The American Council on Renewable Energy (ACORE) held its 2020 Virtual Grid Forum last week. The two-day event examined the role of regulators, grid operators, electric service providers and the renewable sector as states progress toward their clean energy goals. It also explored the policy and regulatory issues and technology challenges associated with integrating increasingly high penetrations of renewable electricity on the grid.

Following is some of what we heard.

Tackling MOPR Issues

During a panel on capacity market design and the future of resource adequacy Nov. 17, panelists discussed at length the minimum offer price rule (MOPR) as a symptom of outdated design.

Grid Strategies President Rob Gramlich said several states have threatened to back out of capacity markets and that MOPR is not viewed as a “long-term, sustainable approach,” according to PJM, which is “trying to get back into a way that works with states rather than contravening [their] wishes and goals.”

Abe Silverman, general counsel for the New Jersey Board of Public Utilities, said that clean energy policies “are non-negotiable in New Jersey, and we’re not backing off; we’re not slowing down.” Silverman noted New Jersey is also “very active” in current MOPR litigation.

“I think we see MOPR as a symptom of a market design that’s about 20 years out of date,” Silverman said. “These markets were put into place in the early 2000s, and they were great at optimizing cost and maximizing reliability. … They’re very effective at that, but they haven’t been tweaked a lot.”

Clockwise from top left to right: Abe Silverman, New Jersey Board of Public Utilities; Casey Roberts, Sierra Club; Lloyd MacNeil, McDermott Will & Emery; Rob Gramlich, Grid Strategies; and Nora Mead Brownell, EPSY Energy Solutions | ACORE

Silverman said “fundamentally” the question should be: What are these markets doing for states?

“We’re putting band-aids on band-aids, and MOPR is the ultimate band-aid, and it’s not a good one,” Silverman said.

Former FERC Commissioner and Pacific Gas and Electric board Chair Nora Mead Brownell added that capacity markets were supposed to be “a short-term solution.” According to Brownell, another quick fix is additional responsibilities for the RTOs, which have created administrative solutions like MOPR.

“They’re going to be imperfect,” Brownell said. “We can dance on the head of a pin all we want. At some point, there’s going to have to be compromises.”

Brownell said that it needs to be clear that if RTOs are going to have a stakeholder process, “You don’t get everything you want. You look for everything you need. How do we get to a place where we are more market-driven, rather than these endless, litigated, imperfect administrative solutions?”

Silverman said New Jersey also has an ongoing proceeding about whether it should take back resource adequacy from PJM.

“It’s about MOPR, frankly, but it’s also about cost and achieving our clean energy goals faster and at the least cost to our consumers,” Silverman said. “We look to California as obviously the gold standard for driving a clean energy agenda. But it is daunting, and it’s an amazing thing that they’ve done that their reliability has been so good while they’ve been pioneering so many different new technologies and driving the investment.”

ERCOT Example

“Probably the best part of the ERCOT market is that it does allow, or encourages, consumers to moderate their energy behavior,” Silverman said.

Silverman added there is no default service provider in ERCOT, which makes “all things become possible because you have third-party suppliers … who have a million customers so that they can make those kinds of long-term hedging arrangements.” Silverman said most New Jersey customers stay with the default service provider, which was included in restructuring the state’s markets.

“ERCOT took that very bold step 20 years ago of forcing the baby birdie out of the nest, and other states were not willing to go that direction,” Silverman said.

Brownell said she agreed with Silverman that ERCOT took a bold step, but it also had “very strong political and business leaders who made the decision to go to markets fully and stuck with it; they didn’t back off.”

“It’s unbelievable to me in this day and age, and this isn’t this isn’t a knock on New Jersey, [that] the Northeast largely hasn’t deployed [smart] meters and acts as if it needs, you know, one more death-by-pilot [program]. What don’t we know about the value of meters and the data that they produce? It’s a mystery to me.”

Sierra Club Senior Attorney Casey Roberts said it’s tough to get other states to make that ERCOT-type leap. She said PJM recently approved more revenue being recovered through energy and ancillary services (EAS) and less through the capacity market.

“Because of the way the capacity market works as a missing money mechanism, that [decline in capacity costs] should naturally happen as you increase the energy revenues, but less is coming through the capacity market” Roberts said. “So it’s going to be a more slow and painful transition without that kind of the political and business leadership that Nora was talking about. There is already the framework in place to move away from mandatory capacity markets, or at least reduce their relevance in those Eastern markets.”

Gramlich said it does not have to be an all-or-nothing approach. There can be incremental shifts to have more EAS revenue relative to the capacity market with design changes over time.

Roberts added that FERC needs to lead on market design as “people just get stuck in their corners and don’t see how a series of tradeoffs could ultimately lead to a more optimal design.”

Supporting Renewable Expansion

A panel on Nov. 17 led by Heather Curlee, senior counsel of Wilson, Sonsini, Goodrich, & Rosati, explored the concept of establishing power markets to support the expansion of renewable resources.

Robert Stoddard, managing director of Berkeley Research Group, was asked if expanding RTOs and ISOs would be the right approach for continued renewable integration into the system. Stoddard said markets have performed “extremely well” in helping attract and retain investment in a way that has been “sensibly done” and conducted at the risk of the investors instead of ratepayers.

When RTOs and ISOs were created in their current form by FERC Order 2000 in 1999, Stoddard said, it was done as a response to concerns that utilities owning generation and controlling the transmission lines led to “no nondiscriminatory open access to the grid.” Innovation had to come from the utilities, Stoddard said, leaving little room for innovation or risk-taking from outside investors.

Stoddard said markets can create conditions for innovation, and there are many functions of RTOs and ISOs to ensure the open access that allows outside companies to come forward and take risks. He said markets operate through prices, and the prices tell people what is valuable and allow an innovator to look for changes in generation or transmission to create value.

The challenge with RTOs and ISOs, Stoddard said, has been figuring out the best way to put together market prices with the necessity of long-term planning.

“The RTO markets are really good at wresting all of the small efficiencies out of day-to-day operations,” Stoddard said. “Where we’ve had bigger challenges is [in whether] these markets provide the long-term signals not only for generation, but wise transmission expansion.”

Joe Hoerner, senior vice president of regional grid solutions for Portland, Ore.-based Pacific Power, was asked how carbon pricing fits in to help accommodate existing or future state renewable energy goals and whether more transmission is needed to integrate renewables on the West Coast.

Hoerner said CAISO has been “struggling with” the best way to approach carbon pricing. Absent a standardized approach to carbon pricing, a “hodge-podge approach” to pricing could lead to unintended consequences, he said.

As more solar resources are being built in the Southwest, Hoerner said, there are “a lot of eggs in one basket” in the renewable generation mix. He said the reliance on solar is starting to create reliability concerns.

“There’s not enough transmission to make that connection and build that new backbone throughout the West to interconnect all of the solar resources,” Hoerner said. “You really do need to diversify; you need to be able to get to those different assets, and you need the transmission to be able to interconnect all of that”

The panelists were also asked if RTO membership should be mandated on a federal level to create more efficient markets.

Stoddard said the market would work more efficiently if there was mandatory RTO membership, but efficiency would come at some costs. He said one of the biggest sacrifices would come with the loss of local control and oversight of long-term planning.

“A well-designed integrated resource plan is a great thing, but it does put a lot of risk on ratepayers,” Stoddard said.

Bob Helton of ERCOT’s Technical Advisory Committee said he agreed with Stoddard’s description of an RTO mandate, saying states presently get to “pick their own poison” when it comes to deciding whether to join an RTO or ISO or to go out on their own.

Helton said there are pros and cons to each idea, but it’s a decision best made on a local level rather than a dictate from above.

“It would be hard for me to say to mandate anything on anybody at this point,” Helton said.

Hoerner said he doesn’t think RTO membership should be mandated. He said decisions for a “pursuit of perfection” toward a market design can lead to a market implosion and cause more problems.

“When you mandate something, there’s the risk that it gets jammed in or doesn’t get designed properly, and you end up with something that isn’t well-functioning,” Hoerner said.