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November 14, 2024

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MISO Considers Resource Attributes as Thermal Output Falls

As its on-demand, dispatchable resources shrink, MISO held its first stakeholder discussion on how it can better value generators’ services to the grid.

Senior Vice President Todd Ramey said the RTO is experiencing firsthand the global push to cut greenhouse gas emissions.

“We’re seeing a very similar story, interest in decarbonization, which in the power sector is a very tall ask,” he said during the Wednesday workshop.

Ramey said MISO is changing the way it thinks about power system operations as it grapples with a more decarbonized fleet. He said units that can ramp up or down on MISO instructions are in short supply.

MISO is expecting a 40% renewable energy penetration by the end of the decade.

Ramey said planning reserve margins “have all but disappeared at this point.” He said this is occurring against a backdrop of increasingly severe and unstable weather and electrification’s growing demand.

“Reserve margins might be set daily on what our risk posture is,” Ramey said. “Planning to get through a worst week is really not something the electric industry has focused on until recently.”

During the workshop, MISO proposed a handful of essential reliability attributes for resources that included black start, rapid start up, ramp up and down capability, sustained high output, voltage stability, and fuel assurance.

Zakaria Joundi, director of resource adequacy coordination, said the grid operator is attempting to figure out how much of each attribute it should maintain in its resource portfolio. He invited stakeholders to suggest other essential attributes staff need to consider.

If an aggressive resource transition plays out in the footprint over the next 20 years, Joundi said MISO will need about 366 GW worth of installed capacity on hand to maintain a one-day-in-10-years reliability standard. More than 83 GW of that would have to be capable of providing output for several days in a row.

The RTO also thinks it will require 5 GW of resources capable of ramping up within 10 minutes and 28 GW that can ramp up within an hour.

“Based on public plans that are out there, we feel that we may fall short on these attributes,” Joundi said

Jordan Bakke, director of policy studies, said staff isn’t presupposing an answer on attributes. He said MISO is asking stakeholders what “signals, requirements and facilities” it might need to improve the short-term operational horizon and its long-term resource adequacy.

“First we need to understand what attributes of resources are becoming at risk of being scarce,” he said.

Michelle Bloodworth, CEO of coal lobbying group America’s Power, asked that MISO extend attribute incentives to its current portfolio so that more thermal units don’t retire prematurely. She said a focus on the fleet’s existing attributes will ensure the RTO “doesn’t throw out the old with the new.”

“I think some utilities are making decisions based on political and environmental pressure rather than reliability and logic,” MidAmerican Energy’s Dennis Kimm said. He said utilities’ planning processes don’t include voltage stability and regulation, and they might benefit from MISO telling them which attributes to focus on.

Joundi said the attributes discussion will be “one of many” MISO plans to hold.

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SERC Board of Directors Briefs: Sept. 22, 2022

Blake Praises SERC Entities’ Summer Performance

Jason Blake 2022-09-22 (RTO Insider LLC) FI.jpgJason Blake, president and CEO of SERC | © RTO Insider LLC

CHARLOTTE, N.C. — At Thursday’s meeting of SERC Reliability’s Board of Directors, CEO Jason Blake — reflecting on the fact that it was the first day of fall — reminded attendees “to celebrate our successes” in maintaining grid reliability during a challenging summer.

“I think sometimes within this industry we’re really good at focusing on where we fall short and wanting to take lessons learned,” Blake said. “But if you look at this summer, it was a hard one. We had seasonal peaks coming in earlier than ever, and occurring more frequently: extreme heat, extreme weather generally, whether it be extreme flooding [or] tornadoes. … And the thing I’d really like to take note of is the way the operators in our footprint generally have performed throughout the season. I think it’s been very laudable what they [have] achieved.”

Blake also reminded board members — and those attending virtually — that the challenges facing the grid from the growing adoption of renewable energy, the effects of climate change, electrification of transport and other trends “are not lessening.” He said that SERC and the rest of the ERO Enterprise have an important role to play in educating regulators and policymakers on the relevant issues.

NERC CEO Jim Robb has been instrumental in helping organization the leadership of the regional entities to advance these goals, Blake said, citing a “truly unprecedented” amount of “information and dialogue in this space” over the last year through the ERO Executive Committee, a gathering of the CEOs from each RE to discuss high-level reliability issues. Blake told attendees how SERC has worked to expand this engagement by hosting more meetings for lower-level staff from other REs to discuss the problems they face every day.

“The key point to take away there is that there’s alignment; there’s an understanding. We understand the broader picture, and we’ve had a strong voice,” Blake said. “I can tell you with great appreciation that the SERC team has been actively engaged in these discussions and really coming up with some awesome ideas to help advance the broader ERO Enterprise. So that alignment is key to our success — we need a strong NERC, just like NERC needs a very strong SERC to be successful.”

More Independent Directors a Possibility

SERC’s Nominating and Governance Committee is preparing to begin the process that could lead to a search for new independent directors, Chair Tim Lyons told directors on Thursday. The three independent directors currently serving on the board — Shirley Bloomfield, Lonni Dieck and Deborah Wheeler — are SERC’s first, having joined in 2021 after the RE implemented new bylaws in 2020 that required at least three, and no more than five, independent directors. (See SERC Appoints 1st Independent Board Members.)

Lyons said the committee is currently considering “whether … we are lacking skillsets on the board” that a fresh director could add. Areas of expertise that could be sought by the committee include the natural gas system, battery technology and human resources, along with “various other topics.”

The committee will first develop surveys — one for “stakeholder directors,” one for the current independent directors, and one for SERC’s leadership team — to determine the organization’s views on what skills might be needed. Lyons said the surveys should be sent out within the next six weeks, which would ensure enough time for respondents to return them and for results to be available by the next board meeting in December.

Board Chair Todd Hillman called for a “robust discussion” during the selection process for new directors, which Lyons said would likely take more than a year.

“As you all know, we [won] the lottery with our first set of independent directors,” Hillman said. “We want to continue to have the level of quality, insight and experience, and so we want to go into that conversation knowing full well that that quality is going to stay high.”

Strategic Plan Approved

The sole approval item at Thursday’s meeting was SERC’s long-term strategic plan, which the organization created to outline its contribution to fulfilling the goals of the ERO Enterprise Long-term Strategy. Members voted unanimously to approve the document.

The plan identified three key focus areas, according to which SERC should strive to be a:

  • credible and trusted expert organization;
  • leader in reliability and security across the industry; and
  • highly desirable place to work for all.

Jeni Belew, a senior program manager for strategic development at SERC who introduced the strategic plan, explained that to support the first area, the RE will “provide growth and development opportunities so that our talent is equipped to tackle the challenges facing the evolving electric grid,” along with “gold standard training opportunities [including] continuing education hours” and other credits that can encourage industry stakeholders to see SERC as a valuable source of expertise.

Brian Thumm Jeni Belew 2022-09-22 (RTO Insider LLC) Alt FI.jpgSERC’s Brian Thumm and Jeni Belew presenting the organization’s strategic plan. | © RTO Insider LLC

 

Belew explained that the second area requires building out SERC’s communications ability so that, as policymakers, regulators and other stakeholders learn of its expertise, it can deliver the information they need. To become a desirable place to work, the organization will “continue focusing on our culture and environment … to prioritize diversity, equity, inclusion and allyship … so that everyone finds purpose and value in the work that they do.”

SERC’s next board meeting is scheduled for Dec. 14 in Charlotte.

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FERC Seeking Solutions for New England Winter Reliability

WASHINGTON — FERC’s members opened their monthly meeting Thursday by soliciting feedback on their forum with New England stakeholders on the region’s winter fuel security problems, once again highlighting the philosophical divide along party lines among the commissioners.

All agreed that the situation in New England is urgent, and any extreme weather this winter could result in a loss in electric reliability.

But Republican Commissioners James Danly and Mark Christie were more pessimistic, going so far as to suggest that the role of RTOs in general in ensuring resource adequacy should come to an end.

FERC had the previous day issued a notice in the forum’s docket seeking comment on the issues discussed (AD22-9). Comments are due Nov. 7. (See FERC Comes to Vermont and Leaves with a New England-sized Headache.)

Each of the commissioners urged stakeholders to submit suggestions in the docket on what the commission should do about New England.

Chairman Richard Glick noted that the region is “still heavily reliant on LNG imports, and that’s just not sustainable. In the short term it might be necessary to continue that reliance, but in the long term, it’s just not sustainable.” He noted other “opportunities” to maintain resource adequacy, including more transmission and the coming offshore wind farms.

He also said ISO-NE needs to consider market changes, such as a seasonal capacity construct “to incentivize generators to make arrangements to provide more assurance that there’s going to be fuel supply when it’s needed on the coldest days of the year.”

But Danly reiterated his view, expressed at the forum, that “the situation is bad enough, both in terms of the actual fact of reliability challenges on the one hand and, second, the fact that there is no conceivable way to me that a capacity market can have rates that are J&R [just and reasonable] if the capacity market doesn’t actually deliver the promise of the resources that are to be drawn upon when necessary down the road.”

FERC Protest Sign 2022-09-22 (RTO Insider LLC) Alt FI.jpgThis sign greeted those visiting FERC for the open meeting Sept. 22, the day after Sen. Joe Manchin unveiled the text of legislation that would, among other things, approve the Mountain Valley natural gas pipeline. The meeting itself was interrupted by four protesters, including one who began singing “More Waters Rising” by Saro Lynch-Thomason. | © RTO Insider LLC

 

He recalled that ISO-NE CEO Gordon van Welie had pushed back on his suggestion that FERC should institute a proceeding under Federal Power Act Section 206 to remove their responsibility over resource adequacy and return it to the states. He said he understood that the RTO would not want “a free-wheeling 206 in which we say, ‘You have a problem; go fix it.’”

But “I think we have an unjust and unreasonable market, probably; obviously that would be what the 206 hearing would be for.”

Danly also lamented a recent ruling by the D.C. Circuit Court of Appeals that found ISO-NE’s Inventoried Energy Program, to go into effect for winter 2023, to be unjust because it would unfairly pay nuclear, coal, biomass and hydroelectric resources for fuel storage (ER19-1428-005). (See Court Strikes a Blow to ISO-NE Winter Plan.) The court left the rest of the IEP in place, allowing the RTO to compensate oil, natural gas and refuse generators.

FERC on Thursday issued an order on remand implementing the D.C. Circuit ruling. (The order had not been published as of press time.) “I’m concurring because the court has spoken, and we will do what the court says,” Danly said. “But that got rid of, effectively, one of the possible solutions to the fuel security problem this winter, and I am quite sorry that we’re in a position where … the strategy to get through this winter is to cross our fingers and hope for mild weather. That is not a good plan. …

“If anybody can come up with a short-term fix that would help with fuel assurance this winter, I for one would solicit a 206 filing,” Danly said.

Speaking about a different ruling involving NYISO, Danly also argued that “when you consider how this experiment in markets began, that we were going to use the markets to deliver the least-cost energy generation for the region in which they operate … it’s becoming harder and harder to believe in the premise upon which these markets were originally developed as we have greater and greater price suppression through state subsidies.

“It is getting to the point where I believe that these markets are so manifestly not J&R, given the price warpings, that it is difficult for me not to consider abandoning the entire experiment as long as it’s being conducted this poorly.”

Gradually, Then Suddenly

“I didn’t hear the perspective that markets cannot work, but I certainly share the perspective that at this moment, the markets may not be delivering just and reasonable rates,” Commissioner Allison Clements said. “To me, exerting commission leadership to move this ball forward does not suggest that we know better than the New England states, or that we have the right to override the states’ perspectives. Nor does it suggest that the entire solution set rests in the commission’s jurisdiction.”

She noted that ISO-NE had proposed undertaking a comprehensive study of the problem and potential solutions, with a number of state officials at the forum concurring.

“I, though, did not come away with a level of specificity around what this study should actually look like,” she said. “We know that the root of New England’s winter electric system reliability challenge is the significant dependence on natural gas in these extreme conditions, along with gas supply constraints. Shoring up or adding more natural gas supply capability is one way to address these constraints, [but] it is only one way. The region can also diversify away from reliance on natural gas for electric generation and can reduce both electric and gas demand.”

“When it comes to RTO markets … whether they’re still providing reliability and, more importantly, whether they’re providing it at just and reasonable rates, I think is a serious question,” Commissioner Christie said.

He quoted “The Sun Also Rises” by Ernest Hemingway, in which a character asks another how he went bankrupt. He answers “gradually, and then suddenly.”

“I think [RTOs are] moving from the ‘gradually’ phase to the ‘suddenly’ phase, and I think we’re going to have to grapple with that as we look at the future.”

“I want to hear from people [about] what more can FERC do, both under our FPA authority” and its ability to facilitate discussions, Commissioner Willie Phillips said. “Will additional meetings help? Could we establish a task force? Is there another forum that FERC could use to help bring people to the table? I’m very interested in that.”

On the other side of the extreme weather spectrum, Chairman Glick also complimented CAISO for getting through a weeklong, record-breaking heat wave earlier this month. (See California Runs on Fumes but Avoids Blackouts.)

“California ISO had a number of challenges and did an amazing job of getting through it without having to engage in rolling blackouts.” He reported that, based on a conversation with the ISO last week, the state’s energy storage resources performed very well and were key to maintaining reliability. He also highlighted demand response and California’s ability to import power.

But Commissioner Danly responded: “It is true that various resources played a part, especially on the margins, in keeping the system operating, but a clear-eyed, accurate assessment — if we actually look at where the power came from, natural gas is the reason those lights stayed on. That is the simple fact of the matter.”

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DOE Opens Solicitation for $7B in Hydrogen Hubs Funding

The Department of Energy Thursday announced the opening of applications for $7 billion in funding for six to 10 clean hydrogen hubs.

“These hubs are going to be located in different regions all across the country,” Energy Secretary Jennifer Granholm said in announcing the solicitation at the Global Clean Energy Action Forum in Pittsburgh. “They’re going to use a variety of feedstocks — abated fossil fuel, renewables, nuclear — and they’ll focus on different end uses, for example, electricity generation, industrial production, residential, commercial heating [and] transportation.”

Funded by the Infrastructure Investment and Jobs Act, the “H2Hubs” will be one of the largest investments in DOE’s history, the agency said. It will be managed by DOE’s Office of Clean Energy Demonstrations with support from the Office of Energy Efficiency and Renewable Energy.

Concept papers are due by Nov. 7, with the deadline for full applications set for April 7, 2023.

Funded projects must include a “community benefits plan” to support disadvantaged communities, workforce development and diversity goals.

Demands for hydrogen (DOE) Content.jpgCurrent and emerging demands for hydrogen | DOE

Along with the solicitation, DOE also released its National Clean Hydrogen Strategy and Roadmap for public comment.

The report is the next step in the Hydrogen Energy Earthshot announced in June 2021, which set a goal of reducing the cost of clean hydrogen by 80% to $1/kilogram within a decade.

Granholm said the document projects “that by 2030, that our country’s clean hydrogen market might be twice as large as we projected originally: 10 million metric tons [MMT] by 2030, 20 million by 2040 and 50 million metric tons by 2050.”

The U.S. currently produces about 10 MMT of hydrogen per year — mostly for the petroleum refining, ammonia and chemicals — but that production generates greenhouse gases.

The report says clean hydrogen could reduce U.S. emissions by 10% by 2050 relative to 2005 levels, “based on achieving cost competitiveness to enable demand in specific sectors and where there are fewer alternatives, such as direct electrification or the use of biofuels.”

“Specific markets include the industrial sector, heavy-duty transportation and long-duration energy storage to enable a clean grid,” the road map says. “Long-term opportunities include the potential for exporting clean hydrogen or hydrogen carriers and enabling energy security for our allies.”

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Manchin Details Proposal to Streamline Approval of Energy Projects

Sen. Joe Manchin (D-W.Va.) revealed the text of a much awaited proposal to streamline the permitting process for electric transmission and natural gas pipeline projects Wednesday for inclusion in legislation to keep the federal government operating past the end of its fiscal year Sept. 30.

The plan was controversial even before Manchin made the details public, drawing opposition from some Democrats for its benefits to the fossil fuel industry and from some Republicans because it was a bargaining chip in the recent Inflation Reduction Act.

The unlikely combination makes passage an uncertain prospect in the narrowly divided Senate.

The Energy Independence and Security Act of 2022 would speed and simplify siting of regional and interregional transmission lines viewed as indispensable to the Biden administration’s electrification and decarbonization goals. It would also mandate federal authorization for completion of the Mountain Valley Pipeline, which would boost natural gas exports from Manchin’s home state.

Among other key details, the act would:

  • set a two-year target for National Environmental Policy Act review of major energy and natural resource projects that require a full environmental impact statement and reviews from more than one federal agency, and a one-year target for projects that require an environmental assessment;
  • require issuance of all other permits within 180 days of finishing the NEPA process;
  • designate a lead agency to coordinate project reviews and expand the use of shared interagency environmental review documents and concurrent agency reviews;
  • set a 150-day statute of limitations for court challenges; require random assignment of judges; and require courts to set and enforce a “reasonable” schedule (no more than 180 days) for agencies to act on remanded or vacated permits; and
  • establish procedures for resolving project disagreements without delay.

Manchin has been a pivotal figure in the evenly divided Senate, a Democrat voting with Republicans against some measures that were priorities for his own party.

But he sided with the Democrats on the Inflation Reduction Act in August, in return for a guarantee that his bid to streamline the approval process for transmission projects would be included in a continuing resolution to fund the federal government.

FERC Role

Of particular interest to the electric transmission sector, the act would:

  • clarify that FERC has authority to promote and encourage the construction or modification of electricity transmission facilities within and between regions of the country to ensure an abundant supply of electric energy throughout the U.S.;
  • allow FERC, upon application by a state or utility, to direct the construction of transmission determined to be in the national interest;
  • give the secretary of energy, on application by FERC, authority to designate an electric transmission facility to be necessary in the national interest, which would allow the commission to issue a construction permit for a project;
  • allow eminent domain to be exercised on state land;
  • direct FERC to allocate the costs of projects it determines to meet certain criteria in accordance with its cost allocation principles and roughly commensurate with the estimated project benefits;
  • clarify that FERC is the lead agency for environmental reviews for transmission projects except where approvals are issued by the secretary of the interior; and
  • allow FERC to approve cost recovery payments to jurisdictions impacted by a transmission project.

Uncertain Prospects

Manchin and his bill face opposition from multiple directions, starting in his home state.

Sen. Shelley Moore Capito (R-W.Va.) is promoting an alternative streamlining measure that many of her fellow Republicans are lining up behind.

Many Democrats find the proposal’s benefit for fossil fuel projects and removal of environmental balances unpalatable; Sen. Bernie Sanders (I-Vt.) said earlier this month that he would vote against a measure to keep the government operating if it contained Manchin’s proposal.

And many Republicans are angered at Manchin for supporting the Inflation Reduction Act.

Manchin himself noted at a news conference Tuesday that there might be vindictive Republican votes against something the party has sought for years, simply because it was his plan.

Senate Majority Leader Chuck Schumer (D-N.Y.) pledged to put Manchin’s proposal in the continuing resolution in return for Manchin’s earlier vote, but he presides over a 50-50 split in the Senate and cannot easily force measures through.

The measure applies to projects that entail construction of infrastructure to produce, generate, store or transport energy; capture, remove, transport or store carbon dioxide; and mine, extract, beneficiate or process minerals that require preparation of an environmental document under NEPA.

“Major” projects are defined as those that require multiple federal actions and an EIS under NEPA, or those for which the project sponsor requests treatment as a major project, though only an EA is required.

The act would also require the president to designate 25 energy and mineral projects of strategic importance as national priorities for the American public; energy producers, consumers and workers; and international allies of the U.S.

Reaction

“We applaud Sens. Schumer and Manchin for moving forward with legislation to improve the nation’s outdated system for permitting critical energy infrastructure,” Heather Zichal, CEO of the American Clean Power Association, said in a statement Wednesday. “Making common-sense reforms to our current permitting process will help us unleash the full potential of the clean energy investments spurred by the Inflation Reduction Act and keep us within striking distance of the emissions-reduction targets and climate goals we need to achieve.”

Gregory Wetstone, CEO of the American Council on Renewable Energy, said: “We know we need to expand and upgrade the nation’s electrical grid to fully realize the renewable energy growth expected under the Inflation Reduction Act. … Sen. Manchin’s bill includes provisions that will help streamline the transmission approval process, improving our ability to meet our nation’s decarbonization goals by better connecting our key renewable resources to our largest population centers.”

And Grid Strategies President Rob Gramlich said, “This bill is a massive step forward for permitting and paying” for large-scale transmission projects. “The bill allows broad benefits of transmission to be reflected in how costs are recovered and speeds up approval timelines for siting while preserving the important environmental and public participation protections in NEPA.”

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WPP Shares First Stats from Western RA Program

The Western Power Pool discussed the results of its first regionwide analysis of the Western Resource Adequacy Program (WRAP) with stakeholders Tuesday, including a look at the changing resource mix through 2027 and the need for higher planning reserve margins in the Desert Southwest.

“We are going to be an inch deep and a mile wide, so you should think about this as a survey or 101 overview of the metrics,” Ryan Roy, WPP director of technology, modeling and analytics, said while introducing the webinar.

“We’re going to talk a little bit about the loads and resources in the WRAP footprint,” Roy said. “We’re going to provide an overview of the installations and nameplate [capacity] for wind and solar, give you a feel for the number of units and number of plants that are out there.”

The WPP also provided an overview of the qualified capacity contributions (QCC) and effective load-carrying capability (ELCC) values for each resource class and of planning reserve margin values by region and month.

“This is relatively new for the Western Power Pool,” Roy said. “We’re working our best to ensure that the data is accurate, informative and timely. We’ve made a strong commitment to transparency. So, this is our first opportunity to talk about the broader regional results that we’re seeing in our modeling.”

Among the results:   

For the Northwest, from 2023/24 through 2026/27, additional hydroelectric output will compensate for the retirement of most remaining coal plants, which will make up 2.07% of the resource mix in 2023 but .06% a few years later.

The Southwest, with a much different supply stack, will add solar and short-term battery storage from 2023 to 2027. The region will see a reduction in coal generation but still retain coal as a sizable portion of its resource mix, going from 24% in 2023/24 to 17% in 2026/27.

“The Northwest has planned resource retirements that can impact the capacity available to meet that one event day in a 10-year loss-of-load expectation, and the Southwest [will see a] significant increase in [solar and battery] resources.” Roy said. “They have very aggressive plan-to-build targets.”

An assessment of resource classes showed the WRAP footprint has a total of 146 wind plants with a nameplate capacity of 12,688 MW and 267 solar plants with 11,162 MW of capacity.

Peak loads in the Northwest top out at 41,502 MW during winter and in the Southwest at 37,434 in summer.

Planning reserve margins in the Northwest will not alter significantly in the four-year period covered in the analysis, but the Southwest will need to increase its PRM values to compensate for the infusion of variable solar resources, WRAP said. PRMs in the Southwest, for instance, will need to increase from 20% in November 2023 to 32% in November 2026, a slide in the presentation showed.  

The webinar also included a detailed discussion of the ELCC and QCC of various resource classes by region and month. 

‘Above the Line’

The presentation was a milestone for WRAP, the first broad-ranging resource adequacy program in the West.

WPP, formerly the Northwest Power Pool, started work on the effort two years ago amid concerns that Northwest utilities were increasingly and unknowingly drawing on the same shrinking pool of reliability resources.

Interest in the effort spread quickly to other areas of the West, and in a move that signified its expanding reach across the Western Interconnection, the Northwest Power Pool rebranded itself as the Western Power Pool earlier this year.

The program now has 26 participants from British Columbia to Arizona and east to South Dakota, including major players such as Arizona Public Service, the Bonneville Power Administration and PacifiCorp. CAISO, however, is not involved.

NWPP-Wrap-(NWPP)-FI.jpgWPP’s WRAP program has 26 participants covering much of the Western Interconnection. | NWPP

WPP and SPP plan to launch a “nonbinding” iteration of WRAP soon, one that lacks enforcement and penalties, and a binding phase in 2024, in which participants will be held accountable for failing to meet their expected resource contributions.  

WPP’s board approved a tariff for WRAP last month and is hoping for FERC approval by the end of the year.

SPP, which WPP chose last year as a program operator, provided the modeling and metrics discussed Tuesday.

“Current WRAP participants are completing the non-binding Winter 2022-2023 and Summer 2023 forward-showing submittals using the just-released metrics as a guide to meet program requirements,” WPP said in a news release. “Participants will turn in workbooks to SPP for evaluation and feedback. WPP and SPP intend to release aggregate performance information from these non-binding submittals once complete.” 

Stakeholder comments in Tuesday’s webinar included a question from Fred Heutte, senior policy associate at the Northwest Energy Coalition, asking organizers why they had not summarized data by participant, showing those that have or lack sufficient qualifying capacity, and whether participants will have access to that data going forward.

“Who’s above the line?” Huette said. “Who’s not, for example?”

Rebecca Sexton, WPP director of reliability, responded that public release of the data could impact purchase negotiations between parties.

“There’s just too much sensitivity about that,” Sexton said. “You can imagine that if someone is being shown to the region as slightly deficient, that that just opens a whole can of worms with respect to how their conversations with folks go who might have some capacity they are willing to sell them.

“So, that sensitivity is one we want to be really aware of. We don’t want to have a negative impact on their participation in any market, bilateral now, certainly, or bilateral in the future as well, as we think about this forward procurement, so we will not be sharing that information.”

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FERC Reluctantly Proposes Cybersecurity Incentives

FERC reluctantly issued a Notice of Proposed Rulemaking on Thursday to consider a 200-basis-point incentive for utilities that make voluntary cybersecurity investments, an initiative directed by Congress in last year’s Infrastructure Investment and Jobs Act (RM22-19).

Expenses and capital investments in advanced cybersecurity technology that “materially improve” a utility’s cybersecurity posture and are not already mandated by NERC’s Critical Infrastructure Protection (CIP) reliability standards, or local, state or federal law, would be eligible for the incentives. Also included would be expenses for participating in cybersecurity threat information-sharing programs.

‘FERC Candy’

Chairman Richard Glick and Commissioner Mark Christie said they were reluctantly supporting the NOPR because of Congress’ directive.

Glick said NERC’s mandatory reliability standards have “proven to be a pretty effective approach,” although he acknowledged that it can take too long to respond to emerging threats by amending the CIP standards.

“I think that, if it is important that utilities make investments, or if it’s important that utilities participate in these information-sharing groups, we need to explore whether we need to utilize our mandatory reliability standards approach to get there,” Glick said. “And that that was my preferred option.”

He cited the commission’s 2019 technical conference on cybersecurity incentives, where he said numerous utilities said they had not encountered problems recovering their costs from FERC or state regulators. (See Mixed Reaction for ‘Resilience Incentives’.)

“I’m not totally sure the incentives approach is the way to go, given the significance of these types of investments,” he said.

The NOPR proposes that utilities choose between a return on equity (ROE) adder of 200 basis points or deferred cost recovery, allowing it to add the unamortized portion of the expenses to its rate base.

The commission acknowledged that a 200-basis-point adder exceeds the ROE incentives for transmission facilities. But it said that “given the relatively small cost of cybersecurity investments compared to conventional transmission projects, a higher ROE may be necessary to affect the expenditure decisions of utilities, without unduly burdening ratepayers.”

“Two hundred basis points — that is a lot,” said Christie. “As you know, the ROE already is supposed to represent the market cost of equity capital, and now you’re going to give them 200 basis points on top of that for doing what they ought to do anyway? I mean, there’s a reason why these adders over the years have come to be known as ‘FERC  candy.’ They’re really sweet for those who get it, but not to consumers who have to pay for it. Pretty sour for consumers. …

“I acknowledge the statute says create an incentive,” he added. “One might make the case that the rate treatment itself is a pretty good incentive.”

Commissioner James Danly said that because of the time it takes to enact new mandatory reliability rules, “of all of the challenges that NERC faces, maybe cybersecurity is the one for which NERC is the least apposite.”

Willie Phillips (FERC) FI.jpgFERC Commissioner Willie Phillips | FERC

“So the question becomes, if that is an inapposite  tool — and I would argue that it probably at least partially is — is the provision of FERC candy the proper way to incentivize the rapid immediate response that I think is the policy that is being driven at here? And the fact of the matter is, I do not know. We have to see what the comments are.”

Commissioner Willie Phillips, a former NERC assistant general counsel, said the CIP standards are “a great foundation. The problem is, as everyone has pointed out, they just take too long. …

“We absolutely need to make sure that our utilities don’t do the bare minimum, but that they’re reaching for the sky,” he continued. “What we don’t want to do … is look back years from now, in the wake of some catastrophic, successful cyberattack, and say, ‘If only we had done a little bit more.’”

Prequalified Expenditures

FERC proposed creating a prequalified list of cybersecurity expenditures eligible for incentives with a rebuttable presumption of eligibility. It said it would initially include on the list expenses related to participation in the Department of Energy’s Cybersecurity Risk Information Sharing Program and those for internal network security monitoring, which it said “may better position an entity to detect malicious activity that has circumvented perimeter controls.”

Incentives would generally last as long as the underlying assets are depreciated, with a maximum of five years. Technologies that “may be innovative and/or above and beyond industry standards at one time … may subsequently become conventional, mandatory or even antiquated and therefore may be less deserving of an incentive over time,” the commission said.

The commission also asked for comment on whether cyber incentives should be through performance-based rates. “In particular, we seek comment on whether any widely accepted metrics for cybersecurity performance could lend themselves to be benchmarks needed for performance-based rates, or whether new appropriate metrics could be developed,” it said.

As a result of the NOPR, the commission voted to terminate a previous cybersecurity incentives proposal it opened in December 2020 (RM21-3). (See Industry Warns of Hidden Dangers in Cyber Incentives.)

Comments on the new NOPR will be due 30 days after publication in the Federal Register, with reply comments due 15 days after that.

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Bottlenecks, Cybersecurity, EJ Top of Mind for FERC’s Phillips

NEW YORK — Geopolitics, tackling energy bottlenecks and increasing consideration for environmental justice are novel forces that FERC is now contending with, Commissioner Willie Phillips told an Institute for Policy Integrity conference on Tuesday.

Phillips said the U.S. is “in the middle of an energy transition,” driven by a shifting global energy landscape caused by the war in Ukraine, rising inflation and supply chain issues, all while the Biden administration advances “landmark legislation.”

The past few months have been a “historic period,” and the U.S. is now at a “turning point” where the nation must decide if “we’re ready to make decisions … that help empower the clean energy transition” and address growing crises.

Growing Crises 

The energy crises in Europe and the U.S. represent the first serious challenges in the “net-zero clean energy transition period.”

With Europe confronting staggering increases in energy prices, Phillips pointed to the impact on areas in the U.S., such as New England, where the natural gas-dependent electric sector confronts resource adequacy challenges and high fuel costs as LNG is increasingly exported to the European Union to cover shortfalls in Russian supplies. Phillips said that in recently visiting the region he found that stakeholders were “really hoping for a mild winter.”

Willie Phillips (Institute for Policy Integrity) Content.jpgFERC Commissioner Willie Phillips | Institute for Policy Integrity

Furthermore, other contemporary problems, such as cybersecurity, aging infrastructure, a global pandemic and rapidly advancing technologies, are challenging FERC to remain committed to its duties.

Phillips pointed out, however, that FERC is “addressing all of these issues.”

FERC has responded to the crises “head-on,” Phillips said, and recent legislation, such as the Inflation Reduction Act and last year’s Infrastructure Investment and Jobs Act, has given FERC the ability to help accelerate electric vehicle and renewable deployment, better respond to climate impacts and invest more in disadvantaged communities, while still prioritizing the agency’s guiding principles to provide reliable, affordable and sustainable energy.

Phillips likened those three principles to the “three legs of a stool” that are critical to FERC’s “overall operation.”

FERC’s Challenges 

Phillips explained that FERC’s top challenge will be solving transmission and interconnection reform because the buildout of needed infrastructure for clean resources will be “costly and it’s going to take time.”

FERC is accelerating transmission processes and tackling generator interconnection queue backlogs by encouraging RTOs and ISOs to take a more long-term view that considers state public policy goals and looks “at the reality on the ground,” he said

Interconnection queues have been a “bottleneck” that prevents the U.S. “from unleashing the full potential all of the renewable resources” that currently wait in queue.

FERC is “uncorking” this problem and has proposed “moving away from a serial approach to a cluster approach,” where projects are reviewed not on “a first-come, first-served basis, but a first-ready, first-served basis.”

The next challenge is cybersecurity, which has become increasingly important after Russia’s invasion of Ukraine.

According to Phillips, FERC is using a “two-pronged approach” to ensure grid cybersecurity: mandatory reliability standards and constant stakeholder collaboration. This ensures critical systems are secure and the U.S. avoids another hack like that which shut down the Colonial Pipeline last year.

Environmental Justice

The last challenge is the rising importance of environmental justice (EJ) and the increasing need to consider the environmental and economic impacts that the energy transition is having on disadvantaged communities.

Phillips, who previously served as chair of the D.C. Public Service Commission and was unanimously confirmed by the Senate last November, shared how his rural Alabama background gave him insight into the looming challenges that come with providing reliable energy to disadvantaged communities.

He said is glad that EJ is getting “more and more attention” because his own firsthand experience has shown the positive impact that government regulations can have on homeowners and landowners.

Phillips said that providing clean, sustainable, affordable and reliable energy to disadvantaged communities is always “top of mind,” and he asked industry stakeholders to focus on EJ. He explained that he is paying attention to businesses’ commitments to workforce development, board diversity and entry-level representation, as these have been shown to increase profit and innovation in those communities.

Phillips emphasized that transparency, financial disclosures and targeted communications around decision-making processes will help cultivate environmental justice.

Jeremiah Baumann (Institute for Policy Integrity) Content.jpgJeremiah Baumann, DOE | Institute for Policy Integrity

Additionally, he called on people to “comment, comment, comment” and put their concerns on the record because it helps the commission “sharpen its considerations” and better understand “where pockets of public interest lie.”

EJ concerns were echoed by other speakers, such as Jeremiah Baumann, chief of staff to the undersecretary for infrastructure at the U.S. Department of Energy.

Baumann stated in his panel that the Biden administration “has made commitments that center on key communities, particularly environmental justice communities disproportionately impacted from pollution and those that are liable to be left behind in the clean energy transition, such as timber or coal communities.”

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Texas Lawmakers to Vet ERCOT Market Redesign

The head of Texas’ Public Utility Commission told state lawmakers last week they will get a chance to vet ERCOT’s market redesign early next year before it becomes operational.

During a joint hearing on Sept. 13 before the Texas House of Representatives’ State Affairs and Energy Resources committees, PUC Chair Peter Lake said he intends to publicly present the proposed market design in November. That will give stakeholders, who are expecting the proposal to drop after the Nov. 8 mid-term elections, just enough time to comment before the holiday season’s quiet period.

State Rep. Phil King (R) pressed Lake on whether lawmakers would have a chance to pass judgement on the market design when the 88th Texas Legislature begins Jan. 10. He said his biggest concern is the uncertainty investors see in the market’s future design.

“We’re trying to get people to invest in the market. I think it’s critically important before anything gets implemented that the legislature have a role in affirming that because, otherwise, you’re not going to have certainty for the industry going forward,” King told Lake. “At the end of the day, there just needs to be a marriage between what the PUC comes up with and what the legislature wants. And if there’s not, we’re just going to create a lot of confusion.”

“We would be grateful for that affirmation when it gets to that point,” Lake said. “We’ll always be mindful of how damaging uncertainty in the investor marketplace can be. It’s taken us a long time to get to this point. I want to start putting steel on the ground as soon as possible.”

“Many legislative members would rather these kinds of major policy changes not be made at the agency, asserting that is their domain,” tweeted Austin-based energy consultant Doug Lewin.

Lake said the commission has already received the first component of a consulting firm’s review of the proposed design. He said the commissioners “synthesized” that report and have sent it back to the consultants to “iterate and continue narrowing the filter … to drive towards a final market product.”

“We’ll present a final product to you all that is as ready as possible to be plugged into ERCOT,” Lake said.

The Phase II proposal has sometimes been described as a “capacity-light” market with a load-side reliability mechanism and a backstop reliability service. (See PUC Forges Ahead with ERCOT Market Redesign.)

Coincidentally, E3 Consulting, which is reviewing the PUC’s proposal, also developed the load-side reliability obligation mechanism that may be the central part of the market design. E3’s proposal introduces a formal reliability standard for load-serving entities and a mechanism to ensure sufficient resources to meet this standard.

“It seems to make sense that the companies that get paid for providing power should do it reliably, and so that’s what we’re working through now,” Lake said, noting the commission unanimously approved the Phase II design last December.

Brad-Jones-2022-04-19-(RTO-Insider-LLC)-FI.jpgERCOT CEO Brad Jones | © RTO Insider LLC

“The blueprint … is designed so that we can go through the different iterations with these consultants to capture the features of each concept and integrate those into a hybrid while discarding the flaws,” he said.

Speaking on the same panel with Lake, ERCOT’s Brad Jones — interim CEO “at least for the next 17 days and five hours,” he said when introduced — defended his proposal to add a gas desk to the grid operator’s control room. Jones has been publicly promoting the idea of ERCOT operators monitoring gas availability and restrictions for gas-fired power plants as early as January.

“There’s not a great deal of transparency around the operations of our natural gas system. That information doesn’t usually flow to us,” Jones said in January during an education session for the Board of Directors. (See ERCOT Preps for 2nd Cold Snap of Year.)

‘They Want it to Stay Private’

Gas industry representatives pushed back during the hearing against the desk and a similar proposal for a gas market monitor.

“As an agency, we don’t understand what a gas desk and a market monitor is because we are in a free market in the state,” said Christi Craddick, who sits on the intrastate gas-regulating Railroad Commission. “I’m not clear what a gas desk or an independent market monitor is, [or] how that would resolve or make the electricity grid even more reliable. That’s not clear to me.”

Rep. Tom Craddick (R) from gas-rich West Texas, who is also Christi Craddick’s father, said he does not want a gas desk proposed until the legislature can opine on it.

“I believe it’s a policy change,” he told Jones. “My constituents don’t like the idea. They don’t want to give you all that information. They want it to stay private.”

“There’s been a lot of confusion around this and hopefully, we can begin to resolve some of that confusion,” Jones said, explaining that the desk would have nothing to do with trading gas commodities.

“It’s just an accident of the words that we use when we first began discussing this concept,” he said. “It only makes sense as gas is a significant contributor to over half of our generation fleet. This is purely operational information. Is a [pipeline] operating? Is a compressor station out? Is there maintenance been done?”

Jones stressed the information would be voluntarily provided by gas operators.

“There’s a lot of people who are not willing to give you that information or wanting it out,” Rep. Craddick said. “So how are you going to have them give it to you?”

“That’s where I’m facing opportunity. Most people know that I’m a very positive person, and I’m just positive enough to believe we can make this work,” Jones responded. “If we can get down to the fact that it’s really just operational information that is necessary for ERCOT to operate the system. I’m still very hopeful that we can get to that place where the gas companies will recognize moderate amounts of information … it’s purely for improving reliability

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Will Hydrogen Fuel Cell Vehicles Beat out Battery Electric?

ARLINGTON, Va. — Sunline Transit in Southern California’s Coachella Valley — home to Palm Springs and the Coachella music festival — got its first hydrogen fuel cell bus in 2006.

Today, the regional transit agency runs 21 hydrogen buses and recently received funding for 10 more, according to Lauren Skiver, CEO and general manager.

The agency also has several battery electric vehicles and plans to add more, but Skiver said as the 82-bus fleet transitions from compressed natural gas, most of its buses will run on hydrogen, produced by the agency’s own electrolyzer.

“It doesn’t make sense to go all battery electric,” Skiver told a packed hall at Infocast’s Hydrogen Hubs Summit last week.

“We get about 150 miles per charge on our battery electric buses; we get 350 miles on a full fill of hydrogen,” she said, noting that a growing number of transit agencies in California “have put the flag down for hydrogen.”

The California Fuel Cell Partnership reports 66 fuel cell buses currently on the road in the state, with more than 100 in the pipeline. The state also has 54 hydrogen fueling stations.

Skiver was one of six speakers on a panel on the potential market for green hydrogen in long-haul transportation, and the opportunities and challenges of competing with the fast-growing market for electric vehicles. Transportation is one of the applications for green hydrogen that the U.S. Department of Energy has specified for the demonstration hydrogen hubs to be funded with $8 billion from the Infrastructure Investment and Jobs Act (IIJA).

The market could also benefit from the $3/kg production tax credit for green hydrogen contained in the Inflation Reduction Act (IRA). (See Summit Attendees Hail IRA’s Hydrogen Tax Credit as ‘Game Changer.’)

James Kast, hydrogen infrastructure manager for Toyota Motors North America, reeled off a list of clean hydrogen’s selling points, from better air quality for rural and remote communities that experience high levels of pollution from diesel trucks to the ease and flexibility of switching to hydrogen.

Toyota’s hydrogen fuel-cell sedan, the Mirai, has been available in the U.S. since 2020 but has had only minimal sales ― 499 in 2020 and 2,629 in 2021, according to figures from CarFigures.com. The company’s fuel cell drive train is also being used in Class 8 trucks ― 18-wheel semis ― at the ports of Los Angeles and Long Beach.

“You can produce hydrogen from so many different methods; you can even move it around with a lot of different methods,” Kast said. “So now you have this very fuel-flexible energy carrier that you can still put in an existing truck stop and have a similar fuel dispenser and still fuel a bunch of trucks back-to-back 10 to 20 minutes at a time.

“That really resonates with people who say, ‘Well, what’s our other solution?’ Make a massive battery charging farm for all of your trucks,” he said.

But Kast said the $8 billion in hub funding from the IIJA “doesn’t solve all our problems. It’s a start, but really these aren’t [an] enabler for all the other investment to achieve all the things we’re talking about” at the conference.

Still, developing the hubs could allow the industry “to get some synergies to enable cost reduction because there are a lot of vehicles, like trucks and other things, that take a lot of [hydrogen] demand,” he said.

Echoing Kast, Shawn Yadon, president of commercial markets at Hyzon Motors, also stressed the parallels between traditional fossil-fueled trucks and hydrogen as a key issue for market development. Based in Rochester, Hyzon is selling hydrogen fuel cell semis, commercial coaches and garbage trucks in the U.S. and global markets.

“You’re going to have fleets who are saying, ‘Look, I need [fueling] behind the fence — on site,” Yadon said. “Every element and every touchpoint that fleets are used to today with their traditional fueling are going to be asks and requirements down the road. Starting from the hydrogen hub and production all the way through distribution, down to the actual user, all of those elements, all of those touch points are going to have to be covered, and different costs, obviously go with those different methods.”

‘Laser-focused’ on California

Nikola Corp. already has its electric semi, the Tre BEV, on the road, helped by incentives such as California’s Hybrid and Zero-Emission Truck and Bus Voucher Incentive Project (HVIP), according to Erik Mason, the company’s global head of energy supply and trading.

Nikola’s hydrogen fuel cell semi is due out in 2024, and the company will again be “laser-focused” on the California market, Mason said. He was, however, more cautious in looking at the impact of the IRA’s $3/kg production tax credit and the DOE’s Hydrogen Earthshot, which is targeting a $1/kg price for green hydrogen over the next decade. “What does the $1/kg mean? What point of the value chain is that?” he said. “Is that $1/kg dispensed into a truck? That’s very different than $1/kg produced at the [hub]. … You produce hydrogen at ambient temperature at the hub; now you’ve got to compress it or liquefy it to get it into a station. You’ve got to transport it; you’ve got to build the station. There’s cost of capital.”

The price of green hydrogen produced by electrolysis has recently soared, with industry analysts citing prices between $10 and more than $16/kg.

Siting clean hydrogen fueling stations could also run into the same roadblocks as EV chargers ― the lack of critical infrastructure, Mason said.

“Five years ago, when we started envisioning how we would solve this, we were going to build 700 stations across the U.S., all with on-site electrolysis,” he said. “But when you get down to reality, most locations where you want those stations don’t have the electrical infrastructure, and you’re going have to pay transportation [and] distribution costs and all these things that just make the electricity costs way too much.”

The company is now planning for a “hub and spoke” model for its hydrogen charging stations, he said, with hubs located at sites with the necessary existing infrastructure, he said.

Unified Voice

Regulation remains another, significant roadblock as state regulators and policy makers lag the speed of technology adoption.

“The standards organizations are not keeping up,” said Rich Mihelic, director of emerging technologies for the North American Council for Freight Efficiency (NACFE), “So there is a lot of learning for this industry to get through. A lot of operational issues are out there.”

A key example, he said, are state regulations that prohibit trucks carrying hydrogen as a commercial product to go through some tunnels. Maryland does not allow trucks carrying hydrogen in its long harbor tunnels.

New Jersey also bans self-service gas stations, and Oregon still limits self-service to standalone gas stations in counties with fewer than 40,000 residents.

“Is that going to apply to hydrogen?” Mihelic said. “You have union contracts where the phrase ‘hydrogen fueling’ has never been used.”

Yadon said the industry is going to have to take on the education of state and local officials.

“It’s about refreshing some of these statutes or regulations that just really didn’t foresee hydrogen to be a player,” he said. “We just have to get people … to understand why these things need to be refreshed and what makes sense and what doesn’t make sense. But all of these barriers need to be tackled one by one … and that’s going to take coalition efforts.”

Skiver also called for the industry to speak with a more unified voice. “We have to stop arguing with ourselves about what the benefits [of hydrogen] are,” she said. “If you look at electrification [advocates], they’re not arguing with themselves about cost, about applications, about manufacture. They are just on [Capitol Hill], in the offices, talking about the benefits of electrification.

“We’re still arguing about pathways to cost parity. We still talk about that more than anything else,” Skiver said. “We really have to start getting a unified voice out there with our elected officials.”