Dominion Energy is embarking on a “top-to-bottom” review of its investments and operations to address underperforming share values, the company announced during its third-quarter earnings call Friday.
“Fundamentally we took a look at how we’re doing — how our share price is doing — and the market is telling us that we’re not performing the way investors expect, so we think it merits a complete review from top to bottom,” Dominion CEO Robert Blue said during the call. The company started the year with a share price of $80.21 and has seen that fall over the past three months to $67.13.
The review will include looking at investments in businesses that may be considered “non-strategic” and exploring unregulated investment activities and initiatives. Blue said that the possible changes, however, are not likely to impact the “core earnings growth driver of this company: the continued execution of what we view as an industry leading, highly visible regulated decarbonization growth capital investment opportunity.”
Despite the decline in share value, Blue noted that operating earnings per share are above the midpoint of the company’s quarterly guidance range and said the company is well positioned to meet its annual expectations. It is setting expectations for 98 cents to $1.13 in earnings per share and has narrowed annual 2022 operating earnings to be between $4.03 and $4.18, with the midpoint remaining the same as its original guidance, according to the company’s announcement of the earnings report.
Blue also said the company has “been steadily executing on our investment programs focused on decarbonization. This successful execution is already benefiting our customers, communities, the environment and our investors.”
The company reported $778 million in net income ($0.91/share), compared to $654 million ($0.79/share) for the third quarter of 2021.
Steve Fleishman of Wolfe Research questioned what reasons Dominion believes could be behind its stock performance.
Responding to an analyst’s question about what has driven the company’s stock price, Blue said, “Investors are telling us … what they’re looking for is predictability. What they’re looking for is earnings quality.”
Coastal Virginia Offshore Wind Project Remains on Track
Work on Dominion’s $9.8 billion Coastal Virginia Offshore Wind (CVOW) project is continuing according to schedule, with onshore construction projected to begin in the third quarter of 2023 and offshore work starting in second quarter 2024. Completion of the 2.6-GW project is expected in late 2026, according to Blue’s presentation.
“Development of the project has continued uninterrupted to maintain the project’s schedule, and we expect over 90% of the project costs, excluding contingency, to be fixed by the end of the first quarter 2023 at the latest, as compared to about 75% today,” Blue said.
The company’s turbine installation vessel is more than 60% complete, and it expects it to be in service ahead of the 2024 turbine installation season, Blue said. There are currently no changes to the estimated installation cost, lifetime capacity factor or levelized cost of electricity.
A draft environmental impact statement is anticipated from the U.S. Bureau of Ocean Energy Management, which is also expected to release a record of decision in mid-2023.
The company recently signed a settlement agreement with several parties, filed with the Virginia State Corporation Commission (SCC), that proposes an alternative to the performance requirement ordered by the commission in August. The proposed agreement would supplement the requirement — which Blue had called “untenable” — with a review process in which the company explains any capacity shortfalls and the commission can determine remedies. (See Dominion, Va. Stakeholders File Settlement over Performance Req for OSW Project.)
The agreement also contains consumer protections for possible construction cost overruns. The other parties to the proposal are Virginia Attorney General Jason Miyares, the Sierra Club, Walmart and environmental advocacy organization Appalachian Voices.
“The agreement provides a balanced and reasonable approach that allows the project to continue moving forward to meet the commonwealth’s public policy and economic development priorities and the needs of our customers,” Blue said during the earnings call. “If approved, significant customer benefits include protection from unforeseen increases in construction costs above the project’s budget and enhanced SCC review of performance in lieu of a performance guarantee. We look forward to a decision from the SCC later this year.”
Blue said the completion of the project will be a boon to the local economy and jumpstart the development of further offshore wind projects drawing off upgrades at the Port of Virginia’s Portsmouth Marine Terminal to support OSW installations. (See Dominion Secures 10-Year Va. Port Lease for OSW Staging.)
Steven Ridge Promoted to CFO
Blue also announced the promotion of Steven Ridge, who currently manages Dominion’s Western natural gas distribution operations, to take the place of James Chapman as chief financial officer. Chapman is leaving the company to become treasurer at ExxonMobil.
Ridge “has a wealth of experience in finance, is well known to many of our investors and is a strong, capable leader. We are very fortunate to have him in this new role,” Blue said.
The outcome of Tuesday’s election will have minimal impact on U.S. leadership and action on climate change because “the market has made its decision,” Special Climate Envoy John Kerry said Tuesday at the 27th UN Climate Change Conference of the Parties (COP27) in Sharm el-Sheikh, Egypt.
“President Biden is more determined than ever to continue what we’re doing [on climate],” Kerry said at the opening of the U.S. Center Pavilion at the conference. “And most of what we’re doing cannot be changed by anybody else because much of it has to do with working with the private sector, with the marketplace.”
The role of the private sector and other “nonstate actors” — cities, states, nonprofits, schools and research organizations — took center stage at COP27 Tuesday as a range of global leaders acknowledged the critical role they play in the implementation of clean energy projects and other climate action.
Launching the Sharm el-Sheikh Adaptation Agenda, COP27 President Sameh Shoukry called on countries and nonstate stakeholders “to get behind this crucial agenda. It is the firm conviction of the COP27 presidency that nonparty stakeholders need to not only be part of the discussion but part of the action.”
The agenda provides a set of critical initiatives and outcomes needed to promote climate adaptation in an estimated 4,000 “climate-vulnerable communities” by 2030. It defines adaptation as “the process for human and natural ecosystems to adjust to actual or expected climate change and its effects in order to moderate harm or exploit potential benefits.”
For example, one of the goals set for infrastructure adaptation is the deployment of “585 GW of battery storage capacity and extension of transmission and distribution networks [to] enable decentralized generation and consumption.”
Simon Stiell, executive secretary of the UN Framework Convention on Climate Change, talked up the agency’s Global Climate Action Tracker, which monitors climate pledges and progress for thousands of cities, regions, businesses and investors worldwide.
But, he said, “delivery is not a singular moment; delivery is a compilation of many moments, added together, that make change. … We need clear standards to assess the net-zero commitments of nonstate actors and measure progress,” he said, calling on private and public entities to establish “a clear and credible process to put all climate action on the track that science has identified.”
Kerry pointed to America Is All In, a coalition of hundreds of cities, counties, businesses, schools, churches and cultural institutions that pledged their commitment to the Paris climate accords — and the goal of limiting global warming to 1.5 degrees Celsius — after former President Donald Trump pulled the U.S. out of the agreement in 2017.
Biden rejoined upon taking office in 2021.
“If you think about it, the place that we have to go to reduce our energy consumption is the cities, because energy is used by people; that’s where people live,” said Michael Bloomberg, UN special envoy for climate ambition and solutions and one of the founders of America Is All In. “After all, local leaders are the ones that turn global pledges into action.”
He and Kerry announced a new partnership between the U.S. State Department and Bloomberg Philanthropies, dubbed the Subnational Climate Action Leaders Exchange (SCALE). With $3 million in funding — $1.5 million each from the State Department and Bloomberg — the initiative will “support cities, states and regions in the development and implementation of net-zero policy, and they’re going to change our entire approach,” Kerry said.
Bloomberg sees the partnership driving “more bottom-up, collaborative progress,” both in the U.S. and other countries. “We’ve seen how much progress is possible when cities, states and businesses take the lead and get the support they need,” he said,
“It is in the interest of all nations to develop their own clean energy systems, and cities, states, regions and businesses can help pave the way forward,” he said.
‘Lies, Lies and More Lies’
Nonstate actors, particularly young climate activists, also play an important role as climate gadflies, calling government and corporate inaction to account.
Sophia Kianni started translating climate change information into Farsi while still in middle school and visiting family in Iran. She started Climate Cardinals in 2020, after graduating from high school, and the nonprofit has mobilized thousands of students worldwide to translate climate reports into more than 100 languages.
Speaking in Sharm el-Sheikh, Kianni slammed some government and business leaders “for saying one thing but doing another.”
“On top of the emissions gap, we have an honesty gap,” she said. “Which is why we are here today, to define what real action is … to prevent leaders from being able to create loopholes, creative accounting and lies, lies and more lies.”
Shoukry acknowledged that Kianni’s criticisms are “well-founded, and it is up to us to shoulder the responsibility of proving her wrong.” He encouraged nonstate actors to continue their work to “keep the parties honest and true to their commitments.”
Finance Reform Now
But honesty and political will cannot achieve climate goals, particularly in developing countries, without climate finance, which has become a major focus for nonstate financial institutions and philanthropies.
“I have a 14-year-old daughter who was asking me as I was coming here, ‘Does any of this actually matter?’ said Rajiv J. Shah, president of the Rockefeller Foundation. “The answer is, it only matters if we follow up on what we say we’re doing and deliver results and outcomes.”
Last year, the Rockefeller Foundation joined with 18 other partners in an $11 billion collaboration, the Global Energy Alliance for People and Planet, “to reach 1 billion people who don’t have access to effective renewable electrification with power,” Shah said during a Tuesday panel discussion on climate finance. To date, “we’ve spent $340 million of that money that has unlocked $3 to $4 billion from our partners.”
Echoing leaders from developing countries, Shah also called for reform of international finance institutions “that were set up after World War II to support Western Europe’s reconstruction. … We need to transform that system, and we need to do it now.”
Shah pointed to the Bridgetown Initiative, a set of reform recommendations aimed at increasing “concessional” — below-market-rate — financing for developing countries while also easing debt pressures. Led by Barbados Prime Minister Mia Mottley, the recommendations include extending concessional funding, usually reserved for very low-income countries, to middle-income countries with significant low-income populations.
The initiative is “an actionable plan … that will unlock hundreds of billions of dollars of new liquidity for developing economies,” Shad said. “We need to apply real political pressure to make sure that happens in 2023.”
Climate finance is also on a list of priorities for the U.S. mission at Sharm el-Sheikh, Kerry said in his remarks at the U.S. Center opening. “We will enhance cooperation on reduction of emissions, on adaptation, on climate finance, on technology development, on loss and damage and other parts of the Paris agreement and Glasgow climate pact.”
President Joe Biden “is deeply committed to making certain that we the developed countries, we the largest economy in the world, the second largest emitter, have a special responsibility to less developed nations, to third world, to the south. We need to do, and we will do what is necessary to make sure this is a just transition. That is imperative for everybody.”
Participants in CAISO’s Western Energy Imbalance Market saw a record $526 million in benefits in the third quarter of 2022 as the market approached $3 billion in total benefits, six months after it passed the $2 billion mark.
The results outstripped the next highest quarter, Q3 2021, by $225 million. The new record was the result of more participants in the interstate WEIM and “economical transfers displacing more expensive generation,” especially during September’s Western heat wave, CAISO said in its third-quarter report Oct. 31.
“Resource sharing among WEIM participants during this summer’s extraordinary 10-day heat wave provided meaningful economic benefits while helping maintain reliability for millions of consumers in the West,” Stacey Crowley, CAISO vice president of external affairs, said in a news release.
The Balancing Authority of Northern California (BANC) had more than $111 million in benefits in Q3. BANC consists of inland areas where temperatures set records in September. One BANC member, Sacramento Municipal Utility District, warned customers of potential outages as the high hit 116 degrees Fahrenheit in Sacramento on Sept. 6.
Other BANC members, such as Modesto Irrigation District and Turlock Irrigation District, also dealt with record-high temperatures and soaring demand.
PacifiCorp obtained $84.5 million in benefits last quarter, while CAISO saw $66 million in benefits. Other large beneficiaries included Southwest utilities NV Energy ($62 million), Arizona Public Service ($36 million) and Tucson Electric Power ($27 million).
The third quarter was the first full quarter of WEIM participation for Tucson Electric Power and the Bonneville Power Administration, which obtained a bit more than $9 million in benefits.
With 19 participants, the WEIM “finds and delivers the lowest-cost resources to meet immediate power needs and manages congestion on transmission lines to maintain grid reliability,” the news release said.
CAISO expects the WEIM to encompass 80% of load in the Western Interconnection by next year, after the entry of new participants El Paso Electric Co. and the Western Area Power Administration’s Desert Southwest Region.
Since WEIM began operations in November 2014, its cumulative economic benefits have totaled $2.91 billion, the ISO said.
“The measured benefits of participation in the WEIM include cost savings, increased integration of renewable energy, and improved operational efficiencies, including the reduction of the need for real-time flexible reserves,” CAISO said in its quarterly report.
WEIM surpassed $2 billion in cumulative benefits in Q1 2022, 20 months after it reached $1 billion in total benefits. The entry of new participants accelerated and compounded the market’s overall benefits, the ISO said at the time.
CAISO has cited the economic benefits of the real-time WEIM as reason for utilities to join its proposed expanded day-ahead market (EDAM), which it hopes to bring before its board of governors and the WEIM’s Governing Body in December.
VALLEY FORGE, Pa. — The PJM Operating Committee last week endorsed the winter weekly reserve target (WWRT) values, used to coordinate planned outages scheduled during winter, as recommended in the 2022 reserve requirement study (RRS).
The RRS also recommends values for the installed reserve margin and the forecast pool requirement, both of which were approved by the Markets and Reliability Committee on Oct. 24.
The WWRT is used to cover against uncertainties associated with load and forced outages during the winter month with a large enough reserve to handle any contingencies.
This year’s study recommended a reserve of 21% for December, 27% for January and 23% for February.
“When we get to the winter period, we want to make sure that the available reserves are sufficient so that we can handle those uncertainties,” PJM’s Patricio Rocha Garrido said. The values are fairly similar to last year’s, he said.
Maximum Emergency Status Change Advances to MRC
The committee endorsed changes to Manual 13 to allow coal generation owners to offer their units as maximum emergency if their fuel inventories fall below 10 days because of issues outside their control and not relating to economic decisions. The proposal is set to go before the MRC for endorsement on Nov. 16.
For a unit to be able to enter into maximum emergency under the proposal, PJM cannot have declared a hot or cold weather alert or conservative operations, and the RTO can deny the use for any reason. A unit granted maximum emergency can remain in that state until they have 21 days of fuel inventory or until either of the previous conditions are met.
Independent Market Monitor Joe Bowring said the proposal could effectively put PJM in the position of managing the fuel supply risk on behalf of companies.
Synchronized Reserve Dispatch
The committee approved a revised problem statement and issue charge by acclamation to examine synchronized reserve event actions.
The issue charge argues that during an all-call to deploy synchronized reserves, the “market tools for dispatching resources based on economic order are not consistently utilized.” Additional lack of clarity around the process for approving real-time security-constrained economic dispatch around a synchronized reserve event presents challenges that the work stemming from the issue charge would attempt to resolve.
The revisions made to the issue charge include education on FERC responses to filings on synchronized reserve deployment and evaluating pricing throughout the deployment events.
Monitor Presents CIP Cost Recovery Proposal
Bowring presented a slate of proposed revisions to PJM’s issue charge on cost recovery for facilities identified as critical infrastructure, which he said would address the issue charge moving too far into the direction of proposing solutions.
The modified issue charge was initially listed under the OC’s first reads, but it was moved to the informational items because no member sponsored the item. Motions to do so will be considered at the committee’s next meeting.
Bowring also suggested in the revisions that it should be considered whether non-market approaches under the expected deliverables should be used, even though he believes they shouldn’t.
PJM Presents Winter Capacity and Load Projections
PJM’s Todd Bickel presented the Operations Assessment Task Force study of the capacity projections for the upcoming winter season, which found that the RTO is expected to meet the 30-minute reserve requirement of 3 GW, while having an additional 14 GW on hand.
No reliability issues were identified for the base case and N-1 analysis, though re-dispatching and switching is expected to be required in some areas to control local thermal or voltage violations.
The results of PJM’s Operations Assessment Task Force 2022-23 Winter Study show the RTO is expected to have adequate reserves through the upcoming winter season. | PJM
“For this winter we have sufficient margins and no reliability concerns,” Bickel said.
There is expected to be 168.1 GW of capacity available this winter, which is offset by 16,510 MW of discrete generator outages. There is also expected to be 4,200 MW lost in net interchange, and 6,100 MW which could be unavailable should there be no wind and solar available. The largest gas/electric contingency is expected to amount to 6,200 MW in capacity that could be unavailable.
The Load Analysis Subcommittee’s forecasted peak load is 136.9 GW, while the 90/10 diversified load is projected at 143.8 GW.
Fuel Inventories Remain a Concern
Fuel inventories are overall improving, though natural gas prices remain volatile, and the possibility of a railroad strike makes coal transportation a concern, according to PJM Principal Fuel Strategist Brian Fitzpatrick.
According to the latest Energy Information Administration update, the natural gas storage deficit is now 3.7% below the five-year average, compared to 5.5% in its previous update, Fitzpatrick said. PJM expects that the starting winter inventory will be around 2.5% below the five-year average.
Coal and oil reserves, as shown in GWh of fuel inventory, remain below their 5-year averages according to PJM’s fuel supply update. | PJM
Coal production remains high, he said, but prices remain significantly elevated over the first half of 2021. EIA remains optimistic about inventories, but there are many contingencies that could “derail” those expectations. Chief among the concerns is the possibility of a railroad strike as half of unions in the industry have yet to ratify a contract, with a Nov. 17 deadline approaching.
“It certainly could be a crippling effect,” Fitzpatrick said.
Distillate and residual fuel oil inventory also remain below their five-year averages, and price volatility remains high, with prices in the $80 to $90/barrel range. Recession fears, a strong U.S. dollar, low inventories and geopolitical tension are all driving prices, but Fitzpatrick said there are no specific concerns at this time.
PJM Cybersecurity Update
PJM Chief Information Security Officer Steve McElwee said distributed denial of service attacks remain one of the most prominent digital security issues being seen at this time as offensives continue against NATO allies. While the RTO may not be the primary target, he said there could be collateral impacts seen as the Russian invasion of Ukraine continues.
The RTO is also exploring ways to collect contacts for members’ security teams so that in the event of an emergency, that information is more readily at hand. While those contacts are currently asked for in the contact management feature, it is not mandatory to provide and has primarily been used for invitations to events like conferences.
Massachusetts regulators have rejected developers’ requests to pause the review of their power purchase agreements for two planned offshore wind projects.
So the companies say they will look for other ways to push forward plans for the 1.2-GW Commonwealth Wind and 405-MW Mayflower Wind projects, which they say are no longer financially viable under the PPAs negotiated with Eversource (NYSE:ES), National Grid (NYSE:NGG) and Unitil (NYSE:UTL).
Avangrid asked the Massachusetts Department of Public Utilities for a one-month suspension of review on Oct. 20. Mayflower followed on Oct. 27. (See Mass. DPU Hears Opposing Views on OSW Finances.)
The DPU denied the requests in an interlocutory order on Nov. 4, saying developers could either move forward with their contractual obligations under the negotiated PPAs or file a request to dismiss the proceedings.
Avangrid spokesperson Craig Gilvarg told RTO Insider Monday that the company “can present a proposal that would return the project to economic viability while still delivering transformational economic investments, significant job creation, and cost-savings to ratepayers, and intends to present that information to the Baker-Polito administration, regulatory officials, the Attorney General’s Office, and the Massachusetts electric distribution companies in the coming days.”
Mayflower told DPU on Nov. 7 that it would move forward with the PPAs but still would seek to resolve the cost issues that led it to request the pause, starting by submitting third-party analysis of the terms.
In its request for a delay, Avangrid said inflation, supply chain constraints and other factors had changed the economics of the project. In a Nov. 1 affidavit to the DPU, Senior VP for Offshore Projects Saygin Oytan said the anticipated cost had increased by hundreds of millions of dollars, giving the project negative value and making it financially unviable.
Mayflower Wind submitted comment supporting Commonwealth’s motion and submitted a similar motion about its own project.
The DPU replied that the PPAs appear to have been negotiated in good faith. Renegotiating them now, at considerable delay, would be tantamount to starting the proceeding over again, the DPU said.
The DPU also faulted Commonwealth on its timing, saying DPU staff spent several months “expending precious resources” to review the proposed PPAs. But Avangrid did not flag these agreements as unviable until Oct. 20, even though their non-viability is based on cost factors that became apparent well before Oct. 20.
DPU noted that Avangrid discussed its concerns with financial analysts Sept. 22.
With their revenues burgeoning from Russia’s invasion of Ukraine, fossil fuel companies around the globe should be required to put some of their billions in profits into the fight against climate change, key world leaders said at the U.N. 27th Conference of the Parties (COP27) in Sharm el-Sheikh, Egypt, on Monday.
U.N. Secretary-General António Guterres said he was “asking that all governments tax the windfall profits of fossil fuel companies. Let’s redirect that money to people struggling with rising food and energy prices and to countries suffering loss and damage cause by the climate crisis.”
“Loss and damage can no longer be swept under the rug,” Guterres said. “It is a moral imperative. It is a fundamental question of international solidarity and climate justice.”
The issue, officially on the agenda in Sharm el-Sheikh, has been a flashpoint between developed and developing countries almost since the Paris Agreement was signed at COP21 in 2015.
A “clear, time-bound roadmap” on loss and damage is needed, Guterres said, which will be “reflective of the scale and urgency of the challenge [and] deliver effective institutional arrangements for financing.”
He also called for a universal early warning system to alert countries to extreme weather events intensified by climate change.
Barbados Prime Minister Mia Mottley | UNFCCC/COP27
Barbados Prime Minister Mia Mottley said that “non-state actors and the stakeholders — the oil and gas companies and those that facilitate them — need to be brought into a special convocation” between now and next year’s COP28 in the United Arab Emirates (UAE).
“How do companies make [billions] in profits in the last three months and not expect to contribute at least 10 cents in every dollar of profit to a loss-and-damage fund?” Mottley said. “This is what our people expect.”
Former U.S. Vice President Al Gore said the trillions of dollars needed for climate finance, including loss and damage, “can only be provided by the private sector … by unlocking private access to private capital” and revamping the world banking system.
He also called for a halt to new fossil fuel development — the “dash for gas” — in response to the fuel shortages caused by Russia’s invasion of Ukraine. “At a time of turbulence in the global energy markets, the wealthy nations of the world should not confuse the short term with the long term,” Gore said. They “should not be fooled by the absolute need to backfill the shortage of fossil energy caused by the cruel and evil war launched by Russia in Ukraine as an excuse for locking in long-term commitments to even more dependence and addiction on fossil fuels.”
The second day of COP27 opened with videos of floods, hurricanes and other natural disasters exacerbated by climate change and the catastrophic impact these events are having on people’s lives. With a focus on Africa and developing countries in the southern hemisphere in general, speakers called for immediate, concrete action, laying out the key themes that will likely dominate the conference over the next two weeks.
One after the other, they spoke of the need to relieve the suffering caused by climate change with a global agenda that prioritizes steep emission reductions and recognizes the responsibility of developed countries to provide more equitable support for developing countries by reforming international finance.
Abdel Fattah el-Sisi
As the first to speak on Monday, Egyptian President Abdel Fattah el-Sisi began by telling leaders that people around the world were watching them, hoping for “an environment healthier for development, for life, for workers and more respectful of the diminishing resources of the planet.”
“They want a rapid, concrete implementation of genuine, practical, concrete actions to reduce emissions; to reinforce the ability to adapt; to guarantee the funding necessary for developing countries who today are suffering more than others the consequences of these crises,” he said.
While not providing details, el-Sisi said his country is “determined to focus on and increase investment in key green areas.”
He also emphasized the need for trust-building between developed and developing countries, saying the priorities of developing countries of Africa “must be taken into account. … This will inspire trust in our ability to achieve our goals. That trust, that mutual or multilateral trust will be the best guarantee of our success, the best guarantee of progress and of achieving our goals.”
El-Sisi also appealed for an end to the war in Ukraine.
“The entire world is suffering because of the war between Russia and Ukraine,” he said. “Please allow me to say this in all respect: This war must stop, and the suffering it has caused must finish.”
Solidarity or ‘Suicide Pact’
Secretary-General Guterres, an outspoken advocate for climate action, warned that with “greenhouse gas emissions and global temperatures continu[ing] to rise … and our planet is fast approaching tipping points that will make climate chaos irreversible.”
“We are on a highway to climate hell, with our foot still on the accelerator,” he said, calling for the phasing out of coal in developed countries by 2030 “and everywhere else by 2040.”
While acknowledging the devastating impacts of the war in Ukraine and other global crises, Guterres said, “We cannot accept that our attention is not focused on climate change. It is unacceptable, outrageous and self-defeating to put it on the back burner. Indeed, many of today’s conflicts are linked with growing climate chaos.”
To keep global warming to 1.5 degrees Celsius, the target set in the Paris Agreement, Guterres proposed “a historic pact between developed and developing economies and especially between developed and emerging economies — a climate solidarity pact … in which all countries make an extra effort to reduce emissions this decade in line with 1.5 degrees; a pact in which wealthier countries and international financial institutions provide financial and technical assistance to help emerging economies speed their own renewable energy transition.
“The two largest economies, the United States and China, have a particular responsibility to join efforts to make this pact a reality,” he said. “This is our only hope of meeting our climate goals. … It is either a climate solidarity pact, or a collective suicide pact.”
UAE Pledges Green Investments, Continued Oil Production
Sheikh Mohamed bin Zayed Al Nahyan, president of the UAE, embodies the complexities of climate action in a world still heavily dependent on fossil fuels. Taking the dais at COP27, he spoke of his country’s efforts to balance being “a responsible supplier” of oil and gas with “lowering carbon emissions emanating from this sector.”
“Geology has its own logic,” he said, noting that the UAE has “among the least carbon-intensive oil and gas around the world.” He said his country would continue to produce fossil fuels for as long as the world needs them.
But the UAE is also diversifying its economy with new renewable resources and clean energy and has set a 2050 target for carbon neutrality, Al Nahyan said. The country recently announced a new partnership with the U.S. aimed at providing $100 billion in investments “to produce 100 GW of clean energy in various parts of the world.”
Next year’s COP in Dubai will focus “on supporting the implementation of the outcomes of the previous COPs,” Al Nahyan said. “We will also focus on engaging everybody, all stakeholders, with adequate representation of women and also making sure that youth from around the world will [take part] and also further promote their enthusiasm for sustainable solutions.”
Al Gore Preaches
Gore, the former vice president turned climate activist, came to Sharm el-Sheikh ready to preach.
Humanity is facing a choice, he said, between blessings and curses; life and death. “Today we can continue the culture of death that surrounds our addiction to fossil fuels by digging up dead lifeforms from eons ago and burning them recklessly in ways that create more death,” Gore said.
Former Vice President Al Gore | UNFCCC/COP27
Continued global warming poses a threat to democratic governments, he said. “Experts are predicting as many as 1 billion climate migrants crossing international borders in the balance of this century. Think of the millions that are crossing borders now and the xenophobia and authoritarian populism that is caused by large surges of refugees, “ he said.
“Then imagine, if you will, what a billion climate refugees would do. It would end the possibilities of self-governance,” he said.
But Gore also sees hope in the growth and falling prices of renewable energy and the passage of the Inflation Reduction Act, calling it “the biggest and most ambitious climate legislation in the history of the world.”
“If we absolutely do reach true net zero, the scientists tell us temperatures will stop going up with a lag time of as little as three to five years,” he said. “And if we stay at true net zero, half of the manmade CO2 will fall out of the atmosphere in as little as 25 to 30 years.”
Barbados PM: Faster Action Needed
Barbados’ Mottley, an advocate for island and developing nations, questioned why the world is not making faster progress on climate action.
“We’re in the country that built pyramids,” she said in her closing speech Monday. “We know what it is to remove slavery from our civilization. We know what it is to be able to find a vaccine within two years when a pandemic hits. … But the simple political will that is necessary, not just to come here and make promises, but to deliver on them and to make a definable difference in the lives of people who we have a responsibility to serve seems still not to be capable of being produced,” she said.
Her small island nation has high climate ambitions, but has been unable to deliver on them, hampered by global industrial and financial structures, Mottley said.
“Our ability to access electric cars and our ability to access batteries or photovoltaic panels are constrained by those countries that have that dominant presence and can produce for themselves,” she said. “The global south remains at the mercy of the global north on these issues.”
Interest rates for clean energy projects in developed countries are much lower than those for projects in developing countries, she said. Countries that cannot get financing for clean energy projects are often forced to depend on natural gas, she said. The multinational development banks must be changed to have “a different view to risk appetite” and “other ways to expand the lending that is available from millions to trillions,” she said.
Needed financial reforms include “natural disaster and pandemic clauses” in debt agreements, which would put a two-year pause on debt repayments so that developing countries recovering from a disaster or pandemic have “flexibility in the first two years to address issues of loss and damage,” she said.
FERC has approved an SPP proposal that establishes a way for “byway” transmission projects to be allocated across the RTO’s entire footprint on a case-by-case basis.
Under current rules, SPP allocates one-third of the cost of byway projects — lines rated at 100 to 300 kV — to the RTO’s full footprint, with customers in the transmission pricing zone where the project is built being allocated the rest. “Highway” projects — those larger than 300 kV — are allocated RTO-wide.
The new process allows entities to seek exceptions to the RTO’s cost-allocation process for byway facilities, addressing a growing issue for ratepayers in transmission zones where most of the power being generated is exported to other areas (ER22-1846).
In a 3-2 decision issued Oct. 28, the commission found that the proposal will help ensure that SPP’s “byway” facility costs are allocated roughly commensurate with estimated benefits, consistent with FERC’s cost-causation principle. The order is effective Aug. 1, 2022.
Commissioners James Danly and Mark Christie dissented from the order, saying it forces some states to pay for other states’ renewable energy policies. Kansas was the only one of the 14 states in SPP’s footprint to support the order at FERC.
Al Tamimi, vice president of transmission policy and planning for Sunflower Electric Power, said the order addresses the changes necessary to align costs and benefits for local zones with renewable energy that exceeds the zones’ peak loads and is exported to other zones in SPP.
“In renewable-rich zones, the function of the byway transmission facilities has changed from mainly serving local loads to now carrying and exporting regional flows … where the byway facilities function as a regional flow carrier,” Tamimi told RTO Insider. “Renewable-rich areas like Sunflower Electric have experienced increased costs required to build transmission infrastructure that export substantial energy to other areas of the SPP region. The majority of the transmission costs for byway transmission facilities have been shouldered by local ratepayers versus those benefiting from the energy exports.”
Tamimi has been involved in finding relief for wind-rich zones since 2017. The Holistic Integrated Tariff Team in 2019 recommended evaluation of a narrow process through which specific projects between 100 and 300 kV could be fully allocated regionally. Transmission owners largely opposed the proposal as it wound its way through the stakeholder process, saying it would shift byway cost responsibility from wind-rich areas to others.
SPP singled out Sunflower in its request to FERC. It said the Kansas utility’s pricing zone has 3,100 MW of wind but only a 900-MW peak load.
SPP’s first attempt to gain approval was rejected last year by FERC over concerns the proposal granted the RTO’s Board of Directors too much discretion in allocating costs and did not include clear standards for making decisions. (See FERC Rejects SPP’s Cost-allocation Waiver Proposal.)
The majority in the Oct. 28 decision said Danly failed to identify any evidence to support his conclusion that SPP’s proposal is “designed to facilitate the shifting of some states’ public policy costs onto other states.” The commissioners noted that 11 of SPP’s 14 states do not have active renewable energy standards and that a majority of those that do not (seven out of eight) voted in favor of the measure at the Regional State Committee meeting.
“Such robust support for the proposal, including among states without public policies, strongly undercuts [Danly’s] claims about improper cost shifts,” the majority said. “What matters here is that SPP’s proposal establishes regional cost sharing, consistent with the cost-causation principle, where the relevant infrastructure provides significant benefits to the entire region.”
SPP Responds to Self-funding Comments
SPP on Monday responded to a protest by a group of clean energy advocates that argues the RTO’s proposal to create a standard pathway for TOs to build and profit from network upgrades necessary to bring generators online is “patently deficient” and should be rejected outright (ER22-2968).
The grid operator told FERC that it made clear in its original request that it was not proposing tariff revisions to provide for the TO self-funding option, given that this option already exists in its pro forma generator interconnection agreement. Instead, staff said, the revisions were providing details for implementing the TOs’ right to elect self-funding, including a pro forma facilities service agreement that would promote administrative efficiency and predictability for TOs and interconnection customers.
TOs would be able to recover the self-funding network upgrade costs and a return on the investment from the interconnection customer. FERC approved a similar request by MISO in 2020 (ER20-359).
The American Clean Power Association, Advanced Power Alliance, Solar Energy Industries Association, Natural Resources Defense Council and Sustainable FERC Project filed the protest in October, urging the commission to reject SPP’s request.
They said the RTO’s proposal is “wholly unsupported” and would be unjust and unreasonable if accepted. SPP has the burden under Section 205 of the Federal Power Act to demonstrate that the proposed change is just and reasonable, they said, noting that FERC can reject a filing that “patently fails to substantially comply with the applicable requirements” of its regulations.
“SPP did not submit any information to support the proposed tariff change,” the coalition said, claiming the tariff filing is “devoid” of supporting information. “The entire filing consists of a 17-page transmittal letter and the proposed revised tariff records. SPP failed to include any testimony or supporting affidavits and has failed to meet its burden under Section 205.”
PJM Presents Changes to CIR for ELCC Resources Proposal
VALLEY FORGE, Pa. — The PJM Planning Committee continued fine-tuning the five remaining packages addressing the level of capacity interconnection rights (CIRs) assigned to effective load-carrying capability (ELCC) resources on Nov. 1.
PJM’s Jonathan Kern presented changes to the RTO’s Package I to expand eligibility for transitionary headroom studies to include all resources, rather than solely ELCC generators. The studies will investigate permitting facilities to receive a higher level of temporary/annual CIRs and include energy up to this higher level when accrediting the amount of capacity they can offer for the Base Residual Auction. The increased CIRs will be based on existing headroom in the transmission system at the time the studies are conducted. Under the proposal, they would be able to do so until all transitionary interconnection study queues have been completed, in addition to the first queue under the new system. (See Stakeholders Challenge PJM in Capacity Accreditation Talks.)
A study of transmission headroom would be conducted each year before the BRA to determine how much is available and how to allocate it. Stakeholders questioned if alternatives have been considered for how to distribute that headroom among generators if requests for CIRs exceed the headroom available, such as prioritizing those units that would provide the most value to load.
Kern said the PJM proposal would prorate the headroom based on factors such as a facility’s power flow. If a study finds a generator is close to an electrical overload, it will likely be scaled down more than other units in that area. Kern indicated PJM was considering a final approach to this type of adjustment.
Expanding the use of headroom to all resources was a compromise with generation owners who felt limiting the studies to just ELCC resources was discriminatory. Tom Hoatson of LS Power said expanding the headroom studies met one of his company’s concerns with the PJM package. But he said the overriding issue is ensuring that the solution chosen is effective for next year’s June auction. He said multiple auctions have been held without the issue being resolved.
“We’re getting close to having a resolution; we’re getting close to putting this in place,” he said.
Economist Roy Shanker said it’s important that any issues that come up over the coming months don’t create delays that could prevent the new rules from being ready for the auction.
“It’s already been three auctions where what we consider an incorrect accreditation has taken place,” he said.
Ken Foladare of Tangibl said it’s likely many stakeholders will remain interested in PJM’s Package D, which he pushed to remain under consideration until the PC takes an endorsement vote. Three additional packages also remain: Package E from LS Power, Package F from Eolian and Package G from E-Cubed Policy Associates. (See “Poll Opened to Gather Support for Packages on CIR for ELCC Resources,” PJM PC/TEAC Briefs: Oct. 4, 2022.)
$50M+ in Projects Reviewed by TEAC
PJM reviewed several baseline reliability projects totaling more than $40 million as part of its reliability analysis update:
Purchasing a spare VAR 345-kV reactor for Penelec’s 345-kV Mainesburg substation at a $6.44 million price tag.
Installing two new 500-kV breakers on the existing open SVC string, which would be relocated into a new bay location at the 500-kV Black Oak substation near Rawlings, Md. The APS proposal also calls for installing a 500-kV breaker on a 500/138-kV transformer and upgrading relaying in the substation. The work is expected to cost $17.37 million with a June 1, 2027, in-service date.
Baltimore Gas and Electric and PECO Energy recommended replacing and upgrading equipment along the companies’ 500-kV Peach Bottom-Conastone circuit, which is overloaded for multiple contingencies. The recommended solution for BGE’s side of the work includes upgrading two breaker bushings on a Conastone substation, while the PECO work would involve replacing 4 meters and bus work inside the Peach Bottom substation. The total cost of the work is expected to fall at $5.8 million with an in-service date of Dec. 1, 2027.
PPL has identified that a stuck breaker contingency would result in the 500/230-kV Lackawanna transformer No. 3 being overloaded. The solution recommended is to re-terminate transformers Nos. 3 and 4 on the 230-kV side to remove them from the buses and into dedicated bay positions. The work is expected to cost $10.7 million with a Jan. 30, 2026, in-service date.
Dominion (NYSE:D) also reviewed its own supplemental projects, amounting to nearly $10 million.
Five 230-kV breakers and six disconnect switches at the company’s Clover substation are at the end of their lives and experiencing increased maintenance issues and difficulty sourcing replacement parts. The work, which is in the engineering phase, is expected to cost $2.75 million with a projected in-service date of June 1, 2023.
Dominion has identified a need to replace $2.36 million in 230-kV equipment at the North Anna substation in Virginia. The work is currently in the engineering phase and is projected to be in-service on Aug. 30, 2023.
The company is seeking to replace its Davis TX#2 168-MVA, 230/69/13.2-kV transformer bank because of its 32-year age, degradation of components and the basic insulation level being below standard. The project, currently in its engineering phase, is estimated to cost $4.5 million and be completed by June 30, 2023.
Dominion has also submitted three new requests for substations in Loudoun County, each with a total load in excess of 100 MW. The company has also identified overloads on a 230-kV line on the Brambleton-Evergreen Mills for the loss of the Brambleton-Poland Road line. It is in need of a temporary solution to avoid the overload and provide flexibility for future construction outages.
Inside our industry it’s no secret that net zero — or anything like it — is going to be incredibly expensive if you want to keep the lights on.
There are the global challenges I’ve written about,[1] with the U.N. highlighting the most recent shortfalls.[2] There’s our national picture, where past attempts to make net zero look easy have been discredited.[3] And we’ve had rosy state modeling that, as I’ve pointed out before, would leave California without any electricity for big parts of winter months;[4] ditto for Germany.[5]
The most recent reality checks come from David Rapson and James Bushnell[6] and from The Economist.[7] The case mounts for a Plan B.[8]
Fantasy
Meanwhile there remains a fantasy that net zero is feasible and affordable — because it must be.
Thus Hurricane Ian brought not only mass destruction and suffering, but also predictable attempts to find a silver lining for a net-zero future.
CNN, “60 Minutes,” Newsweek, Yahoo, Fortune, Slate, The Atlantic, MSN, Time, The Hill, Axios, RMI and many others, even the New York Post, ran gushing stories about the Babcock Ranch planned community in southwest Florida, claiming that the lights stayed on during the hurricane because of solar panels and battery storage.[9] Sample headlines:
“This 100% solar community endured Hurricane Ian with no loss of power and minimal damage”[10]
“The U.S.’s ‘first solar-powered town’ kept its electricity and water running during Hurricane Ian — and became a model for how to adapt to climate change”[11]
“Babcock Ranch: Solar-powered ‘hurricane-proof’ town takes direct hit from Hurricane Ian, never loses electricity”[12]
“Solar-powered town in Florida kept lights on during Hurricane Ian”[13]
One Wee Problem: Ain’t So
Babcock Ranch saw its last sunlight around 3 p.m. on Sept. 26 as Hurricane Ian covered southwest Florida. From then on, there was negligible sunlight for the solar panels to provide power to homes or to recharge the battery, until 9 a.m. on Sept. 29.[14] Total time without sunlight: 66 hours.
After loss of sunlight, the 10-MW/40-MWh battery[15] could have powered 10,000 homes for four hours at average electric home usage of 1 kWh,[16] leaving about 62 hours without anyone getting any power from the solar/battery system at Babcock Ranch.[17]
So how did the lights stay on? The same way they stayed on wherever distribution lines[18] weren’t taken out by Ian: fossil fuel and nuclear generation; nothing to do with solar generation and battery storage.
To summarize, the solar/battery system could have supplied power to some homes for four hours during Ian, while fossil fuel and nuclear generation supplied power for about 62 hours.
One News Organization Got it Right
One news organization got the story right by interviewing the CEO of the company developing Babcock Ranch. Ironically, it’s not even a U.S. news organization, but Canadian.[19] In an interview this CEO honestly says: “We’re the first solar power town in America. We have 150 MW; that’s 700,000 panels on about 340 hectares. Now that’s all fine and good, but when a storm comes in like Ian did, and there’s cloud coverage for a long period of time, you can no longer depend on that solar energy. So we then had to draw from the main utility.”
What a concept: interviewing someone who actually knows something. But for major U.S. media, it’s the happy talk that matters.
Columnist Steve Huntoon, principal of Energy Counsel LLP, and a former president of the Energy Bar Association, has been practicing energy law for more than 30 years.
[14] To confirm this, please go to www.wunderground.com and search location “KFLPUNTA222” (Babcock Ranch DM). Under Weather History enter a day, click View, and then scroll down to Solar Radiation data (please note that full sunlight is about 1,000 W/square meter). The data at this location are confirmed by other nearby stations, KFLPUNTA361 and KFLLABEL37.
[17] The solar/battery project is reported to power many more homes than in Babcock Ranch proper. If the project had been limited to supplying just Babcock Ranch’s 2,000 existing homes (https://babcockranch.com/babcock-ranch-exceeds-2000-home-sales/), the battery could have lasted 20 hours, with fossil fuel and nuclear generation supplying the remaining 46 hours.
[18] Power can also be taken out by loss of transmission (as opposed to distribution) lines, but there was reportedly no loss of transmission lines from the hurricane. RTO Insider, Nov. 1, 2022, page 3.
VALLEY FORGE, Pa. — The Market Implementation Committee last week overwhelmingly adopted a problem statement and issue charge to explore whether PJM should account for local issues, such as state and local policies, that may impact the development of the net cost of new entry (CONE) in a region.
The measure passed Wednesday with 97% of votes supporting.
While there was general agreement among stakeholders that the issue should be addressed by PJM, there were questions about how far the scope of the issue charge should go.
James Wilson, a consultant to state consumer advocates, likened making changes to the derivation of net CONE to changing the length of one leg of a stool without looking at the others, with the stool in the metaphor being the capacity market and the impact being the tilting of the markets in favor of certain sectors.
“That would cause money to slide off the stool and into their pockets,” he said.
That could be mitigated by implementing the changes to net CONE in the next quadrennial review, when other factors related to the capacity market can also be considered, or by widening the issue charge.
Gary Helm, PJM lead market strategist, said it wasn’t the RTO’s intention to limit discussion and that he did not believe the stakeholder process would yield such results.
Approval to Merge DER and DIRS Subcommittees
Stakeholders approved by acclamation to support merging the Demand Response Subcommittee and the DER & Inverter-Based Resources Subcommittee into a new Distributed Resources Subcommittee (DISRS).
PJM’s Peter Langbein and Scott Baker, the former chairs of the DRS and DIRS, respectively, said the stakeholder composition of the two committees and the materials they reviewed were similar enough that they conduct their work in unison. They said it would be best to work in tandem, particularly when recommending manual changes.
The combined charter will also examine behind-the-meter generation and energy efficiency, in addition to the existing scope of the two committees: DR, distributed energy resources and inverter-based resources.
Independent Market Monitor Joseph Bowring said the committee’s charge would be too broad, which could institutionalize a separate system being created for inverter-based resources. Since the resources falling under the committee are part of the capacity market, he believes they should be addressed by the existing committee structure, which handles other resources.
MIC Endorses Proposal on Hybrid Resources
The committee endorsed a proposal to expand PJM’s hybrid resource rules — which are currently applicable only to solar and storage combinations — to now include all inverter-based resources (IBRs) paired with storage.
PJM’s proposal to revise its day-ahead zonal load bus distribution factors would draw off data for each hourly node of the most recent corresponding work day, rather than relying only on 8 a.m. from that date. | PJM
The proposal allows IBR and storage hybrids to participate in the energy market model created in the first phase of the hybrid resource design, which was implemented for classification and metering on Oct. 1. The energy market model is set to go live on June 1, 2023.
The package also broadens the definition of hybrid resources to include combinations of different types of generation, with or without storage, with the implication of allowing more resource types, such as hydro or gas paired with solar to participate under the provisions from the first phase. (See PJM Releases Phase 2 of Energy Transition Study.)
The language also contains clarifications to PJM’s EcoMax parameters and corresponding uplift rules.
First Read on Changes to Day-ahead Zonal Load Bus Distribution Factors
PJM’s Amanda Martin presented a first read of proposed changes to the RTO’s day-ahead factor analysis, which would shift from calculating each hourly node based on state estimator load for that node as of 8:00 AM on that day of the prior week to instead use the previous week’s real-time data from each hour.
For example, instead of basing expectations for 10 a.m. on Nov. 8 on 8 a.m. data from Nov. 1, the corresponding real-time data from 10 a.m. would be pulled.
The lookback period would use the most recently available day of the week where all 24 hours of data are available, meaning if an hour of data was unavailable for Nov. 1 in the previous example, that date would be skipped and data would be pulled from Oct. 25.
