Dominion’s OSW Project to Cost $9.8B, up from $8B

Dominion Energy (NYSE:D) said Friday the projected cost of its 2.6-GW Coastal Virginia Offshore Wind (CVOW) project has increased by more than 20% to $9.8 billion, citing “commodity and general cost pressures.”

The company announced the projected cost increase on the day it reported a near doubling of third quarter profits and filed a request for approval and certification of the CVOW project with the Virginia State Corporation Commission.

In September 2019 Dominion announced a “pre-engineering” estimated cost of about $8 billion.

“Since that time through the process of detailed engineering and, most importantly, through competitive solicitations for all components and services, we’ve now developed a detailed budget of approximately $10 billion,” CEO Bob Blue told analysts during the third quarter earnings call. “The cost increase can be attributed to, among other things, commodity and general cost pressures — as seems to be the case across a number of industries right now — and the completion of the conceptual design phase for the onshore transmission route.”

Blue said the company has meet the three tests required for Dominion to qualify for cost recovery via a rider on customers’ bills: using competitive procurements; a projected levelized cost of energy (LCOE) below the $125/MWh maximum set in the Virginia Clean Economy Act (VCEA), and a projected start to construction before 2024.

Dominion asked the SCC to classify many of the details of its filing as “extraordinarily sensitive,” citing the commercial value of its negotiated contracts and terms with vendors. The filing includes information on “costs, contractor selection, project components, transmission routing, capacity factors and permitting.”

The company said the filing keeps it on its scheduled timeline to leap from its current two-turbine, 12-MW pilot project in federal waters off Virginia Beach to the planned 2.6 GW wind farm.

Last December, Dominion submitted the plans for the larger project to the Bureau of Ocean Energy Management, which is expected to complete an environmental study and reach a decision by June 2023. The company is also expecting a final order approving the project from the SCC in the third quarter of next year. If all goes as planned, onshore construction will begin in the third quarter of 2023, followed by offshore construction in the second quarter of 2024 with construction finished in late 2026.

The company says the project will create approximately 900 jobs and have $143 million in economic impact annually during construction, increasing to approximately 1,100 jobs and almost $210 million in economic impact annually during its operation. On Oct. 25, Siemens Gamesa held a ceremony at the Portsmouth Marine Terminal celebrating the launch of the first offshore wind turbine OEM blade manufacturing facility in the U.S. The plant’s initial output will go to the Dominion project. (See Virginia Builds out OSW Supply Chain with Turbine Blade Plant.)

News of CVOW’s $1.8 billion cost increase sparked criticism on social media. A ProPublica-Richmond Times-Dispatch investigation last year reported that Dominion lobbied for changes to the VCEA that increased the maximum cost of CVOW from $7.3 to $9.8 billion.

“Dominion lobbyists snuck in an extra $2 billion on the wind cost cap in the VCEA at the last minute. Now all of the sudden their costs include an extra $2 billion…?” tweeted Brennan Gilmore, executive director of Clean Virginia.

“Lo and behold: The ceiling for rate base is the price of the project,” responded former Montana regulator Travis Kavulla, now vice president of regulation for NRG Energy (NYSE:NRG).

Blue said the LCOE of the offshore wind farm is estimated at $87/MWh but could be reduced to $80/MWh if Congress approved proposed OSW tax credits included in the $1.8 trillion spending bill pending before the House. (See related story, Energy Groups Quick to Praise Infrastructure Bill Passage.)

Although construction costs are higher than anticipated, Blue said that — based on data from the pilot turbines — the company now assumes a lifetime capacity factor of 41.5% for CVOW, up from an earlier estimate of 43.3%.

When asked about the potential impact of the Republican victory in last week’s Virginia elections on these plans, Blue said Dominion Energy “has maintained constructive relationships with members of both parties,” and that there is “a bipartisan commitment to jobs and economic growth.” Referring to the Siemens Gamesa announcement, he added: “Both parties deserve credit for that kind of job creation in Tidewater Virginia. We would expect that that’s going to continue going forward.”

Dominion Energy also recently filed a rider with the Virginia SCC that included about 1,000 MW of solar and battery storage, Blue said. The company expects a final order from the agency for this project, with its planned $1.4 billion capital investment, by the second quarter of next year.

Q3 Results

In addition to highlighting its offshore wind and solar projects during the earnings call, Dominion officials said that the utility company is nearing its pre-pandemic normal in electricity sales.

The company expects to see electric sales in its Virginia and South Carolina service territories rise by 1% to 1.5% per year, similar to growth rates before COVID-19 struck, CFO Jim Chapman said.

Dominion Energy reported $654 million ($0.79/share) in net income, nearly double the $356 million ($0.41/share) in the third quarter of 2020.

Chapman said the company expects to grow its earnings per share at a rate of at least 6.5% annually through 2025, thanks to a $32 billion, five-year growth capital plan, more than 80% of which is focused on decarbonization. Going forward, he added, investors should expect to see “compelling earnings and dividend growth combined with the largest regulated decarbonization opportunity in the industry, and an unyielding focus on extending our track record of successful projects, regulatory and financial performance.”

Assuming normal weather for the rest of 2021, the company says, it expects full-year results to be above the $3.85/ share midpoint of its 2021 estimated guidance.

The SCC is due to review a comprehensive settlement agreement in the company’s pending triennial base rate case, now that stakeholders have weighed in. Blue said a decision is expected by the end of the year. If the commission approves it, the agreement will resolve the ongoing review of the company’s earnings over the past four years, while generating $330 million in one-time refunds on customer bills, a $309 million offset as part of the Customer Credit Reinvestment Offset (CCRO) mechanism, and a $50 million rate reduction going forward. The CCRO “offsets the customer bill credit amount that the utility has invested or will invest in new solar or wind generation facilities or electric distribution grid transformation projects for the benefit of customers,” according to Virginia statute.

November 7, 2021June 14, 2023

Vistra Recovering from Winter Storm’s Costs

Vistra (NYSE: VST) CEO Curt Morgan on Friday celebrated his organization’s recovery from the $1.6 billion in losses suffered in the wake of February’s Winter Storm Uri by saying he was excited to share details of the long-term capital allocation plan.

“It’s hard to believe we are still in the same year where we experienced the significant effects from Winter Storm Uri,” Morgan said during a conference call with financial analysts. “We are beginning to execute on our strategic priorities … that have begun prior to Uri but accelerated greatly immediately on the heels of the storm.”

Vistra plans to strengthen its business model, which includes both generation and retail sales, through investments in its fleet and fuel supply and improved risk management practices. Morgan said that involves $2 billion in share repurchases through next year, just over 60% of its market capitalization, “for as long as our stock remains at what we believe is such a meaningful discount to its fundamental value.”

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Vistra CEO Curt Morgan

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The company’s quarterly results excluded a net $10 million “benefit” related to Uri, including in ERCOT resettlements and revenue true-up of $43 million net of $33 million in bill credits applied to large commercial and industrial customers that curtailed during the storm. Vistra also expects to receive about $500 million in proceeds when the grid operator begins securitizing the market’s uplift balance in the first quarter of 2021.

Morgan said the company has already completed about 85% of the $500 million “self-help” initiatives it announced after Uri, including monetizing certain commercial positions, generation savings from lower operations and maintenance project work, retail savings, and reduced administrative expenses. “All of that done without really impacting any future periods,” he said.

Vistra reported third-quarter ongoing operations of adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) of $1.177 billion, down slightly from last year’s third quarter of $1.183 billion.

The company uses adjusted EBITDA as a performance measure because it believes that external analysis of its business is improved by visibility to both adjusted EBITDA and net income prepared in accordance with generally accepted accounting principles.

Vistra’s share price gained $1.25 Friday and closed the week at $20.46. It dropped to $17.25 in February after the company’s Uri losses were disclosed. (See Vistra Stock Plunges After Market Losses.)

CenterPoint Profits Surge

Another Texas company hammered by the winter storm, Houston’s CenterPoint Energy (NYSE: CNP), said its profits surged during the third quarter.

The utility delivered third-quarter earnings of $195 million ($0.32/diluted share), nearly triple 2020’s third-quarter performance of $69 million ($0.13/diluted share). That beat analysts’ expectations of $0.28/diluted share compiled by Thomson Reuters.

“We now have six quarters of meeting or exceeding expectations, but we believe that there is much more to come,” CEO Dave Lesar said.

He said the company has mechanisms in place to recover the storm’s gas costs in its various jurisdictions and recently reached a settlement on prudence proceedings supporting securitization of 100% of gas costs in Texas.

CenterPoint has also begun recovery in Minnesota and is “working with stakeholders … to reduce the impact on our customers,” Lesar said.

The utility’s share price finished the week at $26.67, a 40-cent gain following the earnings announcement.

OGE Energy Maintains Status Quo

OGE Energy (NYSE: OGE) released quarterly earnings Thursday of $252 million ($1.26/share) as compared to $177 million ($0.89/share) in the third quarter last year. The utility narrowed its year-end guidance to $1.79-$1.83/share.

Oklahoma City-based OGE has reached a joint settlement that would, with regulatory approval, allowing it to securitize $875 million over 13 years and recover 99% of the fuel and purchased power costs incurred during Uri.

The company’s share price gained a penny over its per-earnings close, finishing the week at $34.60.

November 7, 2021November 28, 2023

DERs and Clean, Firm Power Needed to Decarbonize Grid

Two key components of the decarbonized grid of the future — distributed energy resources, and the clean, firm power needed to back them up — were the topics of two panels at the two-day American Council on Renewable Energy’s Grid Forum.

The central question for Wednesday’s panel on integrating DERs — both wind, solar, storage and demand response, and their various “hybrid” combinations — across power markets was what’s needed to bring them on the grid in a way that maximizes their multiple value streams while ensuring system reliability.

Taking in a 20-year horizon, MISO is “looking at various ratios of wind to solar to DERs to storage and hybrids,” said Renuka Chatterjee, the grid operator’s executive director of system operations. “As we look at those futures, the thing that we are learning is it’s pretty similar. So, to the extent you can see these resources as similar in the sense that they provide a service, be it energy or ancillary services, you get a lot of common ground.”

In the example of storage, Chatterjee said, MISO treats storage the same as it treats oil or gas, letting “storage manage its own fuel, which is the battery. … So, that allows us to key in [a] market signal that is consistent and unique while enabling the features of these new resources.”

But Jamie Link, vice president for solar and storage at EDF Renewables North America, said such a technology-neutral approach may not be the best for optimizing the value of utility-scale solar and storage projects. With more than 2 GWh of storage under contract in the West, EDF is “quite closely” following CAISO’s implementation of storage integration, Link said.

“CAISO’s resource adequacy market is a bilateral capacity market, which is very strong both on the system and local level in providing value to storage, and storage can also capture value in the energy and ancillary markets in California,” she said.

She pointed to CAISO’s aggregate capacity constraint (ACC) proposal as a model for other grid operators to follow, as increasing amounts of solar, storage and other DERs come online. The proposed rule would allow the ISO to set multiple capacity constraints for co-located solar and storage projects sharing a common interconnection point, so that output from any one project does not exceed the limits of its interconnection agreement.

“So, instead of the project owner having to worry about making sure a dispatch doesn’t violate their contract and having to make a decision on whether to be available, those two things are synched up,” she said.

CAISO submitted the ACC proposal to FERC in September (ER21-2853).

Leveraging the value of DERs at the residential level is even more complex, said Suzanne Leta, head of policy for SunPower. “There is a fundamental right when it comes to distributed technologies, which is consumer choice,” she said. “But in order to enable that choice, we have to have the policy tools in place and the incentives in place for customers to take that leap.”

For example, Leta said, while only 3% of U.S. homeowners have rooftop solar, and only 2% of all car sales are electric vehicles, 40% of EV drivers have rooftop solar. “There’s this automatic connection on the customer end about the relationship between these technologies, and we have to transfer that into getting the rules in place, so the regulators are able to value them in the same way that customers are,” she said.

Allowing Failure and Positive Collisions

The forum’s closing panel on Thursday looked at what many in the cleantech sector believe will be essential for decarbonizing the U.S. grid by President Biden’s target of 2035: the emerging and still-to-be-developed technologies that can provide clean dispatchable power.

But Debra Lew, associate director of the Energy Systems Integration Group, an educational organization, said as levels of renewables on the grid increase, the real need on a day-to-day basis will be flexibility to balance out intermittent wind and solar.

She believes demand-side management is the low-hanging fruit here. “We can do tons of stuff on the demand side, especially today in the advent of electric vehicle charging and [smart] thermostats,” she said.

Building out the grid to allow for cross-region aggregation is another must-have. “Imagine having solar in the Southwest shipped over to the East to help provide for peak hours, or wind from the Midwest being shipped over to the West. There’s a lot you can do with aggregation by building out more transmission.”

The outer edge of flexibility — the days or weeks when sun and wind power may not be available — is where other technologies, such as long-duration storage, come in, though they face considerable obstacles to commercialization, said Thomas Jarvi, director of defense contractor Lockheed Martin’s flow battery program. The company has spent several years developing its new GridStar flow battery, which is in the final stages of verification testing, he said.

Technology developers need “to think about kind of the transactional end state: Who are their customers, and what are their contract considerations? And what does that transaction look like?” Jarvi said. “What are the customers’ buying factors, risk considerations? Can you buy down risk by virtue of government incentives, rate structures, market structures and so forth?”

The investment needed to develop such new technologies is yet another obstacle. While capital markets are “flush with money,” said Lee J. Peterson, senior manager at cleantech investment banker CohnReznick, tax equity markets are still hesitant to invest in emerging products and processes.

“The comfort level with wind and solar is so large that to get tax equity interested in something other than wind or solar is really a challenge,” Peterson said.

His solution is “total optimization of the U.S. tax code for renewables and clean energy in particular,” he said. “I can go through the code and find you a dozen or more little … ‘glitches’ or stops [that] are really holding back the clean energy economy.”

The federal government also needs to play a more active, “first mover” role in de-risking new technologies to help them scale and get to market, Jarvi said. “Other governments understand the implementation of early technology as a key role for the government … because we’re competing in energy technology, always, against massive incumbencies that have volumes baked in already.”

Adria Wilson, U.S. policy and advocacy manager at Bill Gates’ cleantech venture group Breakthrough Energy, pointed to funding in the newly passed bipartisan infrastructure bill for an Office of Clean Energy Demonstrations in the Department of Energy as a step toward that more active role. But, she said, “there should be a more acceptable culture for the government’s projects to fail. I wouldn’t want them all to fail, but I think we would want them to be taking risks and creating knowledge that stakeholders and private industry could use to build on.”

She called for government “convening with people who are more active in the grid space or other sectors who really know what the market needs are. If you can create moments of collision, positive collision between those two groups, it can help direct the flow of innovation funding in a more productive way.”

November 7, 2021November 28, 2023

MISO Says IMM’s Market Recommendations Fair

MISO last week said its Independent Market Monitor was reasonable in proposing four market changes in the 2020 State of the Market report, though two improvements must wait years for the RTO’s new market platform to be brought online.

IMM David Patton, Potomac Economics’ president, suggested four changes:

- - Creating a new uncertainty capacity product that can be deployed instead of out-of-market commitments;
  - better matching emergency procedures and pricing of transmission versus capacity emergencies;
  - disqualifying wind generation from providing ramping services; and
  - developing individual effective load carrying capabilities (ELCCs) for more specific capacity accreditations for distributed resources, load-modifying resources (LMRs), solar generation, and battery storage.

Patton in June underscored transmission congestion, heightened ramping needs, and undervalued capacity prices as areas of concern. (See MISO Monitor Warns of Ramping Needs, Tx Congestion.)

MISO Director of Market Design Kevin Vannoy said some of the recommendations were already in MISO’s five-year plan and market redefinition outline.

He said uncertainty management is a high priority at MISO, evidenced by the grid operator’s development of a 30-minute short-term reserve product and work on a better ramping product. Vannoy said staff will continue to work on a look-ahead commitment tool for generators.

“We’re looking at how we can leverage and align our existing products to manage uncertainty,” he told stakeholders during a Thursday Market Subcommittee meeting.

However, Vannoy said additional market products to temper uncertainty would probably need to wait four years so that they can be hosted on MISO’s new market platform. Staff has repeatedly said the RTO is severely limited on market offerings in the current platform’s 1990s era technology.

Vannoy also said MISO will likely have to wait until 2025 to remove wind generation’s eligibility to provide ramping services. He said the change is dependent on MISO moving its market operations to the new platform.

The grid operator has already drawn a clearer distinction between pricing during capacity emergencies and transmission emergencies, Vannoy said, pointing to an August FERC filing that specifies its $3,500/MWh value of lost load applies to capacity emergencies only, not those caused by felled transmission towers (ER21-2801).

MISO agreed that it could use more tailored ELCCs for its non-traditional resources.

“MISO agrees with further evaluation and development of accreditation methodologies for [LMRs], intermittent resources and other resource types with high level of variability and uncertainty,” Senior Manager Lynn Hecker said.

The RTO said it will probably file with FERC sometime next year to create more specific ELCCs.

November 7, 2021December 5, 2023

Kerry on COP26 Week 2: ‘This Moment is Promising’

After a whirlwind first week at the U.N. Climate Change Conference (COP26) in Glasgow, Scotland, U.S. Special Presidential Envoy for Climate John Kerry was cautiously optimistic about what the delegation could achieve in Week 2.

Bringing the global community together in the “ultimate test of multilateralism” is not easy, he said, but “this moment … is promising.”

“There is a greater sense of urgency at this COP [Conference of Parties]; there’s a greater sense of focus, and I have never in the first few days of any of the COPs I’ve been to counted as many initiatives and as much real money being put on the table,” he said during a press conference Friday.

Coming out of Glasgow at the end of the conference, countries will have “huge follow-on tasks,” but with it they should have “a level of ambition, a statement of goals and the capacity to get where we need to go that we’ve never had before.”

Countries, he said, are cooperating to produce a strong statement on climate goals that can be implemented.

“All of us have seen years of frustration for promises that are made and not kept,” he said. “We understand that, but I believe that what is happening here is far from business as usual.”

Week 1 Status Check

Commitments to reduce emissions and finance a green and resilient transition came at a fast pace during the first week of COP26 through measurable national pledges and public-private initiatives.

Taken together, existing and updated nationally determined contributions (NDCs) and existing and new initiatives would limit global temperature rise to 1.8 degrees Celsius, according to an International Energy Agency analysis released Thursday. Pledges announced prior to COP26, IEA said, would only limit warming to 2.1 C.

Despite the clear progress, IEA estimated that there is still a 70% gap in the emissions reductions needed by 2030 to keep warming to 1.5 C.

National pledges made last week to cut methane emissions could deliver a reduction of 50 million metric tons by 2030, according to Adair Turner, chair of the Energy Transitions Commission. President Biden on Nov. 2 joined other global leaders in leading a global methane reduction effort that is endorsed by 105 nations. (See US, Canada, EU Pledge to Slash Methane Emissions.)

An additional cut of 80 million metric tons is possible by 2030, very little of which is reflected in current NDCs, Turner said. Updated NDCs, as of Friday, could reduce carbon dioxide emissions by 3 metric gigatons (GT), Turner said.

Globally, he added, CO₂ emissions need to drop 22 GT by 2030.

A commitment to end deforestation made Nov. 2 by leaders representing 85% of the world’s forests could reduce CO₂ emissions by 3.5 GT, according to Turner.

If countries could agree not to build any new coal plants and phase out existing plants by 2030, CO₂ emissions could go down by 3.5 GT, but Turner said that doesn’t look possible given commitments made during Week 1 of the conference.

A group of countries got behind a Coal to Clean Power transition statement, but with large countries such as the U.S., India and China not among the signatories, the agreement would only deliver a 0.2-GT reduction by 2030, he said.

While major industry and transport commitments will come in Week 2 of the conference, the Race to Zero framework and auto manufacturer plans would already reduce CO₂ emissions for road transportation by 1.5 GT. The U.N.-led Race to Zero campaign started in 2020 to bring together public and private entities to reach net-zero emissions by 2050, with current participants covering 25% of global CO₂ emissions.

All NDCs and sectoral commitments on CO₂ emissions would deliver a 9-GT reduction of the 22 GT needed, according to Turner. He expects significant CO₂ reduction commitments to come in Week 2, including potential progress in the steel, aviation and shipping sectors.

“But we won’t achieve in Glasgow the full 22 GT we need,” he said. “We won’t be able to leave Glasgow saying, ‘Job done; mission accomplished.’”

November 7, 2021December 5, 2023

PNNL: New Climate Pledges Likely to Thwart Worst-case Warming

If fulfilled, the greenhouse gas reduction pledges made just ahead of the UN Conference of the Parties (COP26) “significantly” increase the chance that global warming can be limited to under 2 degrees Celsius by 2100, according to analysis published Thursday in the journal Science.

But the analysis by the Pacific Northwest National Laboratory (PNNL) also makes clear that heavier commitments will be needed to keep warming below catastrophic levels.

“We are so much closer to getting to the 2-degree goal than six years ago when the Paris Agreement was first signed,” analysis co-author Haewon McJeon, a PNNL research scientist said in a statement. “The wave of strengthened climate pledges and net-zero targets significantly increased our chance of staying under 2 degrees Celsius. And we practically ruled out the possibility of the worst climate outcomes of 4 degrees or higher.”

In the same news release, lead author Yang Ou, a postdoctoral researcher at the Joint Global Change Research Institute, said: “We find there’s a roughly one in three chance that we’ll stay under 2 degrees Celsius. But even with increased ambition, we’re still far away from getting down to 1.5 degrees in this century.”

The institute is a partnership between PNNL and the University of Maryland.

“New commitments, technological advances, and the near- and long-term recovery from the pandemic have set us on a different course than what laid before us at the 2015 Paris Agreement,” said co-lead author and PNNL research scientist Gokul Iyer. “But if we adopt more ambitious goals that truly reflect the common but differentiated responsibilities across all parties, that gives us a better than even chance of staying under 2 degrees Celsius.”

“And this highlights the importance of the Glasgow meeting,” Iyer said. “Without periodic and transparent updates, we won’t get the commitments strong enough to meet the temperature goal.”

More than 100 nations have recently made extra pledges to reduce greenhouse gas emissions through their nationally determined commitments (NDC).

PNNL and the University of Maryland concluded that pledges made following the Paris Agreement in 2015 translated into an 8% chance of hitting the 2-degree goal and zero likelihood of holding the global temperature increase to 1.5 degrees. Under the 2015 commitments, the was a 10% chance of global warming increasing by 4 degrees by 2100, the analysis said.

With the latest increased commitments, the analysis concluded the likelihood of limiting global warming to 2 degrees was 34%, with a 1.5% chance of limiting global warming to 1.5 degrees by 2100.

If countries additionally increase their NDCs by 2030, there is a 60% chance of holding global warming to 2 degrees and an 11% chance of hitting the 1.5-degree goal by the end of this century, the researchers said.

November 7, 2021December 5, 2023

Ige, Agencies Update Hawaii Climate Commission

The Hawaii Climate Change Mitigation and Adaptation Commission met last week to recap its progress over the past year, set the stage for the United Nations Conference of the Parties (COP26) and restate Hawaii’s climate goals.

Gov. David Ige opened the meeting to speak about the state’s involvement in COP26, saying that he and a Hawaii delegation will travel to the Glasgow conference to argue three main points: 1) that “islands matter” because they are the “canaries in the coal mine;” 2) that “it’s time for action;” and 3) that “we need to stay below a 1.5 degrees Celsius” rise in the global temperature.

Ige pointed to evidence of Hawaii being at the leading edge of climate risk: “We see the coral bleaching events, we see the rain bombs, the overwhelming flooding, the drought, the wildfires that continue to ravage our community.”

Hawaii “has been on the forefront of this climate challenge for many, many years,” he said, adding that “because other, larger organizations and governments have been timid and unable to take that step forward … We cannot wait for a global solution.”

The governor argued that sequestering carbon will eventually become the most important factor in fighting climate change, telling the commission, “All of you know that net zero is not good enough. It is about going beyond net zero to capture more carbon than we emit.”

Double Crises

Hawaii County Planning Department Director Zendo Kern discussed the financial impact on renters and homeowners from updating building codes for climate change.

“There are two crises that we’re in: We have climate, and we have affordability. The merger of these two together… they don’t jive, on the surface. What we’re doing is we’re increasing the cost of homes through climate adaptation, mitigation, etc. At the same time, we’re saying we need all these homes,” Kern said, adding that the county is projected to be short 13,000 housing units over the next five years.

Kern argued for more a more nuanced building code system that would take coastal impact areas into consideration. “If you’re in a coastal impact area, your code should probably be pretty close to what it is, maybe even ramped up. But if you’re not, what’s wrong with an older style of construction?”

Kern spoke on what he thinks is a lack of data showing that a uniform housing code increases safety, saying, “I don’t think that really exists … What we see is people living in plantation homes, still working great. What we see is people living in single-walled homes, still working great … But if you want to build new, no. You need to bulletproof this thing to the next level.”

Kern said he wants to discuss a tiered system that would allow areas to use more nuanced building codes that allow for more affordable housing construction.

Cleaner Transport

Hawaii Department of Transportation (HDOT) Director Jade Butay reviewed the state’s recent commitment to transitioning its fleet to all electric vehicles via House Bill 552, which requires state agencies to switch all light-duty vehicles to zero-emission by the end of 2035. HDOT is also implementing a pilot program to transition buses to zero-emission on Kauai, Maui and Hawaii island. Butay noted that “a complete conversion to zero-emission buses for the three counties will likely lead to at least a reduction of 15,000 short tons of greenhouse gas production per year.”

Butay also described HDOT’s Climate Adaptation Action Plan, which focuses on reducing road hazards caused by climate change, reducing single-occupancy car rides by supporting public transportation and ride-sharing, and encouraging telework through a pilot program that provides rural communities with broadband internet.

Coal Plant Closure Looms

The Powering Past Coal Task Force, a subdivision of the Hawaii State Energy Office (SEO), gave updates on the shutdown and replacement of Hawaii’s last remaining coal plant, AES Hawaii on Oahu. “We’re now about 10 months away from the retirement and a lot of work has been done, but a lot more needs to happen,” SEO Chief Energy Office Scott Glenn said. (See Hawaii PUC Weighs Oahu Coal Plant Closure Options.)

A few renewable energy projects will still be under construction once the coal plant retires, Glenn pointed out, causing a potential energy shortfall from spring to fall 2023. “There will be a slight decrease in reliability that we are working to address … I’m not talking about necessarily blackouts, but it’s a question of degree in terms of how much reliability we have in terms of the cushion between our normal operating levels and backup power.”

100 Million Trees

The Department of Land and Natural Resources (DLNR) reported on its efforts to “conserve, preserve, and plant” 100 million trees over the next decade.

The work is being done as part of the World Economic Forum’s worldwide “Trillion Trees Initiative” to restore biodiversity and fight climate change through carbon capture.

“We’re doing that primarily through protecting existing forests with watershed fences,” said Natural Resource Planner Leah Laramee. “We’re also conserving private land through legal protections, planting trees to restore existing forests, planting trees to reclaim unused rural lands where forests used to exist, planting trees to advance agroforestry, planting trees in urban areas, and facilitating natural regeneration.”

Other Updates

The University of Hawaii Institute for Sustainability and Resilience presented the state’s views on climate change with respect to equity. Director Makena Coffman said the institute is primarily examining vulnerability, which it defines as adaptive capacity (“the ability to prepare for, respond to, and recover from an event”), sensitivity (“personal factors driving vulnerability”), and enhanced exposure (“environmental factors that mitigate or exacerbate climate impacts”). The institute is gathering and collating data from various local and federal sources, such as the CDC social vulnerability index, to aid in its determinations.

Kauai County Planning Department Director Ka’aina Hull gave an update on the island’s sea level rise (SLR) plans, saying that while planning is still in its preliminary stages, he and his team are going to meet with officials in Boston to discuss that city’s SLR strategy and use the information gained from its plans.

Maui County Senior Planner Jeffrey Dack explained Maui’s plans of strategic retreat, saying that Maui is proposing the county enact a strategic retreat of 40 feet from what they are calling the “erosion hazard line,” meaning areas at risk from coastal erosion once sea level rise has occurred.

November 7, 2021December 10, 2023

PJM MIC Briefs: Nov. 3, 2021

RTO to Propose Review of Regulation Market

Stakeholders at last week’s Market Implementation Committee meeting heard PJM’s plan to win endorsement of a solution to deal with its regulation mileage ratio calculation problem after two proposals failed last month.

Adam Keech, PJM’s vice president of market design and economics, discussed the “logical next steps” of the proposal, which seeks to fix the calculation of the ratio to prevent an undefined condition.

PJM’s performance-based regulation market splits the dispatch signal in two: RegA for slower-moving, longer-running units; and RegD for faster-responding units like batteries that operate for shorter periods. If a signal is “pegged” high or low for an entire operating hour, the corresponding mileage would be zero for that hour. There has been an increased frequency of RegA signal pegging and times the RegA signal is pegged for extended periods, creating a divide-by-zero error in the calculation of the mileage ratio.

The RTO’s proposal, which called for setting the RegA dispatch mileage floor at 0.1 instead of zero, failed in a sector-weighted vote of 2.12 (42.4%) at the October Markets and Reliability Committee meeting, short of the 3.33 (66.6%) threshold for endorsement. A separate proposal from the Independent Market Monitor, which called for a cap of 5.5 instead of 0.1, also failed, receiving a sector-weighted vote of 3.07 (61.4%). (See “Regulation Mileage Ratio Fails,” PJM MRC/MC Briefs: Oct. 20, 2021.)

Keech said PJM heard stakeholders’ desire during the voting process to discuss “more systemic issues” with the regulation market and to examine those issues more closely, so it brought forward a proposal to begin a broader market review. Danielle Croop, senior lead market design specialist at PJM, reviewed the problem statement and issue charge. Keech said they were similar to the ones endorsed and created the former Regulation Market Issues Senior Task Force that last met in 2017.

The key work activities include regulation market education, evaluating the benefits factor curve and proscribed RegA/RegD commitment percentages, and proposing any modifications to the regulation market to address issues raised in the evaluation.

Keech said the review would utilize a new senior task force reporting directly to the MRC. PJM plans on conducting a first read of the problem statement and issue charge at the Nov. 17 MRC meeting.

Once the problem statement and issue charge are approved, Keech said, another vote would take place on the short-term solution proposals from PJM and the Monitor that were not endorsed.

“We could go for a vote of the short-term solutions knowing we have the larger regulation market review that we are going to commence,” Keech said.

Fuel-cost Policy Standards and Penalties

Melissa Pilong of PJM provided a first read of an RTO/Monitor proposal addressing clarifications to fuel-cost policy standards in Manual 15 and Operating Agreement Schedule 2 penalty language developed through the Cost Development Subcommittee.

PJM’s fuel cost policy form. | PJM

Pilong said the proposal includes a combination of clarifications and language for more elaboration on PJM’s fuel-cost policies that resulted after the RTO examined the fallout from the February winter storm in Texas and other parts of the South and Midwest.

The proposal calls for market sellers of generation units to verify that all intraday offer triggers are specified in the unit’s fuel-cost policy. Market sellers will also have to verify that weekend or holiday natural gas estimation practices match either the default assumptions in the PJM Fuel Cost Policy Guidelines contained in Manual 15 or specify estimation practices in the unit’s policy.

The Manual 15 updates include changes to the intraday update triggers. In order to opt into intraday offers, Pilong said, market sellers need to have a one-time trigger to update the maximum allowable cost offer.

The committee will be asked to endorse the proposal at its next meeting. PJM is seeking final endorsement by the Members Committee in February and a FERC filing following approval by the Board of Managers.

Manual 6 Revisions

Emmy Messina, senior engineer with the PJM market simulation department, presented a first read of conforming changes to Manual 6 resulting from the endorsement of a proposal to address the RTO’s auction revenue rights and financial transmission rights at the October MRC meeting. (See Stakeholders Endorse PJM ARR/FTR Market Changes.)

Messina said the changes would only impact Manual 6 and include language for bid limits and the network model user guide. They would update section 6.6 to reflect an increase of bid limits from 10,000 to 15,000 per corporate entity, auction round and period in FTR auctions. Section 9.1 would also be updated to direct stakeholders to a new network model user guide on the FTR section of the PJM website to get additional information on the auction.

The committee will be asked to endorse the revisions at its next meeting.

Regulation for Virtual Combined Cycles

Michael Olaleye, senior engineer with PJM’s real-time market operations, provided a first read of a proposal by Vistra to revise to Manual 12 addressing regulation for virtual combined cycle units.

The issue charge was originally endorsed at the May MIC meeting. (See “Virtual Combined Cycle Regulation Issue Charge Endorsed,” PJM MIC Briefs: May 13, 2021.)

PJM’s examples of proposed performance group scoring using the historic performance score calculation. | PJM

Units that are modeled virtually by PJM can sometimes receive regulation awards from the market clearing engine that vary, Olaleye said, which Vistra has been experiencing with some of its units. When a combined cycle unit is modeled as multiple virtual units, there is a possibility for unbalanced or unequal regulation awards to each unit by the engine.

Vistra’s proposed enhancement to performance group scoring calls for calculating the “hourly” score and extending it to each market resource with an assigned regulation for the given hour. It also calls for PJM to also calculate the “historic” performance score and extend it to each market resource in the performance group.

Olaleye said the enhancements would ensure that all resources of the performance group have the same historic performance score, which should fix the regulation clearing calculation problem in the software.

The committee will be asked to endorse the proposals at its next meeting.

November 7, 2021

ISO-NE Seeks to Terminate CSO for Conn. Power Plant

ISO-NE put the future of a 650-MW natural gas power plant in eastern Connecticut into potential regulatory doubt when it asked FERC on Thursday to terminate the project’s capacity supply obligation (CSO) in the next 60 days.

In a heavily redacted filing to the commission, ISO-NE said it is exercising its right to seek termination of the CSO for the Killingly Energy Center after consulting with NTE Energy, the Florida-based developer of the project. If FERC accepts the termination, NTE must forfeit any financial assurance associated with the terminated megawatts. Terminated resources also lose their associated CSO and rights to any related payments. It would also make Killingly ineligible for the 16th Forward Capacity Auction in early February 2022.

ISO-NE spokesperson Matt Kakley told RTO Insider that Killingly, which initially secured a CSO in 2019’s FCA 13 for the 2022/23 capacity commitment period, was required to meet several development milestones such as financing, permitting, major equipment orders and commercial operation. Developers facing delays in meeting milestones can find other resources to cover their obligations for up to two years. But if a project is still unable to meet its milestone deadlines after two years, ISO-NE has the right to seek termination of the resource’s CSO through FERC.

“The ISO is exercising this right with regard to the Killingly Energy Center,” Kakley said.

NTE Managing Partner for Development Tim Eves said in a statement to RTO Insider that “while we appreciate all of the work that ISO-NE does, we are disappointed that it has not chosen to come down on our side of this equation.”

“ISO-NE’s determination is based on an incorrect assumption regarding a financing milestone date. Financing for the Killingly Energy Center is imminent, and this filing will only further delay this much needed source of cleaner, more affordable energy,” Eves said. “Killingly is the much needed bridge to the clean energy future, and we will exercise all options available to show FERC that Killingly has not only already commenced its construction schedule but also will be online in time to meet its capacity supply obligation.”

A spokesperson for the Connecticut Department of Energy and Environmental Protection said the agency has long heard “that there have been questions regarding the viability of this project.”

“Clearly, ISO-NE identified things that called into question the project’s ability to reach required project milestones and made their determination to file a resource termination,” the DEEP spokesperson said.

Killingly Opponents React

A divided Connecticut Supreme Court in September upheld a lower court decision to dismiss a complaint from local environmental group Not Another Power Plant that the Connecticut Siting Council acted “improperly” in its decision when it did not account for potential environmental damage from a needed expansion of a pipeline to deliver fuel. The decision was a legal victory for NTE and Eversource Energy (NYSE:ES), the latter of which was expected to rebuild an existing pipeline to deliver gas to the facility. (See Conn. Supreme Court Affirms Lower Court Decision on Power Plant Approval.)

Opponents of the plant welcomed Thursday’s action by ISO-NE.

“People from all over Connecticut have recognized that dirty power generation conflicts with the future we all want and need to avoid the worst impacts of climate change,” Samantha Dynowski, director of Sierra Club’s Connecticut chapter, said in a press release that also captured similar sentiments from other groups opposed to Killingly. “Sierra Club is very hopeful that FERC will accept ISO-NE’s request for termination of the capacity contract for the fracked gas power plant proposed for Killingly and that Connecticut can focus on a clean and climate-friendly future. This is a major step in the right direction for clean air and a livable planet.”

Kate Donnelly, a member of Killingly, Conn.-based No More Dirty Power, said the plant would increase the pollution in a town “with high asthma rates that already houses a fracked gas power plant.”

“Its construction would make it impossible to meet Connecticut’s goals to address the climate crisis, [and] the energy from this plant wouldn’t even be used in our state,” Donnelly said. “For these reasons, people have been fighting construction of the power plant since it was first approved. Even though we were repeatedly told it was a ‘done deal,’ we fought on. With this news, we are hopeful that it is the beginning of the end of the Killingly Energy Center, and we can all focus on meeting our climate goals through energy-efficiency programs and the development of renewable resources.”

Leah Ralls, president of NAACP’s Windham-Willimantic branch, said its membership unanimously passed a resolution opposing the construction of the power plant in April.

“Environmental racism and economic injustice can be defeated when we stand together and work toward development and construction of clean, renewable energy sources,” Ralls said. “Today’s news of ISO-NE’s termination filing for [Killingly] brings us closer to that outcome.”

November 7, 2021December 10, 2023

Northeast RTOs Asked to Run Offshore Transmission Studies

A group of environmentalists and clean energy industry proponents have asked RTOs in the Northeast to conduct an interregional offshore wind transmission study for two distinct regions off the East Coast.

The Clean Energy Advocates presented their proposal at the joint NYISO/PJM/ISO-NE Interregional Planning Stakeholder Advisory Committee (IPSAC) meeting late last month, pushing the need for a study that examines the costs and benefits of an interregional HVDC transmission network for New York and New Jersey, as well as for the line of offshore wind projects running from Massachusetts to North Carolina.

“States are very focused on meeting their internal state goals, and regions are focused on their regions, which is fine, but it doesn’t seem like anyone is talking about this mythical transmission grid … and how all this would work,” Cullen Howe of the Natural Resources Defense Council, part of the group, told RTO Insider.

The group also includes the Sustainable FERC Project, Americans for a Clean Energy Grid, American Clean Power Association, Sierra Club, Advanced Energy Economy, Union of Concerned Scientists and New York Offshore Wind Alliance.

“No one has really kicked the tires on this, so we felt like [IPSAC] was the place that could do it,” Howe said.

Shell Offshore Wind also made a presentation from a developer’s perspective, saying that that the lack of planning is really hindering it, Howe said.

“Timing is a key consideration given that states will proceed with clean energy initiatives before FERC resolves issues in its” Advance Notice of Proposed Rulemaking, Shell said. (See Transmission Industry Hoping for Landmark Order(s) out of FERC ANOPR.)

The Joint ISO/RTO Planning Committee and IPSAC, through the Northeastern ISO/RTO Planning Coordination Protocol, are positioned to provide policymakers with analyses and information in the near term on benefits that may be obtained with enhanced interregional coordination, Shell said.

Federal Backing

Because of the way that interregional projects work generally, it’s hard to get regions to agree on any solution, Howe said.

“Effectively all regions — in this case three regions — would have to agree not just that an interregional solution is the way to go, but exactly what that interregional solution would be, and that often doesn’t happen,” Howe said. “So one of the reasons you don’t see a lot of interregional projects is because … [the parties] often can’t come to an agreement on what a particular solution might look like.”

DOE 2021 graph provides the breakdown of development phase by state to meet demand for offshore wind, with projects at various stages. | DOE

The group has a powerful ally in Amanda Lefton, director of the Bureau of Ocean Energy Management. Speaking at a conference in New York last month, Lefton said a planned approach to offshore transmission is going to be critical, and “something that’s been incredibly clear is that we need a strong collaborative effort between states and the federal government.” (See “Powering NYC with Renewables,” New York Writing Ending to Tale of Two Grids.)

The U.S. Department of Energy last month released a report on the gaps that will need to be filled to build enough transmission to interconnect electricity from turbines in the Atlantic to power grids along the East Coast. (See DOE: Atlantic Coast Needs Integrated Transmission Planning for OSW.) The DOE report cited a lack of comprehensive evaluation across all the necessary aspects of transmission planning to support offshore wind energy development at scale.

“Current reactive processes that evaluate individual offshore wind projects may not optimize benefits to support deployment of 30 GW by 2030 and beyond. As a result, comprehensive interregional studies of possible offshore wind transmission options are needed,” the report said.

If RTOs/ISOs are worried about who will pay for the analysis, there is a provision in the Build Back Better bill, passed by the U.S. House of Representatives on Friday, to allocate $100 million for offshore wind planning.

“To do this study right now seems to be a no-brainer because it does seem like you could identify a lot of efficiencies by looking at how [this could] be built out in a way that takes into account limited interconnection points on land, what’s the best way that we can do this, and thinking beyond just one state at a time or even one region at a time,” Howe said.

At some point in the next 20 to 30 years, the U.S. will have a lot of offshore wind projects out in the ocean and operating, he said, so it seems like planners would want to say right now what is the most efficient way to build the needed transmission grid.

The next IPSAC meeting is scheduled for Dec. 4.