WASHINGTON — The need for gas peakers and electric transmission and the increasing popularity of hybrid storage projects were recurrent topics at the American Council on Renewable Energy’s (ACORE) Policy Forum on Wednesday. And of course, no energy conference would be complete without a discussion of FERC’s controversial order on PJM’s minimum offer price rule (MOPR).
Here’s what we heard:
Dominion vs. NextEra on Building More Peakers
Speakers from Dominion Energy and NextEra Energy had a very different take on the viability of natural gas-fired peaking generation.
Emil Avram, vice president for business development for Dominion, said the company sees a continuing role for natural gas even as it ramps up its renewable generation. (On Friday, Virginia lawmakers approved legislation requiring Dominion and other utilities to go to 100% renewable sources by 2045.)
“While some may not want to hear this … in order to maintain reliability for the gigawatts that will be added to our system over the next decade, we have to build peaking plants. And that means bringing more natural gas into our system,” he said.
Moderator Renee Eastman, of Salt River Project, asked whether energy storage could replace the need for natural gas peaker plants.
Yes, said Rob Gramlich, founder of consulting firm Grid Strategies and executive director of Americans for a Clean Energy Grid and the WATT Coalition. “My firm is testifying ‘yes’ in a number of states’ integrated resource plan proceedings, and that’s kind of where the rubber meets the road,” he said. “So yes, it can. Not all cases, but yes.”
“Maybe yes,” said Eric Vandenberg, deputy director of FERC’s Office of Energy Policy and Innovation.
“I think yes, eventually,” responded Dominion’s Avram. “Maybe eventually.”
Former FERC Chair Joseph T. Kelliher, now NextEra’s executive vice president for federal regulatory affairs, wasn’t hedging. “I think there’s no reason to … build peakers going forward,” he said. “And I think storage is going to start leading to the retirement of existing peakers.”
The Hybrids are Coming
Vandenberg said hybrid generation-plus-storage projects have grown “faster than I think a lot of us expected.”
“The business case for pairing storage with renewable resources just keeps getting better. … That starts to create some questions about how do you handle those at both the energy markets — because they’re not fully dispatchable, but they’re much more dispatchable than a regular renewable resource. And then, how do you handle those for interconnection purposes? Obviously, again, it’s like a renewable resource, but not exactly like a renewable resource, not exactly like a standalone battery storage facility. So that’s something we’re keeping our eye on. I think all of the RTOs at this point, except for maybe one, have stakeholder processes underway because they understand that that’s coming down the pipe, and we need to deal with it. So that’s something that we’re going to be paying really close attention to here in the next 12 to 18 months.”
Kelliher said NextEra, the largest renewable company in the world with 15,000 MW of wind and 2,000 MW of solar, is bullish on the potential for hybrids. “We find it very exciting because it firms up renewables, and at some point, it makes renewable energy projects a functional substitute and effective substitute for thermal generation.”
Gramlich said he has become convinced of hybrids’ potential despite earlier skepticism.
“I will eat some crow on that. I always thought that, well, it doesn’t matter if the battery is 300 miles away from the renewable. It’s all a big power pool; it all mixes together,” he said.
But he said the capabilities of inverters and the efficiencies of combining storage and generation in a single interconnection have become compelling. “NextEra and others are doing incredibly innovative work in how to optimize and autonomously operate these units. You can make them do almost anything because they’re inverter-based. You can do everything in millisecond time frames as fast up or down as you as you want.”
Gramlich noted that hybrids were not mentioned in FERC Order 841, which opened RTO markets to storage, or Order 845, which sought to increase the transparency and speed of the interconnection process. But he said he sees no need to ask FERC to take further action — for now.
“I think the message that the commission sent by doing [Order] 841 has gotten all these RTOs off the dime and they have their own processes and they’re moving forward pretty well,” he said. “I mean, obviously, if [RTOs] slow down and we’re stuck, we’ll be walking back over to 888 First St. [FERC headquarters]. But for now, there’s a lot of progress.”
Is Transmission Essential for All Renewables?
FERC Commissioner Richard Glick told ACORE the biggest hurdle to integrating renewable generation is electric transmission.
Glick said FERC is unlikely to win siting authority over transmission, given the controversies over its regulation of interstate gas pipelines. But he said FERC’s pending Notices of Inquiry on transmission incentives and return on equity may provide some improvements.
And he said the commission could improve Order 1000, noting that although it required RTOs to consider public policies in regional transmission planning, “very little public policy transmission is getting built.” Instead of spurring the long-distance transmission needed to deliver renewables, Glick said, Order 1000 encouraged utilities and RTOs to focus on small reliability projects by exempting them from competition.
“I’m a big believer in distributed energy resources, solar panels and so on,” he said. “But I think we’re all fooling ourselves if we think we’re going to get there with just those particular types of technology, the microgrids and things like that. We’re going to have to access areas with substantial wind [including] offshore [and] areas of substantial solar, Southwest and elsewhere.”
Gramlich said Order 1000’s requirement for interregional planning has not produced the HVDC lines or other types of a “macro grid” that is needed. “There is still a ton of renewable resources in the central region that want to go … towards PJM or the Southeast,” he said.
“I think transmission is the linchpin for some renewables, but not all renewables,” Kelliher said. “It’s the linchpin for the best wind resource. And ironically, it’s also the linchpin for the worst wind resource. It’s of less importance for the mediocre wind resource, and it’s actually not that important for solar.
“Look at Southeast renewable development,” he continued. “For a while, people thought we needed a monster transmission project to bring low-cost wind from SPP. But at some point, the economics of solar got so low that it just … made more sense to build solar locally. And then you avoid the brain damage of trying to figure out how do you get transmission siting across four or six states, in the absence of any effective federal siting authority.”
Avram said the incentive to build long-distance transmission from one RTO to another has diminished because of low power prices.
“Ten years ago, you had an incentive to bring, $30 to $40 wind to an RTO that was selling power at $60 to $70/MWh. That gap created some potential opportunities to build transmission and … renewable energy zones and so forth. I think that that has flattened out now, with all the natural gas and solar and wind that’s suppressed wholesale market prices across all the RTOs. So, I think it’s a challenge now to build a business case to build transmission across RTOs.”
A Maryland Capacity Auction? Dominion Going FRR?
Speakers from Dominion and Maryland’s Department of the Environment talked about their response to FERC’s December order extending the MOPR to new state-subsidized resources.
Devon Dodson, an aide to Maryland Environment Secretary Ben Grumbles, said the state is “ridiculously concerned” about the MOPR order. “The singling out of the PJM market really pisses us off — no sense in sugarcoating it,” he said.
The legislature has created a working group on the issue, and the governor’s office directed the Public Service Commission to work with Grumbles’ office and the state Energy Administration to plan a response. “Is it running [our] own capacity auction? I mean, that’s the elephant in the room when we have these discussions. No one wants to say it, but does the state take on the task of running its own capacity auction?”
Avram said vertically integrated utilities that are growing, like Dominion, will likely have to leave PJM’s capacity market because FERC interpreted its state-regulated cost recovery as a subsidy.
The company expects continued load growth driven by the construction of large data centers in the D.C. suburbs.
“I think any utility that’s vertically integrated, that has a growth plan to build renewables or really any new generation … is going to be subject to MOPR. And really the only alternative they have is to elect a fixed resource requirement [FRR] alternative in order to maintain the same economics of those assets in the future,” he said.
In the past, Dominion justified generation additions to state regulators by showing the economics of the asset compared to forecasted prices for energy, capacity and renewable energy credits. Under the MOPR, a new resource will be unlikely to clear the capacity market, reducing its value.
“By electing FRR … you’re now pooling your entire resource [mix] and managing your capacity reserve in its entirety,” he said. “What we’re going to be proposing to the [Virginia State Corporation Commission] is avoided capacity cost from the load side. … That’s the reason why I think, personally, vertically integrated utilities are going to have to exit the capacity market if they’re growing.”
Gramlich was rendered speechless.
“I don’t know what else I can say. Half a minute ago, we heard one of the largest utilities in the country say we’re seeing the end of peakers. Now we’ve got one of the other largest utilities in the country saying this is the end of vertically integrated utility participation in capacity markets. You got your news,” he said to a reporter. “There’s nothing else I can add.”
— Rich Heidorn Jr.
