’) should be excluded in accreditation of variable resources with respect to the amount of AUCAP [accredited UCAP] they can sell (or should even be considered in any ELCC calculations),” Shanker wrote.

In comments defending PJM’s practice, a group of environmentalist and clean energy organizations jointly argued that Shanker’s complaint is based on a misreading of PJM’s tariff that each megawatt of capacity must equal 1 MW of deliverable power. With this interpretation, they write that FERC’s findings in the 2021 ELCC filing were well-informed and correct.

“The commission was not misinformed, but instead reached a well considered decision that it agreed with PJM on a disputed issue — a determination for which Dr. Shanker’s client in that matter did not seek rehearing,” said the Sierra Club, Natural Resources Defense Council, American Clean Power Association and Solar Energy Industries Association.

They also argued that the current practice does not introduce any reliability risks, as repeat PJM analysis has not identified any transmission upgrades required for existing intermittent resources. Citing information from PJM’s Data Miner portal, they also noted that wind resources delivered energy 350% times their CIR level during the December winter storm.

Stakeholders’ Accreditation Proposal may not Address all Issues

The Markets and Reliability and Members Committee endorsed a proposal last week addressing some of the same issues in Shanker’s complaint, including language that would cap the hourly output of resources to their CIR rating when using the ELCC analysis to set their accreditation. Shanker told RTO Insider Jan. 30 that the proposal would not, however, resolve the issue of hourly input above CIRs being entered into the accreditation for resource classes, leading to resource types being allocated inflated capacity payments to be divvied between generators in that category.

The proposal would limit the slice of the pie that an individual generator can receive but would continue to allow intermittent resources to have an overly large portion reserved for them, Shanker said. He also noted that the endorsed language remains a proposal and still requires the approval of the PJM Board of Managers and FERC.

“It never goes away once it gets into the database,” Shanker said of energy output above CIRs being included in resource class accreditation. “The pie increases, and it will always get allocated to someone.”

The complaint also asks that FERC order PJM to change its accreditation methodology immediately and potentially provide a form of retroactive relief. This would effectively eliminate the transition methodology included in the endorsed proposal, which would create a system for generation owners to submit uprate requests and seek access to available headroom on the transmission system until PJM processes their request for higher CIRs in the interconnection queue. Without the formal execution of an ISA recognizing the higher CIRs, Shanker argued that PJM does not have the power to grant a resource a claim on any available transmission headroom.

In comments on the complaint, the Independent Market Monitor agreed that PJM’s tariff dictates that the ELCC methodology must cap the hourly output for a generator at its CIRs when determining accreditation for both individual units and resource classes. The impact of PJM’s current practice has been overstated intermittent capacity suppressing the final clearing price in recent Base Residual Auctions (BRAs).

“PJM has, to date, based on a mistaken interpretation of the market rules, based on an initial oversight, included energy deliveries above the level of CIRs obtained for intermittent resources in defining the ELCC values for those resources, affecting both the capacity value of individual resources and the capacity value of the total ELCC resources and therefore capacity auction clearing prices,” the Monitor wrote.

Had the correct accreditation been used for solar resources in the 2022/23 BRA, the IMM estimated the resource class average derated MW would have been 20% lower, while for wind resources it would have been 48.9% lower. Ultimately the IMM estimates that generator revenue would have been 4.4% higher with the proper ratings.

The Monitor called on FERC to require that PJM correct its definition of the capacity available from intermittent resources for the 2025/26 BRA and to not permit that auction to go forward until the issue has been resolved. The auction is currently scheduled for June 14, 2023.

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NJ Bills Push Rooftop Solar, EV Chargers, Grid Upgrades

The New Jersey Senate Environment and Energy Committee advanced bills Monday that would variously require new state buildings to facilitate distributed energy resources, provide business tax credits for the retrofit of warehouses to take solar panels and clarify the space needed for electric vehicle chargers at multiunit dwellings.

The spate of climate change-related legislation also included a bill that would set increasing targets for food recycling in an effort to reduce the methane produced when organic food is dumped in landfills. And a fifth bill would require the New Jersey Board of Public Utilities (BPU) to study how to upgrade the state’s transmission and distribution systems to interconnect more DERs.

Sen. Bob Smith, the committee chairman and a sponsor of four of the bills, said the BPU is “generally in favor” of the grid study.

“We all agree this is a really good bill. So, I think we should get it moving,” Smith said shortly before the committee approved the bill. “Just by way of background, our grid really stinks,” adding that addressing the issues is “really the key to … renewables.”

The bill, S3489, would require the BPU to “study means of allowing grid segments to host more distributed energy sources and improving the reliability of the grid.”

The areas of research suggested in the bill include: using substations to transmit electricity from the distribution system to the grid; the use of solar inverters to “to autonomously control the reactive power passing through the inverter”; and the impact of requiring the use of storage systems that can allow the input and output to vary depending on the power demand on the grid.

The BPU would be required to file a report on the study within a year. It would have another year to draft rules and regulations that would implement the findings of the report, which would be the basis for a pilot program and eventually perhaps a statewide program.

Doug O’Malley, director of Environment New Jersey, said the key elements of the bill are those that plan for pilot testing of the solutions unearthed in the study, and the adoption of rules and regulations needed to implement the solutions.

“The reason why this bill is so critical is because our energy grid obviously needs to be modernized and updated,” he said.

S1533 would require any new building used solely for state government that is larger than 15,000 square feet to include a DER that could be switched on “when the normal source of electricity is disrupted due to a power outage.”

The bill defines a DER as “one or more electric power generation, management or storage technologies, excluding diesel fuel technologies, located at or near the point of energy consumption, which are capable of providing the standard energy needs of a building or structure, or group of buildings or structures.”

Smith said the bill should be called “do what you are asking everybody else to do.”

“We’re the ones who are trying to make our state more sustainable, more renewable; all that kind of stuff,” he said. “We should be setting the standard and the example.”

EV Charging and Warehouse Solar

Smith said he drafted the EV charger bill, S3490, to amend a law that mandated the allocation of spaces set aside for EV charging stations in certain buildings. The law, enacted in July 2021, had left some confusion as to what was required, he said.

The bill would exempt multiunit low- or moderate- income housing dwellings from the law’s requirements to install “make-ready” parking spaces: those with the cables and support equipment ready to hook up to EV charging equipment. It would also clarify how many make-ready spaces are required by, for example, exempting off-street spaces that are incapable of supporting chargers from the total number.

Jeff Kolakowski, CEO at New Jersey Builders Association, said the bill still needs refinement to clarify how many spaces are needed in the multitude of different scenarios faced by builders.

“There’s a lot of different parking situations in residential communities out there,” he said.

S427 follows a law enacted in June 2021 that required new warehouses of more than 100,000 square feet to be ready to install rooftop solar in the future. (See NJ Bill Would Require Warehouses to be Solar Ready.) It would provide a tax credit for a warehouse that installs solar panels on a building with a “solar ready” zone. The credit would pay for 50% of the cost of the retrofit or $250,000, whichever is smaller. And the total amount of tax credits allocated to pay for the retrofits would be no more than $25 million.

The bill drew support from the Chamber of Commerce of Southern New Jersey, the New Jersey Conservation Foundation and Environment New Jersey. Alison McLeod, policy director of the New Jersey League of Conservation Voters, urged legislators not to overlook the rapid pace of warehouse development in New Jersey. The state is seeing a dramatic expansion of the warehouse sector, often on farmland, driven by the need for e-commerce companies and logistics providers serving the Port of New York and New Jersey.

“As warehouses continue to sprawl across the state, anything that we can do to help minimize their environmental impact is helpful,” she said.

Cutting Organic Waste Emissions

Turning to the bill designed to reduce the volume of organic waste disposed in landfills, S421, Smith said, “It’s looking like it might have as much or more of an impact on global climate change than carbon dioxide and fossil fuels, which is huge.”

Several speakers took issue with elements of the bill, however.

The bill would require the state by Jan. 1, 2027, to reduce by 50% the level of organic waste disposed in the state from 2016 levels, and by 75% by Jan. 1, 2032. The statement explaining the bill defines organic waste as “biodegradable waste that derives from organic material, and includes food, paper and cardboard, yard trimmings, animal waste, bio-solids, and sludge.’”

“The vast majority of organic waste that is generated in New Jersey is deposited into landfills, where it breaks down and releases methane, a potent greenhouse gas,” according to the statement. “While a percentage of this methane is collected by landfills and used to provide energy, much of it escapes into the atmosphere, contributing significantly to climate change.”

The bill would also require, within 18 months, the Department of Environmental Protection (DEP) to adopt rules and regulations for the program. Among them would be rules on how local governments direct the behavior of organic waste generators and suggestions for potential penalties for noncompliance.

The rules also would set out how the state by 2030 can recycle 20% of the “excess, unused and edible food that is currently disposed of” for human consumption, the bill states. It would also require the DEP by July 2027 to submit a report for the governor documenting the state’s progress toward the targets.

Gary Sondermeyer, vice president of operations at Keasbey-based Bayshore Recycling, told the committee that he generally supports the bill but does not believe that New Jersey could reach the 75% target.

“The real problem is we have woefully inadequate composting infrastructure in the state,” said Sondermeyer, who also represented the Association of New Jersey Recyclers. “Municipalities and counties are very eager to set up and develop composting programs to drive material away from landfills, and from resource recovery plants. But, to use the old cliche, we’re all dressed up and nowhere to go. We need infrastructure.”

Mary Ellen Peppard, vice president with the New Jersey Food Council, echoed the sentiment, adding that the council is committed to food waste reduction.

“A really big concern is the lack of food waste recycling facilities,” she said. “We actually have a couple of members at the moment who have been trying for several years to build some food waste recycling facilities, and they’re running into a lot of challenges.”

Ray Cantor, a lobbyist for New Jersey Business and Industry Association, said his group agreed with the goal of cutting food waste disposal but was concerned that the bill gives too much power to the DEP.

“Our major concern is there’s just an awful lot of delegation to DEP as to how to implement those goals,” he said. “We don’t necessarily have a tremendous amount of faith that DEP is going to do the right thing or will not come up with regulations that may be too onerous or too burdensome.”

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FERC Ends MISO Compensation for Reactive Power Supply

FERC last week approved MISO’s Transmission Owners’ request to eliminate reactive power compensation for generators, rejecting multiple protests.

The commission’s Jan. 27 order cited Order 2003, which said generators do not have to be compensated for providing a standard range of reactive power because they’re simply meeting a condition of interconnection (ER23-523).

MISO Transmission Owners in December filed to eliminate reactive power and voltage control charges from their own and unaffiliated generation resources. TOs said the revisions will result in a rate decrease for transmission customers. They argued that the number of unaffiliated generators collecting reactive power compensation has grown to a $220 million annual revenue requirement and climbing. (See MISO TOs File to End Reactive Supply Compensation.)

Under Schedule 2 of MISO’s tariff, most generation owners can apply to receive separate compensation for their reactive supply. The TOs asked FERC to eliminate separate charges to pay for reactive service supplied within the standard power factor range of 0.95 leading to 0.95 lagging.

Several clean energy generation owners accused the TOs of using their agreement with MISO in an “abusive” manner. Groups including the Coalition of Midwest Power Producers, American Clean Power Association and Clean Grid Alliance said MISO TOs lacked the authority to make the change, gave stakeholders just 19 days’ notice that it intended to make the change and failed to vet the proposal in the stakeholder process.

EDF Renewables and Vistra Energy argued many independent power producers in the footprint will suffer harsh financial effects. The Solar Energy Industries Association and Wolverine Power Supply Cooperative contended that eliminating reactive supply compensation could lead to generation developers installing reactive power capabilities only to the bare minimum standard power factor range, setting off a possible shortfall that could keep MISO from returning to reliable operations during an emergency.

The protestors also said the removal of Schedule 2 wasn’t fair because generation-based reactive power won’t be eligible for compensation while MISO TOs will continue to be paid for their transmission-installed reactive devices in their rate bases. They noted that MISO’s 2022 Transmission Expansion Plan includes $146 million of new reactive support and voltage control devices on which the MISO TOs will earn cost recovery plus a rate of return.

But FERC said a reliance on reactive supply compensation isn’t a good enough argument to continue its practice. It said new interconnecting generators must provide standard reactive service as a condition of interconnection and aren’t entitled to payment for doing what’s mandatory.  

The commission waved away concerns that MISO’s system reliability could suffer without the compensation. It said other wording in MISO’s tariff allows MISO to compensate a resource if it has to direct it to provide reactive power outside of the standard power factor range.

FERC also said it found no discrimination against independent power producers in the proposal. It said the IPPs are free to try to recover lost reactive power revenue through increased power sales rates, just as TOs’ generating units can through retail rates.

Finally, the commission rejected arguments that TOs can unfairly continue to collect reactive power payments through transmission-installed reactive devices. The commission said the issue at hand related to generation-based reactive power payments, not transmission. It said TOs proposed to treat affiliated and unaffiliated generation alike.

Commissioner James Danly disagreed with the commission’s decision, writing that MISO TOs did not meet their burden of proof that the current rate was unreasonable, given the “substantial unrebutted evidence of the negative rate impacts that this will have on generators not affiliated with the MISO TOs.”

Danly said it was unsatisfactory for MISO TOs to simply cite Order 2003 and previous orders where the commission decided that generators don’t have to be paid for reactive power within the standard range.

Danly argued that in prior cases, FERC “eliminated reactive power compensation when only a handful of unaffiliated generators were receiving — or still seeking — it.”

“The situation in MISO clearly is distinguishable where scores of generators are recovering reactive power compensation and it has been a part of the MISO tariff for years,” Danly wrote.

Commissioner Allison Clements concurred in a separate statement, writing that she would have preferred the MISO TOs use a “different procedural approach” that incorporated more stakeholder input.

She said MISO TOs’ filing is evidence that FERC’s current cost-based methodology for reactive power compensation “is poorly suited for newer technologies and non-synchronous generation like wind, solar, and storage.” She said FERC should act on its Notice of Inquiry opened in 2021 to examine the current regulations associated with reactive power compensation (RM22-2). The commission has not acted in response to comments filed in the docket early last year. (See FERC Seeks Comments on Reactive Power Compensation.)

“Whether or not generators located in MISO were justified in relying on continued reactive power compensation, parties have stated in the record that this decision will cause financial disruption,” she said.

Clements encouraged MISO stakeholders to “consider more effective alternatives to cost-based reactive power compensation.”

“Services should be appropriately compensated for the benefits they provide, and reactive power plays an important reliability function… [S]takeholders may wish to consider market solutions and/or compensation models that are based on the performance of the generators in providing reactive power when called upon, or that incentivize reactive power generation to be located where additional reactive supply is most needed from a reliability perspective,” Clements wrote.

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Solar Trade Group Challenges MISO Ban on Renewable Ancillary Services

The Solar Energy Industries Association on Tuesday lodged a complaint at FERC against MISO’s practice of blocking intermittent resources from its ancillary service market.

SEIA, represented by Earthjustice, asked that the commission find as unjust and unreasonable MISO’s tariff provisions and business practice procedures restricting wind, solar and battery hybrid resources from providing regulation service, spinning reserves and supplemental reserves.

The organization said the RTO prevents its dispatchable intermittent resources (DIRs) from ancillary services participation “despite the fact that [they] have the operational capability to provide such services.”

“No other FERC-jurisdictional RTO or ISO codifies this explicit discriminatory prohibition,” SEIA said in its filing, noting that PJM and CAISO explicitly state wind and solar resources’ eligibility.

SEIA also pointed out that MISO never meant for its ban on renewable ancillary services to be permanent. In a 2010 filing with FERC, the grid operator said it needed “to gain experience with this new method of modeling and dispatching” before allowing renewable energy to supply operating reserves. SEIA said FERC’s ultimate agreement with MISO’s prohibition hinged on its temporary nature. To date, MISO has never provided a “technical justification” for its ban, the organization said.

It argued MISO’s market rules discriminate against some resources because they’re tailored to the large, centralized power plants of the past.

“MISO’s discriminatory and unjustified tariff provisions that prohibit DIRs from providing ancillary services in MISO’s wholesale market is a prototypical example of how outdated tariff provisions can result in unnecessary and deleterious market barriers,” the organization said.

SEIA said lifting the ban would increase competition and allow new resources to “provide the critical grid-stabilizing services that MISO will need.” It said that though MISO “fundamentally agrees” that renewable resources should be able to provide all the services they’re capable of, the grid operator hasn’t acted on a longstanding suggestion that it extend its ancillary service market to renewable energy. According to SEIA, the issue was raised as part of MISO’s 2018 market roadmap improvement ideas; staff last year recommended putting the idea to rest without action.

The complaint comes as MISO has announced plans to ban dispatchable intermittent resources from providing ramping needs, saying they’re historically unhelpful. (See MISO Plans to Bar Intermittent Resources from Ramp Capability.)

“Rather than doubling down on nonmarket-based blanket prohibitions, MISO ought to be focused on facilitating technology-neutral, operations-focused solutions that properly establish criteria for when a resource is called upon to provide ancillary services,” SEIA said.

In a press release accompanying the complaint, Earthjustice attorney Aaron Stemplewicz said his organization is prepared to challenge MISO’s “attempts to strip wind, solar and battery hybrid resources from providing ramp capability.”

“Any backsliding will be rigorously challenged with regard to the eligibility of renewable resources to provide all the services they are capable of providing,” he said.

SEIA Energy Markets Director Melissa Alfano added that energy markets must keep pace with a changing grid.

“Renewable assets like solar, storage and wind have more than proven themselves as reliable, and we need to recognize the full scope of their benefits if we want to rapidly decarbonize in the next 10 years,” she said.

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Transmission Project Would Span Across Interconnection Divide

A Midwestern utility and an independent transmission company are teaming up to build a first-of-its-kind line that would span across the Western and Eastern interconnections and through three different electric regions.

ALLETE (NYSE:ALE), a Minnesota-based energy company, and Grid United, a competitive transmission developer, announced their plans this week to build the North Plains Connector, a roughly 385-mile HVDC transmission line between North Dakota and Montana.

The developers say their project would be the first transmission connection between three “regional U.S. electric energy markets”: MISO, SPP and the Western Interconnection. It would create 3,000 MW of transfer capacity between the regions.

SPP spokesperson Meghan Sever said that Grid United has been conducting a feasibility study on several transmission projects with the grid operator’s staff and the Transmission Working Group, the scope of which was approved in September.

“Several merchant HVDC developers have approached SPP about projects in various stages of development. As with every project, SPP follows our stakeholder-approved study practices when evaluating the impacts of these projects on the SPP system,” Sever said.

The project is still in the development stage, with permitting expected to start this year and a planned in-service date of 2029. Its unique nature has captured attention from the energy world, earning praise for its ambitious goals to connect the regions.

Grid United is run by Michael Skelly, a prominent clean energy executive whose past portfolio includes building transmission and wind projects at Clean Line Energy and Horizon Wind Energy.

“It is no secret that the U.S. is in desperate need of new electric transmission capacity, and the North Plains Connector will provide resiliency and reliability benefits for decades to come,” Skelly said in a statement.

ALLETE owns utilities in Minnesota and Wisconsin, as well as energy production subsidiaries in North Dakota, Minnesota and Maryland. Its CEO and president, Bethany Owen, called the project “innovative” and said its an “important step toward a resilient and reliable energy grid across a wide area of the country.”

The collaboration between a utility and an independent transmission company is also an innovative part of the project that energy experts have called out.

“It’s starting!” tweeted Rob Gramlich, an energy consultant and former FERC official. He predicted that “joint ventures, joint ownership and joint [transmission companies] will join forces to build infrastructure, serve specific utility load and upsize to serve wider market demand.”

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Murphy Signs NJ Low-carbon Concrete Law

New Jersey took a big step in promoting the use of low-carbon concrete Monday when Gov. Phil Murphy (D) signed a law that will provide business tax credits to producers who supply state projects concrete made with lower greenhouse gas emissions.

The law, S287, gives state corporation business and gross income tax credits to producers that provide more than 50 cubic yards of low-carbon concrete under a state procurement contract or to a private contractor contracted by state government. It enables the supplier to earn credits for up to 5% of the cost of the concrete if it is “low-embodied-carbon concrete.” The credits can be up to 3% if the concrete’s production incorporated “carbon capture, utilization and storage technology,” according to a legislative explanation of the bill.

Some producers may deliver concrete that meets both criteria, and so be eligible for up to 8% of the cost, an analysis by the state Office of Legislative Services said.

The law targets a major source of carbon emissions from one of the most widely used construction materials and could yield significant emissions reduction if low-carbon concrete is widely embraced, analysts say.

The Natural Resources Defense Council, which tracks low-carbon concrete initiatives, said the law is the first of its kind in the U.S.

“It’s a model for other states,” said Sasha Stashwick, NRDC’s director of industrial policy. The law is “a really unique policy that combines performance standards with performance incentives.”

“We hope to see a lot more states adopt it,” she said.

The bill’s enactment comes 14 months after New Jersey enacted a law, S3091, that provides builders with tax credits for using unit concrete — pre-fabricated concrete that is delivered in ready-to-use form, often as pavers or concrete blocks — produced in a low-carbon method. (See New Jersey Lawmakers Back Low-carbon Concrete.)

The International Energy Agency (IEA) has said that the cement sector, which provides a key ingredient of concrete, is the second largest industrial emitter of carbon emissions, generating about 7% of worldwide emissions.

Murphy, who has set a target for the state to reach net-zero emissions by 2050, said in a statement that the tax credit law is an example of the state’s “nation-leading innovation and cross-sector collaboration.” He said it shows that the benefits of clean energy extend beyond the environment and added that the law will “further support the construction of greener, cleaner buildings and roadways in New Jersey.”

“As our efforts to decarbonize our economy become more urgent, we must also ensure that they become increasingly more economically attractive,” Murphy said. “It’s bills like these that prove that the steps we take to combat climate change can — and will — stimulate economic activity and growth in the industries that remain key to our climate solution.”

Bipartisan Support

The law limits the amount of tax credits awarded to $10 million a year, and no producer can receive more than $1 million a year.

It requires the Department of Environmental Protection (DEP), working with the Department of Treasury, to create a process by which concrete producers can certify that their concrete is low-embodied-carbon concrete, or that its production used carbon capture, utilization and storage technology. The agency must produce a report three years after the program is implemented that contains a “cost-benefit analysis of the tax credits.”

The bill drew bipartisan support in the legislature, with a 74-4 vote in the General Assembly and 39-0 in the Senate. It was embraced by both environmentalists and business groups, such as the New Jersey Business & Industry Association (NJBIA), which is often at odds with some of the Murphy administration’s clean energy efforts.

“We must also incentivize the business community to further use innovative products and processes,” said Raymond Cantor, the NJBIA’s deputy chief government affairs officer. “This bill does exactly that, by providing tax incentives to developers to use low-carbon concrete.”

Reducing Cement Use

Stashwick said it’s not yet clear the extent to which the use of low-carbon concrete cuts emissions, in part because much of that depends on the specifics of each project.

Cement accounts for about 90% of the carbon emissions associated with concrete, and reducing the amount of cement in the concrete mix and replacing it with other ingredients can achieve a significant cut, perhaps by 50%, she said. But deeper cuts in emissions require changes upstream in production and in the plants that make it, with retrofitting and new technology, which can be expensive, she said.

“Cement kilns run at very high temperatures. So, you’re burning a lot of fossil fuels because you’re heating up the raw material,” she said. “So, the more we can reduce demand for cement with these types of policies like we have in New Jersey, the greater we will be able to reduce emissions associated with the final product, which is concrete.”

The governments of New Jersey, New York state and New York City are among the largest procuring low-carbon construction materials, with leaders in New York signing executive orders to do so, according to NRDC.

New York Gov. Kathy Hochul in January signed the Low Embodied Carbon Concrete Leadership Act (LECCLA), which established guidelines for procurement but was not as “robust” as the New Jersey law, Stashwick said. The New York law requires the Office of General Services to create a stakeholder panel to make recommendations for low-carbon concrete procurement policies, with that work set to start next month, she said.

“And now they have a real-world example of a type of policy that they could recommend for New York to adopt,” she said, referring to New Jersey’s new law.

In New York City, Mayor Eric Adams signed an order stating that “capital project agencies shall make their best efforts to incorporate low-carbon concrete specifications for all batch plant ready-mixed concrete used in capital projects and for concrete sidewalks.”

The Port Authority of New York and New Jersey also has made a point of using low-carbon concrete. The agency — which operates bridges, tunnels and the Port Authority Trans-Hudson, as well as three airports — enacted the Clean Construction program to promote low-emission construction, which included a requirement to use “low-carbon concrete mixes.”

The authority followed that in 2021 by enacting the Low Carbon Concrete Program, in which it put together a project with New York University and Rutgers University to develop and test new low-carbon concrete mixes.