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November 17, 2024

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TOs Approve Transferring Transmission Plan Filing Rights to PJM

Transmission owners have approved transferring filing rights over PJM’s planning protocols to the RTO through a package of amendments to the Consolidated Transmission Owners Agreement (CTOA).

The June 13 vote at the Transmission Owners Agreement-Administrative Committee (TOA-AC) greenlights the revisions to be filed at FERC, following a May 31 communication from the PJM Board of Managers announcing it had agreed to the proposed amendments.

The proposal would remove Schedule 6, which details the Regional Transmission Expansion Plan (RTEP), from the Operating Agreement (OA) and create a new corresponding Tariff Schedule 19. The proposal would also move the RTEP dispute resolution processes to the Tariff and cleanup references and definitions to point to the Tariff instead of the OA. During the May 6 MC meeting, PJM Associate General Counsel Jessica Lynch said the substance of the RTEP would remain unchanged by the shift.

Shifting the RTEP process to the Tariff would allow PJM to revise its planning processes through a Federal Power Act (FPA) Section 205 filing, which would not require the endorsement of the PJM membership and would not require a finding that the existing governing documents are unjust and unreasonable, as would be the case with a Section 206 complaint. The PJM board communication also stated that the 60-day timeline for FERC to respond to a 205 filing would allow faster action when prompt action is needed.

“It has become very clear that PJM will need to be more proactive and nimble in its planning efforts. As has been referenced in prior discussions, most all other ISOs/RTOs (and indeed virtually all other transmission planning public utilities in the United States) have Federal Power Act (FPA) Section 205 filing rights over transmission planning, which allows these entities to independently propose rules to FERC, and perhaps most importantly, receive a reaction from FERC, whether positive or negative, within 60 days. The Board views this ability to receive feedback from FERC in a timely manner as strategically important in determining how best to plan the PJM system for the energy transition in the coming years,” the board wrote.

The Members Committee voted against endorsing the revisions during its May 6 meeting, where the changes received 25% sector-weighted support. Several stakeholders argued that empowering PJM with unilateral filing rights over regional transmission planning would allow it to bypass the stakeholder process and that the proposed dispute resolution process included would create an inappropriate barrier to MC endorsed OA amendments being filed at FERC. (See Members Vote Against Granting PJM Filing Rights over Planning)

During the May 8 Public Interest and Environmental Organization User Group (PIEOUG) meeting, Ari Peskoe, director of the Electricity Law Initiative at Harvard University, said the language would allow create a “shadow governance” where CTOA signatories could challenge PJM prospective Section 205 filings, PJM regional plans, or other PJM actions through a confidential mediation process. He also argued that it would allow utilities to pre-empt PJM planning by submitting similar, but more expensive, projects of their own. (See Consumer Advocates, Environmentalists Urge Holistic Thinking at PJM)

Peskoe told RTO Insider he believes the CTOA amendments would violate the FPA and should be rejected by FERC. He said it’s unfortunate the PJM board accepted the agreement.

The May 31 letter from the PJM board said the RTO continues to value the stakeholder process, however there may be times that changes are needed even in the face of a deadlocked membership.

“As PJM has stated many times, having FPA Section 205 rights will not curtail stakeholder discussion of planning matters – never has it been more important to have stakeholders weigh in on the issues before us. But should Member consensus be unattainable, having FPA Section 205 rights will allow for PJM to still move forward with an FPA Section 205 filing with FERC, and in turn, receive a timely reaction from the Commission on a given planning rule change. This will better position PJM to continue to fulfill the reliability needs of consumers as we advance through this energy transition.”

Exelon Director of RTO Relations & Strategy Alex Stern told RTO Insider that the proposal would reinforce PJM’s independence and ensure that PJM, as the FERC-jurisdictional public utility, holds the authority to act when it determines reliability warrants change. He said that authority would be no different than what exists today for the RTO on the markets side.

“These revisions are a big step that those who own transmission don’t take lightly,” he said. “They afford PJM greater independence to plan the energy grid. This requires stakeholders, including Exelon, to compromise. However, to support reliability during the energy transition, Exelon believes it is critical that PJM has every tool at its disposal.”

As the PJM board noted in its May 31 correspondence, the lack of support at the MC for the revisions underscores the need for PJM to have the ability to operate independently from its membership when necessary.

Stern added that comments stakeholders made prior to the MC vote showed a mistaken belief that the membership, rather than PJM, has public utility rights and responsibilities to control regional planning. He said that is not the case under the status quo and creates a dynamic where PJM is responsible for planning a reliable grid without having the needed control over how it conducts that planning.

“With generation deactivations accelerating, energy demands increasing and a portfolio of new generation waiting to interconnect, PJM’s ability to ensure future reliability and affordability for customers is critical and would be enhanced by PJM having the ability to bring critical regional transmission planning issues to the Commission at the time it believes appropriate and as intended when PJM was formed,” Stern said.

Stern said there have been several efforts to expand PJM’s planning processes in the past that have been stymied by deadlocks in the stakeholder process, including establishing a paradigm for storage as a transmission asset (SATA), as well as efforts to enhance interregional planning. (See Vote Delayed on PJM SATA Proposal)

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New England Stakeholders Talk Community Engagement at Roundtable

BOSTON — Early and meaningful engagement with host communities will be an essential component of expediting energy permitting and siting processes, panelists said at Raab Associates’ New England Electricity Restructuring Roundtable on June 14. 

“We are in a change-or-die moment,” said the Rev. Mariama White-Hammond, former chief of energy, environment and open space for the city of Boston, adding that the pace of clean energy deployment must accelerate rapidly to meet the need to decarbonize.  

To meet the moment, utilities and project developers will need to collaborate with many of the communities and organizations they fought in the past, she said.  

“There is a question of who will hold the power,” White-Hammond said. “Will it be the technocrats, investors and government officials, or will it be all of us?” 

Ultimately, developers will face significant backlash if they try to force through projects without incorporating community input in the decision-making process, White-Hammond added. 

Penni McLean-Conner of Eversource Energy echoed the need to work with communities in the early stages of project development and consider community input when weighing the tradeoffs of project alternatives. 

“Eversource is committed to an enhanced community-centric approach,” McLean-Conner said, adding that the company hopes new energy facilities can be seen as opportunities rather than burdens by residents. 

One key to changing this conversation is understanding and respecting the historical inequities faced by these communities, McLean-Conner added. 

“We can’t assume we know or have all the answers,” she said. “We need to incorporate their shared experiences and unique perspectives into our thinking going forward.” 

Larry Susskind, professor of urban and environmental planning at MIT, said project developers should work with a range of stakeholder representatives and organizations to reach “informed consensus” within a “confidential space for joint fact-finding and collaborative problem-solving.” 

Once developers identify the unique needs and concerns of a host community, they should negotiate and sign binding community benefit agreements they submit to the state during the permitting process, Susskind said. 

Getting community benefit agreements right is “as much about compensation as it is about mitigation,” Susskind said, adding that “we need to think in terms of bartering to create benefits, not just minimizing costs.” 

Permitting and siting has been a major topic of conversation for Massachusetts lawmakers over the past few months, with key legislators indicating it’s a top priority for a potential climate bill they hope to pass by the end of the current session in July. 

Legislative leaders of the House and Senate have been working with the Healey administration to develop a compromise bill that likely will revolve around the recent recommendations of the state’s Commission on Energy Infrastructure Siting and Permitting. (See Mass. Commission Issues Recs on Energy Project Siting, Permitting.) 

The Massachusetts Senate plans to take up a climate bill centered around permitting and siting reform this week.  

The state commission recommended consolidating state and local permitting and siting processes and requiring authorities to issue permits within 15 months of verifying that an application is complete.  

Michael Judge, undersecretary of energy at the Massachusetts Office of Energy and Environmental Affairs, said the state’s Energy Facilities Siting Board (EFSB) historically has taken between one and four years to approve a project, “after which the project still needs to get all other permits.” 

“This isn’t working for anyone,” Judge said, adding the state is unlikely to meet its climate mandates without permitting reform.  

Adam Chapdelaine, CEO of the Massachusetts Municipal Association, which represents the state’s 351 cities and towns, expressed his “concern about getting consolidated permitting right” while preserving the rights and role of municipalities. 

He recommended initially adopting an opt-in consolidated local permitting program to inform the consideration of statewide reforms to local permitting. 

In response, Judge emphasized that, under the commission’s proposal, local permitting would remain under local control but would need to be expedited and consolidated under one permit parallel to the EFSB approval process.  

He said making the local permitting reforms optional could lead to an “inconsistent framework” for smaller projects that are subject only to local permitting, potentially creating longer timelines for some smaller projects.  

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Counterflow: Fusion is Getting Increasing Attention

2024 is the 35th anniversary of the discovery of cold fusion! 

OK, just kidding. 

Back to reality: Renewable resources generally are not dispatchable. We are searching high and low for an economic solution to this problem because dispatchable resources like coal and natural gas emit carbon.  

Certainly it is wise to maintain existing nuclear plants, as I urged long before it became fashionable. But other resources remain highly problematic.  

New nuclear fission, such as small modular reactors, has a very high cost. Although a recent Atlantic article says we should take a leap of faith because failure is not an option (citing the siting challenges of large wind, solar and transmission), hope is not a plan. 

Long-duration battery storage is extremely costly, as I discussed in my most recent column. Green hydrogen electricity is a pipe dream (no pun intended), as I discussed before. 

The Fusion Revival

Fusion is getting increasing attention as a possible salvation. 

I’m here to tell you that commercial fusion is another fantasy. 

The old saying is that commercial fusion is 30 years away and always will be.1 An Oak Ridge director of fusion energy research said at a conference: “The projected time to realize the ultimate goal of commercial fusion always seems to be 25 or 30 years away.” He said that in 1986 — 38 years ago. So even then it was a cliché. 

‘Net Energy’

But the hoopla continues, most recently about “net energy” being generated in fusion tests (for example).

Two things about such tests that don’t get reported in the media: first, that the amount of energy generated is trivial. The most energy generated in a fusion test, at the U.K.’s Joint European Torus (JET), is 69 megajoules. That sounds like a lot, but it is the equivalent of 19 kWh. Basically, it could power one American household for about two days. (The monthly average is 900 kWh.) 

Second, this isn’t really net energy. When the JET was running, it consumed 700 to 800 MW (yes, megawatts). 

As for the 3.88 megajoules generated at the U.S. National Ignition Facility, the claim is made of “net energy” because 3.88 megajoules generated are more than 2.05 megajoules “delivered to the target.” The net of 1.83 megajoules would power a 100-W lightbulb for all of five hours. 

But more importantly, this formulation ignores the 322 megajoules it took to power the 192 lasers to “deliver” the 2.05 megajoules.2 It’s not “net energy” — it’s negative energy. The ratio of energy consumed to energy generated is about 83 to 1.  

Reality Check from a Retired Nuclear Fusion Physicist

Part of the problem with fusion is that we’ve spent $100 billion on it, and thereby created an industry dependent on huge taxpayer subsidies and on hoopla to keep those subsidies coming. Experts not dependent one way or another on the public’s money are few and far between. 

But I did find this sobering analysis by a nuclear fusion physicist who worked on nuclear fusion experiments for 25 years at the Princeton Plasma Physics Lab in New Jersey, and who is … retired.3 Here are some of his key points: 

    • huge parasitic power consumption 
    • tritium fuel not fully replenished 
    • radiation damage and radioactie waste
    • nuclear weapons proliferation 
    • outsized operating costs.

His follow-up article focused on the colossal International Thermonuclear Experimental Reactor (ITER) in France, originally scheduled to test its “first plasma” in 2020 and achieve full fusion by 2023. However, the schedule was pushed back to test first plasma in 2025 and achieve full fusion in 2035, and now the schedule is … nobody knows. The ITER has been portrayed repeatedly as using 50 MW to generate 500 MW, but the reality is that it will use 300 MW to generate 0 MW of electric energy. 

If, after reading his analyses, you still think there’s a realistic future for commercial fusion, then I admire your optimism. And there are three dozen fusion startups that might welcome your investment dollars. 

Path Forward

The fact remains we have no realistic, affordable way to maintain resource adequacy in a net-zero future other than to keep a fleet of natural gas plants around that can be dispatched as needed — maybe not many hours a year, but enough. This will vary across regions. And they’ll have to be compensated to be available and flexible as needed. In the organized markets, they’ll have to get meaningful capacity payments to stick around. In the cost-of-service states, they’ll have to get regulated compensation. The carbon emissions of the gas plants can be offset/captured as different states deem worthwhile. 

This is not rocket science.  

Speaking of rocket science, let me repeat from a couple recent columns4 that regardless of what we might do here and in Europe, humanity as a whole is gonna need Plan B: solar geoengineering. There is no realistic alternative, at least for the near and medium terms (until perhaps those 30 years for commercial fusion to become reality). 

“We all have to take a chance. Especially if one is all you have.” — Capt. James T. Kirk, “Tomorrow Is Yesterday,” 1967. 

Columnist Steve Huntoon, principal of Energy Counsel LLP, and a former president of the Energy Bar Association, has been practicing energy law for more than 30 years. 

 

 

1 A collection of articles about fusion spanning decades as published by the Bulletin of the Atomic Scientists is here: https://thebulletin.org/collections/fusion-energy/

2 https://www.scientificamerican.com/article/nuclear-fusion-lab-achieves-ignition-what-does-it-mean/ (“NIF’s 192 lasers consumed 322 megajoules of energy in the process.”)
https://pubs.aip.org/physicstoday/online/42581/National-Ignition-Facility-earns-its-name-for-a https://www.vice.com/en/article/xgwpkk/jet-reactor-fusion-energy-record-setting-breakthrough

3 https://thebulletin.org/2017/04/fusion-reactors-not-what-theyre-cracked-up-to-be/#post-heading. An interesting and very readable anonymous posting by an electrical engineer in the industry is here, https://www.reddit.com/r/fusion/comments/10buldl/what_are_the_biggest_hurdles_facing_companies/

4 https://energy-counsel.com/wp-content/uploads/2023/08/World-of-Hurt.pdf; https://energy-counsel.com/wpcontent/uploads/2022/05/We-are-Going-to-Need-a-Plan-B-RTO-Insider-5-10-22.pdf A recent Economist article on the Antarctic ice melt also sounds the alarm, https://www.economist.com/interactive/science-andtechnology/2024/03/27/antarctica-earths-largest-refrigerator-is-defrosting

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Calif. Clean Transportation Program Needs Equity Emphasis

California’s funding of zero-emission vehicle (ZEV) infrastructure must be more equitably allocated to disadvantaged communities, according to advisory committee members for the state Energy Commission’s (CEC) Clean Transportation Program Investment Plan.  

“We have the highest prevalence of asthma in Imperial County in comparison to the rest of the state of California and the rest of the nation. … From the moment we arrive here, we are persistently assaulted … with carcinogens and irritants that are causing respiratory problems and cancer,” committee member Luis Olmedo, executive director of the nonprofit Comite Civico del Valle, told NetZero Insider. “For that reason, it is extremely important that we transition to net-zero transportation and the net-zero economy as swiftly and as quickly as we possibly can.”  

Details of the Clean Transportation Program were discussed at a June 7 meeting hosted by the CEC, where industry experts grappled with how best to spend the almost $100 million available annually.  

“How do we spend our money wisely to accelerate zero-emission transportation and do it in a way that’s very attentive to equity?” CEC Commissioner Patty Monahan said at the meeting. “We need to ensure that Californians who are too often left behind in the transition to clean energy and left behind in terms of facing disproportionate burdens of air pollution, we need to make sure those communities benefit.” 

Established in 2008 and recently extended through July 2035 under Assembly Bill 126, the Clean Transportation Program promotes accelerated development and deployment of ZEVs and related infrastructure to meet California’s goal of electrifying 100% of passenger vehicles and drayage trucks by 2035 and 100% for medium- and heavy-duty trucks by 2045. It receives an annual investment of up to $100 million using funds collected from vehicle and vessel registration, license plate and smog abatement fees.  

Through 2023, the program was responsible for installing or planning more than 33,300 chargers for ZEVs, creating block grants to incentivize light-duty EV charging infrastructure projects, and allocating funding for 96 publicly available hydrogen fueling stations. It also awarded more than $107.4 million in ZEV infrastructure incentives to 190 projects through the nation’s first commercial vehicle fleet incentive project, called Energy Infrastructure Incentives for Zero-Emission Commercial Vehicles, and more.  

The CEC provides an annual investment plan update that guides the allocation of program funding for transportation solicitations for the upcoming fiscal year. Proposed investments for 2024/25 totaled $1.52 billion with the addition of National Electric Vehicle Infrastructure program funds, according to Benjamin Tuggy, Clean Transportation Program Investment Plan project manager at the CEC. Of that total, $656 million is allocated to light-duty charging infrastructure, $810 million to medium- and heavy-duty charging, $46 million to “emerging opportunities” and $3 million to ZEV workforce development.  

The CEC requires that more than 50% of funds go to projects that benefit low-income or disadvantaged communities. The Communities in Charge program, which is run by CALSTART and deploys Level 2 chargers, provided $68 million over two funding windows, all of which went to projects in disadvantaged communities, Marissa Williams, a supervisor in the CEC’s Fuels and Transportation Division, said during the meeting.  

Additionally, the CALeVIP 2.0 program, which is administered by the Center for Sustainable Energy and deploys DC fast chargers, also distributed $68 million, with a requirement that all projects be in disadvantaged communities.  

‘Equity Equals Capital’

But despite the emphasis on equity, some advisory committee members said disadvantaged communities still weren’t being adequately considered. Olmedo told NetZero Insider that while funding is being allocated to low-income communities, it often goes to those in metropolitan areas “where the market is,” creating EV deserts in rural communities like his own.  

“We have a lot of EV deserts in California. Companies aren’t going to go and invest there because the market isn’t there,” Olmedo said at the meeting. “The other thing that makes it even more challenging is when you have other state agencies like GO-Biz [Governor’s Office of Business and Economic Development] directing developers to go where the market is and specifically where they have adopted a streamlined permitting process. So, these programs are working against each other to continue to make it more difficult for these EV deserts to thrive.”  

Olmedo pointed to legislation that requires permitting agencies to develop a streamlining mechanism, saying it is well intentioned but creates unintended barriers for low-income communities that may not have an internal permitting agency or the staff and resources required. GO-Biz created a map that shows which cities have streamlined permitting processes, signaling developers to “go there,” Olmedo said. 

“That communication is what we characterize as redlining in our communities, making it harder when you’re signaling to developers not to come here. You’re creating an EV desert” he said. “There’s a lot of times a misalignment in communication between the Energy Commission, who’s like ‘Hey, let’s build, build, build,’ and then GO-Biz … saying, ‘Yes, build, but build over there.’ So, that became very problematic.” 

In an interview with NetZero Insider, advisory committee member Rev. Dr. Charles Dorsey described how state efforts to distribute funding for clean transportation or other resources don’t adequately consider disadvantaged communities. In particular, he pointed to problems with the state’s processes around requests for proposals, which pit disadvantaged communities against bigger organizations that have won awards in the past.  

“The structure and the requirements of the proposal automatically create barriers for companies that are led by people of color,” he said. “You have a limited number of contractors who can actually equitably apply.”  

“They believe that just by putting the proposal out, that it is equal competition. It is not. Because they designed the proposal without considering the barriers that are already in place,” Dorsey said.   

Both Olmedo and Dorsey think the state should better address inequities built into its processes. Olmedo emphasized the importance of including more nonprofits in the process instead of prioritizing for-profit companies that can make money quicker. He noted at the meeting that Comite Civico Del Valle was one of the first nonprofits to receive funding from the CALeVIP 2.0 grant program, which says “a lot about how the state has been wrong in how it has prioritized its investment.”  

“If you go to rural communities, you’re not going to make a profit in the next three years,” he said. First, you [have to] create reliable EV infrastructure, and then disadvantaged, low-income communities can take the risk of buying an electric vehicle. Because you have less income, you can’t risk not having reliable infrastructure, because that might mean you don’t get to work on time. That might mean that by the end of the day, you don’t have a job.”  

Collaborating with nonprofits and investing in a three-to-five-year plan can create a market in rural communities that ultimately will help California meet its decarbonization goals, Olmedo said. He’s optimistic the Clean Transportation Program will bring EV infrastructure to rural, disadvantaged areas, as long as enough money is invested.   

“What we need is capital, and we need to make that a commonly used term whenever we talk about disadvantaged communities,” Olmedo said in the meeting. “Don’t give us more paper. Don’t give us more education. Yes, that is necessary, but equity equals capital, and these programs need to be designed to bring equity and capital into these rural clean transportation deserts.”  

While many advisory committee members at the meeting said the allocation of the $1.52 billion was appropriate, Dorsey emphasized he won’t know until there’s a formal process in place to overcome investment barriers for disadvantaged communities.  

“When you ask me if the spread is right, you’re also asking me if the process is right,” Dorsey said. “And I can’t answer that question.” 

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Stakeholder Soapbox: A New Twist on Capacity Markets in Japan

Reliability is a global problem that requires local solutions. For more than 15 years, PJM’s solution has been its forward-looking capacity market, the Reliability Pricing Model. Meanwhile, on the other side of the world, Japan recently enacted major reforms to its energy system. Those reforms have included a PJM-inspired capacity auction first held in 2020 for the 2024 delivery year and a related long-term decarbonized power resource auction inaugurated this year. 

Japan’s energy reforms are of increasing importance globally, including to U.S. companies and investors. A weak yen has spurred investment in Japanese energy projects, and foreign- and U.S.-owned energy companies have started winning major capacity contracts in Japan’s new system. Recent developments in Japan have revealed, however, that its market differs in significant ways from those in the U.S. — including from the very PJM capacity market on which Japan modeled its own. 

A Modified PJM Capacity Market in Japan

When Japan embarked on its energy reforms, it formed a study group to examine foreign capacity markets, including PJM’s, and to make a proposal for how best to ensure long- and midterm reliability in its energy markets. Ultimately, the study group concluded a capacity market similar to PJM’s model (and the model used in the U.K.) would work best. 

The capacity market system Japan ultimately adopted shares the same basic structure as PJM’s. It is presided over by a private transmission organization called the Organization for Cross-Regional Coordination of Transmission Operators (OCCTO). Like PJM, OCCTO runs a centralized capacity auction where generation resources offer to sell capacity for a price, and the auction’s clearing price is ultimately set at the point where supply and demand curves cross. 

There are, however, several key differences between Japan’s market and PJM’s. For example, unlike PJM’s system, participation in OCCTO’s capacity market is never required for participation in Japan’s wholesale electricity markets.  And unlike PJM, OCCTO does not administer the wholesale electricity market itself: Another organization, the Japan Electric Power Exchange, does. 

Perhaps most critically, OCCTO’s and PJM’s systems are different because they are governed by different legal frameworks. OCCTO is authorized and governed by Japan’s 2015 amended Electricity Business Act, while PJM (like other U.S. RTOs) is governed by the Federal Power Act. Those laws impose materially different restrictions, based on different national policies. The FPA, for example, embraces what U.S. courts have long called the filed-rate doctrine, which forbids retroactive rate changes. That prioritizes pricing predictability, even when doing so may result in higher-than-necessary consumer prices. Japan, by contrast, has not adopted the filed-rate doctrine; it has prioritized lowering consumer prices instead. 

A Focus on Reducing Prices

Japan’s focus on reducing prices has been especially clear in its management of its new capacity markets. Since the first capacity auction in 2020 yielded prices far higher than expected, Japan’s energy regulator — the Electricity and Gas Market Surveillance Commission (EGC) — has been on the lookout for ways to ensure that OCCTO’s capacity auction prices remain as low as possible. That has been especially clear in the EGC’s handling of the 2022 capacity auction for the 2026 delivery year. 

First, after the 2022 auction closed but before results were announced, the EGC discovered that one capacity supplier’s offer was too high because of a mistake. In consultation with OCCTO, the commission took the unprecedented step — one that no statute or auction rule permitted — of requiring that the offer be corrected and the resulting capacity price for all participants be changed accordingly. 

Second, this year, the EGC discovered another “misbidding” mistake — this time, after the 2022 auction results had been announced and the supplier had been awarded a contract. The commission and OCCTO promptly announced that they would amend the supplier’s contract to reduce the contracted capacity price. Recognizing that such a change was also unprecedented, the organizations emphasized that such an adjustment should be made only when the resulting capacity price would be lower, to protect consumers. 

Will Japan Adopt Something Like the Filed-rate Doctrine?

Japan’s energy and capacity markets are, in many ways, still in their infancy. Japan might still develop or adopt something akin to the filed-rate doctrine, or it might reject the doctrine expressly. Either way, Japan cannot help but recognize that market forces demand some degree of pricing predictability. Even in the recent misbidding investigations, for example, Japanese regulators showed they are sensitive to the same concerns that motivate the filed-rate doctrine. They could have undone the entire 2022 capacity auction this year after they discovered that misbidding affected the clearing price, but they did not. Instead, they amended only the responsible supplier’s contract while recognizing that amending such established contracts should be a rare event — one limited to situations where it will protect consumers without destabilizing market expectations. 

Even without a formal filed-rate doctrine, in other words, Japan’s capacity markets are not the Wild West. Japan cannot make reneging on capacity prices a habit, because participation in the capacity markets there is entirely voluntary. To incentivize participation and ensure reliability for consumers, if nothing else, Japan will need to safeguard the predictability of prices once they are set. Whether it will formally adopt the filed-rate doctrine, or something like it, in the years to come remains to be seen. 

 

Eri Akiyama is an attorney with Nagashima Ohno & Tsunematsu with a practice that includes energy and other complex civil litigation. She served as an international associate at MoloLamken LLP in New York from September 2023 to June 2024. 

Jennifer Fischell is a partner at MoloLamken with a practice focusing on energy and complex civil litigation, administrative law and appeals. She has clerked for judges at all levels of the federal judiciary, most recently for U.S. Supreme Court Justice Elena Kagan. 

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Clements Says Order 1920 Will Help States, not Usurp Authority

WASHINGTON — FERC Commissioner Allison Clements said last week that Order 1920 will make it easier for states to address the changes facing the industry. 

Rehearing requests have come into FERC, and some states are argue the commission cannot impose the new transmission planning and cost allocation rules on them, Clements said at the annual meeting of the Energy Bar Association’s Northeast Chapter. The issue of states having the authority to protect their consumers from costs of external policies drove Commissioner Mark Christie to dissent from the order, which Clements and Chair Willie Phillips responded to in a concurrence. (See FERC Issues Transmission Rule Without ROFR Changes, Christie’s Vote.) 

“Good luck to the states who think they’d be better off going at this alone. Good luck to the economic development opportunities that your state faces. Good luck to the health and safety of your citizens in extreme weather,” Clements said. “I mean, I don’t know that there’s any other way to get there besides all the solution sets, and regional transmission and inter-regional transmission has to be at the top of that list, at least in the FERC-jurisdictional bucket.” 

The changes ultimately are an incremental step from what FERC did more than a decade ago in Order 1000, and it rests on a firm legal framework, Clements said. It should stand up in court in the face of any appeals. 

“The reality is that this money is getting spent every year anyways, $20 [billion] to $40 billion a year on annual spending on transmission,” Clements said. “It has to be the commission’s responsibility to try and direct that money towards more cost-beneficial outcomes for customers.” 

Along with Order 1977 implementing the commission’s rules on National Interest Electricity Transmission Corridors, and Order 2023 that revised interconnection queue rules, 1920 is meant to help address the rapid changes the industry is facing from new demand to a changing resource mix, Clements said. 

“I think the whole time I’ve been here, I’ve been focused on what I set out to do in this role, which is to facilitate affordable and reliable electricity as the world around us changes,” Clements said. “It’s not our job to dictate where the world goes; it’s our job to facilitate affordable and reliable electricity service in light of where it’s going.” 

Until this year, load growth in most of the country had been flat, but that has changed with new demand from data centers, reshoring manufacturing and ongoing efforts at electrification. It’s unclear how much demand will grow, even in the near future, she said. 

“I don’t think we know that it’s going to be a 5% increase in U.S. consumption in the next five years,” Clements said. “We can estimate that; we can model that; we’re sure to be wrong.” 

The new demand is cropping up in specific areas, and potential shortages are going to occur only part of the year, but investments to bolster the grid are likely to be “low regrets” for the near future, she added. 

“I think we’re not yet at the point where we need to start worrying about the ‘no one’s going to show up,’” Clements said. “The top thing I hear from companies, whether it’s tech companies or advanced manufacturing companies, is that we are shopping for location, with the No. 1 priority being, ‘where is there available capacity on the grid?’” 

The low-regrets case is bolstered by the fact the grid has plenty of room for improvement with advanced grid-enhancing technologies (GETs) that can affordably make the existing system more efficient, she said. The Brattle Group estimates such technologies could double the amount of renewables online now absent major investment in new transmission, but even if the reality is half that, GETs are a worthy investment, Clements said. 

Clements will step down this month after the open meeting June 27, having served three and a half years. Her replacement, Judy Chang, was confirmed by the U.S. Senate the same day she spoke. 

“It has flown by for me, personally. I’m not sad for it to be over for my sake and my family’s sake,” Clements said. “But … all of the work we’re doing is pretty important. You know, I’m really proud of helping to establish our first Office of Public Participation. I think it’s a really long row to hoe to think that you’re going to actually engage members of the public in our esoteric, technocratic conversations, but we’re on our way.” 

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Texas Supreme Court Rules for ERCOT, PUC During Uri

The Texas Supreme Court has ruled ERCOT and the Public Utility Commission were within the law when they raised wholesale prices to more than 300 times above normal during the deadly February 2021 winter storm that came within minutes of bringing down the grid.

The high court on June 14 reversed a state appeals court’s ruling that the PUC’s order to raise wholesale prices to their $9,000/MWh cap during Winter Storm Uri violated state law.

The Supreme Court said the commission met the requirements of the Public Utility Regulatory Act’s (PURA) Chapter 39 — added when ERCOT was opened to retail competition — when it issued the emergency orders in a desperate effort to bring generation back online to meet demand. It also found that the commission “substantially complied” with the Administrative Procedure Act’s procedural rulemaking requirements (23-0231).

“The [PUC] has the expertise to manage the electric utility industry; the courts do not,” Chief Justice Nathan Hecht said, writing for the 7-0 majority. (Two justices recused themselves.) “The Court of Appeals thus strayed from its lane by inquiring whether the orders could have used ‘competitive rather than regulatory methods’ to any greater extent than they did.”

The Texas 3rd Court of Appeals in March 2023 reversed the PUC’s emergency orders and raised the issue of repricing the market transactions during the storm. The court found the commission’s actions “entirely” eliminated competition and were contrary to state law. (See Texas Court Reverses PUC’s Uri Market Orders.)

Luminant initiated the proceeding after it incurred $1.6 billion in losses when forced to buy backup power at the system cap and gas supplies at equally exorbitant prices. (See Vistra’s Winter Storm Loss Deepens to $1.6B.)

The PUC argued that Luminant’s ability to recoup its losses in the administrative proceeding was speculative because ERCOT does not maintain a fund of money.

ERCOT “just facilitates market transactions — and any payment would come out of the pocket of other market participants,” the high court said. “Essentially, the commission’s argument is that the egg cannot be unscrambled.”

The court noted that Chapter 39 directs the PUC to establish protections entitling customers “to safe, reliable and reasonably priced electricity, including protection against service disconnections in an extreme weather emergency.”

It said the law also “expressly” directs ERCOT to “ensure the reliability and adequacy of the regional electrical network” and gives the commission “complete authority” to ensure that ERCOT adequately performs that duty, including rulemaking related to the grid’s reliability.

The Supreme Court heard oral arguments in January. (See Texas Supremes Hear Arguments Over Uri’s Prices.)

When the PUC issued its directive to ERCOT on Feb. 15, 2021, the grid operator’s algorithm was setting prices as low as $1,200/MWh, even though generation was dropping offline. Under ERCOT’s market construct, prices are designed to increase during scarce conditions to incentivize more generation to come online.

The problem was there wasn’t enough generation during the first two days of the storm because of frozen equipment or lack of fuel supplies. ERCOT kept prices at the $9,000 cap — since reduced to $5,000 — until Feb. 19, resorting to rolling blackouts to keep the grid stabilized.

The emergency order resulted in $16 billion of market transactions that ERCOT’s Independent Market Monitor said were incorrectly priced during the 33 hours that followed the end of firm load shed. The PUC declined to reprice the transactions. (See “Monitor: $16B ERCOT Overcharge,” ERCOT Board Cuts Ties with Magness.)

Some of the $16 billion balance has since been securitized. Other transactions have been settled outside ERCOT and can’t be undone, according to legal experts.

The court also dismissed a lawsuit by RWE Renewables Americans and an RWE wind farm, finding that the 3rd Court of Appeals did not have jurisdiction over the proceeding (23-0555).

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SPP’s REAL Team Approves Base PRMs, Sufficiency Value Curve

SPP’s Resource and Energy Adequacy Leadership (REAL) Team approved a proposed tariff change June 13 that would codify its work and some votes over the past six months.

The revision request (RR622) would set separate base planning reserve margins (PRM) at 36% and 16% for the winter and summer seasons, respectively, effective with the 2026 summer. It would also clarify that the sufficiency valuation curve is effective for three years, beginning at the same time.

“I think it dawned on us, and probably a number of you in the room, that it wasn’t exactly clear,” Casey Cathey, SPP vice president of engineering, told the REAL Team.

The tariff change would also implement the 2023 loss-of-load expectation study that determined the appropriate PRMs for both seasons.

The Market Monitoring Unit (MMU) offered cautious support for the change, saying it supported the 36% and 16% PRMs and the sufficiency valuation curve’s extension. However, it also recommended that SPP continue to monitor generation’s performance during the next winter storm “and the one after that.”

“We see those as a minimum that should be approved,” the MMU’s John Luallen said, referring to the PRMs. “But with that said, I want to point out that in the last three winter storms, SPP found [itself] in a situation where they could not serve their load with accredited capacity. They had to rely on non-accredited capacity and on imports.”

The Monitor’s concern is what’s not in RR622, Luallen said. He said the sufficiency valuation curve lowers the deficiency payment, which, combined with a cost-of-new-entry value that the MMU believes is not quite accurate, could be sending the wrong market signals.

“If [the CONE]’s not updated for another four years, it will be even further from accurate,” Luallen said. “In our mind, it discounts an already discounted number, which is fine except that if the deficiency penalty gets low enough, then it could not have the signal that it needs for [load-responsible] entities to get the capacity. They could choose to just pay the penalty instead. So, we’re concerned about the signal this could be sending.”

The REAL Team approved the package 9-4. American Electric Power, Arkansas Electric Cooperative Corp., the Oklahoma Corporation Commission and the Oklahoma Municipal Power Authority provided the opposing votes, mirroring their votes on the related policies.

Looking ahead, the team’s workload includes ramping resource adequacy, an issue heightened by the increasing addition of intermittent renewable resources.

“What is ramping capacity?” SPP’s Charles Hendrix asked by way of explanation. “As load is increasing or decreasing, can your resources follow that load?”

“There’s a lot of data out there, but here’s what’s happening in real time,” Cathey said, using a graph of forecasted wind and solar resources to make his point. “We’re trying to figure out ways to incent and better value ramp.

“It should not be alarming to LREs in terms of what the system needs today. We have enough rampable capacity today. The question is, how long can we sustain it? Does it send a strong signal around dispatchable resources?” Cathey added. “That’s part of the reason we’re trying to add this requirement.”

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Survey to Begin for Planned Calif. Floating Wind Farm

An autonomous underwater vehicle will soon slip out of sight off the north California coast, mapping thousands of acres of seabed as a first step toward construction of the floating wind farm envisioned there. 

The data gathered in the coming months will give a better picture of the ecosystem in the lease area and any obstacles, hazards or sensitive sites that lurk a half mile or more below the surface. And it will inform RWE when it puts together a construction and operation plan for the 1.6-GW project it has named Canopy Offshore Wind Farm. 

The site characterization surveys are similar to the early-stage work the German company has done for its 19 existing offshore wind facilities with one key exception: Lease Area OCS-P 0561 is 1,760 to 3,400 feet deep.  

RWE has contracted with Norwegian firm Argeo to survey the depths with one of the fluorescent-painted uncrewed micro-submarines that it also uses for offshore oil, gas and mineral applications. It will arrive on site this month. 

A third of a century after the first commercial offshore wind farm came online, more than 70 GW of capacity is installed worldwide, almost all of it firmly affixed to the seabed with a rigid foundation in shallow water.  

RWE is one of many companies and governments trying to extend the success of fixed-bottom wind to floating wind in deeper water — it launched a 3.6-GW tubular steel demonstrator off Norway in 2021 and a 2-GW twin-hull concrete demonstrator off Spain in 2023. 

RWE is preparing proposals in France, Norway and the United Kingdom, but it expects Canopy Wind to become its first operational floating farm sometime in the mid-2030s. 

Project Director Rob Mastria spoke to NetZero Insider on June 13 with a look at what is ahead.  

The underwater work starts this month with the geophysical survey. 

The autonomous underwater vessel glides about 130 feet above the seabed, using sonar to avoid obstacles and using a digital camera to make a photographic mosaic of the environment where the turbines would be moored and where the export cables would run. 

The geotechnical survey gets right down to the bottom, using equipment that collects sediment samples and biological information. 

Subsequent research and design work will build on the results of these two surveys. 

Back on land, different work is being done. 

“We need to really have two major focus areas,” Mastria said. “The first is building relationships and collaborating with the local community in the Humboldt area and tribal nations, trying to make sure we develop those points of connections and relationships so that we can share information back and forth. The second pillar is really working on the market development in California.” 

As elsewhere, there has been pushback against offshore wind on the West Coast because of feared impacts on the scenery and fishing industry, and developers are working to overcome this. They also need to help create a supporting industrial and infrastructure ecosystem that does not now exist. (See West Coast OSW Will Require Robust Supply Chain.) 

RWE, which bid $158 million for its 63,338-acre California lease in a 2022 auction, looks internally and externally to build the confidence to make these investments, Mastria said. 

“It’s a combination of believing in floating, knowing that there’s vast opportunity in the future for it because there’s only so much area in shallow water depths that can be used, but it also comes down to what I’ll call market signals,” he said. 

“We have a federal policy of wanting to have 30 GW of offshore wind by 2030. California has its own state targets for offshore wind, 25 GW by 2045.” 

He added: “California has always been a leader in the climate change space and wanting to really incorporate renewable energy into the grid there. This is a technology that can play a major role in helping California meet its clean energy goals.” 

The long development timelines for Canopy and wind farms in the four other lease areas along the California coast give some room to prepare the transmission, manufacturing, workforce and port facilities needed for the new industry, Mastria said.  

The company has already taken steps in that direction: The protected species observer training program it put together graduated a class of 19 area residents in April. These people or others certified in the task will be on duty on vessels around the clock while underwater survey work is in progress, watching for marine mammals in the vicinity. 

RWE is the only wind power developer to hold leases off all three mainland U.S. coasts: Atlantic, Pacific and Gulf of Mexico. The underwater, political and market conditions are different in each, just as fixed-bottom and floating wind are different from one another, creating three distinct sets of hurdles to clear. 

But RWE frames the question as how to build a wind farm, Mastria said, not whether it is possible. 

“We have a ton of experience, and we know that this works,” he said. “We have, in addition to our projects, a global floating team. So that’s a team that focuses on advancing floating technology, doing assessments to monitor the state of the market and how the technology solutions are developing.” 

Mastria has worked 16 years in the renewable energy industry, the past four of them in offshore wind. Notably, he was project development director for New York’s South Fork Wind, which this year became the first utility-scale offshore wind farm completed in U.S. waters. 

South Fork is a bright spot in the Northeast offshore wind industry, where most projects have canceled contracts or been canceled altogether since early 2023 due to rising costs and supply chain constraints. 

Most of the affected Northeast proposals remain in active development, but advancing to construction will take longer and cost more, in most cases. 

Among the casualties has been Community Offshore Wind, RWE’s two-phase joint venture with National Grid Ventures.  

In the past 12 months: 

Community’s 1.3-GW Phase 1 contract with New York had to be spiked when General Electric halted development of an 18-MW turbine. (See NY Offshore Wind Plans Implode Again.) 

New York “waitlisted” the 1.3-GW Phase 2 proposal so the state could concentrate on getting two mature projects back into the pipeline after they balked. (See Sunrise Wind, Empire Wind Tapped for New OSW Contracts.) 

The partners withdrew a 1.3-GW proposal in New Jersey when the financials did not pencil out. (See NJ Awards Contracts for 3.7 GW of OSW Projects.) 

A recurring theme in the early stages of West Coast offshore wind development has been the need to avoid the setbacks seen on the East Coast. (See Strategy Offered for Success of Future West Coast OSW Sector.) 

Mastria offers the same message. 

“One of the things that I try to do is bring the experience from what has been done on the East Coast to try to make sure that the way we set up how offshore wind will work on the West Coast learns from those experiences on the East Coast and smooths the way based on the experiences that the industry has had,” he said. 

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FERC Issues Show-cause Order on TO Self-funding in 4 RTOs

FERC on June 13 initiated show-cause proceedings into the practice by four RTOs of allowing transmission owners to self-fund network upgrades needed to bring generation online, saying the practice may amount to favoring TOs over interconnection customers.

The commission directed MISO, PJM, SPP and ISO-NE to explain within 90 days how their tariff language on the initial funding is fair or, alternatively, to propose changes to make their policies impartial (EL24-80). All four grid operators currently allow TOs the first shot at funding and earning a return on the capital cost of network upgrades required for generators to connect to their systems.

FERC said that approach might be biased against interconnection customers, who could see their interconnection service costs rise when compared with having the ability to finance their own upgrades. It said TO self-funding might “increase the costs of interconnection service without corresponding improvements to that service, may unjustifiably increase costs such that it results in barriers to interconnection and may result in undue discrimination among interconnection customers.”

The commission added that the grid operators’ current practice may amount to barriers to interconnection. It also seeks to “consistently and comprehensively” address the RTOs/ISOs that maintain a TO self-fund option.

Started with MISO

The Order to Show Cause is the latest in a string of seesawing decisions between the commission and the D.C. Circuit Court of Appeals that originated with disputes in MISO.

MISO restored TOs’ rights to self-fund in 2019 at FERC’s direction. The commission originally issued an order in 2015 preventing TOs from providing initial funding for network upgrades, but that decision was remanded by the D.C. Circuit. At the time, the court said the commission didn’t consider complaints from Ameren and five other TOs who claimed the policy forced them to accept “risk-bearing additions to their network with zero return” and essentially act as “nonprofit managers” of network “appendages.”

However, the court ruled in late 2022 that FERC did not adequately explain why it reinstated TOs’ option to finance network upgrades before the interconnection customers owning generation projects were given the chance to do the same. (See FERC Must Clarify MISO Tx Funding Decision, DC Circuit Finds.)

Since 2019, MISO interconnection customers have taken to filing unexecuted network upgrade agreements to protest the RTO reinstating TOs’ rights to self-fund. (See FERC Accepts Unexecuted Agreements Filed in Protest.)

Other affected grid operators have made filings regarding TOs’ right to self-fund upgrades.

PJM in 2021 filed on behalf of its TOs to replace its existing method of generator upfront funding of upgrades with a TO self-funding provision. The RTO also specified that interconnection customers must provide security either to PJM or the transmission owner in question to protect against non-payment. FERC accepted the switch but placed PJM’s new rules in a paper hearing and subjected payments to possible refund.

SPP allows either TO initial funding or generator upfront funding. However, FERC last year rejected an SPP proposal regarding its initial funding option, saying its plan to allow TOs a nonbinding decision to elect initial funding could create uncertainties for interconnection customers because a TO could reverse course at the end of interconnection studies, leaving customers with different network upgrade costs.

ISO-NE allows a TO to unilaterally elect initial funding. However, FERC said the practice of initial funding by TOs is rare in ISO-NE, where no TO has ever pursued the option. SPP in 2021 saw its first FERC-approved network upgrade agreement in which the TO elected initial funding.

In 2021, New York TOs filed a complaint against NYISO, which does not have an initial funding option, contending it was unfair the ISO wouldn’t allow them to be compensated for “the risks and costs associated with owning, operating and maintaining system upgrades.” FERC denied the complaint, reasoning the TOs didn’t demonstrate that NYISO’s current funding mechanism was inequitable.

‘Replacement Rate’

In its show-cause order, FERC singled out testimony from RWE Renewables, NextEra Energy and EDF Renewables, who argued that their costs “double or increase exponentially” when TOs take the reins on funding network upgrades. EDF claimed MISO’s use of TO initial funding has stymied development of new generation development in MISO and SPP, with larger MISO TOs hiking the cost of network upgrades.

FERC said it was concerned that unilateral TO initial funding might force an interconnection customer to pay a higher financing rate than it otherwise could secure through a lender. The commission also said interconnection customers may incur additional costs through securities to the TOs over a 20-year payback schedule.

“It appears that these increased costs do not provide any additional benefits to the interconnection customer than it would otherwise receive through generator upfront funding. We also are concerned that in some cases, an unjustified increase in costs may be significant enough to result in a barrier to interconnection because the costs are so high that projects that would otherwise be commercially viable cannot proceed,” FERC wrote.

Beyond that, FERC said it was troubled by the risk of discrimination to interconnection customers. It said vertically integrated TOs or TOs with affiliates may strategically decide to elect initial funding only for non-affiliate interconnection customers in an attempt to raise costs for competitors.

FERC also said it worried that initial funding may provide TOs the opportunity to double-dip on risk premiums because risks associated with owning, operating and maintaining network upgrades essentially are “baked-in” to TOs’ transmission rates, but also noted it might identify that TOs are not being adequately compensated for those risks.

The commission concluded the order saying that if it finds that TO initial funding is prejudiced but also finds that TOs take on uncompensated risks building network upgrades, it could enact a “replacement rate” compensation mechanism.