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November 8, 2024

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Non-standard Loads Becoming an Issue in SPP

An ad hoc group in SPP’s Strategic Planning Committee, tasked with advising the committee on “non-standard loads,” said last week that the RTO’s tariff is based on a wholesale/retail regulatory regime and, therefore, can handle the potentially interruptible load interested in interconnection.

Staff said SPP has received 56 requests for delivery point changes totaling 7.1 GW of capacity since June 2021, primarily for data centers and cryptocurrency miners. While they are the most familiar non-standard loads, others include server farms, biofuel manufacturers and hydrogen electrolyzers.

Richard Dillon (SPP) Content.jpgRichard Dillon, SPP | SPP

“And our favorite, the cannabis growhouses, especially in Oklahoma, where it’s very legal to do that for recreational purposes,” SPP’s director of market policy, Richard Dillon, said during the SPC’s virtual meeting Wednesday.

These loads represent significant potential firm or non-firm additions. Staff determined that stranded transmission costs, resource adequacy and whether the loads would be considered interruptible or demand response were all significant issues.

“There was a lot of concern about what happens if these loads come on and then disappear,” Dillon said. “These are major concerns for load-serving entities because ultimately, they will be comparing costs with those decisions.”

He said many of the loads interesting in the SPP market are trying to sidestep being considered retail load in a footprint that is devoid of retail competition. Some of the inquiries are trying to co-locate with renewable generation and net out the load with generation where both the load and the generation is behind the meter.

“The discussion with those entities has been, ‘OK, so you’re going to put in controls that automatically cut power off in microseconds, the moment that the renewable generation drops,’” Dillon said. “Thus far, no one has taken us up on that scenario, because crypto miners make money by burning electricity. If they’re down, they’re not making money.”

This has raised members concerns about resource adequacy and stranded costs because of the loads’ uncertainty. Southwestern Public Service’s Jarred Cooley said his company has been fielding several calls a week from loads, some as large as 1,400 MW, interested in connecting to its system.

“One of the key issues here is the transient nature of the loads and the likely need for significant transmission investment,” he said. “We’ve talked at the point of interconnection that’s between us and our load and us and our customers and figuring out how to properly protect them or how we charge those based on our state jurisdictions.

“These loads, we don’t expect them to be transmission investments that are going to be paid for,” Cooley said.

Dillon was unable to offer solutions but suggested members take advantage of this week’s Market Working Group meeting for an in-person discussion of the issue. He said the MWG will revisit a draft revision request (RR521) that clarifies the tariff’s DR and net metering provisions.

SPP Staffing up in West

Bruce Rew, SPP’s senior vice president of operations, told the SPC that the grid operator’s efforts in the Western Interconnection remain on track.

Seven Western entities are continuing to evaluate membership in SPP’s RTO West, he said. They face a commitment target date of March 1, 2023.

“Once that begins, they will move forward with the RTO transition and everything associated with that,” Rew said.

Markets+, an RTO “light” service offering, is also on schedule to receive commitments from interested parties next year. A final development session is being held in Westminster, Colo., in November.

The development of RTO West and Markets+ will be funded by the participants, but Rew said SPP has still hired more than 40 staffers to support those and other efforts.

“We would hire additional staff based on the implementation effort and long term effort for supporting the RTO expansion,” Rew said. “We will ultimately go to receive approval of the budget once we have a final commitment from those parties and know exactly what size and scope that we’re dealing with. We will add additional staff should we receive a long term commitment to RTO West or Markets+.”

Cupparo Joins Committee

SPC Chair Mark Crisson welcomed Director John Cupparo onto the committee as a replacement for Director Susan Certoma, who will chair the Board of Directors next year.

Cupparo will replace Crisson, who is cycling off the board next year, as the committee’s chair.

“A lot of important things come through here. I look forward to working with everyone,” Cupparo said.

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ACORE Panel: IRA Will Accelerate Storage Deployment, but Markets not Ready

WASHINGTON — Energy storage, along with other distributed energy resources, are changing the way electricity markets and the grid are planned, structured and operated, and the new tax incentives for standalone storage in the Inflation Reduction Act will accelerate the pace and urgency of the transformation ahead.

The impact of the law and the growing presence of storage as a core technology for grid reliability and decarbonization were the focus of a panel at the American Council for Renewable Energy’s Grid Forum on Thursday. In his opening remarks, Carl Fleming, a partner at McDermott Will & Emery, reported that the IRA is driving deals at his law firm, even before the Internal Revenue Service issues guidance on the new law’s tax credits.

“We’ve seen a number of deals — the first two tax equity … deals, the first two energy community deals and the first two transferability deals,” Fleming said, referring to specific provisions in the law that provide bonus credits and expand the entities that can receive credits.

New figures from BloombergNEF are predicting global storage capacity of 411 GW by 2030, a 15-fold increase from the 27 GW online at the end of 2021, he said — a forecast driven in part by the IRA.

Ann Coultas 2022-10-13 (RTO Insider LLC) Content.jpgAnn Coultas, Enel North America | © RTO Insider LLC

Ann Coultas, regulatory affairs director at Enel North America, said her renewable energy development company, like many others, is still “digesting everything in the legislation and figuring everything out. I would say we are very familiar with working across a variety of platforms, whether it’s wholesale energy markets, whether it’s microgrids; and one of the exciting things about this legislation is that it has incentives for all types of applications.”

Similarly, for Gabe Murtaugh, storage sector manager at CAISO, the law provides more options for leveraging the 5,000 MW of storage that will be coming onto the California grid in the next two years, doubling the close to 5,000 MW now online.

Existing tax credits for storage are narrowly drawn, Murtaugh said. To qualify, a project had to be co-located with and only charge from solar or another renewable energy source.

“If you as a grid operator need those resources to charge during the middle of the night, when there is no solar [or when] there’s no wind, you can’t do that under the current rules,” he said. “The new rules are going to allow a lot more flexibility for these resources to participate maximally in the market.

“Those are the kinds of rules and the kinds of incentives we need in place … to build the new renewable resources and the resources that are going to make a sustainable resource portfolio mix possible, but don’t necessarily restrict how those resources are going to work in the market,” Murtaugh said.

Nidhi Thakar 2022-10-13 (RTO Insider LLC) Content.jpgNidhi Thakar, Form Energy | © RTO Insider LLC

The IRA will also help startup Form Energy bring its multiday, iron, air and water-based long-duration storage technology to market faster, said Nidhi Thakar, vice president of policy and regulatory. “It helps companies like us who are preproduction and prerevenue to commercialize faster, to put steel in the ground faster and to start producing our batteries.”

Form is in the process of selecting a site, east of the Mississippi River, for its first factory, which will be able to produce 500 MW of its 100-hour batteries, Thakar said. However, while lauding the “unprecedented” clean energy investments in the IRA and Infrastructure Investment and Jobs Act, Thakar also pointed to the gaps in the laws, including the need for permitting reform and tax incentives to support new transmission.

“We can’t take full benefit of what’s in the IRA for clean technologies” without addressing these issues, she said.

‘Shallow’ Markets and Marginal Pricing

The panel also tackled the uneven pace of storage integration on transmission and distribution systems and its deployment as a grid asset, as some utilities, regulators and grid operators continue to argue that the technology is not sufficiently mature or cost competitive.

In California, the leading storage market, four-hour duration lithium-ion battery storage is now the standard, Murtaugh said. But longer-duration technology will be needed for the days or weeks when renewables aren’t available, because of the increasing frequency and severity of extreme weather events driven by climate change.

A core challenge in California and other markets is the need to develop market structures that incentivize the deployment of storage and appropriately compensate the specific attributes of the technology. Traditional marginal pricing, effective for fossil fuel generation, doesn’t mean much for storage developers, Murtaugh said. “They don’t care so much about instantaneous prices; what they care about is the price that they can buy energy at and the price they can sell energy at,” he said.

Markets based on thermal generation and spinning and non-spinning reserves are not designed for battery growth, Coultas agreed. They don’t offer “the right products to attract a battery,” she said.

Enel has had a lot of success with batteries in Texas, where ERCOT has “defined products in ways that suit batteries really well. So, there are products where you must respond within 20 cycles; you must respond within a matter of seconds or milliseconds. Products like that in a market [are] going to attract batteries.”

ERCOT’s battery-friendly products, however, are offset by the grid operator’s “shallow” markets, Coultas said, meaning that the energy needed is relatively small. “To attract more batteries, markets need to be really thinking about creating the right level of ancillary services,” she said.

Further, no one has completely cracked the pricing issue yet, Coultas said, though she pointed to ERCOT and CAISO as models of progress.

Murtaugh said one possible solution is to replace LMP with “something where we pay a fixed amount to a storage resource when we’re charging that storage up, and the ISO has sort of a call option to be able to discharge that resource any time we want to.”

Coultas offered yet another possibility — technology-neutral dispatchable energy credits, similar to renewable energy credits, for resources “that have attributes guaranteeing dispatch,” she said. At the same time, she cautioned, “There are values [of storage] that will just never be compensated in a multistate ISO because they don’t have the power to do that; for example, clean peak. I don’t think in a multistate ISO we’re ever going to a see a product that pays batteries for clean peak.”

In CAISO, Murtaugh and others are working on changing California’s resource adequacy programs, now based on peak demand, “to a new paradigm where we’re going to be looking at making sure we have enough energy overall 24 hours a day, as well as actual generation during each hour of the day and for charging resources earlier in the day,” he said.

New Tools 

Thakar believes that long-duration technologies, like Form’s, could provide targeted, “microfitted” solutions for a range of grid challenges, “whether it’s for use on a consistent basis or as support to central service providers or other critical communities that are stuck in some of these difficult load pockets and experience a lot of grid instability,” she said.

But, she said, no markets, not even California’s, have created market valuation or compensation structures for the “innovative resources that are going to be coming online in the next couple of years.”

Part of the problem, Thakar said, is that the focus on federal implementation of the IRA has left a blind spot around implementation of the law by state utility commissions.

State-level integrated resource plans have relatively short time frames — two or three years — for procuring clean energy resources, she said. “How does that hamstring the general ability to take advantage of the 10-year window we have for benefits from the IRA now? … We need to be thinking about what kind of tools can help state regulators really fully capture the overall benefits of IRA for customers.”

Form has built its own modeling tool that “focuses on a 365-day evaluation, using a model that looks at that entire yearlong snapshot. It also looks at multiple weather years,” she said.

Murtaugh said he and CAISO’s operations team have also spent the last few years “building a whole suite of tools that we never even contemplated having before because we were never worried about storage state of charge and thinking about energy we could potentially dispatch later.”

“We’re enhancing all of our markets and the modeling we do for storage resources to accommodate resources that can charge and discharge, resources that have a minimum and maximum state of charge, so that our market can optimize those resources alongside all the other resources. There are a lot of unique operating characteristics for storage resources,” he said.

“In the next five to 10 years, I think a lot of ISOs are going to be seriously thinking about their market constructs,” Murtaugh said. “I think we’re going to see some pretty radical changes come after that.”

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Scenario Planning, Magical Thinking and Energy Efficiency

WASHINGTON — MISO’s Jennifer Curran is worried that U.S. decarbonization efforts are relying on magical thinking.

“I think we’re all really focused on this end goal, which is really good … this carbon-free future. But as an industry, we’re not spending nearly enough time talking about how do you actually get from point A to point B reliably,” Curran, MISO’s senior vice president of planning and operations and chief compliance officer, said during a panel discussion at the American Council on Renewable Energy’s (ACORE) Grid Forum last week.

“It’s a little bit of, ‘Here’s where we are, a miracle occurs, and then we’re suddenly carbon-free. So really digging in and thinking about the hard work of how do we actually go through this transition, and keep this system reliable?” is essential, she said.

Moving Beyond One-day-in-10-years

Curran said the industry needs to shift from its reliance on the one-day-in-10-years reliability construct.

“I hear a lot of people say, “Well, that’s okay, we’ll just do some demand-side management or [add] some batteries, and we’ll shave the peak,’” she said. “Well that’s not our problem right now. We’re not looking at a five-hour problem; it’s a five-day problem. In January of 2020, MISO went 72 consecutive hours with less than 5% of our wind output. … In 15 of those hours we actually had negative wind output — station power pulling from the grid. So the question that I would like us to focus more on is how do we deal with these energy adequacy questions? How do you deal with the three days or five days? And what technology is it going to take to get us there?”

Mark Lauby, NERC’s senior vice president and chief engineer, agreed on the need to move beyond the one-in-10-day construct, which he said was based on “random equipment failures, as opposed to weather.”

“Weather is not random; sometimes it’s a bit predictable. And we need to start bookending that maybe through climate change models and all that to develop scenarios,” he said. “Things like no nuclear [power] is available, or it’s really cold or we have a forest fire … or it’s too windy in Iowa. … We have to … be able to survive those scenarios. And that becomes part of your integrated resource plan. … Those [scenarios] will then help drive: What are our transmission needs? How big do you need to be to solve this problem across the nation?”

“[It] used to be that capacity was king. The king has no clothes,” Lauby continued. “It’s energy and essential grid services.”

Jason McDowell, senior director of technology, strategy and policy for GE Energy Consulting, praised NERC’s work with industry on developing reliability guidelines for inverter-based resources. “The first thing to do — and that we really need a lot more visibility [on] — is understanding where we have grid stability issues, weak grid issues; understanding where there might need to be more advanced capability of inverter-based resources and how they work together with more conventional synchronous power generation.”

‘Self-inflicted Wounds’

Consultant Alison Silverstein repeatedly cited Texas’ experience during February 2021’s winter storm, saying the hundreds of deaths that followed ERCOT’s load sheds resulted from “the self-inflicted wounds [of] 30 years of underinvestment in energy efficient homes and businesses in Texas.

“One of the most important things we can do to make the world safer [in addition to] transmission and more renewables is energy efficiency,” she continued. “Energy efficiency can buy time for us to figure out how to do better integration of renewables and build more transmission. It will improve reliability because it will bring down both peak at summer and winter.”

Those who died during in 2021 were “not rich people,” she added. “Those were people with low incomes, living in bad housing. Energy efficiency can help them significantly, and it can slow the rate at which we have to spend money to increase … the grid to improve reliability. And that can help these people … survive. Because the grid is going to fail, no matter what. No matter whether it’s transmission, no matter whether it’s renewables, no matter whether it’s storms — the grid’s going to fail again and again. And energy efficiency helps to protect people’s lives.”

Silverstein also made a plug for transmission, saying the risk of overbuilding is minimal.

“At the few lines that we have seen built for economics, they turned out to be essential for reliability. Every line we have built for reliability has turned out to have extraordinary value to improve the cost-effective delivery of electricity and to flatten costs for customers. It is very rare that new transmission will ever be stranded. The only transmission that’s been stranded that I know of has been attached to a coal plant or has been attached to something on a coast that is going under water.”

Silverstein urged the audience to read a July 2021 paper she wrote with Robert Zavadil advocating for creation of a national electric transmission authority, saying such an organization is needed to avoid unplanned and ineffective transmission expansion.

“We really need the level of concerted vision and analysis that something like a national electric transmission authority could bring to this effort that doesn’t exist today,” she said. The paper “is a useful stalking horse. … It is [such a] radical proposal and people will react to it so badly that anything that you all want to recommend as an alternative will look super reasonable.”

Silverstein also called for an investigation into the poor performance of ERCOT’s black start generation during the February storm.

“Over 40 to 50% of ERCOT’s black start plants were down. They were frozen. They didn’t have enough fuel, whatever the reason,” she said. “We came five minutes from [an] ERCOT-wide collapse, and without interconnection to the rest of the nation, we would have been down for weeks because our black start capability was gone. …

“No one has … ever investigated this and figured out why the plants that we were paying good money to be available in black start were not available. Why they have not been penalized? What standards are wrong? Clearly they met their obligations, which means the obligations were bad.”

Defending Clements

Grid Strategies President Rob Gramlich, who moderated the discussion, asked Silverstein about a Fox News story accusing Commissioner Allison Clements of impropriety for speaking at a “funders only” event hosted by her former employer, the Energy Foundation.

When he and Silverstein served as aides to former FERC Chair Pat Wood, Gramlich said they met with scores of stakeholders.

“We met with everybody who had the sense to ask,” Silverstein confirmed. “It is your job as a federal official to talk to everyone to make sure that as much information is available … within the bounds that your lawyers allow you to talk. It is your right as a citizen or as an organization to come into a commissioner’s office and the chairman’s office and share your views and ask for the commissioners’ input and guidance. And so Commissioner Clements was doing her job and I applaud her for doing that.”

“If she did anything wrong then every single commissioner, and just about all their advisers for the last 25 years, violated the same thing,” Gramlich said.

Glick: Not Worrying About Reappointment

In remarks opening the conference FERC Chairman Richard Glick encouraged attendees to help shape the future by getting involved in RTO stakeholder discussions on market rules and transmission, even though he acknowledged, “they can get very tedious and boring.”

“A lot of the decisions that are made …  are kind of — I wouldn’t say fully baked because FERC still has to review them and consider them and determine whether they’re just reasonable. But a lot of those decisions, they get worked out during the stakeholder discussions,” he said.

Richard Glick Gregory Wetstone 2022-10-13 (RTO Insider LLC) Alt FI.jpgFERC Chair Richard Glick listens to a question from ACORE CEO Gregory Wetstone at the ACORE Grid Forum. | © RTO Insider LLC

Glick said grid reliability is “the subject of the day in many ways,” noting California’s scramble to shave loads during a heat wave in September and the commission’s recent forum in New England. (See FERC Comes to Vermont and Leaves with a New England-sized Headache.)

“We’re experiencing extreme weather like we’ve never seen before. And that’s going to continue on, most experts say,” Glick said.

He said the Inflation Reduction Act “will, almost undoubtedly, prove to be a game changer for [ACORE members] and for the good of the country.”

Glick said he was not worrying about whether he will be confirmed to a second term on the commission. President Biden has renominated Glick but Sen. Joe Manchin (D-W.Va.), chair of the Energy and Natural Resources Committee, has yet to signal his support. Although Glick’s term expired June 30, he can remain in his post through the end of the current congressional session in December.

“I’m being told that there’s a lot of folks — the White House, Sen. [Chuck] Schumer (D-N.Y.) and others — that are working hard towards confirmation. They are confident,” he said.

“I just use an analogy: My son plays a lot of baseball and sometimes he’s on the mound. And you know, the guy behind him makes an error and sometimes he used to get really upset … and then he loses focus. And I just say to him all the time, you can only control what you can control and not worry about others. And at FERC that’s what I’m trying to do, is not think about that. I just feel we have a lot of day-to-day work to do. Try to focus on that on a daily basis, and whatever happens happens.”

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Counterflow: Nice Work If You Can Get It, Take 2

tesla powerwallSteve Huntoon | Steve Huntoon

Six years ago, I explained how regulators across the country were allowing electric utilities about 50% more return on equity than their actual cost of capital — amounting to roughly $17 billion in annual excessive costs to consumers. No more EEI cocktail parties for me.

I won’t repeat here the basis for that $17 billion, but if you’re interested, the excruciating detail is in that 2016 piece.[1] By the way, with the big increase in electric utility common equity over the last six years, that $17 billion would now be more like $25 billion today.[2] A mere bagatelle.

This being a subject that is not just dry but bone dry, no one seemed to care one way or the other. The band has just played on.

It’s Even Worse

Now the Energy Institute at Haas has released a working paper by Karl Dunkle Werner and Stephen Jarvis showing that equity returns charged to consumers have remained the same while various measures of capital cost have declined.[3] Severin Borenstein’s excellent blog about the paper is here.[4] A killer chart from the paper is reprinted nearby.

In other words, as bad as the overcharging was when I wrote that piece six years ago, and as much as the overcharging has grown with more utility common equity, it’s even worse than that.

Wait, There’s More

Excess returns not only cause excess charges to consumers but have two other pernicious consequences. When utilities get a return on equity above their cost of equity, they have incentive to fight like cats and dogs to keep and expand their monopoly on rate base assets like transmission. Which they are doing at the state and federal levels — frustrating the competition that is an unalloyed good thing.[5]

And when utilities can get a return on equity above their cost of equity, they have incentive to construct the most expensive solution to address a given reliability violation (or other driver).[6] The Haas study actually found evidence of this: “The paper finds that every extra percentage point of allowed return on equity causes a utility’s capital rate base to expand by an extra 5% on average.”

If allowed equity return is set equal to the cost of equity capital then the utility should be indifferent to whether it or a competitor adds a given increment of transmission, and it would not have incentive to gold-plate the system. Don’t take my word for it; just ask your neighborhood economist.[7]

FERC, historically the most sophisticated utility regulator in the country, seems unaware of all this. Instead of reducing the cost of equity being charged to consumers and reducing pernicious incentives to frustrate competition and inflate rate base, FERC seems intent on increasing the future transmission infrastructure to be monopolized by incumbent transmission owners.[8] No competition from lower cost providers or incentive for lower cost solutions.

In my humble opinion, climate change won’t get fixed by throwing money at monopolies.

[2] My calculation was based on electric utility common equity of $356 billion then, which has now grown to $526 billion, https://www.eei.org/-/media/Project/EEI/Documents/Issues-and-Policy/Finance-And-Tax/Financial_Review/FinancialReview_2021.pdf, page 63.

[6] There are many potential solutions to a given reliability violation, as I’ve discussed before, https://energy-counsel.com/wp-content/uploads/2022/06/Transmission-and-Technology.pdf;  https://www.energy-counsel.com/docs/waste-not-what-not.pdf. 

[7] Or the Haas authors: “To the extent a utility’s approved ROE is higher than their actual cost of equity, they will have a too-strong incentive to have capital on their books.” https://haas.berkeley.edu/wp-content/uploads/WP329.pdf, page 21.

[8] Proposing a federal right of first refusal for transmission upgrades is Exhibit A. https://energy-counsel.com/wp-content/uploads/2022/07/Say-It-Ain-t-So-Joe.pdf. Eliminating generators’ right to pay for interconnection upgrade costs is Exhibit B. https://www.energy-counsel.com/docs/new-ball-and-chain-for-renewable-energy.pdf.  

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Can New Revenue Models Unlock Interregional Transmission?

WASHINGTON — New ways of paying for transmission could increase interregional transfer capacity and improve reliability, speakers told the Energy Bar Association’s Mid-Year Energy Forum last week.

Nicole Luckey 2022-10-12 (RTO Insider LLC) FI.jpgNicole Luckey, Invenergy | © RTO Insider LLC

Nicole Luckey, senior vice president of regulatory affairs for Invenergy, said her company hopes to make the case for  how interregional merchant HVDC can aid reliability during system emergencies at a FERC staff-led workshop Dec. 5 to 6 on setting minimum requirements for interregional transfer capability (AD23-3).

“Merchant transmission can provide these benefits at a significant cost savings when compared to lines paid entirely on a traditional cost-of-service basis,” she said. “Of course, the majority of the time, a merchant line is going to be providing service to its customers. But if properly incorporated into commercial agreements, that service could be interrupted to provide emergency energy and capacity to keep the lights on.

“Transmission’s value during extreme weather events is being significantly undervalued, and … policy to encourage merchant transmission — which can deliver these benefits to the grid, and potentially avoid complicated cost allocation arguments that I think have really stymied the deployment of transmission in this country — has been completely overlooked,” she said. “Worse, because merchant transmission is treated inconsistently across the country, it creates a disincentive to deploying it interregionally.”

Michael Skelly 2022-10-12 (RTO Insider LLC) FI.jpgMichael Skelly, Grid United | © RTO Insider LLC

Michael Skelly, founder and CEO of Grid United, which is seeking to build long-distance, interregional transmission, also called for new models for funding transmission, during an EBA panel discussion Oct. 11.

“I think there’s this notion that we’re either going to build a line and it’s going to get cost allocated toward everybody, or it’s not going to get built at all. … But there are other models out there,” he said, citing batteries, which can collect revenue for providing grid services such as frequency regulation but also generate revenues through energy markets.

Skelly also pointed to the U.K.’s proposal to construct transmission to France, under which a developer would receive a “floor” return of 3 to 4% with the ability to earn up to 15% through markets. Profits above the 15% cap would be returned to ratepayers who help finance the project.

Under such a model, “transmission lines start to look a little bit like generators,” he said. “And we’ve actually had pretty good luck mobilizing capital around investment in generation.”

By reducing the guaranteed return to 3 to 4% from 7 to 8%, “your revenue requirements go down like 40%,” he said. “You could save a lot of money if other parties take some of these risks.”

2,000 MW

David Kelley 2022-10-12 (RTO Insider LLC) FI.jpgDavid Kelley, SPP | © RTO Insider LLC

David Kelley, director of seams and tariff services for SPP, noted that the U.S. currently has little more than 2,000 MW of transfer capability among its three interconnections: 1,270 MW from the Western to Eastern Interconnection, and 800 MW between SPP and ERCOT.

“Think about the scale of the demand in this country. And we really only have the ability to share a little over 2,000 MW from the East Coast to the West or vice versa,” Kelley said. “I really think interregional transmission can certainly play a role in helping us introduce more operational flexibility. And HVDC, in particular, I think plays a really key role as we’re talking about transferring between the interconnections.”

The importance of transfer capacity was tragically illustrated during Winter Storm Uri in February 2021, when ERCOT and SPP were forced to shed load, leading to more than 200 deaths in Texas.

“Without a doubt, this was the most challenging operational event in SPP’s history,” said Kelley, who noted it was the first time SPP had to direct load sheds in its history. “That was a very sobering moment for our organization. And I know we fared better than others did. But that was absolutely a wake-up call for us.”

During the height of the storm, SPP was importing as much as 6,000 MW. David Souder, PJM’s executive director of system planning, who also spoke on the panel, said the RTO exported as much as 19,000 MW to its West while importing 3,000 MW from the North.

HVDC’s Impact: Location, Location, Location

Moderator David Schwartz, of Latham & Watkins, asked Kelley how much of a difference HVDC transmission could have made to SPP during Uri.

Kelley said it would depend on the HVDC line’s sink location relative to SPP’s AC transmission.

During the storm “we ran into limitations within the SPP footprint … moving massive amounts of energy in ways that was never planned to be moved within the SPP region before,” he said.

“You may have a 3,000-MW HVDC line that’s perhaps dumping power at a specific location within the footprint. So can you receive it there? And then can you move it to where it needs to go within the region?

“At the time, we were shaking couch cushions trying to find every kilowatt we could find in order to keep the lights on. So would we have loved to have had another 3,000 to 4,000 MW? Absolutely. But it would have to be at the right spot, I think, in order to be effective.”

Dunkelflaute

Kelley said SPP recently increased its planning reserve margin to 15% from 12% because of concerns about the variability of its wind power. Although the RTO has more than 33 GW of nameplate wind capacity — and in March was serving 90% of its load with renewables at times — “we still have periods of time where we have less than a gigawatt of wind capacity generating within our footprint,” he said.

Skelly noted that the Germans have a phrase for the fear of having inadequate sun or wind energy: dunkelflaute, or “a dark lull.”

“This is a real challenge in this energy transition that so many of us are trying to try to figure out,” said Skelly. “One way to do that is to connect the grids, because we have a whole continent to work with here. We don’t have just, you know, a few hundred miles.

Skelly said it’s a bigger problem for SPP than MISO. “MISO is basically oriented East-West,” he said. “As Dale Osborn, a legendary MISO planner always points out, when you have wind fronts move across the country, if you have enough grid, you can integrate those along the way.”

The Easy Part

Kelley said the obstacle to increasing interregional capacity is not technical.

“The engineering part of this is pretty easy. Getting everybody to agree on what the problem is to be solved — and then to how do you pay for that — those are the hard parts,” he said. “You can get a group of engineers in a room to run a study [and] we could probably design a national grid for you in less than a year. And I’m not kidding about that. That’s how easy it is, if everybody agreed on what the national grid was supposed to do, and who was going to pay for it.”

Invenergy’s Luckey said one problem is that RTO voting structures “gives incumbent transmission owners a lot of power.”

Incumbents were unhappy that FERC Order 1000 called for interregional projects to be competitively bid. “I don’t want to sit here and say that’s the only reason these projects haven’t been planned. But it certainly doesn’t help that incumbent TOs know they’re going to have to compete,” she said. “They’d really rather build stuff they know they’re not going to have to compete to build.”

Another problem is how RTOs perceive merchant transmission, such as Invenergy’s proposed Grain Belt Express, an 800-mile, 5-GW HVDC line that would connect four balancing authorities: SPP, MISO, PJM and Associated Electric Cooperative Inc., which serves 51 distribution cooperatives in Missouri, Iowa and Oklahoma.

Grain Belt Express Map (Invenergy) Content.jpgInvenergy envisions its proposed Grain Belt Express as “the reliability backbone of the Midwest” Designed to deliver wind and solar power from western Kansas to customers in Missouri, Illinois and beyond, it could reverse flows during system emergencies. | Invenergy

 

The project, which the company envisions as “the reliability backbone of the Midwest,” is designed to deliver wind and solar power from western Kansas to customers in Missouri, Illinois and beyond. “But during system emergencies, if we have contractual agreements in place with our customers, we could reverse flow on that line,” Luckey said.

In MISO, Luckey said, “we’re triggering hundreds of millions of dollars in network upgrades, simply to interconnect our merchant transmission project, which by the way, will provide benefits to that region. So not only are we paying to upgrade the system to move our energy around — to make sure that it’s deliverable. But now we’re providing a benefit to the system, potentially based on the multidirectional ability [of] an HVDC line. But there’s really no way for the grid operator to evaluate what the benefit is to their system right now. They see us as more of a problem that needs to be solved rather than as an asset that can benefit them.

“That’s not necessarily their fault, right? That’s just the way the system is sort of set up for merchant transmission today. And I think it’s something that needs to be changed, because you don’t have that one entity that’s looking at this project and saying, ‘How can this benefit these two regions?’”

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Lawyers, Industry Debate Path for Hydrogen Regulation

WASHINGTON — To be a natural gas, or not to be a natural gas? That was the question at the Energy Bar Association’s debate Wednesday on how hydrogen — the “Swiss Army knife” of decarbonization — should be regulated.

Van Ness Feldman partner Michael Diamond told the EBA’s Mid-Year Energy Forum that hydrogen should be regulated under the Natural Gas Act, along with the fuel it will compete with. Venable counsel Joseph Hicks said it would be better for the nascent industry to be regulated under the “less onerous” Interstate Commerce Act (ICA).

Amanda Mertens Campbell 2022-10-12 (RTO Insider LLC) FI.jpgAmanda Mertens Campbell, The Williams Companies | © RTO Insider LLC

Amanda Mertens Campbell, vice president of government affairs and community outreach for The Williams Companies (NYSE:WMB), said additional federal regulation would be counterproductive now. Campbell said that although hydrogen blended with natural gas is covered by the NGA, all-hydrogen “purity” pipelines are not currently federally regulated.

Williams, the largest operator of natural gas infrastructure in the U.S., has pledged to reduce its greenhouse gas emissions by 56% from 2005 levels by 2030 and reach net zero by 2050. The federal government is betting that hydrogen can decarbonize heavy industry, freight shipping and air travel. (See DOE Opens Solicitation for $7B in Hydrogen Hubs Funding.)

“Nobody’s [net-zero] vision for 2050 can exist without introducing and accommodating a hydrogen economy,” said Campbell.

The Case for the Natural Gas Act

The NGA governs gases that can be used for energy, while the ICA covers oil pipelines, which also transport gasoline, diesel and jet fuel.

Michael Diamond 2022-10-12 (RTO Insider LLC) FI.jpgMichael Diamond, Van Ness Feldman | © RTO Insider LLC

Diamond said the NGA regulates natural gas and any blend of natural and artificial gas, which he said FERC has defined as gas “created by the agency of man or the product of some kind of engineering process.”

“Hydrogen fits pretty neatly into this definition,” said Diamond. Currently, most hydrogen is manufactured through steam methane reforming, in which high heat and high pressure is used to strip the hydrogen molecule (H2) from methane (CH4). “That fits very neatly into this idea that it’s artificial. The same really goes for hydrogen created from water through electrolysis: splitting the molecular structure of water and pulling the hydrogen from the oxygen.”

Diamond cited a letter that FERC Chairman Richard Glick wrote to U.S. Sen. Martin Heinrich (D-N.M.) in October saying the commission has the authority under the NGA over hydrogen blending with natural gas in interstate pipelines. Because FERC recently approved the abandonment of the natural gas storage facility to be used for hydrogen, Diamond said, the “only logical conclusion” is that the commission considers hydrogen as artificial gas.

He said FERC could assert jurisdiction over hydrogen as a natural gas under a more expansive reading of the word “natural,” as hydrogen is a naturally occurring element. Sen. Joe Manchin’s (D-W.Va.) legislation to ease permitting of pipelines and electric transmission would have amended the definition of natural gas in the NGA to include hydrogen. (See Manchin Permitting Package Cut from Spending Bill.)

Under either definition, Diamond said, the NGA is the right law for hydrogen. “Hydrogen … competes directly with natural gas. It is going to be a direct substitute for natural gas. … So there’s a lot of good reasons to regulate hydrogen under the same statute that natural gas is,” he said.

Diamond said the industry need not fear FERC’s oversight because the agency has flexibility under the NGA to apply light-handed regulation, as it has done with LNG terminals.

The Case for the Interstate Commerce Act

Joseph Hicks 2022-10-12 (RTO Insider LLC) FI.jpgJoseph R. Hicks, Venable | © RTO Insider LLC

Hicks countered that hydrogen is not an artificial gas. “The courts have looked at this multiple times. They’ve never said that hydrogen is an artificial gas; there’s no precedent to support that. There the test appears to be about where the origin of the gas comes from, rather than its composition,” he said.

Hicks said the ICA is “far less onerous in its requirements” than the NGA, with no certifications of pipelines or affiliate standards of conduct. NGA jurisdiction could also require corporate reorganization or revision of existing long-term contracts, he said.

The ICA would aid in the financing of hydrogen pipelines. “But the ICA is hands-off other than rates and recordkeeping and making sure that it’s treating people equally; that there’s antidiscrimination provisions,” he said.

“If a developer seeks to construct a hydrogen pipeline between two points already served by a methane natural gas pipeline, [and] hydrogen is now natural gas, the FERC has to make some type of determination about whether it’s going to allow two pipelines transporting natural gas to the same destination and has to approve one or the other.”

Hicks acknowledged that the ICA doesn’t provide the eminent domain authority that comes with certification under the NGA. “But I think that’s really a double-edged sword, considering how long it takes for pipelines to be certified. And there are plenty of petroleum products pipelines that have been built and operate in this country without siting authority.”

Campbell agreed. “Eminent domain is not worth what it used to be. And so if we are trying to incent interstate construction of either purity or blended pipelines, we should think about the current situation, which is where you need state permits and there’s no federal regulator. Would that not allow more [pipelines] to be constructed?”

Manchin Permitting Bill

If hydrogen were regulated as natural gas, Hicks said, it should be accompanied by provisions exempting existing hydrogen transportation assets, such as hydrogen-only pipelines in the Gulf Coast and spur lines that deliver hydrogen to refineries.

“My understanding is that Sen. Manchin’s energy adviser wrote an article arguing that hydrogen should be regulated by the NGA,” said Hicks. “I don’t know honestly if it was fully thought out about what the implications of doing this were. My sense was that it wasn’t, because of the possible implications to industry.”

Williams also opposed the provision. “We thought it was premature to add that language to the permitting reform bill, because it did not fully flesh out all of the unintended consequences,” Campbell said.

Short-term Thinking?

Diamond cautioned against what he called “short-term thinking” focused on existing hydrogen pipelines. “Yeah, bringing them under the NGA would impose some uncertainty during the time that FERC works out how it’s going to regulate,” he said. “But we’re talking about the hydrogen industry for the next 50 years. So we’re trying to lay a sustainable groundwork for something that could be a major source of energy, not just an input into oil production in the Gulf.”

Responded Hicks: “I would say if you’re looking for a … statute that has been successfully administered for a long period of time, that would [point] you to the ICA, which has been around since the 1880s.

“It’s a weighing of priorities,” he added. “Do we want this industry to get off the ground very quickly, such that we mitigate climate change issues quickly? Or do you want a situation where it takes time to integrate this industry into the existing regulations?”

Hicks said he could also support a new law for hydrogen “that kind of takes the best of both [ICA and NGA] worlds.”

“But right now, I think that — if the goal is to take the money that has been laid on the table by the government in this recent legislation and run with it as quickly as possible to decarbonize our economy — I think light regulation is better.”

‘View from the Ground’

Campbell offered Williams’ “view from the ground,” saying the company is investing in hubs where it can mostly use existing infrastructure.

“It’s really hard to build pipelines … and so a hydrogen strategy does not exist without repurposing existing infrastructure, because those are critical pathways into population centers,” she said. “The real opportunity in 2022 and the foreseeable future is decarbonizing the gas stream through blending. And that’s clearly under Natural Gas Act regulation and jurisdiction.”

Because hydrogen has one-third of the energy content of methane, “in order to [replace] our methane with hydrogen, we will need three times as much infrastructure,” Campbell said. “So that should be part of the consideration when determining who should regulate.

“We think we have time as this purity economy develops to be thoughtful; to weigh the pros and cons; to think through all of the potential unintended consequences of adding a federal regulator on top of an industry that [now] only needs state permits,” she said. “To add this layer of regulation without first thinking through all the pros and cons … is premature.”

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Coaltrain Agrees to $4M Settlement with FERC over UTC Trades

Pennsylvania-based Coaltrain Energy has agreed to pay $4 million in disgorged profits to resolve a FERC investigation into accusations that the company engaged in market manipulation in the course of its up-to-congestion transaction (UTC) trading in 2010.

In its order approving the stipulation and consent agreement issued Oct. 11, FERC said the company “had engaged in market manipulation by placing UTC trades for the sole or primary purpose of collecting marginal loss surplus allocation (MLSA) payments, rather than to profit from price changes.” Under the agreement, Coaltrain neither admits nor denies the alleged violations (IN16-4).

In a 2016 Order to Show Cause, FERC alleged that in 2010, the company shifted from legitimate UTC trading — in which companies aim to predict the changes in spreads between PJM’s real-time and day-ahead markets — to profiting off PJM’s MLSA alone by minimizing the UTC price spreads and collecting refunds of a portion of the transmission loss charges from PJM. (See FERC: Spy Software Provides Evidence of UTC Scam.)

MLSA is designed to account for the loss of electricity as it is transmitted between its source and sink; traders receive rebates proportionate to megawatts delivered. FERC alleged that Coaltrain made trades between nodes in both directions to simply collect the rebates.

The agreement marks the last of three investigations FERC launched over allegedly manipulative UTC trading in PJM. In each case the commission said traders used risk-free strategies designed to maximize line-loss rebates from MLSA, instead of trying to predict price spreads between the RTO’s day-ahead and real-time markets. (See Trader Agrees to Pay $2.7M in Win for FERC and Powhatan Energy to Declare Bankruptcy.)

FERC also accused Coaltrain of providing “false and misleading statements to [FERC Office of] Enforcement staff about the existence of records created by employee monitoring software.”

That charge stems from investigators learning of employee-monitoring software that captured evidence of trading and messaging, which was provided by a former Coaltrain employee. FERC claims that the company concealed information about the software and did not make access readily available; the company had said in its March 2016 response to the show-cause order that it hadn’t occurred to staff that the software contained information relevant to the investigation. (See Traders Deny FERC Charges; Seek Independent Review.)

In addition to Coaltrain itself, the agreement also lists co-owners Peter Jones and Shawn Sheehan and traders Robert Jones, Jeff Miller and Jack Wells as defendants in the case. In the show-cause order, FERC had previously sought more than $42 million in civil penalties from the company and individual defendants.

The fine is to be split into five disgorgement payments to PJM over the same number of years, which the RTO will distribute to its members in a manner to be approved by the commission. Should the provisions be abided by, the agreement will end a 2016 lawsuit FERC filed against Coaltrain in the U.S. District Court for Southern Ohio.

The agreement notes that while FERC’s investigation into Coaltrain will cease, there could be additional sanctions still to come.

“Coaltrain acknowledges and agrees that this may subject it to additional action under the enforcement provisions of the FPA, which in turn may result in additional sanctions separate and apart from the $4,000,000 restitution payment required to be made by Coaltrain pursuant to this agreement.”

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Youngkin Announces Funding for Va. ‘Nuclear Innovation Hub’

Virginia Gov. Glenn Youngkin (R) is doubling down on his efforts to bring the nation’s first commercial small modular nuclear reactor (SMR) to abandoned coalfields of Southwest Virginia, announcing plans on Friday to provide up to $7 million in state funds to help kickstart the project.

Speaking at an abandoned mine site in the southwest corner of the state, Youngkin announced he would be proposing a $10 million Virginia Power Innovation Fund in his next budget, with half the money dedicated to “our moonshot mission to establish the very first small modular reactor right here in Southwest Virginia within the next 10 years.”

Earlier in the day, the governor and U.S. Rep. Morgan Griffith (R-Va.) announced another $10.6 million in grants from the state’s federally funded Abandoned Mine Land Economic Revitalization (AMLER) program, including another $2 million for the Energy DELTA Lab, an innovation testbed, launched Oct. 4.

The test bed is being developed with $975,000 in previously announced AMLER funds and has been in the works for four years, according to the project’s website, which makes no mention of nuclear as part of its plan for future energy development.

Rather, the website outlines two potential projects. One would seek to draw in data centers, which would be cooled with geothermal technology using “the billions of gallons in water collected in underground mines.” The second, called Project Energizer, would develop modular pumped hydro storage that could be paired with solar or wind projects to provide dispatchable baseload power.

CA Electricity Production by Fuel (EIA) Content.jpgNuclear power currently provides about 29% of Virginia’s electricity. | EIA

But Youngkin has been keenly focused on the idea of bringing nuclear development to the southwestern part of the state since the release of what he called Friday his “all American, all-of-the-above“ energy plan on Oct. 3. The plan sees Virginia as particularly well positioned to lead SMR development, pointing to nuclear engineering programs at Virginia Commonwealth University and Virginia Tech, and companies such as Huntington Ingalls, which maintains nuclear submarines and aircraft carriers at Norfolk Naval Base. (See Gov. Youngkin Releases 2022 Energy Plan.)

“By marshaling the state and federal resources, we will establish a Virginia nuclear innovation hub that will bring together Virginia’s nuclear stakeholders … universities, corporate interests [and] research dollars to develop new and emerging nuclear technologies for deployment right here in the commonwealth,” Youngkin said Friday. “And we will work with our regional allies to go after more than our fair share.”

He envisioned the hub performing “research on advanced material manufacturing and design; methods to improve reactor lifespans and ensure safe operations; on advanced computation and machine learning; on workforce training; and strategies to improve the nuclear fuel cycle and supply chain, including recycling spent nuclear fuel.”

Alireza Haghighat, director of the Nuclear Science and Engineering Laboratory at Virginia Tech, stressed the integral role of nuclear as clean, baseload power. “Nuclear is a must to continue not only affordable, reliable energy [but] also to achieve what we all look for: zero carbon emissions. … You have to be realistic and just follow the science.”

According to figures from the U.S. Energy Information Administration, Virginia’s two nuclear plants, owned by Dominion Energy (NYSE:D), currently provide 29% of the state’s electric power. Hydropower and non-hydro renewables account for 11%, with fossil fuels — predominantly natural gas — providing the other 60%.

One of the Dominion plants, the Surry nuclear plant, won a 20-year license extension from the Nuclear Regulatory Commission in 2021. The commission is reviewing the utility’s application for a similar extension for its North Anna plant.

Surry Nuclear Power Plant (NRC) Alt FI.jpgSurry nuclear power plant | NRC

 

Under the 2020 Virginia Clean Economy Act (VCEA), Dominion is required to decarbonize its electricity supplies by 2045, increasing clean power 3% per year through 2030 and 4% per year through 2045. Youngkin’s Energy Plan criticizes the VCEA as mandating the retirement of baseload resources and recommends that it be reauthorized every five years.

Local Criticism

While the small audience at Friday’s event responded enthusiastically, Youngkin’s announcement drew quick criticism from local environmental and community groups.

“The announcement comes as a surprise to many key stakeholders in the region,” according to a press release from Appalachian Voices, a community group that has supported the growth of solar in Southwest Virginia. “No local citizen groups were informed about the governor’s visit — nor have any been invited to participate in the planning of the location and development of the new energy infrastructure.”

“Project development processes that leave out community voices [are] the wrong way to build support for a proposal,” said Rebecca Shelton, director of policy and organizing at the Appalachian Citizens’ Law Center, who was quoted in the release. “Time and again, the way residents learn about a new project is through a press announcement. There is every reason to be skeptical about the benefits of a project when it’s planned behind closed doors.”

While Appalachian Voices supports clean energy and the development of new technologies, Adam Wells, the group’s regional director of community and economic development, called for “a new model of energy production that centers equity, justice and communities. So far, it appears that this [nuclear] effort misses that opportunity — all the more alarming given the well documented social and environmental problems associated with nuclear energy.”

Groups like Appalachian Voices and The Nature Conservancy have been pushing forward on bringing solar development to Southwest Virginia and its abandoned mining sites.

Earlier in the week, Appalachian Voices and other members of the region’s Solar Workgroup cut the ribbon on a new rooftop solar installation at Wise Elementary School, one of 12 schools in Wise and Lee counties the workgroup is helping to go solar. Apprentices from a local community college training program worked on the project, according to a press release.

The Nature Conservancy is also developing 120 MW of utility-scale solar on abandoned mine sites in its Cumberland Forest Project, 253,000 acres of preserved forest land in Southwest Virginia and along the Tennessee-Kentucky border.

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New WPP Board Features Figures from PJM, WEIM, Industry

The Western Power Pool’s future independent board of directors will include the previous CEO of PJM, a former member of the Western Energy Imbalance Market’s Governing Body and the WPP’s present board chair, among others.

The WPP’s current board of directors last week approved the slate of nominees who will serve on the new independent board once the group’s Western Resource Adequacy Program (WRAP) is approved by FERC. The federal regulator requires organizations under its jurisdiction to maintain independent boards.

“This is an important step in the path toward WRAP implementation,” WPP Treasurer Mary Ann Pease said in a press release Friday. “I look forward to the continued development of a sustainable resource adequacy program, with the incredible benefits it will bring to participants, while ensuring we continue to deliver the benefits and cost savings the Western Power Pool has long provided our members and our region.”

According to the release, the board members were selected after a monthslong “continent-wide” search led by WPP’s 14-member Nominating Committee and assisted by an executive search firm.

“The committee’s stated criteria for candidates included electric industry, regulatory, general management, Western electric system or organized market experience; geographic diversity, so no region was overrepresented; diversity of perspectives, including professional background, gender, ethnicity and life experience; and strong collaboration skills,” WPP said.

Among those chosen to sit on the new board is current WPP board Chair Bill Drummond, who has held that position since 2018. Drummond formerly led the Mid-West Electric Consumers Association and previously served as administrator and deputy administrator of the Bonneville Power Administration.

But perhaps the most well known industry figure on the new board is Andy Ott, former CEO of PJM, the largest RTO in the country. Ott was at the helm of PJM when it kicked off an effort to partner with now-defunct reliability coordinator Peak Reliability to create an organized market that would compete with CAISO’s own efforts to expand into other parts of the West. (See Q&A: PJM’s Ott Still Looking West.)

The PJM-Peak Reliability effort dissolved after CAISO moved to undercut Peak’s core business by offering RC services to Western utilities at lower costs. Peak closed its doors at the end of 2019 after nearly losing nearly all of its customers to competing RCs.

Ott retired from PJM in 2019 amid the fallout from a massive default by a trader in the RTO’s financial transmission rights market. (See PJM CEO Andy Ott to Retire.) He is currently director of technical operations at Tapestry, X Development’s “moonshot” for the electric grid.

WPP’s other independent board members include:

  • Doug Howe, former chair of the WEIM’s Governing Body and past member of New Mexico’s Public Regulation Commission. Howe is currently a consultant for the West Coast Public Utility Commissions’ Joint Action Framework on Climate Change. He previously led the Global Power consulting group for international consultancy IHS CERA and worked for various utilities.
  • Michelle Bertolino, who served as director of Roseville Electric Utility in California for 12 years before retiring this year. Bertolino previously worked for the Sacramento Municipal Utility District, San Francisco Public Utilities Commission and KPMG Peat Marwick. She has served as president of the Northwest Public Power Association and the California Municipal Utilities Association, and as chair and commissioner of the Balancing Authority of Northern California and the Transmission Agency of Northern California.
  • Susan Ackerman, who last year retired as chief energy officer of the Eugene Water & Electric Board in Oregon. Before that Ackerman served as an attorney for BPA, an attorney and regulatory manager for NW Natural, and as a commissioner and chair of the Oregon Public Utilities Commission from 2010 to 2016.

Current board members Pease and Secretary Scott Waples will hold non-voting advisory seats on the new board, which will take effect after FERC approves the WRAP tariff and the program receives commitments from a “requisite” number of participants, WPP said.

“The varied backgrounds and expertise the new board members bring are first class,” Waples said. “The Western region, and the customers who rely on a reliable source of electricity, are in very good hands.”

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ISO-NE Firms up its Support for Marginal Capacity Accreditation

ISO-NE is narrowing down its options as it moves forward with revamping its process for resource capacity accreditation (RCA).

In a presentation to the NEPOOL Markets Committee last week, ISO-NE officials gave an update on their thinking, which included a firmer decision to work on a marginal reliability measure rather than other options, including an average approach.

The marginal approach, which ISO-NE has been leaning toward from the beginning, sets a resource’s accredited capacity based on the “marginal reliability impact [MRI] of an incremental change in size.” (See ISO-NE Starts its Capacity Accreditation Journey.)

In its latest update, the grid operator said that marginal approaches are the only ones that are truly cost-effective.

Because the average approach, which accredits resources based on their share of their class’s total reliability contribution, does not “yield substitutable accredited capacity, there is always a better way to set FCA [Forward Capacity Auction] awards that result in the same level of reliability at lower cost,” the RTO said in its presentation to the committee.

The marginal approach does put forward substitutable accredited capacity, so “there is not a better way to set FCA awards that result in the same level of reliability at lower costs.”

“As a result, the ISO cannot support a non-marginal approach to accreditation and will pursue an MRI approach as part of the RCA reforms,” said RTO economist Steven Otto.

NRDC Fleshes out Worries About MRI

The Natural Resources Defense Council had said previously that it was concerned that ISO-NE’s preferred method of measuring MRI undervalues clean energy resources’ contributions. (See NRDC: Early Worries About ISO-NE’s Capacity Accreditation Approach.)

At the MC meeting last week, the group backed that up with new numbers from an analysis that it commissioned from GE Energy Consulting.

“At high penetrations, average and marginal accreditation have vastly different results for clean energy resources,” the analysis says. In its model, renewables plus batteries under marginal accreditation would get capacity awards of about 2,200 MW less in 2028 and 6,400 less in 2040 compared to average accreditation.

“Socializing over half of the total reliability contributions of clean resources could result in a reduced market signal for reliability in clean resource selection and development,” the group said. It urged ISO-NE to thoroughly examine the tradeoffs between the two approaches and not dismiss the possibility of a hybrid between them.

NRDC also called on the grid operator to look at whether a seasonal capacity auction and capacity accreditation might be worth considering in light of the changes in seasonal peak load in New England.

Also at the MC meeting last week, RENEW Northeast gave a presentation laying out its own set of design principles for capacity accreditation and promising to use them to assess ISO-NE’s proposals down the line.