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November 20, 2024

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New York Governor Signs Clean Building Codes, Thermal Networks Legislation

New York Gov. Kathy Hochul signed a climate-related legislative package Tuesday that includes bills to align building codes with state climate law and authorize utilities to operate thermal energy networks.

The Advanced Building Codes, Appliance and Equipment Efficiency Standards Act (A10439/S9405) will update New York’s codes to help reduce greenhouse gas emissions in the building sector, which is the state’s largest contributor to emissions.

“We are going to save $15 billion, which includes $6 billion for low- and moderate-income households at a time when that is so critically important for them,” Hochul said at the bill signing ceremony in Brooklyn. “Stronger energy codes also will give us $2.5 billion in lifetime savings for homeowners.”

The act establishes a new definition of life-cycle cost for regulators to consider when making any potential amendments to the state’s energy conservation construction code. That definition requires regulators to consider the estimated cost of acquisition, operation, maintenance and construction of an energy system for the life of a building.

In addition, regulators will have to ensure that efficiency standards and regulations do not increase emissions of co-pollutants or burden environmental justice communities.

Meanwhile, the Utility Thermal Energy Network and Jobs Act (A10493/S9422) authorizes New York utilities to own and operate thermal energy networks and sell the energy to consumers. Under the law, the Public Service Commission must initiate a proceeding this fall to support thermal network deployment.

Thermal networks are defined in the legislation as the infrastructure that supports utility-scale projects supplying energy from piped, noncombustible fluids for building heating and cooling. State utilities now have three months to submit proposals to the commission for at least one, and up to five, thermal network pilot projects.

For projects developed under the law, utilities will have to demonstrate that they have signed an organized labor agreement, with job priority given to workers at risk of losing their jobs from the downsizing of the gas transmission and distribution system.

Hochul also signed a bill (A.9598/S.8648) that amends the state labor law to ensure that renewable energy systems workers receive prevailing wages for projects with a capacity of 1 MW or more. The previous wage standard applied to projects of 5 MW or more.

“It is critical that workers in new green industries are paid a fair wage and that workers in the fossil fuel industry are not left behind,” John Murphy, international representative for the United Association of Pipe Trades, said during the signing ceremony. A coordinated effort between union leadership and state legislators ensured that “labor standards are front and center in these climate bills.”

Crypto Bill

A cryptocurrency mining bill (A07389/S06486) that passed the New York legislature in the final hours of its session in early June was “missing” from Hochul’s climate package, according to a statement from the advocacy group Seneca Lake Guardian.

“In the middle of a climate crisis, New York cannot allow fossil fuel plants to reopen as gas-guzzling crypto-mining cancers on communities, accelerating climate change just to make a few rich people even richer,” the group said.

The bill would put a temporary moratorium on cryptocurrency mining operations that use an authentication method called proof-of-work (PoW) to validate blockchain transactions.

On June 30, the New York Department of Environmental Conservation denied an air permit renewal for Greenidge Generation’s PoW crypto-mining operation in Torrey, saying that it is “inconsistent” with the state’s climate law.

The natural gas power plant that supports Greenidge’s operations has transitioned from supplying power to the grid to “primarily” providing behind-the-meter power for the mining facilities, the department said.

Under the cryptocurrency bill, the department would develop a generic environmental impact statement for crypto-mining to help the state understand the effects of the PoW technology on energy use.

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UN Climate Conference Presidency Preps Guide on Just Financing

The leadership for the U.N.’s 27th Climate Change Conference of the Parties (COP27) is preparing a new guide for Paris Agreement signatories on just financing that it will release at the conference in Sharm El-Sheikh, Egypt, this fall.

“The idea is to capitalize on the needed interplay between different stakeholders in order to promote an actionable climate agenda and achieve scale financing,” Nada Tawfik, senior adviser for strategic planning at Egypt’s Ministry of International Cooperation, said Wednesday.

The Sharm El-Sheikh Guidebook for Just Financing will highlight the role in global climate financing of different stakeholders, such as multilateral development banks (MDBs), philanthropies, private-sector entities and climate funds, said Tawfik during an E3G-hosted webinar for London Climate Action Week.

Key goals of the guide are to: map the global climate finance landscape; identify key stakeholders and their complementary roles and competitive edge; and target priority sectors that have a direct impact on accelerating climate action.

“Recent statistics have … shown that the climate financing that has been mobilized in 2021 mainly was targeting [greenhouse gas emission] mitigation sectors,” Tawfik said. “In this guidebook, we aim to strike a balance between adaptation and mitigation and pinpoint opportunities to accelerate climate action.”

The guide will provide an international framework for climate action that applies to all developing and emerging counties, while also detailing implementable regional actions.

“The role of the different stakeholders would be important for creating an enabling environment for climate investment, enhancing the invest-ability of green projects and thinking of innovative ways to de-risk investments and bring in financing at scale,” Tawfik said.

The COP27 presidency’s preparation committee is holding discussions now with multiple stakeholder groups, which includes MDBs, to discuss “a pipeline of implementable projects on the national level” for the guide, she said.

Key Strategies

In preparing the guide, the COP27 leadership wanted to show how MDBs can instigate investments by the private sector.

“MDBs play an important role in providing financing and technical support; however, this financing is not enough to meet the recent estimates of more than $4 trillion in order to finance the [global] climate action agenda” through 2030, Tawfik said.

An MDB is a financial institution established by a group of countries to support developing countries. The U.S., for example, is a member of five MDBs, which include the World Bank, Inter-American Development Bank, Asian Development Bank, African Development Bank and European Bank for Reconstruction and Development (EBRD).

Nationally determined contributions (NDCs) and long-term low GHG emission development strategies, as the building blocks of the Paris Agreement, are important levers in MBDs’ ability to support developing countries. An NDC, which is a five-year climate plan of a party to the Paris Agreement, does not have the time frames that MDBs need to plan for climate investments, according to Jan-Willem van de Ven, head of international climate policy and engagement at EBRD.

“It’s very good that the Paris Agreement found this instrument of long-term strategies [LTSes], because the long-term strategies are where the analysis, synthesis and objectives can come together on a longer time pathway,” van de Ven said. “We know that if [MDBs] invest in infrastructure, these are typically investments with payback times of more than 10 years.”

The current challenge, he added, is that more countries need to “ramp up” work on their LTSes and submit them to the U.N.

To date, 51 countries have submitted an LTS, and only 30 of those are countries with coordinated economic development goals as members of the Organization for Economic Co-operation and Development, according to Marcela Jaramillo, senior associate at the 2050 Pathways Platform. The U.S. submitted a pathway for net-zero GHG emissions by 2050 during COP26 last fall.

An additional 60 countries are working on their strategies, and Jaramillo says many of those governments expect to submit a strategy in September. Others in that group may continue to work on their strategies and present them at the 28th Conference of the Parties (COP28) in 2023 in Dubai, United Arab Emirates.

“The LTS process really takes time to bring everyone to the table, build consensus and have conversations on this vision of the country,” Jaramillo said.

The U.N. climate change secretariat will release a report on all the strategies submitted by September for review at COP27. That report will allow parties to the Paris Agreement to look at the strategies in relation to the goal of holding global temperature rise to below 1.5 degrees Celsius, said Tom Evans, a researcher at E3G.

It will take another year, however, to really understand the scope of LTSes and their impact. Evans sees COP28 as the next “important moment” for working on those strategies and giving parties clear instructions for moving their climate goals forward.

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Biden Admin. Sees Climate Action Via Private Sector After Court Ruling

Before the U.S. Supreme Court ruled Thursday to limit the Environmental Protection Agency’s ability to regulate carbon emissions from existing power plants, the White House released a fact sheet announcing that 61 major hospitals and health sector companies had pledged to cut their greenhouse gas emissions 50% by 2030.

These commitments, from some of the country’s largest hospital systems, came in response to the administration’s Health Sector Climate Pledge. With the health care sector accounting for 8.5% of the nation’s GHG emissions, the fact sheet said, the administration “is committed to using every available tool to protect public health, while moving full-speed ahead with our mission to tackle the climate crisis.”

Exactly what those tools might be, how they might be used and the role of the private sector in the fight against climate change quickly became a central theme in the administration’s response to the court’s ruling in West Virginia v. EPA.

In a statement Thursday, Biden promised continued action on climate, including a careful review of the decision to “find ways that we can, under federal law, continue protecting Americans from harmful pollution, including pollution that causes climate change.” 

Michael Regan (PBS) FI.jpgEPA Administrator Michael Regan: “The markets have already spoken.” | PBS

EPA Administrator Michael Regan and National Climate Advisor Gina McCarthy amplified the administration’s stand in media appearances. Speaking on PBS New Hour on Thursday, Regan called the ruling “devastating” and “frustrating,” but said his agency still has the authority to regulate climate and “health-based pollution” from power plants.

“We have just lost some flexibility there,” he acknowledged, adding, “we’re hoping that, when they [generation operators] look at the regulation of waste and discharges in water, climate pollution, health-based pollution, they will see that it’s not worth investing in the past and they will continue to do what they’re doing now, which is invest in the future.

“The market is already moving in this direction. And it’s our obligation as the government to be able to provide some certainty, so that they can make longer-term investments,” he said.

In a June 28 interview with Time magazine, McCarthy anticipated the court’s ruling, saying the administration would need to find “creative” ways to continue the climate fight.

“It can’t just be about using regulations or using Congress to fix this,” said McCarthy, who headed the EPA during the Obama administration, when the agency proposed the Clean Power Plan rejected by the court. She pointed to Biden’s ongoing engagement with the private sector — the health care industry, for example — and the use of its own purchasing power and the Defense Production Act to promote investment in clean energy. (See Biden Waives Tariffs on Key Solar Imports for 2 Years.)

“We’re making significant progress on the transition to clean energy, and that is not going to live and die by the Supreme Court’s decision,” she said.

The former EPA administrator was even more outspoken in a June 30 interview with CNN following the ruling. While the decision “sent a signal that the Supreme Court is interested continually in going backwards instead of forwards … the private sector is all in on this transition to clean energy because it makes them money,” she said. “And we’re interested in it because it creates jobs, it lowers costs for families that are trying to struggle with energy costs today … and we’re succeeding, which is why this decision actually happened.”

Separation of Powers

The Clean Power Plan sought to cut power sector carbon emissions by 32% compared with 2005 levels by substituting coal-fired generation with natural gas and renewables. The court’s 6-3 ruling voided the CPP, saying that without “clear congressional authorization,” EPA lacks authority to compel generation shifting to reduce carbon emissions. (See Supreme Court Rejects EPA Generation Shifting.)

The immediate impact of the ruling is minimal, as the Clean Power Plan was withdrawn by the Trump administration, and the Biden administration has said it would not attempt to implement it. Moreover, the Biden administration says the electric industry achieved the CPP’s emission limits a decade ahead of its 2030 deadline, without the regulation.

But as the latest in a series of orders by the conservative-dominated court to limit executive agencies’ discretion, it could act as a constraint on any future EPA action. 

Noting that the decision is rooted in the concept of separation of powers, industry analysts ClearView Energy Partners said going forward, EPA “policy ambitions are limited to clearly expressed congressional authority.”

Similarly, in a post-decision blog, Jay Duffy, an attorney with the Clean Air Task Force, said the ruling takes generation shifting, the “most efficient, cost-effective emissions reduction measure off the table.”

But Duffy says the decision does uphold an essential tool for the EPA – its right to regulate carbon dioxide from power plants under the Clean Air Act. The agency has “ample authority to set stringent existing source standards based on directly applied pollution control technologies and techniques, such as carbon capture and sequestration and co-firing with zero-carbon fuels,” he said.

Market mechanisms, such as emission trading — “as long as the trading is between power plants in the [same] source category” — could also be available, Duffy said.

Echoing Regan, ClearView pointed to EPA’s ability to tighten rulemakings for health-based and other pollution — such as mercury and wastewater — that “could make the operation of coal plants more expensive.” But ClearView cautions, in light of West Virginia v. EPA, Regan “may be well-served to downplay any potential climate ‘co-benefits’ associated with incremental tightening of those regulations and clearly articulate the wisdom and affordability of tightening each for their own sake.”

West Virginia v. EPA has also intensified calls for congressional action on clean energy, specifically the portfolio of clean energy tax credits from the failed Build Back Better Act, now being renegotiated in the Senate. With the midterms looming and gas prices and inflation still high, the likelihood of Senate Democrats hammering out a compromise that can gain the support of party conservatives — particularly Sen. Joe Manchin (D-W. Va.) — and House progressives seems tenuous at best.

Private Sector

The private and tech sectors, which invariably move faster than regulators or law makers, are now providing major momentum for the clean energy transition, a momentum Biden clearly wants to accelerate and leverage.

In another pre-decision fact sheet, the White House heralded more than $700 million in private sector investments in electric vehicle charging manufacturing in the U.S., which would produce about 250,000 EV chargers per year.

Such investments have been catalyzed, the fact sheet said, by the $7.5 billion for EV charging infrastructure in the Infrastructure Investment and Jobs Act and the president’s goal of having electric vehicles make up 50% of new car sales in the U.S. by 2030. State policy, like California’s target of ending all sales of new gas-powered vehicles by 2035, are also moving the market.

The fact sheet cited a $450 million investment by Electrify America to expand its network of fast chargers with a “rapid deployment of up to 10,000 ultra-fast chargers at 1,800 charging stations, more than the number of high-power chargers available in the United States today.”

Technology giant Siemens has also invested $250 million to increase its U.S. manufacturing capacity, with the goal of producing one million chargers over the next four years. 

While policy can be a drag on the private sector, it has rarely stopped it. Or as McCarthy said on CNN, “The private sector isn’t sitting around twiddling its thumbs about one provision in the Clean Air Act. It is worried about moving forward to capture the clean energy market of today.”

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MidAmerican to Pay $82k Penalty to MRO Over Facility Ratings

MidAmerican Energy will pay $82,000 to the Midwest Reliability Organization for violating NERC’s reliability standards, according to a settlement between the utility and the regional entity approved by FERC on Thursday (NP22-25).

The settlement between MRO and MidAmerican was part of NERC’s monthly spreadsheet notice of penalty, filed on May 31. In its filing Thursday, the commission said it would not further review the agreement, or the others filed in the SNOP, leaving the penalties intact. Commissioner Allison Clements did not participate in the decision.

MRO Knocks MidAmerican for Misratings

MidAmerican’s violation concerns FAC-009-1 (Establish and communicate facility ratings), which was active from 2007 until 2012, when it was replaced by FAC-008-3 (Facility ratings); the latter standard was in effect when the utility discovered the violation.

Requirement R1 of FAC-009-1 makes transmission owners and generator owners responsible for establishing facility ratings for their “solely and jointly owned facilities that are consistent” with an established facility ratings methodology (FRM). MidAmerican reported in June 2018 that it was noncompliant with this requirement and had been since the standard became enforceable in 2007.

The utility reported that it had identified 21 facility ratings errors during an internal review, later expanded to 89 errors after an extent of condition examination. MidAmerican’s FRM required that it base facility ratings on the “most limiting element of a facility,” which was not done at the affected facilities because of oversights. In some cases, the utility “failed to consider industry standards for substation bus design … and for reducing equipment loss of life.” In others, MidAmerican changed its field equipment but neglected to update the documentation used for ratings.

MidAmerican’s mitigation steps included updating all its facility ratings. This resulted in reduced ratings for 62 facilities, including one whose summer normal rating was lowered 5% while its winter rating was reduced 20%. The other 27 ratings were increased. The entity also overhauled the checklists for its substation engineering quality assurance review, trained personnel on the changes, and implemented annual field reviews, starting in 2018.

MRO decided that the violations comprised a “moderate” but not a “serious or substantial” risk to BPS reliability. While the RE acknowledged that operating a facility above the rating of its most limiting element could damage that element and possibly lead to failure, in practice none of the misrated elements experienced enough flow to cause problems during the 12 years the utility was in violation. For the underrated elements the danger was even less, because the misratings “resulted in overly conservative operation of the facilities.” No harm has been attributed to the violation.

Army Corps Failed to File Models

The SNOP also included a settlement between SERC Reliability and the U.S. Army Corps of Engineers (USACE) for violations of reliability standards in USACE’s Savannah, Mobile, and Wilmington districts. No monetary penalty was assessed for these violations.

The same two standards were at issue in all three cases: MOD-026-1 (Verification of models and data for generator excitation control system or plant volt/var control functions) and MOD-027-1 (Verification of models and data for turbine/governor and load control or active power/frequency control functions). SERC discovered that Savannah and Mobile were in violation of both standards during compliance audits in 2018; Wilmington notified the RE of its infringement in 2020.

Requirement R2 of MOD-026-1 requires GOs to provide transmission planners a verified excitation control system and plant volt/var control function model; under MOD-027-1, requirement R2 mandates that TPs be provided a verified turbine/governor and load control or active power/frequency control model. The implementation plans for the standards set deadlines for achieving certain percentages of compliance. Violations began in all three cases on July 1, 2018, when the GOs were to have provided the needed data for at least 30% of applicable units.

SERC determined the cause of the violations to be ineffective resource management in the case of USACE-Savannah, and management oversight for the other two districts. But the description of the error was the same for each district: The managers “failed to allocate sufficient manpower and resources dedicated to track and maintain NERC compliance.”

The districts also implemented the same mitigation strategies. Each one created a team dedicated to compliance monitoring; established a central electronic repository for evidence and documentation; performed model verification testing for the relevant standards; and submitted model verification data to their TPs.

SERC had planned to resolve the violations as compliance exceptions, which can be recorded and mitigated without triggering formal enforcement actions. However, the RE decided to elevate them to settlement agreements and file the infringement with FERC because the utilities were unable to meet their initial goal of completing the mitigation plan by December 31, 2021, and requested a 12-month extension.

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Vegetation Eyed in AEP Ohio Outages Following Storms

VALLEY FORGE, Pa. —American Electric Power (NASDAQ:AEP) has identified vegetation as a likely cause of the transmission line failures that left more than 240,000 customers in Ohio without power for up to two days following violent storms in June, PJM officials said last week.

PJM ordered load sheds on three of AEP’s 138-kV lines to prevent overloads and cascading outages June 14 after a storm identified as a derecho downed power lines. (See AEP Under Fire as Load Sheds Persist in Ohio.)

Although the cause of the line tripping remains under investigation, AEP said vegetation was a contributing factor, Paul McGlynn, PJM executive director of system operations, told the Markets and Reliability Committee on Wednesday. “Whether vegetation was blown into the lines or whether there were encroachment issues, we don’t have the answers yet,” he said.

Monday, June 13: Load Forecast Falls Short

McGlynn and other PJM officials gave the MRC an in-depth briefing on the RTO’s challenges in mid-June, which began Monday, June 13, when load peaked around 136 GW, well above the forecasted 128 GW. McGlynn said PJM’s under-forecast was 1,800 MW during the “valley” overnight, rising to 8,000 MW by noon.

The load forecast fell short because of weather that was warmer and more humid than expected, and storms expected to provide cooling did not arrive until after the evening peak. “If we had perfect weather knowledge, [the load forecast] would have been spot on,” McGlynn said, citing backcasts the RTO did after the event.

The RTO also saw generation losses of about 1,150 MW and a constraint, followed by an overload, on the 500-kV Peach Bottom-Conastone line that impacted what resources the RTO could bring online. It responded by taking transmission loading relief procedures, “something we don’t do all that frequently,” said McGlynn.

It also called on little-used combustion turbines to maintain reliability. The RTO activated almost 26,000 MW of CTs, versus the 16,000 MW it had expected to use.

“It was tighter than we anticipated, but we were reliable through the whole operating day,” McGlynn said. The result was “some fairly high prices through the peak period.” LMPs peaked at $2,643/MWh in the 4-5 p.m. ET hour.

Independent Market Monitor Joe Bowring said PJM exported about 4,000 MW to MISO “when it was economically illogical.”

“We will investigate the reasons,” he said in an email after the meeting.

PJM dispatch also approved 35 shortage intervals between 2:55 and 6:05 p.m., said Phil D’Antonio, director of energy market operations.

“I’m surprised we would dispatch so tight to the timing of a thunderstorm,” said Public Service Enterprise Group’s Gary Greiner.

“Storms are sometimes a challenge to predict as to when they will occur” and where, McGlynn responded.

Tuesday, June 14: Storms Down Lines, Poles

When the storms finally arrived late Monday night and continued into Tuesday morning, they were violent and set off tornadoes in Ohio, McGlynn said. AEP Ohio reported wind gusts as high as 95 mph, which downed poles and lines across its service territory.

Between 1 and 2 p.m. June 14, nine 138-kV facilities tripped in the AEP zone, with loads on several facilities above their load dump rating.

Timeline of performance assessment intervals (PJM) Content.jpgTimeline of performance assessment intervals, June 14-16. | PJM

Beginning at 2:02 p.m., PJM issued the first of several load-shed directives to AEP, triggering performance assessment intervals (PAIs), in which capacity resources face penalties for shortfalls in output.

Fearing multiple cascading overloads, the RTO also called on pre-emergency and emergency demand response in the Marion area of AEP at 3:50, followed at 7:21 by an additional load-shed directive to prevent a potential N-5 cascading outage on the 138-kV Beatty-Bolton line.

Wednesday June 15: More Line Failures

In the early morning hours of June 15, AEP returned to service several lines that had tripped the previous day. PJM cancelled its load-shed directive at 3 a.m.

But over a 10-minute period ending at 10:40 a.m., three 138-kV lines in AEP tripped. PJM issued a load-shed directive to relieve an overload on the 138-kV Gahanna-Hap Cremean line at 10:41, just a minute before that line also tripped, triggering another PAI.

At virtually the same time, AEP restored service to the 345-kV HyattCS-Hayden line, which had been recalled on Tuesday from a maintenance outage. McGlynn said the timing of the restoration was a coincidence and that officials don’t know whether an earlier restoration might have prevented the Gahanna-Hap Cremean overload. “It’s certainly something we’re looking at,” he said.

At 10:50, PJM again called for pre-emergency and emergency DR in the Marion area, followed 50 minutes later by another load-shed directive issued to prevent a potential N-5 cascading outage for the 138-kV Kenney-Roberts line.

It wasn’t until 10:25 p.m. that several lines returned to service and load decreased enough to end the load-shed directives and the PAI.

Thursday June 16: Hot Weather Alert

On Thursday, June 16, PJM issued a hot weather alert for the western part of the RTO. At 10:36 a.m. the 138-kV Corridor-Blendon line, which had tripped the previous day, tripped again, but there was sufficient generation to control the constraint.

PJM used contingency switching where it was able to manage thermal loading. But as load continued to increase, PJM — with no generation or switching available — issued several post-contingency local load relief warnings.

After the 138-kV Corridor-Morse line tripped about 12:18 p.m., PJM again called on DR for the Marion area about 12:30, initiating another PAI. The DR was canceled about four and a half hours later, following the return to service of the 138-kV Bexley-St. Clair and Morse-Spring Rd-Genoa lines.

In total, about 100 MW of DR was called to reduce load, but because operators had not defined a closed-loop interface, DR did not set LMPs. Instead, price was set by the worst contingency in PJM’s security-constrained economic dispatch.

McGlynn said the load sheds began with 160 MW and grew to “several hundred” megawatts.

Rebecca Carroll, senior director of market design, said there were 345 PAIs over about 11 hours during the week — the first PAIs since 2019, when 24 occurred.

Under PJM’s confidentiality rules, officials said, balancing ratios will not be posted for the PAIs because there were a small number of generation owners with capacity resources in areas affected by the emergency actions.

Mike Bryson, senior vice president of operations, said AEP, PJM, NERC and ReliabilityFirst are investigating and will produce “lessons learned” in four to 10 weeks, with updates at monthly Operating Committee meetings.

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Counterflow: Say It Ain’t So, Joe

tesla powerwallSteve Huntoon | Steve Huntoon

As the story goes, Shoeless Joe Jackson was leaving the Cook County Courthouse in 1920 amid the Black Sox scandal when a kid yelled, “Say it ain’t so, Joe!” [1]

I felt like that kid when I read that FERC proposes to wipe out competition in transmission.[2]  

What’s the public policy case for this? The oft-repeated claim that transmission competition isn’t working. I call this truth by repetition.[3]

The reality, as I pointed out five years ago,[4] is that transmission competition works great — when and where it’s allowed to work. The problem is that it’s been hobbled since its advent in FERC Order 1000. As Professor Paul Joskow concludes: “The progress has been slow but promising.”[5]

Transmission Competition Works 

Let me give you an example of how transmission competition works. PJM biennially identifies highly congested facilities and has a competitive solicitation for solutions. The table below shows the most recent PJM evaluation of proposed solutions to one source of congestion.[6]

PJM APS Proposals (PJM) Content.jpgPJM selected Proposal 756, which called for spending $770,000 on terminal equipment upgrades at the French’s Mill and Junction 138-kV substations, to improve market efficiency in the APS zone. Proposal 547, a new 500-kV line found to be slightly less effective, would have cost more than $136 million. | PJM

 

Proposal 756 above is 100% effective at mitigating congestion and costs $770,000; Proposal 547 is 99.97% effective and costs $136,070,000. Which should consumers have to pay for?

Here’s the rub: Absent a transparent, competitive process, how would anyone know about the $770,000 solution? And no one being the wiser, if the notice of proposed rulemaking is correct that adding rate base is what incents transmission owners,[7] why wouldn’t a TO want the $136,070,000 solution?

Please note that consumers are not well protected by regulatory oversight. As Joskow observes: “FERC does not have a well-developed process to scrutinize the costs presented to it for inclusion in the transmission owners’ revenue requirements or a history of disallowing unreasonable costs.”[8]  

Even when the competition is not in solutions, but simply in procurement of the same basic project, national and international experience suggests cost savings in the 20 to 30% range.[9] And this is capital cost savings, which does not include the additional savings from a lower cost, competitive capital structure for determining the annual revenue requirement.

Exceptions to Competition: NOPR Misdiagnosis and Misdirection

The NOPR says the problem with competition is that TOs are motivated to avoid it through exceptions, which leads to smaller, less expensive solutions.[10] As I said in my last column,[11] that can be a good thing! Why build large greenfield transmission lines when a simple upgrade relieves the problem (like the PJM example in the prior section)?

If there really is a problem with an incentive for less expensive solutions because of exceptions, the right answer is to minimize the exceptions. Not go the other way and eliminate competition!

The NOPR’s Substitute is Escher Stairs Leading to Synthetic Monopoly

Finally, a few words about the NOPR’s proposed substitute for competition: Requiring some sort of joint ownership of a given project. For anyone concerned about delays in getting new transmission built, please read NOPR paragraphs 358-382, and contemplate the endless squabbling and litigation that this concept portends. The possibilities are endless!

As for the NOPR notion that joint ownership could somehow provide “at least some of the potential cost-related benefits of competitive transmission development processes,”[12] let’s recognize that each joint owner would have a shared interest in building the most expensive project possible. That is a coordinated oligopoly, and it performs no differently than a monopoly.[13] Not to be confused with competition!

In Short

FERC, please preserve and expand competition, a better angel of our nature.

[1] Baseball buffs know that the story is mostly false. Some White Sox players were bribed to throw the 1919 World Series, but there’s no evidence Shoeless Joe Jackson was one of them. And there probably wasn’t a kid. More here: http://www.thisdayinquotes.com/2009/09/it-ain-so-joe-actually-wasnt-so.html

[2] Building for the Future Through Electric Regional Transmission Planning and Cost Allocation and Generator Interconnection, Notice of Proposed Rulemaking, 179 FERC ¶ 61,028 (April 21, 2022) ¶ 351-353; https://www.rtoinsider.com/articles/30016-analysis-ferc-giving-up-on-transmission-competition     

[3] For a compilation of transmission owner complaints about competition, please see the Reply Comment of the Harvard Electricity Law Initiative here, https://elibrary.ferc.gov/eLibrary/filedownload?fileid=708A1BD1-1F98-CFCD-9EE1-7D7298400000. 

[7] NOPR ¶¶ 350, 353, 355, 358, 375.

[9]  https://www.brattle.com/wp-content/uploads/2021/05/16726_cost_savings_offered_by_competition_in_electric_transmission.pdf, page 1. In SPP’s most recent competitive procurement, the successful bid was 43% less than the highest bid, and the successful bid had excellent other features.  https://www.spp.org/documents/66929/minco-pleasant%20valley-draper%20rfp%20iep%20public%20report.pdf, pages 67-69. 

[10] NOPR ¶¶ 350, 353, 355, 358, 375.

[12] NOPR ¶ 358.

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Oregon Moving to Adopt California’s Advanced Clean Cars II Rules

Oregon is setting a course to adopt proposed California regulations that would require both states to phase out the sale of gasoline-powered cars by 2035.

Oregon is already one of 17 states to have adopted California’s vehicle emissions standards under Section 177 of the Clean Air Act. That federal statute allows states to substitute the California Air Resources Board’s (CARB) strict emissions rules for the U.S. EPA’s less stringent ones.

CARB’s existing set of tailpipe rules, Advanced Clean Cars I (ACC I), cover the control of both smog-producing criteria pollutants and greenhouse gas emissions. A later amendment to ACC I added a “technology-forcing” component that requires automakers to sell a specific percentage of the cleanest cars available each year, including full battery-electric, hydrogen fuel cell electric and plug-in hybrid electric vehicles (PHEVs).

CARB’s proposed ACC II rules would expand the standards to require all cars sold in California to be zero-emission vehicles (ZEVs) beginning in 2035. The proposed rules would require 35% of the state’s auto sales to be ZEVs by 2026, 51% by 2028 and 69% by 2030. (See CARB Tuning up Advanced Clean Cars II Rules.)

CARB expects to release a draft final version of the rules this month, followed by a 15-day comment period.

Rachel Sakata, senior air quality planner for the Oregon Department of Environmental Quality (DEQ), said her agency thinks the CARB timeline for adoption is doable for Oregon, despite a current shortage of vehicles and the fact that ZEVs accounted for just 7.8% of the state’s passenger car purchases last year, compared with the state’s 4.5% requirement for 2021. ZEV sales are projected to hit 9.9% of total sales this year, exceeding the 5.3% requirement, indicating the state could meet the more aggressive ACC II goals.

“This is something that we as a state feel is going to be achievable for the manufacturers just given where they’re going with vehicle sales right now and what they are planning to do in the future,” Sakata said Wednesday during a DEQ webinar to launch the process for adopting the ACC II rules.

DEQ would be charged with administering the rules, if adopted. Adoption of the program would exceed the mandate laid out in Oregon Senate Bill 1044, which requires that at least 90% of all passenger vehicle sales in the state be ZEVs by 2035.

Mirroring California

During Wednesday’s call, Sakata acknowledged that the costs of most battery-electric vehicles (BEVs) still put them out of reach for many residents. But she expressed confidence the price gap with conventional cars will narrow as automakers scale up battery production, with price parity for most vehicle types projected to be reached around 2033. In the interim, she pointed out, Oregon offers incentives to make BEVs more affordable.

“We’re cognizant that until there’s this price parity, there’s going to be a little bit extra needed to help people make this transition to electric vehicles,” she said.

Although Section 177 gives states some flexibility in how extensively they adopt the full set of ACC II rules, Sakata said Oregon will be looking to “pretty closely mirror what California has proposed.”

That would include updating the program in which auto manufacturers earn credits for the number of clean vehicles they sell in the state. Oregon’s updates would likely follow California’s proposals, including a requirement that vehicles eligible for earning credits have a minimum electric range of 150 miles for BEVs and 50 miles for PHEVs.

A “durability” component of the credit program would require that vehicle batteries retain 80% of their certified range for 10 years or 150,000 miles and be equipped for Level 1 or 2 charging capability. Manufacturers would also have to make provisions for battery recycling.

The credit program would also mirror California’s overall design of allowing automakers to bank “historical” credits for future use after they fulfill a sales requirement in a given year. Manufacturers could also cash in “pooling” credits accumulated across other participating ACC II states with high EV sales.

The DEQ is also looking to adopt a provision in which automakers can earn environmental justice (EJ) credits through efforts to get EVs into disadvantaged communities. That would include offering discounted vehicles to community-based clean mobility programs, ensuring the availability of used EVs or making lower-priced EVs.

Following the California plan, Oregon would cap automakers’ annual use of historical credits at 15% of all credits and EJ credits at 5%. Pooling credits would be capped at 25% starting in 2026, declining to 5% in 2030.

One participant on the call asked whether Oregon has the grid capacity to handle the influx of EVs that would result from adoption of the rules.

Sakata said the state is working to increase the number of EV charging stations statewide, including a $100 million investment by the Oregon Department of Transportation over the next five years to install chargers along major road corridors and to increase charging access in rural areas, underserved communities and at apartment complexes.

“We’re working and talking with the utilities, as well as the Public Utility Commission about what’s going to be needed to ensure that there’s adequate infrastructure buildout and adequate charging capability to meet this demand,” Sakata said.

The DEQ will hold public stakeholder meetings to discuss the rules in July, followed by advisory committee meetings in July and August. Agency staff expect to post draft rules for comment in September and will seek approval of the final rules by the state’s Environmental Quality Commission in November or December.

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Report Examines Initial Wash. Cap-and-trade Prices

Initial prices for Washington cap-and-trade emissions allowances will depend on whether the state joins with the California and Quebec emissions trading system, according to economic analysis released Friday.

North America will soon have two cap-and-trade systems: the existing Western Climate Initiative (WCI) serving California and Quebec and another scheduled to go online on Jan. 1, 2023, in Washington.

Washington’s legislature passed a cap-and-trade law in 2021, ordering the state’s Department of Ecology to map out the regulations in 2022. Final regulations are expected to be adopted late this year. (See Cap-and-trade Project to Provide Wash. $500M Annually.)

Under the program, the Ecology Department will auction a still undetermined number of emissions allowances four times a year to smokestack industries. The first two auctions are scheduled for the first half of 2023, and the state will set the number of emissions allowances 60 days prior to the auctions.

Companies would bid on the allowances in clusters of 1,000 individual allowances. The number of allowances will be decreased over time to meet 2035 and 2050 decarbonization goals. Companies will be allowed to buy, sell and trade those allowances. If Washington chooses to join the WCI, it will expand its purchase and trading territory to those two areas.

For each auction, a specific number of allowances would be made available to bidders. All bids must be above a certain price level set in advance by the state.

The highest bidder would get first crack at the limited number of allowances, while the second highest bidder would get second crack, followed by additional iterations. The auction ends when the last of the designated number of allowances is bid upon. Then all the successful bidders pay the same clearing price set by the lowest successful bid. Bidding companies are limited to acquiring 4% to 10% of the total number of allowances, depending on various criteria.

Washington retained McKinsey & Co. subsidiary Vivid Economics to perform the pricing study, which examines three scenarios.

In the first, “linking” scenario, Washington joins the WCI by 2025.

In the second, “frontloading” scenario, Washington goes solo with a system in which Allowance Price Containment Reserve (APCR) allowances for 2023-2030 are placed into the APCR at the beginning for 2023. The APCR is designed to act as a safety reserve from which additional allowances can be sold if allowance prices rise quickly enough to potentially cause an economic shock.

The study’s third scenario has Washington going solo without linking to the WCI or frontloading the APCR.

In examining the “linking” scenario, Vivid found it more complicated to estimate prices than for the solo effort because the California-Quebec cap-and-trade market is five time the size of Washington’s and would be the dominating market force in setting auction prices.  Vivid said more analysis is needed to get a good grasp on floor prices with Washington, California and Quebec sharing the same program. The report anticipates that if a link-up occurs, Washington’s floor price would be $41 per metric ton (MT) in 2023.

In the “frontloading” scenario, Vivid calculated that the allowance floor price would be $58/MT beginning in 2023, $64/MT from later in 2023 to 2027, and $89 per metric ton from later in 2027 to 2030.

In the third scenario, Vivid estimates allowances would cost $68/MT in 2023, $71/MT from later in 2023 to 2027, and $89/MT from later 2027 to 2030.

A 2021 Washington Department of Ecology report put the state’s carbon dioxide emissions at 99.57 million metric tons in 2018. The report shows that from 2016 to 2018 the transportation sector was the largest contributor at nearly 45% of emissions, followed by industry (19%), electricity consumption (17%) and agriculture (7%). A 2008 law calls for overall emissions to be reduced to 50 million MT by 2030, 27 million MT by 2040 and 5 million MT by 2050.

The Vivid report said that roughly 68 million MT of Washington’s carbon emissions current fall under the cap-and-trade law’s jurisdiction.

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Mass. Sets New 2025, 2030 Emissions Goals

Massachusetts Secretary of Energy and Environmental Affairs Bethany Card adopted state emissions limits Thursday of 33% below 1990 levels of greenhouse gas emissions by 2025 and 50% by 2030. Along with the new goals, the Baker administration released a final version of its 2025/2030 Clean Energy and Climate Plan, a broad document illustrating how the state can meet those milestones.

The plan also sets individual industry submits, aiming for 49% reductions in heating and cooling by 2030, 34% in transportation, 70% in electric power and 82% in natural gas usage, all relative to 1990 levels.

In transportation, it calls for reducing vehicle miles traveled and putting 900,000 electric vehicles on the road by 2030. To support the EV transition, the plan calls for deployment of 75,000 EV chargers. Among the actions the state will take to expand charging will be development of a model building code that municipalities can adopt requiring make-ready charging in new commercial and residential buildings.

The building emissions plan relies on improving energy efficiency in buildings and converting heating systems to electric heat pumps. Under the state’s climate law, the Department of Environmental Protection must adopt regulations for heating sources that emit GHGs to ensure the state meets the new building sector emission sublimits. According to the plan, the department will initiate a stakeholder process this year on those regulations, with a goal of finalizing them by the end of 2023 to take effect “as early as 2024.”

Plans for decarbonizing the electric power system will focus heavily on cooperation with other New England states on electricity system and wholesale market planning, and the state will invest in offshore wind and grow its solar and storage industry, the plan said. The state also expects to work with neighboring states, federal agencies and ISO-NE to develop a regional plan for OSW transmission.

Among the state’s strategies for minimizing the growth of non-energy emissions is the possible adoption of new regulations on hydroflourocarbon gases to help curb emissions from leaking refrigeration systems and natural gas infrastructure.

The plan features a commitment to equity, with a focus on ensuring that decarbonization affects communities across the state equally.

Officials also announced Thursday that the state surpassed its 2020 goal of reducing emissions by 25% below 1990 levels, reaching an estimated 31.4% decrease.

But environmental advocates called on the state government to move more aggressively to curb emissions.

“It’s clear that the state is lagging behind where we need to be in slashing climate-damaging emissions,” said Caitlin Peale Sloan, vice president of Conservation Law Foundation Massachusetts, in a statement. “This administration and the next one need to prioritize real movement in existing policies to match the analysis in this plan, which relies heavily on vague proposals for programs yet to be developed.”

She said CLF will be pushing officials to improve on the plan.

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California Program Seeks Applicants for Hydrogen Fueling Projects

A program described as a first-of-its-kind incentive for medium- and heavy-duty ZEV infrastructure in California is now accepting applications for hydrogen fueling projects.

The program, called Energiize, opened the application period on June 30. The deadline to apply is July 14 at 5 p.m.

The competitive funding round will award a total of $17 million in incentives. The incentives will cover up to half the cost of a hydrogen fueling station project, helping to pay for equipment such as hydrogen dispensers, piping and point-of-sale systems.

The maximum incentive is $3 million. But so-called Jump Start projects are eligible for incentives covering 75% of costs, up to a maximum of $4 million.

Applicants potentially eligible for Jump Start include small businesses, certified minority businesses and veteran-owned small businesses. Public transit or school district projects built in disadvantaged communities may also qualify.

The program is open to commercial fleet or vehicle operators, or vendors applying on their behalf. The project may be a new fueling station or expansion of an existing station.

Speeding Infrastructure Roll-out

Energiize, whose full name is Energy Infrastructure Incentives for Zero-Emission Commercial Vehicles, is being funded by the California Energy Commission.

In March 2021, the CEC selected CALSTART to design and run the program. Energiize has a total authorized allocation of $276 million through 2026.

The CEC described the program as a first-of-its-kind project intended to speed the deployment of medium- and heavy-duty ZEV infrastructure to accommodate future ZEV fleets.

Energiize will help the state meet the goals of an executive order that Gov. Gavin Newsom issued in September 2020, requiring all medium- and heavy-duty vehicles in the state to be zero-emission by 2045, where feasible, the CEC said.

Energiize opened its first round of funding in March. Called EV Fast Track, the incentives were aimed toward charging infrastructure for commercial fleets of medium- and heavy-duty battery-electric vehicles.

The EV Fast Track incentives were offered on a first-come, first-served basis. The $16.24 million in incentives were snapped up within seconds.

The incentives went to nearly 40 applicants across California, to commercial transportation operations including drayage, refuse, school bus and delivery services. And 85% of applicants qualified for the larger Jump Start incentive, CALSTART said in a release.

In addition to the EV Fast Track and hydrogen fueling funding lanes, Energiize will offer incentives this year for public charging infrastructure and EV Jump Start applicants.

Application Process

EV Fast Track is the only Energiize funding lane that is first-come, first-served. Incentives in the other lanes, including hydrogen fueling, will be awarded on a competitive basis.

A recent CALSTART webinar explained the application and scoring process for hydrogen fueling infrastructure incentives.

Applicants must submit information including proof that they’ve met the project’s first “critical milestone,” which is securing the project site through means such as an easement or executed lease.

Applicants must provide confirmation from the local utility that the site is prepared to receive the energy needed for the infrastructure project.

Applicants must also answer three “qualitative” questions. The first asks how the infrastructure will target medium- and heavy-duty ZEVs, and how the operator plans to get the most use out of it over time.

The applicant is asked to detail community buy-in and support for the project. The third question is about benefits the project will provide for local residents, such as paid workforce development opportunities, expanded transit service or hydrogen fueling discounts.

Incentive recipients will be required to operate the equipment in California for at least five years.

“This is a big investment,” said Amy Gower, a CALSTART lead project manager. “We want to make sure that this infrastructure is in the ground for as long as possible.”