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November 13, 2024

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Utilities Seek Rehearing in FERC Interconnection Funding Proceedings

A group of utilities have filed for rehearing of a show cause order FERC issued last month that could change the practice of who pays for interconnection lines at four ISO/RTOs. (See FERC Issues Show-cause Order on TO Self-Funding in 4 RTOs.) 

The commission asked ISO-NE, MISO, PJM and SPP to explain why their tariffs that give utilities the first shot at paying for the transmission upgrades required by interconnecting generators are just and reasonable, or to submit changes. 

Ameren Services, American Transmission Co., Duke Energy, Exelon, Northern Indiana Public Service Co. and Xcel Energy Services filed for rehearing of the show cause order this week. Ameren won a lawsuit involving MISO that started the practice back in 2018, but the District of Columbia Circuit Court of Appeals directed the commission to better explain its reasoning in 2022 after it had spread to the three other markets. (See FERC Must Clarify MISO Transmission Funding Decision, DC Circuit Finds.) 

The 2018 decision from the same circuit court found that revoking transmission owners’ right to self-fund network upgrades for interconnection and earn a right of return raised serious “statutory and constitutional concerns” due to compelling generator-funded upgrades on utility business models. 

“The commission has now decided to take on those serious constitutional and statutory questions — and potentially take the historic step of compelling the construction, ownership and operation of interstate transmission facilities by private entities with no opportunity to earn a return — all on the unproven premise that doing so will actually save consumers money,” the rehearing request said. “The show cause order is short-sighted and unwarranted. Investor-owned utilities investing private capital in exchange for a reasonable return is one of the most basic tenets of the century-old regulatory compact between government and the utility industry.” 

The constitutional issues come from the Fifth Amendment, which bars the government from taking private property for public use without compensation. Under the Federal Power Act, that has been interpreted to mean FERC cannot impose “confiscatory rates,” which means utilities need to be able to earn a reasonable return on the value of property at the time it is being used to render service. 

“It cannot be lawful to compel the construction, ownership and operation of utility-owned assets with no opportunity to earn any return,” the rehearing request said. “On this basis, the proposal in the show cause order is per se unconstitutional.” 

FERC suggested the interconnection upgrades can be treated as “nonprofit appendages without jeopardizing total return,” but the utilities argued it lacks the authority to eliminate equity returns from an entire class of rates represented by a major driver of new transmission investment. The utilities argued the decision could discourage much-needed investment in transmission expansion. 

The commission has run multiple proceedings that led to the rules at issue, while the D.C. Circuit’s 2022 ruling only required a better explanation as to why “generators’ concerns about potential discrimination did not outweigh the transmission owners’ enterprise-risk concerns.” 

The show cause order goes further and reopens the potential for discrimination in what appears to be an effort to “backfill the record that never materialized” in the proceedings leading to the currently effective rules across the four markets, the request said. 

The dispute started in MISO with FERC proceedings stretching back to 2011 with multiple proceedings that wound up before the D.C. Circuit with the court vacating decisions empowering generators to override a transmission owner’s self-funding choice. 

The court concluded the commission had “distorted and dismissed” the transmission owners’ fundamental argument that FERC’s orders would require transmission owners “to act, at least in part, as a nonprofit business,” and constituted an “attack on their very business model,” creating a risk of deterring “new capital investment,” the rehearing request said. 

That 2018 decision found it was “at least uncertain” FERC would reach the same conclusion on remand after addressing the deficiencies identified by the court. FERC sided with the transmission owners on the remand order. American Clean Power Association then filed a lawsuit that led to the 2022 decision, which FERC did not deal with until the show cause orders issued in June. 

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DOE, AAI Reports: VGI Critical to Managing New EV Power Demand

Vehicle-to-grid integration (VGI) is about more than connecting electric vehicles to the grid, say reports from the U.S. Department of Energy and the Alliance for Automotive Innovation, both released July 16.  

Rather, it represents a convergence of the automotive and electric industries in ways that could provide benefits for the grid, utilities, EV drivers, all utility customers and, in the big picture, society in general.  

At its most basic, VGI is the use of electric vehicle batteries, connected to EV chargers, as grid resources, either through managing when and at what pace they charge or tapping EV batteries for grid support or backup at times of peak demand or in emergencies.  

The two reports are complementary, with DOE’s “The Future of Vehicle Grid Integration” laying out a vision for VGI development by 2030, while the AAI report provides lists of recommendations focused on rate design and the kinds of technology that will be needed for consumer, utility and regulatory buy-in. 

DOE sees huge potential for VGI, with “millions of electric vehicles, charging at home and work, at charging depots and along the [highways] … integrated with the electricity system in a way that supports affordable and reliable charging for drivers and enables a reliable, resilient, affordable and decarbonized electric grid for all utility customers.” 

VGI can “seamlessly [align] the grid’s physical infrastructure and operational structure, regulatory frameworks and market design with customer charging behaviors to create a symbiotic relationship that benefits everyone regardless of EV ownership,” the report says. 

AAI’s definitions of success are more specific and targeted at building a solid business case for VGI. For EV drivers, VGI should deliver no-compromise mobility; convenient, reliable and affordable charging; and compensation for grid services, while utility customers will get a more efficient and modern grid that enhances system reliability and resilience and delivers economic and environmental benefits. 

Recommendations for utilities include adoption of time-of-use rates for EV charging and allowing EVs to participate in demand response programs. 

The overlap between the two reports is their recognition of the complexity of the work ahead to achieve their goals and the need for broad-based collaboration between utilities, automakers, regulators, EV charging firms and software developers, and local officials and community groups. 

Both also call for the development of standards and codes, with AAI more focused on data accuracy and technical interoperability, and DOE calling for “cyber-informed engineering” for EVs, charging equipment and the grid to minimize physical and cyber threats. 

What is also implicit in both reports is a shared sense that as more EVs hit the road across the U.S., VGI will be critical to managing their increased electricity demand, and best practices and information sharing will be needed to move beyond a recurring pattern of utility pilot programs to fuller system integration. 

DOE’s Big Picture

The DOE report was developed by the department’s EVGrid Assist initiative, which is itself a cross-industry group. The report notes it is intended to set goals for an ideal VGI environment and that a second report with specific strategies will be forthcoming.  

At the same time, it provides a framework for why VGI is important and specific pillars that could form a core for successful and equitable deployment of VGI.  

The report argues that VGI increases the use of grid infrastructure, cutting system costs, while helping to hold the line on electricity rates and put more clean energy online. EV owners can take advantage of more cost-effective charging, which lowers their total cost of ownership.  

VGI programs could also serve as a model for tapping other distributed energy resources for grid support and flexibility, the report says. 

Pillars for successful VGI deployment will include recognizing the “universal value” VGI provides to all utility customers and promoting a “right-sized” grid in which managed charging programs could cut peak loads and provide system flexibility. “Better use of grid assets reduces the risk of overbuilding,” the report says. 

For example, the report calls on utilities to provide “clear information about upgrade costs, capacity availability and load service request processes [to] help developers and site owners identify cost-effective charging locations where capacity is available.” 

The report’s other pillars focus on developing standards and codes, ensuring system security and providing customers with “a wide range of products and services to accomplish their charging needs,” as well as compensation for the services they provide. 

Both DOE and AAI recommend that VGI programs offer “value stacking,” allowing EV owners to get paid for different services their EVs might provide. 

Telematics and Bidirectional Charging

Incentivizing VGI through various rate designs is a priority in the AAI report. Utilities and regulators could support the deployment of DC fast chargers by adopting commercial and industrial rates that “ensure the … viability of fleet electrification and DCFC stations in the early stages of operations and in lightly trafficked areas.”  

Chargers in remote areas may not, at first, get enough use to cover utility demand charges and make the chargers financially viable, the report says. Possible solutions could include “temporary demand charge holidays … offsetting the demand charge with declining short-term subsidies and replacing the demand charge with a kW-based subscription fee.” 

For fleet electrification, another option is automated load management, a system that manages demand across more than one EV charger and can cut costs for the installation and operation of charging equipment, the report says. 

On the residential side, AAI pushes for a “prompt transition” from pilot programs offering time-of-use rates or managed charging to mass market initiatives, which will be “crucial to achieving cost-effective VGI as EV adoption accelerates.” The report also urges utilities and automakers to work together on wider consumer education programs to ensure EV owners are aware of and can easily sign up for such programs. 

AAI also points to telematics ― the integration of telecommunications and computer data ― as a key tool for advancing the benefits of managed charging. 

“Telematics-based managed charging programs integrate vehicle and utility data to optimize the timing of charging, thereby enhancing the value of an EV as a grid resource,” the report says. 

“By factoring the state of charge into the optimization algorithm, telematics-based managed charging systems can determine how long it will take to replenish the battery and therefore how much latitude there is to modulate charging to shift load and provide grid services,” it says. 

Deploying bidirectional charging at commercial scale is another way EVs can be integrated with the grid. By allowing EVs to charge from or discharge to the grid, bidirectional charging essentially turns EVs into mobile batteries that can provide “frequency regulation, spinning reserves and load shifting,” the report says. “Their ability to charge and discharge multiple times while plugged in significantly augments their value relative to standard EVs.” 

However, not all EVs currently on the market have bidirectional charging, which the AAI report says is costly to build into the vehicles, and incentives may be needed to compensate fleet operators for the added expense.  

The bottom line is that utilities, RTOs and regulators should enact policies and programs to compensate EV owners who send power to the grid, the report says. A Pacific Gas and Electric pilot program for EV commercial fleets provides incentives to offset equipment costs and uses day-ahead hourly pricing to encourage fleet operators to put power from their EV batteries back on the grid during times of peak demand. 

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Clean Energy Orgs Push Entergy Players to Consider Broader Cost Allocation

Clean energy nonprofits continued trying to persuade Entergy and MISO South state regulators to embrace a broader view of cost allocation for an upcoming long-range transmission plan (LRTP) portfolio the RTO intends for the subregion.

The Sustainable FERC Project and the Southern Renewable Energy Association (SREA) took turns during an Entergy Regional State Committee (E-RSC) teleconference July 12 attempting to convince the company and its regulators to open their recommended allocation method to more transmission benefits.

Lauren Azar, a consultant for the Sustainable FERC Project, said if MISO South doesn’t create a functioning cost allocation for regional lines, the South will continue to exclusively build expensive local projects “that are bubbling up in the [integrated resource planning] process.”

“Local projects cannot cost-effectively replace regional projects, but regional projects may cost effectively replace local projects,” Azar told the E-RSC.

In early February, the E-RSC Working Group unveiled a preferred allocation for the upcoming LRTP portfolio of projects that will focus on MISO South. It involves assigning 90% of costs based on adjusted production cost savings and avoided reliability projects; the remaining 10% will be charged to new generation that interconnects in MISO South based on a flow-based methodology. (See Entergy States Debut Long-range Tx Cost Allocation Proposal, MISO Members Unconvinced.) Additionally, the E-RSC wants costs of transmission projects designed to further decarbonization goals solely assigned to jurisdictions that proposed those targets.

The Entergy states want the allocation assigned to upcoming LRTP projects in MISO South. By comparison, MISO Midwest is using a simpler, 100% postage stamp allocation to load for the same class of projects. Entergy states have been adamant that they won’t support any postage stamp allocation component for the third LRTP portfolio.

The E-RSC has said its allocation method would dole out costs as specifically as possible based on cost-causation and beneficiaries-pay principles. MISO, on the other hand, has proposed to allocate 50% of South LRTP projects to the subregion using the load-ratio postage stamp rate, and 50% to the smaller zones where projects are located. The E-RSC has publicly opposed the plan. (See Entergy Regulators Mount Challenge to MISO South Cost Allocation.)

Azar said MISO South’s local projects cannot account for the “economies of scope and scale” that regional, interstate transmission projects can capture. She cautioned that the South’s trend of relying on utilities’ IRPs for transmission planning instead of turning to MISO for comprehensive, cost-shared solutions will cost customers money in the long run.

Because regional lines benefit so many, there are many parties to “bicker” over how the costs of lines should be divided, she said. “Literally the flows on the system are changing minute-by-minute.”

Azar said the E-RSC seems to be hamstringing itself by maintaining an overly restrictive benefits philosophy that prevents it from considering other real benefits of transmission.

Arkansas Public Service Commission consultant Keith Berry disagreed that the E-RSC’s cost allocation principles are boxing its working group in from formulating adequate benefit metrics.

But Azar said the E-RSC Working Group has so far been able to come up with just two benefit metrics that almost certainly will fail to meet FERC’s standard that costs be portioned out roughly commensurate with benefits.

“You’re going to have to come up with different ways to meet that legal standard,” she said.

MISO Midwest’s 100% postage stamp allocation based on a load ratio share is often misunderstood as an “everybody pays the same rate” allocation when it’s really a rate based on grid usage, Azar said.

SREA Executive Director Simon Mahan said MISO South’s failure to settle on a cost allocation direction with the RTO may have kept it from reaping the benefits of major transmission projects.

“It’s my view that if we had a cost allocation for MISO South in place … we might have been able to move faster on the planning side,” he said.

Mahan also said FERC’s recently authorized Order 1920 is essential for MISO South states, whose IRPs are largely silent on long-term, regional transmission.

Mahan said Order 1920 is “based heavily on what MISO already does” for MISO Midwest. He said MISO South can use FERC’s planning directives “to help fill a gap” that exists in the South’s long-term transmission planning.

Though Order 1920 prescribes long-term planning on a five-year cycle, MISO South should undergo regional planning every three years, Mahan continued. That would prevent the yearslong “drought” MISO Midwest experienced between its last market efficiency project and the introduction of the long-term transmission portfolios, he said.

“You can go back at MISO’s old transmission planning futures and see how drastically things have changed,” Mahan said in support of speedier planning cycles.

Six years elapsed between MISO’s last successful market efficiency project — the $156 million, 345-kV Huntley-Wilmarth line in southern Minnesota — and its 2022 approval of its first, $10 billion LRTP for MISO Midwest.

Mahan pointed out that MISO South has never hosted a market efficiency project, and MISO’s only attempt at one in the South proved unsuccessful.

MISO canceled the $130 million, 500-kV Hartburg-Sabine Junction project in East Texas in 2022, five years after recommending it. At the time, Texas’ ultimately unconstitutional right-of-first-refusal law introduced questions over who could construct the line. Entergy in the meantime built the 993-MW Montgomery County Power Station in southeast Texas, and made plans for the 1.2-GW natural gas and hydrogen-powered Orange County Advanced Power Station by 2026, rendering the line unnecessary, according to MISO’s analyses.

Since then, Entergy has proposed billions in transmission projects to serve reliability needs. MISO South accounted for nearly half the cost of MISO’s record-breaking, $9.4 billion Transmission Expansion Plan, including a $1.1 billion, 150-mile 500-kV line and substation project Entergy proposed for southeast Texas.

Bill Booth, a consultant to the Mississippi Public Service Commission, pushed back on the notion that MISO South’s nonexistent allocation has put a drag on MISO planning. He argued that an unfinished cost allocation couldn’t have been holding up regional transmission because MISO hasn’t begun planning the third LRTP portfolio.

Booth said it seemed like Mahan was trying to argue that the South should be more like the Midwest. He also said MISO South is in the construction phase of several million dollars worth of transmission investment.

But Mahan said those investments are set to produce only local lines that don’t cross state lines.

Mahan made the case there are parallels to be drawn between MISO South and Midwest. He said that while the South doesn’t have the impending coal retirements that the Midwest is staring down, it does have aging, legacy gas units. He also said the South boasts utilities with zero-carbon goals, corporate interest in load growth, escalating extreme weather events and growing renewable fleets.

“While we’re not the same as the North, there are a lot of solutions where transmission can help,” Mahan said, adding that the South region is woefully behind on attending to its regional system.

“There are things that beg a larger planning than what we’ve been engaging in the past decade or so,” he said. “We do need to fill in this gap about what we do on long-range transmission planning.”

Azar warned Entergy and regulators against crafting an allocation with FERC’s Order 1000 in mind. By the time MISO pulls together South LRTP projects — likely in 2026 — Azar said Order 1920 will be the prevailing transmission rule.

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Reports Examine Economics of Clean Hydrogen

Two new reports look at the evolving economics and technologies of clean hydrogen as its potential role in the clean energy transition is debated. 

Researchers at the National Renewable Energy Laboratory (NREL) conclude that using electricity from offshore wind farms to produce clean hydrogen may make economic sense, possibly lowering the cost of generation to below $2 per kilogram.  

This is well above the $1/kg target set by the federal government but well below current cost of production, and possibly low enough to make it cost-competitive in some applications. 

An analysis by the Clean Air Task Force (CATF), meanwhile, concludes that use of clean hydrogen for power generation would be a costly and inefficient decarbonization strategy and that hydrogen would best be prioritized as a means of decarbonizing heavy transportation and industry. 

This analysis also found that using hydrogen as a form of energy storage could have some applications but likely would be less cost effective than strategies that minimize the need for long-duration energy storage, such as geothermal or nuclear. 

The Biden administration has prioritized the development of clean hydrogen. It launched the Hydrogen Shot in 2021 to lower the cost from $5 to $1 per kilogram by 2031, and it designated seven regional hydrogen hubs in 2023. (See DOE Designates Seven Regional Hydrogen Hubs and DOE Hydrogen Shot Aims to Build US Supply Chain for Global Markets.) 

But the rules for hydrogen tax credits it proposed seven months ago have been mired in controversy, decried as too strict by some in the energy sector and not strict enough by some clean energy advocates. (See Biden Admin. Releases Proposed Rules for Hydrogen Tax Credits.) A similar reception greeted the announcement of the hubs. (See Hydrogen Hub Announcement Draws Praise and Scorn.) 

Both sides have been pushing since then to influence the final rule-making. The outcome will help determine the net environmental benefits of “green” clean hydrogen and what it costs to produce. 

Offshore Wind

The NREL researchers’ article — “Potential for large-scale deployment of offshore wind-to-hydrogen systems in the United States” — was published in Journal of Physics: Conference Series and was announced July 11.  

Their findings indicate the economics of producing hydrogen with offshore wind electricity would be most favorable in areas where the water is relatively shallow and the wind is relatively strong.  

The levelized cost of hydrogen, which looks at the entirety of the wind, hydrogen and transmission infrastructure, would be lowest in the New York Bight and second lowest in the Gulf of Mexico, they determined. 

The researchers looked at two system configurations that have been considered: a traditional setup with power exported to onshore electrolyzers that produce hydrogen from freshwater and a setup in which electrolyzers at sea produce hydrogen from desalinated seawater and send it ashore via a pipeline. 

The technical feasibility of the offshore hydrogen production scenario is uncertain, the researchers said, as it would require integration of large amounts of equipment on a 250-by-250-meter sea platform. 

In a news release, lead author Kaitlin Brunik, an NREL hybrid systems research engineer, said: “Both offshore wind and clean hydrogen production are technologies that are rapidly evolving and, when combined, have the potential to generate and store a lot of renewable energy and decarbonize sectors that are hard to electrify. Continued investment and research on system- and plant-level design and optimization could spur further technology progress and cost reductions for these systems.” 

Production Economics

CATF announced its report, “Hydrogen in the Power Sector: Limited Prospects in a Decarbonized Electric Grid,” on July 4. 

It points out the challenge of green hydrogen — to produce it in a way that does not cancel out its environmental benefits as a non-carbon fuel. 

It also flags a fundamental handicap of present-day technology: It expends three-quarters of the energy potential of clean hydrogen in the process of making it. So, four units of clean energy that could be used to decarbonize the grid instead are used to create one unit of clean hydrogen.  

The analysis pokes holes in the concept of using hydrogen as a power generation fuel, stating that substantial investments in storage and transmission would be needed; creating green hydrogen with electricity from renewable sources would divert that power from other decarbonization uses; producing hydrogen from natural gas with carbon capture creates significant upstream emissions associated with producing and transporting the natural gas; and the levelized cost of electrolytic hydrogen as a storage medium exceeds other options, such as pumped storage hydropower and batteries. 

It adds, however, that present-day batteries are of limited duration and that hydrogen is at present one of the few technically feasible methods to convert large amounts of electricity into energy that can be stored for months. 

In a news release, CATF Hydrogen Technology Director Ghassan Wakim said: “Interest in using hydrogen to decarbonize power systems has skyrocketed, specifically as a perceived ‘clean’ replacement for natural gas power plants. The superficial logic is simple: Replace a polluting fuel with one that doesn’t emit carbon dioxide. Unfortunately, the inefficiency of hydrogen production means that it either amplifies upstream natural gas emissions or diverts clean electricity that could directly decarbonize the grid instead. After a realistic assessment of clean hydrogen’s potential role in power sector decarbonization, this report finds that clean hydrogen should be prioritized for decarbonizing heavy transportation and industry, not for electricity generation.” 

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CPUC Works to Revamp Tx Permitting Rules

California regulators are overhauling rules regarding the permitting of electric transmission projects, and one proposal suggests creating a shortcut for projects already approved in a CAISO transmission plan.

The California Public Utilities Commission is updating General Order 131-D, which contains rules for the permitting of transmission and distribution lines, substations and generation facilities in the state. The goal of the update is to make the permitting process more efficient and consistent.

GO 131 was originally adopted in 1970. The most recent version, GO 131-D, was approved in 1994 and modified in 1995.

Since then, “there have been significant changes in both the physical configuration of the electric grid and the market structure for electricity in California,” commissioners said in an order instituting rulemaking for GO 131-D.

In addition, Senate Bill 529 of 2022 directed the CPUC to update the general order to streamline the approval process for extensions, expansions or upgrades to existing transmission facilities.

Under GO 131-D, transmission projects of 200 kV or more need a Certificate of Public Convenience and Necessity (CPCN), whereas projects between 50 and 200 kV must obtain a Permit to Construct (PTC), which involves a less complex approval process.

But SB 529 changed the requirement for a CPCN for transmission expansion projects. Those projects now may proceed with the simpler PTC, even if they’re 200 kV or greater.

In Phase 1 of the proceeding, the CPUC updated GO 131-D to be consistent with SB 529.

An order incorporating the changes was approved and took effect in December, ahead of the Jan. 1, 2024, deadline set by SB 529.

Phase 2 Proposals

The proceeding has now moved into its second and final phase, in which additional changes to GO 131-D will be considered.

CPUC staff released a Phase 2 proposal on May 17.

One objective is to provide definitions for terms included in the Phase 1 additions. In particular, “extension,” “expansion,” “upgrade,” “modification” and “existing electrical transmission facilities” aren’t defined.

This has been “causing applicants to be uncertain about whether a particular project will require a CPCN,” CPUC staff said.

CPUC staff have also proposed a streamlining measure for transmission projects included in one of CAISO’s annual transmission plans.

The CPUC process for issuing a CPCN includes a review under the California Environmental Quality Act (CEQA) and an evaluation of the need for the project and its cost.

CAISO also evaluates the costs and need for a project in its transmission planning process, the staff proposal noted.

The proposed change to GO 131-D would establish a “rebuttable presumption” that the project meets the CPUC requirement for need if it’s an approved project in a CAISO transmission plan.

That would be consistent with Assembly Bill 1373 of 2023.

A bill in the state legislature this year tried to take the rebuttable presumption a step further. AB 3238 by Assemblymember Eduardo Garcia (D) would have created a rebuttable presumption that the benefits of a transmission project outweighed its environmental impacts if the project was included in a CAISO transmission plan.

The bill is still alive, but the rebuttable presumption provision was removed. (See Bill to Streamline Transmission Development Advances in Calif. Senate.)

The CPUC staff proposal also looks for ways to speed up the application and CEQA review processes.

One idea is to allow applicants to submit a draft environmental document for their project. That would cut out a step in which the applicant provides a proponent’s environmental assessment, or PEA, which is followed by staff preparation of an environmental document.

The proposal would require applicants to consult with staff on the environmental document at least 12 months before submitting an application.

A comment period for the Phase 2 proposal ran through July 15. The CPUC expects to release a proposed order by Oct. 13.

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PJM MIC Briefs: July 10, 2024

PJM’s Market Implementation Committee endorsed by acclamation a PJM proposal to revise two financial inputs to the quadrennial review to reflect changing market conditions, particularly increased interest rates. The most recent review was approved by FERC in February 2022. (See FERC Approves PJM Quadrennial Review.) 

The proposal would increase the after-tax weighted average cost of capital (ATWACC) from 8.85% to 10% and use a 0% bonus depreciation rate for the 2027/28 delivery year and beyond. The original quadrennial review included a 20% bonus depreciation value for the 2026/27 year. The proposal also updated the Bureau of Labor and Statistics (BLS) indices used in capital cost escalation rates. 

The changes increase values for all five CONE areas by an average of $79/MW-day, with CONE Area 5 seeing the largest increase at $90/MW-day and Area 4 increasing by $65/MW-day. The proposal is slated to go before the Markets and Reliability Committee and Members Committee on Aug. 21, with a targeted filing date at FERC in August or September. 

PJM’s Skyler Marzewski said the automatic ATWACC adjustment was considered by staff and the Brattle Group — which was hired as a consultant for both the original quadrennial review and the re-evaluation of the financial parameters; however, it was determined that would provide minimal benefit, particularly if the review period is shortened to occur more often than every four years. 

Paul Sotkiewicz, president of E-cubed Policy Associates, said the changes improve the accuracy of the values for the 2027/28 delivery year but that the net CONE for the previous year remains “unrealistically low,” particularly since no merchant combined cycle generators have been financed in the past two years. The most recent quadrennial review included shifting the reference resource from a combustion turbine to a combined cycle unit. 

Marzewski said PJM opted against reopening those values, since doing so likely would require altering the Base Residual Auction (BRA) schedule. Sotkiewicz responded that proper price formation with the right cost of capital shouldn’t be sacrificed for timing and maintaining the auction timeline. 

PJM Presents Road Map of Market Design Changes

PJM outlined its expected timeline for several ongoing stakeholder processes and staff efforts to redesign several areas of the RTO’s markets to address reliability issues identified in its Ensuring a Reliable Energy Transition analyses. PJM’s February 2023 4R’s Report was part of that analysis and laid out many of the reliability concerns the road map focuses on. (See “PJM White Paper Expounds Reliability Concerns,” PJM Board Initiates Fast-track Process to Address Reliability.) 

PJM Senior Director of Market Design Rebecca Carroll said the road map was created to track the various working areas and ensure that none fall through the cracks. It is meant to be a “living document” that will be updated as new efforts begin or are completed, she said. 

Efforts already underway include the demand response performance window and accreditation, reserve performance and procurement during periods of operational uncertainty, load flexibility, regulation market signals and performance requirements, and FERC Order 841 requirements on electric storage market participation. The second phase of PJM’s capacity market redesign is expected to begin in the second half of 2024 and continue through 2027. 

The timelines on which work is expected to begin and be complete for each item are based on stakeholder issue charges, FERC filings and estimates from software programmers. 

The rules around generators with co-located load were considered as an independent item of the road map but are  included in the load flexibility category, Carroll said, adding that PJM is conducting a deeper investigation this year to look at what flexibility exists for data centers and large loads. 

Executive Vice President of Market Services and Strategy Stu Bresler said corresponding road maps are being created for operations and planning, with the latter being reworked to reflect FERC’s Order 1920.  

Vistra’s Erik Heinle said it’s important that PJM views the road map as a living document that reflects the shifting priorities of stakeholders. He expressed surprise that the design of the market seller offer cap (MSOC) and possible over-mitigation of offers wasn’t included in the document. 

“When you look at what is driving certain retirements, certainly mitigation is one,” Heinle said. 

Carroll said changes to market mitigation are included in a FERC refiling PJM is preparing with several components of its Critical Issue Fast Path proposal the commission rejected in February (ER24-98). (See “PJM to Refile Portions of Rejected CIFP Proposal,” PJM MIC Briefs: June 5, 2024.) 

Independent Market Monitor Joe Bowring replied there is no over-mitigation of market offers and defended the current design. 

Several stakeholders expressed support for ranking the items by importance with respect to PJM’s stated reliability concerns. Carroll said PJM thinks all the issues being discussed are high-priority and time-critical, but it is valid to consider the urgency of new issues that arise in the future. 

Voltus Discusses DR Market Issues

Demand response provider Voltus presented several issues related to the accreditation of DR participation in the capacity market, known as load management, focusing on capacity offers being limited by winter energy availability and how PJM’s effective load-carrying capability (ELCC) model determines availability. 

Voltus Vice President of Energy Markets Emily Orvis said the company supports expanding the hours DR is available during the winter to match the growing reliability risks PJM has identified in the evening winter hours, which she said would allow DR providers to shift their customer enrollment to capture loads that match that time, rather than looking solely at their winter peak hourly consumption. The Markets and Reliability Committee in May endorsed an issue charge to consider modifying the availability of DR resources, while rejecting a quick-fix proposal to expand the winter availability window by two hours into the evening. (See “DR Availability Issue Charge Approved, Quick Fix Proposal Rejected,” PJM MRC Briefs: May 22, 2024.) 

She said PJM’s practice of capping availability to the lesser of a facility’s winter peak load or peak load contribution (PLC) limits the participation of winter-leaning customers who could provide higher curtailment during that season. 

Additionally, some customers are able to reduce output to a greater degree than their winter peak load or PLC, but that additional capability is not included in the resource’s accreditation. She said Voltus’ energy availability in June 2024 was 25 to 30% higher than its accredited value. 

Resources also are capped by an ELCC modeling approach that assumes that DR availability is proportional to system load, reducing the incentive for customers with flat load profiles to participate. Rather than looking to simulated system loads relative to peak forecasts, she said PJM’s DR Hub holds more accurate information about the ability for a resource to reduce its output at a given hour. 

The caps to DR availability create multiple de-rates to resource accreditation that do not align with the incentives for customers to participate in the capacity market in a way that reflects PJM’s shifting view of when system risks are concentrated. 

Bowring noted that he disagreed with each of the key points made by Voltus and requested an opportunity to provide education at a future meeting.  

Manual Revisions Include ARR Trading Deadline

PJM’s Emmy Messina presented several revisions to Manual 6, including administrative changes and adding a deadline for auction revenue right (ARR) trades. The changes were drafted through the document’s periodic review. 

Requiring ARR trades to be submitted by noon ET on the business day before the auction opens allows time for PJM to complete its necessary analysis. Relinquish requests would have a deadline of noon on the business day before the opening of stage 2 of the annual ARR allocation process. 

The revisions also would disqualify transmission customers with firm services to charge energy storage or hybrid resources from receiving an allocation of ARRs. The language conforms with FERC orders in ER19-469 and ER22-1420. (See RTOs Move Closer to Full Order 841 Implementation.) 

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PJM PC/TEAC Briefs: July 9, 2024

Planning Committee

Elevate Reviews CIR Transfer Proposal

Elevate Renewables presented a first read on one of six proposals to revise how capacity interconnection rights (CIRs) can be transferred from a deactivating generator to a replacement resource interconnecting at the same site. (See “Stakeholders Endorse Revisions to CIR Transfer Issue Charge,” PJM PC/TEAC Briefs: June 4, 2024.)

The package would create a fast-track process for replacement resources to use to go through the interconnection process, provided they would have an equal or smaller output and CIR value as the deactivating retiring resource and no material adverse impacts to the grid are identified. Replacement resources would be required to interconnect at the same substation and voltage as the original resource, although use of a different breaker would be permitted.

Elevate envisions a nine-month time frame for most projects to get through the expedited process, with 60 days for initial application review, 180 days for a replacement impact study looking at any potential transmission violations, and 30 days for the interconnection service agreement (ISA) to be approved.

Projects would be allowed to continue through the generation replacement process if minor network upgrades are identified. A 90-day facilities study process may be required before the interconnection agreement can be offered.

Elevate’s Kun Zhu said resolving localized voltage issues would likely be seen as a minor impact, while violations requiring upgrading a line to a higher rating would require projects to shift to the full interconnection process.

The ability for projects to go forward with minor network upgrades stands in contrast to PJM‘s proposal, which would require the replacement resource to go through the standard interconnection process if any upgrades are identified or if available transmission headroom is changed by the addition of the resource.

Proposals have also been sponsored by Gabel Associates, PowerTransitions, MN8 Energy and the Independent Market Monitor.

The Elevate package would also permit standalone battery storage to be eligible for the generation replacement process, unlike PJM’s design. A companion study of the charging phase or separate load study would be conducted to identify any needs prompted by the charging phase. Zhu said the generation interconnection study process was designed solely for resources that would only inject energy into the grid, making the charging phase irrelevant to the CIR transfer eligibility discussion.

PJM’s Ed Franks said standalone storage is not permitted in the RTO’s proposal because that resource would not have been envisioned in the original network upgrade studies done on the retiring resource and the charging phase would conflict with PJM’s requirement that replacement resources have no grid impacts, such as changing line loading. Hybrid resources with a storage component would only be allowed if the battery could not charge off the grid.

Elevate’s Tonja Wicks said PJM has been messaging that new entry isn’t set to keep pace with deactivations and accelerating load growth, driving the need for process to quickly replace retiring generators with new resources. She also noted that only a small subset of projects that have cleared PJM’s interconnection queue in recent years have entered commercial operation, an issue she argued could be helped by focusing on proposals that can be quickly studied and are likely to be assigned minimal network upgrades.

“We need new approaches to address this new problem that we’re seeing as we deploy new technologies,” she said. “We didn’t have reserve deficits 10 years ago.”

Ken Foladare, of the Tangibl Group, said it’s likely to be well into 2025 before the proposal would be implemented if approved by stakeholders and FERC, putting it close to the targeted full rollout of PJM’s new cluster-based interconnection process. He questioned the benefit of the proposal if it is likely to go into effect around the same time that PJM is completing a process to speed interconnection for all resources.

Wicks said the Elevate package would establish a nine-month study process that would remain quicker than the two years she said it would likely take resources to typically clear PJM’s new approach. Not only would that allow some resources to receive ISAs faster, she said, but it would resolve a timing misalignment between when resources deactivate and when their CIRs can be passed on to a new resource.

PJM Proposes Load Analysis Subcommittee Charter Revisions

PJM presented revisions to the Load Analysis Subcommittee (LAS) charter that would shift its focus from collecting and presenting forecast data provided by transmission owners to reviewing the independent forecasts the RTO produces and its methodology.

Much of the status quo charter language focuses on collecting load data and developing forecasts, which PJM’s Molly Mooney said is a legacy of when TOs would submit their own forecasts to the LAS. The revisions instead focus on review of the end product forecasts and the data used to construct them.

“It’s definitely time to review and update our charter. The charter is also a legacy of when the Load Analysis Subcommittee members provided load forecasts to PJM and we gathered those materials and processed them … now PJM does an independent load forecast, so the role of the LAS has changed a little bit,” Mooney said.

Data Centers Challenge Light Load Forecast Case

PJM’s Stan Sliwa presented revisions to the light load case inputs used in the Region Transmission Planning Process (RTEP) load forecast, which aim to reflect the growth of load with flat profiles unaffected by weather and season. The typical example of such load, Sliwa said, is data centers that tend to consume a consistent amount of power throughout the year.

The light load case is designed to create an accurate representation of shoulder periods by scaling load down to 50% of the summer forecast peak using bus-level data provided by transmission owners. The proposal would limit that practice to not include any non-scalable load reported by TOs.

The Manual 14B changes also expand the NERC TPL standards examined during generator deliverability analysis to match current practice, updating the system operating limit (SOL) definition and adding new standards created by NERC.

Transmission Expansion Advisory Committee

3 TOs Negotiate Changes to Component Project in 2022 RTEP Window 3

NextEra Energy, FirstEnergy and Dominion Energy have redesigned the plans for a new 500-kV line between the 502 Junction substation and the new Aspen facility to reduce greenfield development and improve constructability. The project is a component of the $5 billion transmission upgrade package aimed at resolving reliability violations identified throughout Maryland and Virginia. (See FERC Approves Cost Allocation for $5 Billion in PJM Transmission Expansion.)

The proposed changes would replace a NextEra segment of the construction, which follows a greenfield route to the west of the existing 500-kV Doubs-Goose Creek line, with a design to continue the lines farther east towards the Doubs substation. Bypassing Doubs, the line would follow the existing corridor south through the Dickerson H substation and to the Goose Creek substation, where it would terminate, instead of at Aspen.

The reworked design would split the former NextEra component, which would cost $71.2 million, between FirstEnergy and Dominion, increasing the total cost by $167.5 million. NextEra would retain other components of the overall project amounting to $440.9 million, including building a new Woodside substation between the Black Oak and Doubs substations.

FirstEnergy would connect the line to the Doubs-Goose Creek corridor by rebuilding a 16-mile segment of the 138-kV Millville-Doubs line to be capable of supporting 500-kV overbuild. It would also be responsible for constructing an additional 15 miles south towards Goose Creek.

The Dominion portion of the work involves constructing the final 3 miles south into Goose Creek and installing a 500-kV capacitor bank originally destined for that facility to the Aspen substation.

Ratepayers along the revised corridors questioned the decision-making process for choosing which route would be selected and argued the change was shifting the impact from a wealthier area along the NextEra pathway to a different community.

PJM’s Jason Connell said the RTO is focused on arriving at the most optimal engineering solution.

Reliability Analysis Shows Growing Need for West-to-East Transfer Capability

Analysis of shifting load and generation patterns between 2028 and 2029 RTEP models find that rapidly growing load in PJM’s eastern regions could result in increased power flows from the west, where sizeable solar and wind development is expected to occur.

The MAAC region is forecast to see around 2,800 MW of load growth and 800 MW of new generation between the 2028 and 2029 summers, while the Dominion zone should see 2,500 MW in new load and 300 MW of added generation. While adequate generation growth is expected in the ComEd, AEP and Rest of PJM West zones to cover the load in the east, the analysis identified several voltage collapse violations in the summer across southern Pennsylvania, Maryland and Virginia.

PJM’s Jeff Goldberg said the analysis shows that the need for additional transmission linking the east and west is likely to present sooner than expected.

PJM Director of Transmission Planning Sami Abdulsalam said the analysis is meant to identify future needs and does not include any proposed solutions, adding that any transmission proposals are not bound to follow similar designs to past RTEP projects.

Supplemental Projects

Public Service Enterprise Group presented a $169 million project to construct a new 230/69/13-kV substation near Kenilworth, N.J., to address capacity overloads identified at its Springfield Road and Aldene substations. The new facility would be cut into the existing 230-kV Springfield Road-Aldene line and the 69-kV Springfield Road-Roselle line with a projected in-service date in December 2029.

Dominion presented a $42 million project to construct a new substation to serve a data center complex in Bristow, Va., which is projected to consume over 100 MW by 2029. The proposed Devlin facility would cut into the existing 230-kV Dawkins Branch-Vint Hill line and host nine 230-kV breakers configured as a breaker-and-a-half. The project is in the engineering phase and is targeted to come online in June 2026.

The utility presented a $30 million proposal to construct a substation to serve another data center in Mecklenburg County, Va., which is forecast to add 110 MW of load by 2028. The 230-kV Allen Creek switching station would cut into the 230-kV Finneywood-Cloud line. The design is in the conceptual phase with a projected in-service date of Dec. 30, 2025.

Dominion also said that around a dozen new substations will be needed across Virginia to serve data center growth, with most of the new load concentrated in Northern Virginia, including Prince William, Henrico and Charles City counties. The loads are expected to come online between December 2026 and the end of 2028.

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PJM Hears Proposals to Redesign EE Participation in Capacity Market

VALLEY FORGE, Pa. — PJM stakeholders presented several proposals to revise how energy efficiency resources are measured and verified to the Market Implementation Committee during its July 10 meeting as the number of complaints filed at FERC against the RTO’s handling of EE market participants has grown to three. 

Affirmed Energy argued that while the focus on measurement and verification (M&V) has dominated the stakeholder process on EE, it is secondary to the root issue of the addback: a process in which EE that clears in a Base Residual Auction (BRA) is removed by the supply stack and an equal amount of megawatts are added to the load forecast. 

Affirmed’s Luke Fishback said the company’s proposal would aim to improve PJM’s load forecast using data from the Energy Information Administration’s National Energy Modeling System (NEMS) and only allow EE that is not captured by the forecast to participate in the capacity market. Once there is no overlap between the load forecast and market-participating EE, he said the addback could be removed and EE resources could act as reliability resources with the ability to displace other capacity offers. 

The addback is the subject of a complaint that the consumer advocates for New Jersey, Maryland and Illinois filed against PJM last month, arguing that it improperly prevents EE from acting as a reliability resource and is a substantial change that should have been codified in the RTO’s governing documents and approved by the commission prior to implementation (EL24-118). (See PJM Consumer Advocates File Complaint on EE Market Design.) 

Given the complaints pending over the addback, Fishback argued any changes to PJM’s M&V rules likely would be disrupted by commission orders requiring changes to the EE market design. Moving forward prior to the resolution of those complaints and a reworking of the addback would be “putting the cart before the horse,” he said. 

Affirmed itself filed a complaint against PJM on July 5, arguing the RTO is improperly withholding collateral that the company posted for the 2023/24 delivery year even after approving the company’s capacity offer, approving its post-installation M&V report and the conclusion of that delivery year (ER24-124). 

The complaint states PJM is withholding the collateral because of an investigation FERC’s Office of Enforcement initiated in 2021. The company wrote that it has begun laying off employees and, without the return of the funds, could be “forced out of business.” 

The Independent Market Monitor also filed a complaint against Affirmed and several other EE providers in May alleging they had not met the BRA’s M&V requirements and should not be paid for the claimed EE megawatts in the 2024/25 delivery year (EL24-113). (See Monitor Alleges EE Resources Ineligible to Participate in PJM Capacity Market.) 

PJM: Require Sole Causal Link Between Capacity Market and EE Installations

PJM presented to the committee its own proposal, which would tighten the participation requirements for EE resources to allow only those that can demonstrate that capacity market revenues were the only deciding factor in them materializing. 

PJM’s Pete Langbein said participation should be contingent on auction revenues causing a corresponding decrease in load. “People need to do something to get paid,” he said. 

Affirmed’s Luke Fishback | © RTO Insider LLC

Midstream and upstream programs, which work with manufacturers and retailers to stock shelves with more efficient devices, would be required to validate that participating appliances were installed and in use within the locational deliverability area in which the capacity is participating. End-use customer data would be required upon PJM request for all installations. 

The period for which EE could participate in the capacity market after the installation would be shortened from four years to one, and EE no longer would be permitted to be included in fixed resource requirement (FRR) plans. FRR entities instead would be required to offer EE into the BRA. 

PJM proposed a timeline of endorsement in August, a FERC filing the following month and an order in November. Langbein noted the deadline for post-installation measurement and verification (PIMV) reports is in November, but the aim is to have an order before the 2026/27 BRA scheduled to be conducted in December. 

CPower’s Aaron Breidenbaugh said the 100% causation requirement is the most problematic component of PJM’s proposal and would set the bar so high that none would be able to reach it. 

Fishback challenged PJM’s causation principle by noting that generators are built with the expectation of revenues beyond the capacity market. He said it effectively would eliminate EE participation in PJM’s market. 

CPower Proposes Standardization of M&V, Separate Issue Charge on Addback

CPower proposed creating a process for reviewing M&V methodologies proposed by EE participants, potentially including retaining a third party evaluator. Unlike PJM’s proposal, it would not include any time limit on the validity of using state technical reference manuals (TRM) in M&V plans. 

A tracking system for registering EE installations would be established to ensure that no projects are being double counted between EE providers, which Breidenbaugh said would be akin to the demand response registration process. The physical location of EE installations would be required to be identified to at least the electric distributor company. 

Breidenbaugh said the proposal is designed to create a more standardized process for M&V, including by requiring nonproprietary methodologies to be made public. 

The proposal also includes a problem statement and issue charge focused on revising the addback and EE forecast model, which Breidenbaugh said is meant to “divorce the issues associated with measurement and verification from some of the more contentious issues.” 

Paul Sotkiewicz, president of E-cubed Policy Associates, said the M&V of EE offers stands apart from other resource classes because they are not required to be metered, potentially creating a discriminatory discrepancy compared to generating resources. He questioned whether M&V based on a TRM or external study meets PJM’s sample size requirements, and how EE providers and PJM check and verify the accuracy of those data. 

Breidenbaugh said it’s difficult to compare the metering requirements of a large-scale power plant, where the cost of a meter is relatively small compared to the overall facility cost, with the nature of EE projects that could be as small as upgrading light bulbs. 

Monitor Would Eliminate EE Capacity Market Participation

The Monitor presented a proposal that would remove EE from the capacity market construct outright on the basis that EE has been included in PJM’s load forecast since the 2016/17 delivery year. 

“The tariff states unambiguously that EE is not a capacity resource when EE is incorporated in the load forecast used for the capacity market,” Monitor Joe Bowring told RTO Insider. “As a result, PJM recognized for the 2016/17 delivery year that EE was not a capacity resource and stopped including EE in the capacity market at that time, as they were required to do. But PJM decided to pay EE resources a side payment, or uplift, regardless. The Market Monitor’s proposal is to end that side payment, which is not provided for in the tariff.” 

Monitoring Analytics President Joe Bowring | © RTO Insider LLC

Bowring said consumers are overpaying for a resource that is not a capacity resource and therefore provides no reliability benefits, and there is not evidence that the uplift payments are resulting in changes in consumer behavior. Rather than being compensated through the capacity market construct, he said EE is compensated as a result of the reduced energy and capacity costs to participants. He said it is a double-counting issue that has been recognized by PJM and FERC since the introduction of EE in the RTO’s markets. 

“What we’re calling EE in the PJM world should not be paid through the capacity construct. It is, as a factual and tariff matter, not a capacity resource,” he said. 

Breidenbaugh said it has not been demonstrated that a majority or the entirety of EE is captured in the load forecast. 

“There is a question about how much of this market energy efficiency is included in the forecast and what is not, and I would hope we would agree … that energy efficiency which is not a part of the forecast should not be subject to the addback,” he said. 

Exelon Seeks Protection for State EE Programs

Exelon’s proposal merges components of the CPower and PJM proposals, including the EE registration tracker from CPower and a PJM component that would remove EE from the Capacity Performance construct, exempting EE from performance assessment interval (PAI) penalties and overperformance bonus payments. 

It also would include language that state-authorized EE programs would be de facto qualified to participate in the capacity market, with the state’s legal authority held as the evidence of their validity. 

Exelon’s Alex Stern said PJM approval of the original M&V plan should codify the proposed methodology that the market participant intends to use to support its capacity offer, and that approval of the PIMV report should hinge on whether that methodology was followed. Exelon also proposed to rectify a perceived flaw in PJM’s proposal that would potentially put EE providers in a penalty situation by being unable to rely on the M&V report while then also being unable to fix an after-the-fact identified problem through an Incremental Auction. 

“Market participants need to be able to rely on M&V reports,” Stern said. “It is fundamental to fair EE market participation.” 

Stern said all but CPower’s proposal would impinge on the ability for state-directed EE programs to participate in the capacity market. He encouraged PJM and the Monitor to engage with states to ensure they are educated on the potential impacts to those programs. 

“I still strongly, strongly encourage PJM and the IMM to continue outreach to the states on this effort, but for now we wanted to try to put in a package that preserves and respects the ability for state programs to” continue participating in the market, he said. “As long as the states want the programs in the PJM capacity market, we think the rigor and regulatory scrutiny that characterizes those programs and differentiates them from other market participants should be respected in the PJM market construct.” 

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SPP’s Experience with Seams Could Help Markets+

SPP attempted to allay concerns about its ability to dispatch power among various Western regions during a July 11 webinar intended to illustrate its experience with seams management. 

RTO staff discussed how they address seams issues in the Eastern Interconnection and how power is transacted and delivered between neighboring entities. It’s part of SPP’s effort to differentiate its Markets+ services offering from CAISO’s Extended Day-Ahead Market (EDAM) as both organizations seek to sign up participants for their markets. 

As Western Freedom Executive Director Kathleen Staks said last month during an Infocast conference in Arlington, Va., “We do not have an organized market … we kind of have a mud-wrestling match going on right now.” 

SPP’s outreach was a result of NV Energy’s recent decision to join EDAM, despite the utility’s participation in SPP’s stakeholder-driven effort to set market rules and governance structures. The Nevada utility said EDAM’s expected lineup “provides a significant degree of interconnectivity and supports a diversity of resources.” (See NV Energy Confirms Intent to Join CAISO’s EDAM.) 

Antoine Lucas, SPP’s vice president of markets, told RTO Insider that recent news articles and conversations about connectivity between Western markets following NV Energy’s announcement pushed the grid operator to offer its perspective on seams issues and how Markets+ will dispatch service between the Pacific Northwest and Desert Southwest.

“We wanted to be able to provide a little bit of clarity around what we see and why we feel like the connectivity within the market pretty much remains unchanged,” Lucas said. “I think intuitively, when people look at a map and just focus on geography, the state of Nevada is between the Pacific Northwest and Arizona and the rest of the Desert Southwest. But what really creates that ability to transfer in the market is the availability of firm point-to-point transmission rights that Markets+ participants actually have the right to.” 

He said staff’s initial analysis indicates that the right to transfer between the West’s subregions will not be “materially affected” by NV Energy’s decision to commit to EDAM. 

“What we found is that [transmission rights] remain relatively unchanged without NV Energy’s participation in the market,” Lucas said.  

He told stakeholders during the webinar that establishing effective seams policies will take many parties working together but that SPP is willing to take a leadership role. 

“We just believe it’s in the best interest of Western consumers,” he said. “So, although we don’t know where our market seams will be, nor do we know what the specific seams hurdles that we will need to scale, our priority is to entities formally making their choices on which markets they decide to join.” 

‘One Way or Another’

SPP defines seams as neighbors performing the same function, such as acting as balancing authority, transmission service provider (TSP), reliability coordinator, market operator or, particularly in the West, greenhouse gas area.  

Carrie Simpson, SPP’s senior director of seams and Western services, said during the webinar that after questions arose over the different seams that exist today in the West, “we found that people were using the words interchangeably.” 

With 33 TSPs and BAs in the West, seams will be an issue. Simpson said the current proposal is to retain CAISO’s BA and place EDAM over it, which in turn means the interconnection’s longest seam is retained.  

“We’re going to have seams in the West, one way or the other,” she said. 

“We have a massive geographic footprint [in the West] and the resources are really far away from where the population centers are, so transmission and the coordination between states is imperative,” Staks said at Infocast. 

SPP has largely ported its Markets+ proposed design from its RTO design in the Eastern Interconnection. It includes an independent governance structure and a decision-making process that relies on stakeholder consensus. 

“We largely took the Eastern marketplace rules … and modified them to accommodate the differences and the fact that there are BAs and there are TSPs and there are just unique Western differences,” Simpson said. “Our approach is to optimize the dispatch of these markets, the SPP market, across all those BAs and TSPs using their full capability. 

“This is an important context for how the markets are developing because we’re putting markets on top of the seams, instead of getting rid of the seams first and adding markets,” she added. “I say that not because it needs to happen that way but more because it’s part of the evolution and what’s different about the West and the East.” 

Seams are reduced when BAs or TSPs consolidate their facilities into joint tariffs, such as joining an RTO. Agreements between neighbors coordinating on certain processes can also eliminate seams. 

“We’re trying, as a market operator, to optimize the seams that do exist in such a way that really minimizes them,” Simpson said, noting it will manage the system like an RTO or single BA area. Imports and exports to the market are priced based on footprint needs as a whole and not individual BA areas.  

She warned that without optimized seams, Western markets could see revenue and cost allocation equity undermined by internal seams. Equity is a big deal when you are settling $30 billion in market transactions, as SPP did last year. 

The seams require intentional policies between BAs and TSPs and market design decisions to reduce the effect of internal seams on market dispatch, Simpson said. She said SPP’s marketplace rules have evolved over the last 10 years to “refine equity in cost-allocation principles,” and it will continue to do so in the Markets+ design. 

JOAs

Joint operating agreements (JOAs) are one option for reducing friction on the seams. SPP has such agreements with MISO, ERCOT and Canadian utility SaskPower. During last January’s winter storm, the grid operator was able to rely on JOAs to import about 7 GW of generation to meet unexpected demand. 

Lucas said SPP’s position remains that Markets+ participants will be incented to strike JOAs that will facilitate trade “above and beyond” 1,000 MW of point-to-point rights that will support the market. 

“It can be Markets+ and neighboring markets that really take advantage of the reliability, sustainability and economic benefits that are associated with trade between regions,” Lucas said. “We are always focused on taking steps to add value for our participants and their customers and we think that seams and joint operating agreements are a great way to create efficiencies. We believe that anyone who’s operating the market will see value in joint operating agreements that allow participants in respective markets to be able to trade effectively, to capture those reliability, economic and sustainability benefits.” 

As Western markets and their footprints continue to evolve, Simpson said all staff and potential market participants can do is identify “friction points” that may reduce market optimization or make it difficult to move power from one point to another, a market footprint.  

“By identifying those things, at least we have a path and a framework for how we can reduce that friction,” she said. “The reality is we can start with what we know now. But once we get a better idea of the footprints, that’s really when we can engage. We’ll know who our neighbors are and how to manage that.” 

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Fuel-cell Vehicle Sales Plummet in 1st Half of 2024

Sales of electric vehicles in the U.S. are showing some signs of recovery, while the market for hydrogen fuel cell vehicles (FCVs) has practically collapsed, according to figures from the Hydrogen Fuel Cell Partnership and Baum and Associates, an auto industry research firm.

In the first half of the year, a total of 322 FCVs were sold in the U.S., primarily in California ― an 82% nosedive from the 1,827 sold in the first half of 2023, and the lowest sales since 2016.

Only two FCV models are currently available in the U.S.: the Toyota Mirai (99 sold in the second quarter) and the Hyundai Nexo (26 sold), according to a report by InsideEVs. Honda is expected to introduce a fuel cell, plug-in hybrid model in 2025 ― that is, an FCV with a small electric battery ― called the CR-V e:FCEV, which will only be available in California.

A total of 18,279 FCVs have been sold or leased since 2012, when Baum started tracking sales. California has 66 fuel cell buses, with more than 103 in the pipeline.

California is also the only state with a network of hydrogen fueling stations. The Fuel Cell Partnership lists 54 stations in operation across the state, mostly concentrated around the San Francisco Bay Area and Los Angeles.

When first introduced in the early 2010s, FCVs running on hydrogen were promoted as an alternative to EVs, which then had shorter battery ranges and longer charging times. But the market has shrunk to the point that industry analysts such as BloombergNEF are no longer tracking sales or other developments.

“The vehicles are still expensive; the fuel is still expensive. But most importantly, consumers don’t seem to be very interested in the technology, even in places with really generous incentives,” Colin McKerracher, head of clean transportation at BNEF, said at a recent webinar on the global EV market. (See BNEF: ICE Phaseout by 2035 Critical to Reach Net Zero by 2050.)

BNEF might consider tracking FCVs if and when sales reach 0.1% of the global market, McKerracher said.

Record Q2 for EVs

By comparison, EV sales in the U.S. staged a comeback, according to recent figures from Kelley Blue Book. In the first half of the year, 599,372 EVs were sold, and the second quarter saw record sales of 330,463, a year-over-year increase of 11.3%.

General Motors posted record EV sales in the second quarter as well, with 21,930 EVs on the road, a 40% year-over-year increase.

Stephanie Valdez Streaty, Cox Automotive’s industry insights director, noted that second-quarter EV sales “exceeded expectations.”

“The overall competitive landscape for electric vehicles is intensifying,” Streaty said in a press release. “This increased competition is leading to continued price pressure, gradually boosting EV adoption. Automakers that deliver the right product at the right price and offer an excellent consumer experience will lead the way in EV adoption,” even among consumers still hesitant to go electric.

The Biden administration is also continuing to support the buildout of a domestic EV supply chain with its recent announcement of $1.7 billion in funding to help reopen or retool 11 existing auto factories that have either closed or are at risk of closure.

The funding, from the Inflation Reduction Act, will go to factories in eight states ― Michigan, Ohio, Pennsylvania, Georgia, Illinois, Indiana, Maryland and Virginia — according to the announcement from the Department of Energy.

One example, Blue Bird Body Co. of Fort Valley, Ga., has been selected to receive $79.7 million to convert a factory that previously manufactured vehicles with internal combustion engines into a 600,000-square-foot plant turning out zero-emission buses.