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November 5, 2024

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OurEnergyPolicy Examines Role of Competition in the Energy Transition

Electricity markets might need to change along with the shift to more renewables in the industry, but speakers on an OurEnergyPolicy webinar yesterday argued they were still the best way to make that transition reliable and affordable.

Some have claimed that the transition to markets has been difficult for the old monopoly utilities in the states that have opened their markets, but Emily Sanford Fisher, the Edison Electric Institute’s executive vice president for clean energy, is not among them.

“The answer is ‘no’; I think they’ve responded well,” Fisher said. “It’s been, you know, 20, maybe going on 30 years since some of these restructurings have occurred. But I think one of the interesting impacts that we haven’t focused on is the supplier-of-last-resort obligation.”

In every restructured state except for Texas, utilities are the provider of last resort, and significant shares of small, mass-market customers still take service from them. The utilities have to buy power to ensure that they can meet that demand, plus any customers who come back to their service from a competitive firm, Fisher said.

Texas has gone the farthest with restructuring, and its old utilities in the ERCOT market are effectively wires-only companies now, with the provider-of-last-resort obligation covered by competitive retailers.

“We are equal participants in these markets,” Fisher said. “Some of the discussion often sounds like we live in two worlds: There’s an [investor-owned utility] world, and then there’s a competitive market world. We’re all part of that same sort of ecosystem, but our ability to plan for and to make sure that we are able to provide power to customers is sometimes challenged by that construct.”

Restructured states generally do not allow utilities to directly own generation, but Fisher noted that has started to change in states like Massachusetts that want to see major investments in offshore wind. Utilities’ balance sheets are better able to handle those major, upfront investments, she added.

While utilities can help build massive infrastructure projects, the industry has many more options to supply customers than it used to in the past, said Robert Dillon, executive director of the Energy Choice Coalition.

“They place a bet on one technology, and the market is changing so rapidly, that a lot of times they’re betting on the wrong technology,” Dillon said.

The private sector is able to invest in a broad array of different technologies that can help improve flexibility and reliability, including the distributed technologies that customers are investing in themselves, he added.

“I think the existence of competition and generation makes sense,” Fisher said. “I think there’s a benefit that has allowed us to bring new technologies into the market.”

Renewables were probably going to grow anyways, but the combination of markets and state renewable portfolio standards has driven much of their deployment, Fisher said. Renewables are cheap to deploy now, but other technologies such as hydrogen or advanced, long-duration storage are going to be needed to get to a 100% emissions-free grid, and Fisher said utilities are in a good position to help them become commercially competitive.

Locking in too many decisions now could prove to be a bad bet for the future given that power plants are meant to last for decades, noted Conservative Coalition for Climate Solutions Vice President of Public Policy Nick Loris.

“We don’t necessarily know what the future generating sources that are most affordable, reliable and clean will be,” Loris said. “And the more that the government locks resources in unproductive places with specific tax subsidies to specific energy technologies, it makes it all that more difficult for them to compete in the marketplace.”

The Inflation Reduction Act’s clean energy tax incentives transition to just a “clean incentive” that is not technology specific starting in 2025, which should allow “all the flowers to bloom,” Fisher said.

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Washington House Calls for Dimming Turbine Lights

OLYMPIA, Wash. — The House voted 94-1 Monday to require wind turbine lights be turned off at night when not triggered by airplanes.

House Bill 1173, introduced by Rep. April Connors (R) now goes to the Senate. Connors represents the Kennewick area, where a 224-turbine wind farm proposed in the Horse Heaven Hills just south of the city has prompted pushback from residents upset that the project would clutter their views of a pristine-looking ridge line.

If enacted, the bill would require existing and future turbines to be fitted with an aircraft detection lighting system that would turn on the lights only when airplanes were in the vicinity. The proposed law would go into effect for existing turbines on Jan. 1, 2026.

Scout Clean Energy of Boulder, Colorado, has proposed building up to 224 wind turbines, each about 500 feet tall, on 112 square miles of mostly private land in the Horse Heaven Hills. About 294 acres of the Horse Heaven Clean Energy Center would also hold solar panels. The wind turbines and solar panels are projected to produce 1,150 MW. 

Horse Heaven Clean Energy Map (Scout Clean Energy) Alt FI.jpgThe Horse Heaven Clean Energy Center will generate up to 1,150 MW from solar panels and 224 wind turbines. | Scout Clean Energy

 

At a Jan. 16 hearing before the House Energy & Environment committee, Connors said the blinking lights on top of the 500-foot towers could be seen across an area with roughly 200,000 residents. “Those blinking lights at night, you can see them from hundreds and hundreds of miles away,” she said.

Germany has a similar law in effect, she said. Connors estimated that Washington already has 2,000 wind turbines.

While wind turbines provide needed electricity, “for many others, they are a disturbing eyesore,” said Kennewick resident Paul Krupin at the hearing. 

Peter Godlewski of the Association of Washington Business was concerned that the cost of adding an aircraft detection lighting system to each turbine would increase the cost of producing electricity, which would add to consumers’ bills.

Scout says it is developing visual simulations for numerous viewpoints in the surrounding area as required by the State Environmental Policy Act. “These simulations will provide a good representation of how the project will look once constructed and will be posted to the project website once completed,” the company said.

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Washington Holds First Cap-and-Trade Auction

Washington’s first cap-and-invest auction took place Tuesday, but initial results will not be released until March 7, when the state Department of Ecology will publish information about the auction prices and the number of sold allowances. Each allowance will equal a metric ton of greenhouse gases.

Ecology department spokesperson Claire Boyce-White said it will take a week to compile the initial data, and that the agency will release information on the amount of revenue raised on March 28.

Both the March 7 and end-of-March reports will be posted to the department’s Auctions and Trading webpage under the Market Information tab at the bottom of the page

“Today’s auction marks an important milestone in the implementation of the cap-and-invest program,” said Laura Watson, director of the Department of Ecology. “I am proud of our staff’s work to bring this historic greenhouse gas reduction program to life.”

In January, Washington officials told the Senate Transportation Committee that the cap-and-trade auctions could raise almost $1.5 billion through fiscal 2024.

Later this legislative session, the state Senate and House plan to allocate revenue from the first auction. The ecology department estimates $484 million in cap-and-trade revenue for fiscal 2023 (July 1 to June 30, 2024) and $957 million in fiscal 2024.

The revenue from the auctions is expected to shrink over time as the number of emission allowances is reduced. The department estimates $901 million in revenue for FY 2025, $730 million in FY 2026 and $592 million in FY 2027.

Emitting companies would bid on the allowances, which would be made available in batches of 1,000. The first auction will cover 6.185 million allowances, with a minimum allowed bid of $22.20/allowance.

The highest bidder would get first crack at the limited number of allowances, the second-highest bidder would get second crack, and so on. The auction ends when the last of the designated allowances is bid upon. Then all successful bidders will pay the same price per allowance as the lowest successful bid.

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Changes to Permitting Laws Face a Stark Partisan Divide

“Permitting reform” might be a legislative goal for some on both sides of the aisle in Congress this session, but the two parties are far apart on what that means, as evidenced by two hearings held by the House Natural Resources Committee on Tuesday.

The full committee held a hearing on the BUILDER Act, which would change the National Environmental Policy Act by requiring enhanced coordination among federal agencies, creating predictable timelines for project reviews and limiting litigation to lawsuits brought by parties involved in the agency review process. (See NRECA Endorses 2-Year Limit on NEPA Reviews.)

Earlier in the day, the committee’s Energy and Mineral Resources Subcommittee held a hearing on a pair of bills: the Transparency and Production of American Energy Act and the Permitting for Mining Needs Act of 2023. The first bill is focused on increasing leases for oil, gas and geothermal on federal lands, while the second would make similar changes for mining specifically.

Most people do not know the issues around permitting infrastructure and have never heard of NEPA, committee Chair Bruce Westerman (R-Ark.) said.

“But I do know that every single person in the U.S., regardless of their zip code, has relied on infrastructure, energy or other projects that underwent NEPA reviews,” Westerman said. “And all too often, I know that Americans have faced bureaucratic nightmares and decades-long delays in attempts to build roads and bridges in their communities, or access critical mineral resources.”

Without changes to NEPA, Westerman questioned how any of Democrats’ clean energy goals could be met.

Ranking Member Raúl Grijalva said the afternoon hearing was giving him a case of déjà vu, as his Republican colleagues had spent a previous hearing blaming all of the delays experienced by the oil industry on NEPA and the morning hearing had featured another two bills that he said would gut the law.

“Now we’re here again with yet another bill taking aim at NEPA,” Grijalva said. “And what is best for the public interest is secondary, if that. And, as I have in our other hearings, I feel obligated to point out how irresponsible it is to cut environmental review while we’re in the midst of the greatest environmental crisis of our time.”

Rep. Garret Graves (R-La.), who introduced the BUILDER Act, said he had met with Special Presidential Envoy for Climate John Kerry and Brian Deese, who recently stepped down as director of the National Economic Council. Both of them endorsed permitting reform to ensure that the billions of dollars set aside for clean energy in recent legislation actually leads to projects, he said.

Dairyland Power Cooperative is trying to build a couple of projects that it said would lead to cleaner electricity for its Wisconsin customers, but have been caught up in permitting-related delays for years, said its vice president of strategic growth, John Carr.

One is the Nemadji Trail Energy Center, a new gas plant that would replace coal and less efficient gas in the dispatch stack while helping to balance renewable power. Its permitting review process was done in 2021, but external groups asked the U.S. Rural Utilities Service to review its impact on climate change, and now Dairyland has been waiting more than five years for a final permit.

“Meanwhile, reliability concerns in the Midwest have led to postponement of previously announced coal plant retirements by other utilities in the region,” Carr said.

The other project is the Cardinal-Hickory Creek transmission line, which would bring wind power from Iowa to Wisconsin’s major cities.

“There are currently over 100 renewable energy projects depending on the construction of this line,” Carr said. “In this case, while the NEPA review was completed in a timely manner, delays due to litigation have increased the cost of the project.”

Port Arthur Community Action Network Founder and President John Beard, former mayor of the Texas city, had worked in a refinery for decades in a region that has been home to heavy industry for more than a century. The city has a poverty rate of 30% and more $80 billion of industrial development going on in an area that is already home to numerous heavy industry sites.

EPA has called Port Arthur an environmental justice “showcase community” because its residents have cancer at twice the national and state average, as well as higher rates of heart, lung and kidney diseases, Beard said. The main reason so many heavily polluting sites have been built there is it is the path of least resistance, as Port Arthur’s residents lack the resources of wealthier communities to challenge such developments, Beard said.

“So, when you talk to me about restricting access to the legal system, which is a foundation of our country, then you’re telling me exactly that you are not going to give their voice to be heard,” Beard said.

FERC oversees some of the infrastructure in Port Arthur, notably LNG export terminals, and Beard recalled a commissioner highlighting how such projects were often delayed.

“The permits were not held up because of government inefficiency, but because the permits were incomplete,” he added.

The Inflation Reduction Act included $1 billion to increase agency staff and resources to process permits more efficiently, several Democrats said, including Rep. Debbie Dingell (D-Mich.). She is open to more changes to permitting laws, but not at the expense of gutting environmental protection.

“I know we got to modernize our laws, but we’ve got to do it in a way that protects original intent, but also makes it better,” Dingell said. “These don’t. And I’m serious about working with you on real legislation that would do that. Unfortunately, I don’t think these are serious proposals.”

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FERC Denies Exemption Requests from MISO Accreditation Rule

FERC on Tuesday rejected a pair of requests for exemptions from a resource availability cutoff under MISO’s new availability-based accreditation method.

The commission used near-identical language to deny Southern Minnesota Municipal Power Agency’s (SMMPA) and Cleco’s asks for exemptions from the new 24-hour lead time threshold for thermal resources’ capacity accreditation (ER23-837, ER23-1103).

Under the new construct, MISO treats offline resources that historically take more than 24 hours to start up as unavailable during predefined, risky hours that factor heavily in accreditation. In those cases, staff assigns a zero-capacity value and reduces accreditation accordingly.

Cleco (NYSE:CNL) had asked for waivers through 2026 for Units 1 and 3 at its 1,700-MW Big Cajun II Power Station in Louisiana. SMMPA asked for a waiver through 2026 for its 41% stake (359 MW) in Unit 3 of the Sherburne County Generating Station (Sherco) in Minnesota.

In both cases, FERC said the utilities did not prove that their waivers wouldn’t have “undesirable consequences, including harm to third parties.” It said while granting the waivers would increase Cleco’s and SMMPA’s seasonal accreditation values, it would also decrease the fleet-wide unforced capacity to intermediate seasonal capacity ratio. That would reduce other resources’ final seasonal capacity accreditation values, the commission said.

MISO took no position on the filings.

Commissioner Mark Christie penned a separate concurrence to express “surprise and disappointment in MISO’s failure to take a position on these waiver requests and to submit comments in these proceedings.” He emphasized that the grid operator characterized its capacity accreditation changes as too urgent to be delayed until the 2024-25 planning year.

“Yet now, when SMMPA and Cleco seek waiver of MISO’s new accreditation calculations — and, by extension, collaterally challenge the fairness of the implementation timeline expressed in MISO’s proposal — MISO remains strangely silent,” Christie wrote. “I would have expected MISO to defend its new [accreditation] or to explain why the waiver requests do not undermine the delicate balance it sought to achieve.”

The commission did not address other arguments from the utilities.

SMMPA pointed out that Sherco Unit 3 has a 26-hour startup time, and it now faces “significantly lower” accreditation values than it’s had for the “vast majority of its 30-year history.” It said the reduced accreditation values “do not reflect Sherco’s expected availability during times of need,” and that the unit “has the same capacity, availability, reliability and characteristics as it had in the past.”

Cleco said it lengthened startup times at the Big Cajun II plant in recent years to avoid violating MISO’s limits on uninstructed deviations from its dispatch orders. (See MISO Plans for New Uninstructed Deviation Rules.)

The utility said it wanted to maintain its eligibility for make-whole payments. It offered that its other units “with similar characteristics and design as the Big Cajun units” could change ramp rates, adjust offers in MISO’s real-time market or change startup times and make offers in the day-ahead market with an economic commitment status that would still require a startup period.

Cleco argued that without the waiver, it faced a “uniquely burdensome, … dramatic decrease in the Big Cajun units’ capacity accreditation value.” It said MISO’s accreditation will reduce Big Cajun II Unit 1’s average availability by 390 MW and cut Unit 3’s average availability by 202 MW for the 2023-24 planning year.

Entergy has a similar waiver request pending before FERC. The utility has warned that without waivers for three units in Mississippi and Arkansas, it risks a capacity shortfall this year in Mississippi. Entergy has pre-emptively adjusted the units’ startup times to less than 24 hours. (See Entergy Seeks Exemptions from MISO Accreditation Rules.)

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BCSE Factbook: Clean Energy Transition ‘Hardwired’ in US Economy

Despite the disruptions of 2022 ― the war in Ukraine, inflation and ongoing supply chain issues ― the U.S. clean energy transition hit new highs in terms of renewable energy and storage deployed, new electric vehicles on the road and new investments, according to the Business Council for Sustainable Energy’s 2023 Sustainable Energy Factbook.

The transition is “now kind of hardwired into the U.S. economy and the way in which we’re evolving,” said Ethan Zindler, head of the Americas for BloombergNEF, which compiled the factbook released Wednesday.

Top line numbers from the annual compendium of energy facts and figures show that renewables, including hydro, accounted for about 23% of U.S. power generation in 2022, up 12.6% from 2021 and, together with nuclear, provided more than 40%, Zindler said during a media briefing Tuesday.

Clean energy drew about $140 billion worth of investment in the U.S., and close to 1 million EVs were sold, both new highs, he said.

Zindler also framed the passage of the Inflation Reduction Act as “absolutely a watershed in terms of policymaking in this sector at the federal level. We’ve really never seen any legislation passed by Congress as ambitious as the [IRA], in terms of what it’s trying to do to set us on the right course towards CO2 reduction and energy transition.”

Generating Capacity Build by Fuel Type (EIA-BloombergNEF) Content.jpgWith the exception of 2018, renewable energy has been the biggest source of new generation in the U.S. since 2015. | EIA/BloombergNEF

 

But the scope and speed of the transition must be accelerated if the U.S. is to meet its commitment under the Paris Agreement to reduce its greenhouse gas emissions 50 to 52% below 2005 levels by 2030. Even hitting the interim goal of a 26 to 28% reduction in GHG emissions by 2025 would require annual reductions of 4 to 5% per year, “which would be rather remarkable,” Zindler said.

Non Hydro Commissioned Energy Storage (EIA-FERC-BloombergNEF) Content.jpgWith record growth in 2022, the U.S. continues to be the largest energy storage market in the world. | EIA/FERC/BloombergNEF

Thus far, the U.S. has cut its emissions 13.8% below 2005 levels, according to the factbook. But last year, emissions from the electric power sector dropped only 1.5%, and emissions from nonpower sectors of the U.S. economy increased 1.9%.

BCSE President Lisa Jacobson argued that it’s too early to predict whether the U.S. will be able to hit its emission-reduction goals, or President Biden’s 2035 target for decarbonizing the U.S. electricity grid. Time will be needed to assess the impacts of recent federal legislation — the IRA, the Infrastructure Investment and Jobs Act, and the CHIPS and Science Act — “not to mention what states and communities and the private sector are doing,” she said.

“We’re trying to lay out what we think would accelerate it even more, but I think we have some pretty strong market signals, and it may take two or three years to really know how much they push us,” Jacobsen said.

Other growth markers in the factbook include:

  • As of 2022, corporate procurements of clean energy totaled 19.9 GW. The number of power purchase agreements announced slipped from 118 in 2021 to 112 last year, but the average project size increased from 145 MW to 178 MW. Amazon leads the pack of corporate offtakers, with 8.4 GW of wind and solar.
  • Utilities and independent power producers are investing record amounts in transmission: an estimated $31.7 billion in 2022 and $33 billion in 2023, according to figures from the Edison Electric Institute cited in the factbook.
  • Energy storage deployments on the grid hit a new high in 2022 of 4.8 GW, which put total storage on the grid at 11.4 GW. Bolstered by tax credits in the IRA, the buildout of a domestic battery supply chain has already attracted $17 billion in investments, primarily focused on the EV sector.
  • Driven largely by the growing number of extreme weather events, the number of microgrids coming online has also increased to 101, with the main markets in California, Texas and Florida. Residential storage installations grew 25% year over year in California.
  • With funding from the IIJA and IRA, investment in green hydrogen technology is set for major increases. Federal support for green hydrogen could rise to $20 billion by 2030, and as prices fall, the IRA’s $3/kg production tax credit for green hydrogen could completely cover the cost of generation, the factbook says.

Natural Gas on the Rise

The factbook also contains some less optimistic numbers, such as the drop in solar installations last year because of supply chain delays and uncertainty over the Commerce Department investigation of solar imports from Cambodia, Laos, Thailand and Vietnam.

Biden’s two-year moratorium on any tariffs on solar cells or panels from those countries gave the industry some breathing room, but installations still fell from 24 GW in 2021 to 21 GW last year. Similarly, onshore wind deployments fell from 13 GW in 2021 to 11 GW. (See Biden Waives Tariffs on Key Solar Imports for 2 Years.)

At the same time, energy consumption in the U.S. continued its post-pandemic rebound, growing 3% over 2021. Natural gas accounted for 39.4% of U.S. power generation, and natural gas utilities poured more than $35 billion into infrastructure investments in 2021. Overall demand for U.S. natural gas, including exports, rose 5.4%, to a record 95.4 Bcfd.

Levelized costs of electricity (BloombergNEF) Content.jpgU.S. levelized costs of electricity, unsubsidized for the second half of 2022. Solar and onshore wind remain cheaper than natural gas, but LCOEs for offshore wind and storage are still not competitive. | BloombergNEF

 

Energy efficiency spending by electric utilities fell during the pandemic, from $6.8 billion in 2019 to a flat $6 billion in 2020 and 2021. Another key factor affecting efficiency is state building codes. More than half of the states in the continental U.S. were using residential energy efficiency building codes from 2009 or earlier.

The International Energy Conservation Code, on which state codes are based, is updated every three years, which means the code has gone through four updates since 2009.

The factbook also looks at the ongoing challenge of interconnection queues, with solar and storage installations leading the projects applying for grid access. PJM and CAISO are called out as the grid operators with the longest wait times, averaging three or more years, versus the shorter two-year or less average for ISO-NE and MISO.

While not specifically called out in the factbook, questions about improving permitting policies and practices were also raised during the media briefing. Jacobson expects GOP bills on permitting to be voted out of the House of Representatives and is hopeful some compromise might be reached.

“We have a lot of proposals on the table, and they’re fairly comprehensive,” she said. “The question is, will the urgency of the need, at least in Congress and the Biden administration, get to the point where they are ready to make a deal. … I think the message is getting across that we will not meet our goals if we don’t take care of streamlining and making it faster and more efficient to build energy projects here in the United States.”

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DOE OKs $375M Loan for NY Battery Recovery Plant

The Department of Energy conditionally committed to loan Li-Cycle Holdings (NYSE:LICY) $375 million to develop North America’s first recycling facility for battery-grade lithium, officials announced on Monday.

Li-Cycle’s 65-acre, 14-building facility in Rochester, N.Y. will form the center of the company’s “Spoke & Hub” business model, with the potential to achieve a 95% recycling efficiency rate and support the battery needs of hundreds of thousands of vehicles, according to a promotional video.

The company currently operates four “spoke” facilities in North America capable of processing more than 50,000 metric tons of lithium-ion battery material annually. The facilities produce an intermediate product containing critical minerals called “black mass,” which will be sent to the Rochester Hub for further processing into battery-grade materials.

Once operational, the Rochester Hub will become a domestic source of recycled and reusable battery materials, producing up to 8,500 metric tons of lithium carbonate, 48,000 tons of nickel sulphate and 7,500 tons of cobalt sulphate, according to Li-Cycle.

DOE’s loan is from the Advanced Technology Vehicles Manufacturing (ATVM) program, which was created to support critical infrastructure or technology projects deemed too risky by financial institutions and recently received a massive infusion of funding from the Inflation Reduction Act (IRA).

In January, the ATVM program also gave a $700 million conditional loan to a Nevada lithium mining project. (See Nev. Lithium Project Close to Securing $700M DOE Loan.)

Li-Cycle’s loan, which has a term of 12 years and an interest rate equal to the U.S. Treasury’s 10-year rate (currently 3.92%), remains conditional until the company satisfies DOE financing procedures.

In a livestream of the announcement, Senate Majority Leader Chuck Schumer (D-N.Y.) told attendees that the DOE’s loan will not only bring jobs to New York and revitalize the Rochester industrial area, but “make America the center of electric car and electric battery production in the world.”

Doreen Harris, CEO of the New York State Energy Research and Development Authority, said that Li-Cycle’s facility is “representative of what we need to be doing at scale” and represents “the technologies of the future … that will be necessary to achieve the deep levels of decarbonization across all sectors of the economy.”

Li-Cycle said it received key environmental permits for the Rochester Hub last year and expects to commission the plant late this year. The project is expected to create about 270 permanent jobs and more than 1,000 jobs during construction.

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PJM Generators Say BRA Results Show Market Dysfunction

Generation owners in PJM say that declining capacity prices and market participation in the Base Residual Auction, as shown by the results posted by the RTO on Monday, demonstrate underlying issues with the market.

“The auction results provide a long list of troubling indicators: supplier participation is down; more regions are in need of more capacity than they have; coal, wind, hydro and demand response are all leaving the market; and clearing prices are at near historic lows,” said Glen Thomas, president of the PJM Power Providers (P3).

Prices in the Rest of RTO region fell 18% to $28.92/MW-day from $34.13 in the previous auction, though the overall cost to procure the 140,416 MW in capacity cleared in the auction remained approximately the same at $2.2 billion because of higher prices in five constrained regions. (See PJM Capacity Prices Jump in 5 Regions.)

Pointing to a white paper released by PJM last week that raised reliability concerns with the pace of new generation construction and retirements, Thomas said declining prices show a disconnect in the market. (See PJM Board Initiates Fast-track Process to Address Reliability.)

Capacity Prices (PJM) Content.jpgCapacity prices declined in the auction results released by PJM on Feb. 27. | PJM

“The tragic irony in all of this is that these results were announced just days after PJM published a report warning of looming reliability risks at least partially caused by the accelerated retirement of dispatchable generation necessary to maintain reliability,” he said. “Clearly, there is a disconnect between the market’s rules and outcomes it needs to produce to maintain reliability, and that must be fixed if PJM is interested in retaining the resources it has and incenting construction of the resources it will require as the reliability threats begin to emerge in the coming years.”

Following the posting of auction results, the Electric Power Supply Association (EPSA) said that it is satisfied enough capacity was procured, but the clearing prices still show a need for market changes.

“Once again, the results of this BRA demonstrate the need for a clear price signal for capacity resources,” the organization said. “The market must be designed properly and avoid rule changes intended to accommodate specific preferred resources or technologies. EPSA has long called on PJM leadership, policymakers and regulators to address the serious foundational issues at hand, and we stand ready to continue to provide recommendations and work collaboratively to forge a solution.”

Some of those same concerns were raised by stakeholders in the Resource Adequacy Senior Task Force on Tuesday as they embarked on discussions of how to create market design proposals in response to a letter from the PJM Board of Managers. The board published the letter concurrent with PJM’s white paper announcing a fast-track process for addressing concerns raised by the report and stakeholders in recent months. (See PJM Board Initiates Fast-track Process to Address Reliability.)

Stakeholders said the capacity prices, some of the lowest the RTO has seen, underline the importance of their work and implementing new rules as soon as possible. Much of the discussion centered around balancing the urgency some see in putting those new rules in place with the disruption of potential auction delays that may be necessary to do so.

Constellation and Vistra Report Cleared Capacity

Constellation Energy (NASDAQ:CEG) reported to the U.S. Securities and Exchange Commission that it had cleared 18,725 MW in the auction, nearly the same as its 2023/24 auction figures. Its nuclear fleet cleared 25 MW lower than the previous auction, when its Byron, Dresden and Quad Cities facilities returned to the market.

Vistra (NYSE:VST) announced that it had cleared 6,905 MW at a $43.25/MW-day weighted average clearing price. The company projects it will receive approximately $109 million in capacity revenues for the 2024/25 delivery year, as well as an additional $11 million to $15 million in existing retail and bilateral sales. Total revenues for the year are estimated at $120 million to $124 million, down from 2023/24, which was projected at $164 million to $169 million following the June auction.

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SERC Webinar Highlights Internal Control Issues

It should be “no surprise” that PRC-005-6 (Protection system, automatic reclosing, and sudden pressure relaying maintenance) and FAC-008-5 (Facility ratings) were the most violated operation and planning standards in SERC’s footprint last year, senior compliance engineer Miles Albritton told SERC Reliability’s Operation and Planning Spring Reliability Webinar Tuesday.

“With literally tens of thousands of devices in the field that require an inspection once a month, once a quarter, [or] annually … there are going to be some missing. However, with the right tools in place you can reduce the number of these misses,” Albritton said about the PRC-005-6 violations. Requirement R3 of the standard, which requires transmission owners, generator owners, and distribution providers to follow minimum maintenance schedules for certain equipment, accounted for 19 of the standard’s 20 violations in 2022.

“The same is true with FAC-008-5,” where the most violated requirement was R6, which directs transmission owners and generator owners to have facility ratings that are consistent with an established methodology, he said. “There are tens of thousands of elements in the field that have facility ratings, and these facility ratings can easily get altered, especially during restoration after a winter or summer storm. … As we all know, there are lots of opportunities for failure.”

O and P Violations Reported (SERC) Content.jpgRequirement R3 of PRC-005-6 accounted for all but one violation of the standard in 2022, with the last attributed to Requirement R1. | SERC

 

SERC holds the O&P webinar each spring to give staff at registered entities a chance to discuss recent changes in NERC’s reliability standards and trends the regional entity has seen in its audits in the past year. While the event included discussions on improving entities’ compliance with standards, presenters emphasized that the goal was to encourage entities to go beyond the bare minimum and develop a robust security culture.

“No one really gets up and says, ‘I’m going to be compliant today!’” said Tim Ponseti, SERC’s vice president of operations. “But you do get up and get excited about being safe, about being reliable, about being secure.”

Albritton acknowledged that SERC recorded violations of a “cornucopia” of standards last year but said PRC-005-6 and FAC-008-5 stood out. The first because it and its predecessors have been the most-violated standards over the last five years, and the second because it was the subject of an “influx of self-reports … across the entire ERO footprint” in 2022.

Violations of PRC-005-6 are frequently associated with failures of battery maintenance, with Albritton pointing to “simple [actions] like checking the electrolyte levels or checking for unintentional grounds” that are “easily fixed with a secondary peer review.” Albritton said the primary causes for FAC-008-5 violations are lack of internal controls, an “insufficient change management process, and training, not only for the field but for everybody in the change management process.”

“Change management internal controls are your friend. Many PRC-005, PRC-023, [and] FAC-008 noncompliances could be prevented with good … internal controls,” Albritton said. “Remember to test and audit the effectiveness of your internal controls; don’t just implement them and leave them on cruise control. You have to be able to test them on a periodic basis to make sure that they are still functioning.”

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Sierra Club Report Pins New England’s High Prices on Gas Reliance

New England’s over-reliance on gas-fired power is the cause of big spikes in electricity prices this winter, the Sierra Club said in a paper published Tuesday.

The report “Fossil-Fueled Rates,” by the consulting firm Strategen, argues for increasing renewable generation and electrification to help customers save money, using this winter and its high prices as a case study.

“Far from being a reason to delay or avoid electrification, the recent electricity price spikes in New England ultimately demonstrate the risks of continuing to depend on an energy system reliant on volatile commodities like fossil gas,” the report says.

According to the Sierra Club’s Sarah Krame, the environmental group commissioned the paper to help educate policymakers and ratepayers about why electric bills have been so high this winter.

“We’ve all noticed the skyrocketing price of electricity in New England. It’s obviously an area of concern, and we’ve heard the concern expressed from policymakers: ‘How can we promote electrification if the price of electricity is so high?’” said Krame, a staff attorney for the Sierra Club’s environmental law program. “I think this paper is really helpful in highlighting that the cost of electricity is very high because we’re over-reliant on fossil gas.”

The paper also tries to explain why the impacts on gas rates have been muted compared to electricity prices, laying out the process through which gas utilities “true up” prices up to a year after incurring their costs.

Customers might feel the impact of volatility later in their gas bills, even though they’ve been relatively stable compared to electricity bills so far this winter, Krame said.

The Sierra Club and Strategen said the solution to the high prices is to build more renewables with lower marginal costs, and then electrify.

In the first three months of 2022, wholesale power prices in New England rose to an average of $137/MWh, an 83% increase over 2021, according to ISO-NE data. Eversource Energy doubled its residential electric supply rate from 12.1 cents/kWh to 24.2 cents/kWh for its customers in Massachusetts and Connecticut. 

Rates were especially high in New England because of its reliance on gas, the report argues; the proportion of gas in New England’s fuel mix is roughly 20% higher than the percentage in the country’s fuel mix as a whole. The average settlement price at Henry Hub in January 2022 was up 62% from January 2021.  In New England, the report says, the hike was even more pronounced: “Gas prices in New England in January 2022 were approximately 400% higher than they were in January 2021.”

Renewables have “lower marginal production costs” than gas, the report notes. 

“As wholesale power prices become less heavily influenced by fossil gas costs, customers will have an opportunity to further reduce their exposure to gas cost spikes by electrifying appliances that currently run on fossil gas directly,” the paper says.

Electrification “can eliminate up to 100% of a customer’s direct gas demand, providing a pathway to completely remove New England residents’ dependence on the fuel,” it continued.

Strategen’s Brad Cebulko, one of the report’s authors, said in a statement that “transitioning New England’s electric supply to clean, abundant renewable energy sources and prioritizing the electrification of residential energy needs holds the promise to pay considerable and enduring dividends to residents for decades to come.”