The Energy Bar Association marked its 75th anniversary at its virtual annual meeting last week, which included sessions on capacity markets and resilience and remarks by FERC Chair Richard Glick. Here’s some of what we heard.

Glick and Federal Policy

Glick opened the meeting by answering several attendees’ questions related to President Biden’s ambitious clean energy goals.

One attendee asked how FERC is working with other federal agencies to advance the administration’s policies. The commission, as an independent agency, doesn’t coordinate with the White House or other agencies, Glick said, but it has reached out to the Department of Energy to offer assistance in performing reviews under the National Environmental Policy Act. “We also have expertise related to transmission planning that I think the other agencies don’t quite have,” he said.

The commission’s examination of an offshore grid to better interconnect wind resources — specifically whether there are any impediments in RTO/ISO tariffs to developing one — will also help the administration in its goal of deploying 30 GW by 2030.

“It’s amazing to me … to see the secretary of energy [Jennifer Granholm] talk about transmission time and time again and how important it is to the transition to the clean energy future,” he said. “To me, that’s a dramatic change, and a welcome one.”

Another attendee asked what FERC can do to ensure reliability and resource adequacy if Congress enacts a clean energy standard. Glick answered that he does not think the commission’s responsibilities would change, though it could depend on the legislation. But regardless of whether any such law is passed, states, utilities and grid operators need to rethink their approaches to resource adequacy anyway, he said. “We know investments are being made because demand is coming from consumers, from businesses, from utilities themselves and obviously from state policymakers as well.” The commission’s examination of PJM’s capacity market is part of that “rethink.”

“The old model in some parts of the country of … essentially paying generators to sit there and do nothing, I’m not sure that’s necessarily the right way to go,” he said.

Calpine, AMP Make Cases for Changes to PJM Capacity Design

One panel discussion gave attendees a glimpse of the current debate among PJM stakeholders over FERC’s 2019 order extending the minimum offer price rule (MOPR) to state-subsidized resources. The order was issued under Republican Chair Neil Chatterjee. Glick, who became chairman in January, has called for eliminating the MOPR, saying it is “not sustainable” because it is hampering state efforts to decarbonize. (See PJM MOPR in the Crosshairs at FERC Tech Conference.)

Panelist Sarah Novosel, senior vice president of government affairs for independent power producer Calpine, outlined the company’s proposed “enhanced” Capacity Performance rules. They would require dispatchable resources to have 16 hours of guaranteed run time for three days through on-site or backup fuel or contracted LNG. The MOPR would only be used in instances of buyer-side market power.

Calpine’s proposal would also expand the definition of performance assessment hours to increase the instances of such events; increase the annual stop-loss limit to three times the net cost of new entry; and limit excuses for nonperformance to transmission outages out of control of the generator.

“If we’re going to let subsidized resources into the market, we’re going to have depressed pricing, so we need to figure out some other way to enhance pricing in the market and ensure that the resources … that are supplying capacity are reliable resources and can actually provide the service when called on,” Novosel said.

Limiting the MOPR to instances of buyer-side market power would essentially eliminate it, said Steve Lieberman, assistant vice president of transmission and PJM affairs for American Municipal Power (AMP).

“In PJM, there’s only one real buyer and that is PJM. They’re not exercising buyer-side market power,” he said.

AMP proposes a different solution, saying PJM should make the capacity auction voluntary.

“Rather than forcing [load-serving entities], merchant generators and other market participants to adapt to constantly changing rules and requirements, the transition from mandatory capacity constructs to voluntary, short-term, residual markets is in the best interest of customers,” AMP says. “States and LSEs should be allowed to utilize a combination of bilateral contracts, self-builds and market opportunities to meet resource adequacy requirements based on circumstances specific to each LSE, with appropriate state oversight.”

Also appearing on the panel was Maria Gulluni, vice president and general counsel for ISO-NE, who discussed the region’s difficulty adding more gas pipelines or electric transmission. Gulluni cited opposition in Maine to the proposed New England Clean Energy Connect (NECEC) transmission line that would deliver Canadian hydropower to Massachusetts.

On Thursday, the 1st U.S. Circuit Court of Appeals vacated an injunction that had prevented work on a northern stretch of the line, allowing an affiliate of Central Maine Power to begin full construction. However, a separate case pending in Maine’s Superior Court and a referendum scheduled for November could require the state legislature to approve the project by a two-thirds vote.

“So we are in a pretty difficult spot,” Gulluni said. “We have some real concerns about energy security.”

She also said the RTO expects a need to “bulk up” the ancillary services market in the future, “because the capacity market alone [is] probably not sufficient to ensure that we have the reliability we’re looking for.”

In previous discussions of alternatives to Eastern grid operators’ capacity markets, some have suggested considering an energy-only market, like the one used by ERCOT, saying it saves consumers because it doesn’t result in the large capacity margins seen in PJM.

But that’s “tough politically to talk about” in the wake of the February deep freeze that left millions of customers in ERCOT without power for days, Lieberman said.

Lieberman said the energy crisis that resulted from ERCOT’s failure to winterize its generating units was compounded by a “financial crisis” resulting from days of prices at the cap of $9,000/MWh, which he called an “inactionable price signal.”

“Nobody could do anything about it, and as a result either companies lost billions of dollars [or] went bankrupt. For what?” he asked.

“You could find a way to make an energy-only market work as long as you avoid those inactionable price signals. The same is true even in PJM or ISO-NE or New York. You’ve got to make sure that the price signals either on the energy side or on the capacity side are actionable. … If you’re going to penalize people because things are tripping offline or a transmission line falls and it’s no fault of the generator and now the generator’s [held] at fault, what are we doing here?”

Extreme Weather Events

Former FERC Chair Cheryl LaFleur moderated a panel on maintaining the resilience of electric and natural gas systems as extreme weather events become more frequent.

Because weather is no longer mirroring historical patterns, LaFleur said, planners must start thinking differently about resilience. Increasing use of variable renewable generation and natural gas with just-in-time fuel delivery networks must also be taken into account, said LaFleur, now a member of the ISO-NE Board of Directors and distinguished visiting fellow at Columbia University’s Center on Global Energy Policy.

“How resilient our energy system is, how much it can keep going when bad things happen, depends on how it’s planned, constructed, maintained, operated, restored and how we learn from events,” LaFleur said.

Paul McGlynn, executive director of system operations for PJM, said it’s necessary to have a long-term view of resilience and constantly re-evaluate and update plans.

Resilience at PJM is about “preparing for, operating through and recovering from events,” McGlynn said, adding that PJM’s market designs are one of the most important features incentivizing market participants to maintain reliability.

McGlynn said it’s also important for grid operators to regularly stress test the system to know where the breaking points are. While they have typically done stress testing by looking at higher-than-normal load and other contingencies, McGlynn said, they need to consider more extreme scenarios and longer-duration events, including extended heat waves and severe cold snaps.

Jason Reynolds, vice president of system planning and operations for Entergy, said the utility’s service territory on the Gulf Coast puts it in a “unique storm risk” region.

Reynolds said Entergy is constantly examining its resilience, especially after the 2020 hurricane season, which saw three named storms — Laura, Delta and Zeta — directly impact Louisiana in the span of 62 days. Reynolds said Entergy was able to mobilize 26,000 workers from 31 states to conduct recovery and restoration of the system. (See Entergy, in the Eye of the Storms, Beats Expectations.)

Entergy has taken other actions to bolster the electrical system, Reynolds said, including adding 17,000 MW of generation since 2020, and addressing fuel supply issues. The company has also started including the month of September in its summer readiness study because of its higher temperatures.

“We’re no stranger to risks to our system,” Reynolds said.

North Dakota Public Service Commissioner Julie Fedorchak likened resilience to the foundation and pillars of a structure that can withstand strong tremors.

Fedorchak said the resilience of the electrical system depends on four pillars: the generation resources, the transmission system, the market structures and communication systems. Transmission must be expanded to accommodate new generation, Fedorchak said, while market structures and the communication systems between generation and natural gas pipelines are both “antiquated” and need to evolve.

As more renewables are added, policymakers need to make sure to not “get ahead” of the technology and find themselves without enough dispatchable resources in an extreme weather event or other emergency, she said.

“In this time of transition, we need to focus on maintaining generation diversity and not getting a little bit too eager before the system is able to handle it,” Fedorchak said.