PJM: Increased Gas Won’t Hurt Reliability, Too Much Solar Will

By Rory D. Sweeney

PJM can maintain adequate reliability with a generation fleet almost entirely composed of natural gas units, but a capacity mix of more than 20% of solar would unacceptably increase the risk of loss-of-load events, according to a study the RTO released Thursday.

The study, titled “PJM’s Evolving Resource Mix and System Reliability,” identified essential reliability and adequacy criteria and used them to compare a wide range of potential future fuel diversity scenarios. PJM focused on generator “reliability attributes” of frequency response, voltage control, ramping ability, fuel assurance and flexibility.

PJM created a “composite reliability index” to assess the operational reliability of various resources under four conditions: normal peak conditions, light load, extremely hot weather and extremely cold weather. Resources were grouped into 11 categories: coal, natural gas steam, natural gas combustion turbine, oil steam, oil combustion turbine, nuclear, solar, wind, hydro, battery/storage and demand response.

The RTO said the report is in response to stakeholder concerns that the system is losing too many traditional baseload resources as coal plants retire and nuclear assets struggle to remain profitable.

In 2016, PJM’s installed capacity was 33% coal, 33% natural gas, 18% nuclear and 6% renewables, which include hydro. By comparison, coal and nuclear resources accounted for 91% of its generation fleet in 2005.

“This analysis underscores our responsibility to continue to operate the system reliably, and explore the role of resilience, the ability to tolerate unforeseen shocks and continue to deliver electricity,” PJM CEO Andy Ott said in a statement. “Different resources provide different reliability attributes, though new technology or regulations have the ability to improve those capabilities.”

No Upper Bound on Gas

Of particular interest, given the rise in gas-fired units interconnecting to PJM’s system, was the revelation that the there was no upper bound for the percentage of gas-fired units in the fleet before reliability is harmed.

The scenarios showed natural gas’ share of the fuel mix could rise to as high as 86% without reliability problems. Mike Bryson, PJM’s ‎vice president of system operations, who spoke during a press briefing on the report, said staff stopped at 86% to account for demand response, hydropower and biomass currently on the system. “We figured it was a safe assumption to say they won’t go away.”

The report acknowledged, however, that it didn’t assess the gas-deliverability issues that pinched supply during January 2014 or the continued sluggishness of gas pipeline development. PJM’s previous natural gas studies generally concluded that the existing and planned pipeline infrastructure would be adequate for current and future anticipated electric system needs.

“We did not look at ability for infrastructure to support that, but we think it’s probably worthy of following up with the natural gas industry,” Bryson said. “There’s a lot of work left to do.”

The report also didn’t address the economics of resource types, factors that might impact a fuel’s deliverability or public policy issues such as environmental impacts or the use of subsidies. Bryson suggested coordination with the gas industry to begin addressing “more complicated issues” that cross over from the electricity sector, including data coordination.

That said, the report found that PJM’s current and near-term fuel mixes were near the top of the study’s reliability analyses. Less coal and nuclear generation would decrease frequency response, reactive capability and fuel assurance, but increase flexibility and ramping capabilities.

Renewables Limits

Portfolios with solar representing 20% or more of unforced capacity (UCAP) failed because they resulted in loss-of-load-expectation (LOLE) violations at night. UCAP is calculated by multiplying nameplate capacity by the resource’s capacity factor (38% for solar).

Bryson said increases in batteries and other storage would likely change the conclusions.

He added that certain fuel types were given credit for their abilities, if not their current usages. “We gave wind kind of high marks on flexibility, even though that’s not how they operate today,” he said. “The capability’s clearly there, but they don’t operate in that way.”

Fuel Diversity ≠ Reliability

The study also found that a more diverse fuel portfolio isn’t necessarily more reliable. Certain resource blends that fall between the least and most diverse offer the greatest number of key generator reliability attributes.

“Having a certain amount of diversity — not too much, not too little — gives you optimal reliability,” said PJM’s Chantal Hendrzak, who also spoke at the briefing.

However, high reliance on one type, such as gas, would create concerns that the paper didn’t attempt to analyze. PJM said it would continue to investigate ways to minimize its exposure to “low-probability, high-impact” events that could pose serious threats to the system.

“Our markets are designed to provide the incentives that the [13] states [within PJM’s footprint] need to implement their policies. We think there is an opportunity for PJM to work with the states” to determine how to harmonize well-functioning markets and public-policy initiatives, Bryson said.

The topic of reliability will be the focus of PJM’s upcoming Grid 20/20 conference scheduled for April 19.

March 30, 2017

Kentucky Overturns Nuclear Moratorium: Now What?

By Amanda Durish Cook

Kentucky has dropped its decades-long nuclear moratorium, but experts on both sides of the nuclear debate say the move probably won’t result in new reactors for now.

The law, signed by Kentucky Gov. Matt Bevin on March 27, eliminates the requirement that nuclear power facilities have “means of permanent disposal” of nuclear waste, allowing a less onerous Nuclear Regulatory Commission-approved waste plan.

Sen. Danny Carroll (R), the bill’s sponsor, said it was important that Kentucky start looking to diversify its energy portfolio, pointing out that nearby states take advantage of nuclear energy. Carroll said the law will “keep Kentucky competitive with the energy portfolios of surrounding states.”

“When you run a business, you look for varied funding streams. You don’t put all your eggs in one basket. … That’s what we’re doing in our state. Out of fear of nuclear energy, out of efforts to protect the coal industry, whatever the case may be, we are putting all our eggs in one basket,” Carroll said last year, when an earlier version of the bill languished after Senate approval. Kentucky does not house any nuclear generation.

The law eliminates the requirements that cost of waste disposal be known and that the facility have “adequate capacity to contain waste.” It also grants the Kentucky Public Service Commission the authority to hire consultants “to perform duties relating to nuclear facility certification” and allows it to prohibit construction of low-level nuclear waste disposal sites in Kentucky. The PSC can also direct the Energy and Environment Cabinet to review the nuclear permitting process. Kentucky PSC Director of Communications Andrew Melnykovych declined to comment on the law.

14 States

According to the National Conference of State Legislatures, 14 states currently have restrictions on the construction of new nuclear power plants: California, Connecticut, Hawaii, Illinois, Maine, Massachusetts, Minnesota, Montana, New Jersey, New York, Oregon, Rhode Island, Vermont and West Virginia. Most of the state moratoriums were made because of an absence of a permanent repository for spent fuel in the U.S. Wisconsin’s legislature ended its moratorium last spring.

President Obama ordered NRC in 2009 to stop work on a permit for licensing the nuclear waste depository at Yucca Mountain in Nevada. Obama acted at the behest of then-Sen. Harry Reid (D-Nev.) As a result, waste is being stored in spent-fuel pools and dry cask storage at operating and retired nuclear plants. (See Panelists Weigh Nuclear Waste Solution Post-Obama.)

The Trump administration’s 2018 budget requests $120 million to relicense Yucca Mountain.

Christine Csizmadia, the Nuclear Energy Institute’s director of state governmental affairs and advocacy, said she shared Carroll’s idea that long-term energy planning should not exclude certain generation types.

“You want to have an open option on the table, and that’s something that they couldn’t even consider before,” Csizmadia said. “It’s going to open the door to healthier conversations because now lawmakers aren’t confined and they can have long-term, open conversations.”

Csizmadia said that although she does not envision new nuclear building permits in Kentucky in the near term, she hopes Wisconsin’s and Kentucky’s actions will spark a trend. “That’s exactly what we’re hoping for, and why not? The thing about states is that they can be very competitive with each other; there’s a snowball effect. I don’t see why there wouldn’t be similar repeals. A lot of these moratoriums were made 20 years ago, and attitudes have changed.”

Nuclear Power a Distraction

Not everyone’s attitude toward nuclear energy has changed, however.

“Lifting the nuclear moratorium is not going to produce plants. Nuclear is such a politically charged question that it sucks all of the air out the room when planning,” said Arjun Makhijani, president of the Institute for Energy and Environmental Research, who has testified against overturning Minnesota’s nuclear moratorium. Minnesota’s legislature came close in the 2015/16 legislative session.

Far from opening up planning to new resource types, Makhijani said the moratorium reversal could shut down other, more important energy planning conversations.

“The main result is it’s going to divert the attention of Kentuckians away from the kind of energy policy that will be useful to create jobs in the state,” Makhijani said. “In a state that is hurting from coal industry job losses [the idea that] there are plans to replace those jobs with the nuclear industry — the most polite thing that I can say is that it’s very far-fetched. The idea is that we should have all options [but] the options have to make sense in economic terms and in planning terms. We’re entering the era of distributed energy and smart grids.”

Makhijani argues that the country’s aging nuclear fleet is often in need of repairs, requiring new valves and pumps and expensive shutdowns. He noted that nuclear plants cannot economically ramp up and down, making them too inflexible to be paired with increased wind penetration.

“I think the suffering communities in Kentucky, the coal miners, should be economically protected. But I don’t think they can be protected by promising a return of coal jobs or replacing it with nuclear industry. Nuclear is more expensive and less economic than coal. Nuclear is sort of in hospice care right now,” he said.

Summer, Vogtle Plants

Csizmadia and NEI spokesman John Keely said they did not know of any sites in Kentucky that have been eyed for nuclear development. But Keely said nuclear power can help fill the need for clean energy as coal plants retire.

Nuclear power is being revived, he said, with two new reactors being built by South Carolina Electric & Gas at its Virgil C. Summer nuclear plant near Jenkinsville, S.C., and two by Georgia Power at its Vogtle site near Augusta.

Virgil C. Summer Nuclear Plant Construction | *SG&E*

However, Makhijani said these new reactors are being subsidized by ratepayers and plagued by cost overruns and delays. “It’s even unclear whether those reactors will be finished,” he said, alluding to U.S. nuclear giant Westinghouse Electric’s bankruptcy filing Wednesday. Westinghouse is the lead contractor at both construction sites.

Makhijani also cautions against seeing small modular reactors as an option, saying they won’t be cost effective unless large numbers of them are purchased, and even then, several of them will need to be installed to generate a significant amount of power.

Still, a permanent repository is needed no matter how many more states light up a welcome sign for nuclear energy, Makhijani said. But he maintains that Yucca Mountain is not the ideal site.

“It’s much better than leaving it around in five dozen or odd sites in storage. There are terrorism risks, there are environmental risks, there are safety risks,” he said. Each 1,000-MW nuclear reactor results in 30 Nagasaki-sized bombs worth of plutonium per year in spent fuel, Makhijani said. “Today there is more civilian-made nuclear waste around than all the plutonium of all of the nuclear weapons worldwide,” he added.

Keely maintains that nuclear moratoriums “were a manifestation of the 60s’ anti-nuclear attitude … and can’t be defended anymore. It’s that basic and that pragmatic.”

He also said today nuclear has bipartisan support. “This used to be somewhat of a left-right issue and that’s no longer the case.”

March 30, 2017

New Campaign Urges Renewed Effort to Expand CAISO

By Robert Mullin

A coalition of environmental, renewable energy and business groups called on California officials Tuesday to reignite CAISO’s effort to expand its operations into other areas of the West.

The groups — which include the Natural Resources Defense Council, Environmental Entrepreneurs, Union of Concerned Scientists and the Solar Energy Industries Association — issued a letter urging Gov. Jerry Brown and top state lawmakers to support legislation facilitating the ISO’s transition into a Western RTO.

“An integrated Western Grid is essential to a goal that we know all of you share: meeting our ambitious clean energy targets while driving down energy costs and creating new good-paying jobs,” the letter said. “We urge you to continue the process toward legislative authorization of a transition to a fully independent board for an independent grid operator that all Western utilities and generators will have the opportunity to join.”

The coalition kicked off its Secure California’s Energy Future campaign in response to the Trump administration’s move to roll back the Clean Power Plan, EPA’s chief initiative to combat climate change by reducing carbon emissions from the nation’s power plants. (See Trump Begins Attempt to Undo Clean Power Plan.)

“California has an opportunity — and a responsibility — to continue its leadership in responding to our climate crisis by working to integrate the Western grid,” Ralph Cavanagh, codirector of NRDC’s energy program, said in a statement. “While the White House and some in Congress are trying to roll back the climate progress we’ve made, Sacramento can take action and secure California’s energy future.”

Reduced Costs, Increased Reliability

The campaign’s supporters contend that integration of the Western grid would reduce costs and increase reliability for the region’s electricity customers, reduce the need to curtail output from renewable resources and “safeguard against price gouging by unscrupulous power marketers,” while at the same time allowing state governments to retain control over their energy policies. They also tout the benefits to California’s economy, including expansion of the state’s clean technology sector.

“Every day, California is basking in clean, affordable, reliable solar electricity,” SEIA CEO Abigail Ross Hopper said. “By enabling the state to fully utilize this solar resource, including sharing it across state lines, Californians will reap the benefits of increased jobs and investment and billions of dollars in electricity savings.”

A 2015 California law requires the grid operator and state energy agencies to explore ISO expansion to help the state meet its 50% renewable energy mandate. California lawmakers must sign off on any such expansion, which would necessitate that the state yield its direct oversight authority over CAISO once the grid operator becomes a multistate organization.

Brown Presses Pause Button

With skepticism mounting against regionalization efforts, Brown last August postponed CAISO’s expansion effort, saying he wanted state agencies to take more time to develop a governance proposal for the new RTO. (See Governor Delays CAISO Regionalization Effort.) Before that announcement, Brown had expressed hopes of delivering a proposal to state lawmakers before they concluded their 2016 session in September.

Progress on regionalization has since slowed. While the ISO last October released the third draft of a proposal outlining the principles for governing a Western RTO, nothing formal has been submitted to the legislature for consideration. (See Latest CAISO Proposal Fills out Western RTO Governance Plan.)

“We continue to be involved in discussions with stakeholders, and we get requests for briefings from lawmakers about the studies” related to the economic and environmental impacts of regionalization, CAISO spokesperson Anne Gonzales told RTO Insider. “The ISO is a technical resource for policymakers to understand the studies and the governance changes.”

Gonzales said the ISO has no stakeholder meetings scheduled to further discuss regionalization.

Agreement on a governance plan represents the biggest hurdle for expanding CAISO. Skeptics outside California have expressed concerns about the populous state’s potentially outsized influence over a Western RTO, while those within California are worried about losing the ISO as a key instrument for achieving the state’s environmental goals. (See Governance Plan Critics Urge Slowdown of Western RTO Development.)

The new campaign appears to be an attempt to jump-start the effort to overcome barriers to grid integration.

Other campaign supporters include the Independent Energy Producers Association, Bay Area Council, Health Care Without Harm, Sierra Business Council, Silicon Valley Leadership Group and SunPower.

March 30, 2017

Mountain West, SPP Tout RTO Membership to Colo. PUC

By Tom Kleckner

DENVER — SPP and the Mountain West Transmission Group pitched the benefits of RTO membership Tuesday in an open forum before Colorado’s Public Utilities Commission as the two entities pursue a possible collaboration.

Taking advantage of the opportunity to get the last words in, SPP COO Carl Monroe grabbed a podium microphone just before the meeting adjourned to let his audience know the RTO would be holding its regular quarterly governance meetings in Denver in July, and that it would be a chance to see first-hand how SPP works with its members.

Coincidence?

Maybe not. SPP scheduled the meetings in the middle of last year, about the same time Mountain West was considering joining CAISO, MISO, PJM or SPP. Mountain West announced in January it was entering into discussions with SPP to further explore the relationship. (See Mountain West to Explore Joining SPP.)

The PUC scheduled the forum so regulators, consumer advocates and other stakeholders could gather information and discuss with Mountain West participants the potential benefits, costs and risks of the options under consideration. More than 70 attendees registered to participate, a number Commissioner Frances Koncilja noted was larger than normal.

Mountain West is an informal collaboration of 10 electricity service providers serving 6.4 million customers in the Rocky Mountains. Its members’ coincident peaks total just more than 12 GW, and it generated almost 70 million MWh of energy in 2015. Were it to join SPP, it would create a sprawling organization spread over 17 states.

Monroe told the commission that Mountain West would increase SPP’s size (575,000 square miles of service territory encompassing about 18 million people) by about a third. The new RTO’s Tariff would include seven of the eight DC ties between the Eastern and Western Interconnections, except for one in Canada. SPP also has two DC ties with the Texas Interconnection.

“We own the gateway facilities that go into” the ties, Monroe said. “We’ve spent a lot of time coordinating and understand those ties.”

“This is a very complicated transaction,” Koncilja told RTO Insider. “It will be up to the utilities to persuade us it’s a good thing for the ratepayers. This is just the first of many meetings.”

Mountain West members said they were pursing RTO membership to improve efficiency by eliminating pancake transmission rates and taking advantage of modern market designs to maximize transmission capacity. A 2016 Brattle Group study found Mountain West could save $53 million to $71 million annually through 2024 by participating in a day-ahead market and replacing its nine tariffs with a single one.

“It’s not that we have decided to go forward,” said Steve Beuning, Xcel Energy’s director of market operations. “We are in the process of evaluating what it means to go forward and [determining] the terms and conditions … that Mountain West considers essential before moving forward.”

Familiarity

Beuning said he was impressed by the knowledge in the group’s proposed RTO membership.

“This familiarity with the issues of our proposal, and an understanding of the particular needs of utility service providers in the western U.S., really helped lead to a deep and meaningful discussion,” he said.

Former FERC Commissioner Suedeen Kelly, an attorney with Akin Gump provided an overview of RTOs and ISOs, their functions and their regulatory relationship with FERC, while touting the virtues of regionalization and economic dispatch.

Former FERC Commissioner Suedeen Kelly (right) shares her thoughts on Mountain West’s SPP membership with Colorado PUC Chairman Jeff Ackermann and Commissioner Wendy Moser. | © *RTO Insider*

“The SPP transmission system is managed and operated for the same purpose as an individual system — to maintain reliability across the footprint and to dispatch generation,” she said. “There are no pancaked rates. Energy that flows from the northern end to the southern end pays one rate, no matter how many systems it touches.”

Jennifer Gardner, a staff attorney for Western Resource Advocates, praised SPP’s security constrained economic dispatch and its ability to create more renewable energy.

“By automatically dispatching resources where they’re needed, that allows us to deal with the variability of resources,” she said. “We see the immense potential for getting new renewable energy to the market” with SPP membership.

But Kelly also shared reasons for not joining an RTO.

“Why don’t we have one in the West?” she asked. “A lot of reasons, but to me, the most important, after being in California in 2000 when the California market imploded, is because the market imploded. We said, ‘Wait a minute, whatever they did, we don’t want to do.’”

Abby Briggerman, of counsel with Holland & Hart who generally speaks for large industrial ratepayers in the Rocky Mountains, and speaking on behalf of the ratepayer interests, said she was concerned about the risks of joining an RTO.

“We’ve come a long way since 2001, but we need to look no further than California. We remember the rolling blackouts,” she said. “The ratepayer must have a seat at the table in the decision-making process over whether to join an RTO.”

Briggerman also warned that SPP could be a “Hotel California,” referring to the Eagles’ song in which “you can check out any time you like, but you can never leave.”

“We need to make sure there are no barriers to exit,” she said.

Consumers’ Voice

Other attendees also questioned whether consumer interests would be lost in SPP.

SPP representatives, members and stakeholders countered by praising the RTO’s stakeholder engagement, and Monroe emphasized the diversity of is 94-entity strong membership. “We provide a lot of transparency into SPP,” he said. “Our meetings are open, even up to board level. We had 150 people at our last board meeting. Anybody that has ideas that will help SPP make good business decisions will be listened to.”

SPP General Counsel Paul Suskie brought up Steve Gaw, a former Missouri commissioner and legislator who represents The Wind Coalition at meetings although the coalition is not a member.

SPP COO Carl Monroe makes his point alongside General Counsel Paul Suskie (left). | © *RTO Insider*

“He’s not a member, but he gets just as much input as members,” Suskie said.

SPP and Mountain West have developed a steering committee and working groups focused on governance, rate design and cost allocation, transmission planning, reliability coordination and SPP’s Regional State Committee. Composed of regulators from 10 different states, the RSC will be a key player in the membership negotiations.

Mountain West members said they expect to decide on whether to proceed with SPP membership in the second or third quarter of 2017. Rate cases would be filed shortly thereafter, with a final recommendation presented to SPP’s board in January 2018.

“I would be bold to call [the timeline] aggressive, but it keeps us on track. It keeps us focused on what we’re trying to accomplish,” said Mary Ann Zehr, senior manager of transmission contracts, rates and policy for the Tri-State Generation and Transmission Association.

Mary Ann Zehr (Tri-State), Dan Kline (Black Hills) and Steve Beuning (Xcel Energy) discuss Mountain West’s potential SPP membership. | © *RTO Insider*

Zehr said she anticipates numerous meetings over the next few months devoted to writing a tariff, governance and membership agreements and bylaw changes.

“We’re attempting to answer those questions at the front end,” she said.

March 29, 2017

CAISO, BPA Ink Agreement to Ease Northwest EIM Transfers

By Robert Mullin

CAISO has signed an agreement with the Bonneville Power Administration designed to facilitate Energy Imbalance Market (EIM) transfers in the Pacific Northwest while ensuring that the agency can continue to reliably serve its own transmission customers.

The Coordinated Transmission Agreement (CTA) could provide a model for future joint efforts between the two agencies that operate most of the transmission network along the West Coast, according to Todd Miller, a senior project manager with BPA.

“This agreement kind of seems like a no-brainer,” Miller said during a March 27 call hosted by the EIM Body of State Regulators (BOSR), an informal network of Western utility commissioners that convenes regularly to discuss market issues. “We need to have an operating agreement … so everybody understands the rules of the road.”

The agreement also represents a “milestone” in cooperation between BPA and CAISO, Miller said. “I think it’s really a first step in being able to coordinate seams issues.”

The CTA largely formalizes procedures already put in place before the EIM was launched in November 2014. At the time, BPA worked with PacifiCorp — the EIM’s first member — and the ISO to define practices around exchanging transfer data and setting limits on the use of dynamic transfers on the BPA system.

Since its rollout, the market has expanded farther into the Northwest to include Puget Sound Energy, with Portland General Electric slated to join later this year, followed by Idaho Power in early 2018. All three utilities rely to some extent on BPA, which controls about 70% of the transmission in the region.

“Some of [the original practices were] captured in operating procedures, but until the CTA, there was no contractual obligations regarding these requirements,” BPA said.

The agreement spells out an obligation for both parties to share transmission system data: CAISO must share total market dispatch for EIM resources during a market interval and load forecasts for EIM balancing authority areas, while BPA must convey real-time managed limits and actual flows on its facilities. The agreement clarifies the processes by which that data will be made available, including frequency and granularity.

Bonneville Power Administration caiso eim rate of change limit — The agreement between CAISO and Bonneville Power Administration is intended to facilitate Energy Imbalance Market transfers on Bonneville’s system, which accounts for about 70% of transmission capacity in the Northwest. | *BPA*

“It also includes a confidentiality provision,” Miller said. “Everybody is doing what they’re supposed to be doing, but now there’s something in the contract that makes the lawyers feel better about things.”

The agreement also codifies BPA’s right to place limits on the upward and downward rate of change in usage that EIM dynamic transfers would impose on its transmission network — making explicit an already existing practice.

“Bonneville will set the upper rate of change limit and lower rate of change limit at its discretion and notify the CAISO of such limits for each Bonneville-managed facility before each market interval,” the agreement states.

The agreement gives BPA the ability to manage system operating limits on its paths at its own discretion, but requires it to alert the ISO to any changes ahead of an interval.

It also provides for the development of “flow-relief tools” related to the EIM. Among those tools: a procedure that, in a curtailment situation, will allow BPA to transmit to CAISO the EIM’s prorated share of curtailed flows on an affected transmission flowgate between the two balancing areas.

New Groups

The CTA additionally calls for CAISO and BPA to convene a Coordinating Committee every quarter to address operational issues related to the agreement, resolve disputes and offer up potential revisions.

The agreement also establishes a working group — consisting of Pacific Northwest EIM members, a select group of BPA transmission customers and the Coordinating Committee — charged with discussing implementation, data exchange and transmission operations under the agreement.

“As far as the selected Bonneville customers, we haven’t decided how we’re going to do that yet, but we want to select customers that are representative of our various classes of transmission customers,” Miller said.

Ann Rendahl, a Washington Utilities and Transportation commissioner and chair of the BOSR, noted that the “whereas” clause at the beginning of the CTA specifies that the Coordinating Committee will discuss seams issues.

“I assume that the working group is also to discuss seams issues, but to get at them from a more granular level,” Rendahl said.

Miller agreed and said the group could also be the body that initiates other “major” types of coordination and constraint relief along the interties.

CAISO and BPA plan to file the agreement with FERC in April. “Hopefully we’ll have another FERC commissioner at some point so it can actually be approved,” Miller said.

March 28, 2017

PJM Monitor Says Low Prices Indicate Competitive Market

By Rory D. Sweeney

WILMINGTON, Del. — Independent Market Monitor Joe Bowring said Thursday that that the PJM market is competitive and healthy, despite what some stakeholders believe are uneconomically low energy prices.

state of the market report combined cycle — Bowring, PJM’s IMM, discusses his analysis of market data that he believes shows the market is healthy and competitive. | © *RTO Insider*

LMPs were lower in 2016 than they have ever been since organized markets began, which “is a testament to competitive markets,” Bowring said during a Members Committee briefing on the 2016 State of the Market report. “Prices are not too low. We don’t need to artificially raise prices. They are what they are.”

Despite the market changes created by the introduction of the Capacity Performance model, “prices have been consistent with historical levels,” he said.

Combined cycle units, for example, did “relatively well” in 2016, he said. “Even though their margins are smaller, they are in fact making it up on volume.”

That does, however, create one issue, he said: While combined cycle units have become baseload resources, coal-fired units have shifted to an intermediate role, which is problematic because they can’t ramp up and down well. Coal steam units recorded a 32.5% capacity factor for the year, down sharply from 2015’s 43.8%. Combined cycle plants had a 62% capacity factor in 2016, almost unchanged from 2015.

Generator Markups

Bowring’s presentation focused heavily on the impact of markups, which is the difference between a market seller’s market-based offer and its cost-based offer, which reflects the generator’s marginal costs. The Monitor’s data showed that coal-fired plants often had negative markups in 2015 and 2016.

“I think [the market] is very healthy. I think it’s competitive. I think it’s showing us Manual 15 is wrong, and coal units don’t need a 10%” adder, Bowring said. The manual permits generators’ cost-based offers to include a 10% adder above their marginal costs; it was intended as a cushion against uncertainties, including fuel prices and heat rates that can vary with temperatures and plant loading.

FirstEnergy’s Jim Benchek questioned Bowring’s observation, saying coal units have “really legitimate reasons” for offering negative markups.

Bowring explained that higher markups can be exercises of market power — or an indication that the operators simply don’t want the unit to run. He presented a graph that showed the cumulative number of unit intervals with markups above $150/MWh. The graph showed a major spike in mid-February 2015, which he said coincided with a cold snap that might entice market sellers to exercise market power.

Algorithmic Definition

Bowring also said it’s “staggering to me” that PJM refuses to evaluate fuel-cost policies based on algorithmic standards.

In a ruling Feb. 3, FERC sided with the RTO in requiring that fuel-cost policies be verifiable and systematic but not algorithmic, as the Monitor had proposed. (See PJM Fuel-Cost Policy Changes to Take Effect in May.)

FERC’s order quoted the Monitor as saying the policies should be based on broker quotes, bilateral offers or index prices. The commission said the Monitor’s position that policies be “algorithmic under all circumstances” ignores that natural gas markets can become illiquid during stressed conditions, potentially understating generators’ real costs.

The Monitor said it defines “algorithmic” as simply meaning a step-by-step process to get from a defined input to an output.

“It’s very, very simple, very, very basic,” Bowring said Thursday. “You can’t have a verifiable anything unless it’s algorithmic.”

Bowring also questioned the notion that PJM’s energy production is becoming less fuel diverse, presenting a Fuel Diversity Index that shows little change since its beginning in 2000.

Bowring released the State of the Market report earlier this month, warning that state plans to subsidize unprofitable generating resources present “a very real threat” to wholesale electricity markets. (See PJM Monitor Concerned About State Subsidies.)

March 28, 2017

SPP Briefs

Having concluded that renewable energy is “extremely unlikely” to be exported outside SPP’s footprint, staff have begun working on the Export Pricing Task Force’s final report for delivery in July.

SPP Export Pricing Task Force — Loudenslager | © *RTO Insider*

SPP’s Sam Loudenslager said a market exists for renewable resources, but “rate stress” from building additional transmission and uncertainty that the energy would be deliverable led staff to its conclusion. He also pointed to the difficulties SPP has had in agreeing to joint transmission projects across its seam with MISO.

“It’s not impossible, but it’s difficult,” Loudenslager said.

SPP’s Michael Desselle, the task force’s staff secretary, pointed to a list of proposed market and operational improvements to address renewable resources and advocated for canceling the rest of the group’s scheduled meetings. Members objected, however, and the task force agreed to additional meetings before turning over the final report to the Strategic Planning Committee.

“I don’t think we’re done yet. We haven’t laid out anything that looks at the export issue itself,” said Marguerite Wagner, of independent transmission company ITC Holdings.

The group also discussed creating “national renewable resource areas” to enable wind exports to markets outside SPP and avoid placing the costs directly on the RTO’s members or ratepayers.

Referring to himself as a “big-picture guy,” Golden Spread Electric Cooperative’s Mike Wise, the group’s chair, asked whether the federal government should be involved, as it was in building the nation’s highway system following World War II. That would enable exporting resources outside SPP without the cost being paid directly by the RTO’s members or ratepayers, he said.

“We’re facing a problem because no one wants to pay for that transmission,” Wise said. “Renewable energy is really a national resource. Can this area be declared a national resource? Can we get … through Congress a transmission corridor to get to this resource? Is it necessary to have this sort of major dynamic funded and paid for by the federal government?”

Wise likened his proposal for “national renewable resource areas” to Texas’ Competitive Renewable Energy Zones, which facilitated the construction of $6.8 billion worth of infrastructure connecting West Texas wind farms with urban population centers to their east.

Oklahoma Gas & Electric’s Greg McAuley pointed out wind-energy transmission customers were the ones who invested in the CREZ lines.

“In our case, our customers can’t make use of the additional wind, at least not enough to justify significant additional investment,” he said. “It’s not clear to us how our customers would benefit from additional investment when they’re not going to be the ones using the power.”

The task force was chartered last August to establish equitable and “not unduly discriminatory prices” for exports and imports of the abundant variable energy resources in the SPP region. The RTO says it has 22 GW of renewable resources in its interconnection queue.

Since the year began, the group has discussed how other regions handle export issues and heard from representatives from Southern Co., Enel Green Power NA and Clean Line Energy Partners.

Seams Committee Approves Joint Project with AECI

The Seams Steering Committee on Friday approved a potential joint project with Associated Electric Cooperative Inc., sending it to the Markets and Operations Policy Committee and Board of Directors for final approval. Those groups will hold their regular quarterly meetings in April.

The project would include a new 345/161-kV transformer at AECI’s Morgan substation and an uprate of a related 161-kV line, both near Springfield, Mo.

The Morgan transformer was included in SPP’s 2017 Integrated Transmission Planning 10-Year assessment, which was approved by the MOPC and board in January. The project, valued at $9.2 million, is contingent on reaching a cost-allocation agreement with AECI.

The approval came in a special conference call, after members asked for more time during its during its March 8 meeting to evaluate the project. The vote received one abstention, from ITC Holdings. (See “AECI Joint Projects Move Forward,” SPP Briefs.)

— Tom Kleckner

March 28, 2017

MISO, PJM See No Joint Reliability Projects; Evaluating MEPs

By Rory D. Sweeney

MISO and PJM officials will entertain stakeholder proposals for interregional reliability projects even though none of the 19 reliability upgrades currently planned near the RTOs’ seam offers opportunities for collaboration, RTO officials said last week.

The 10 projects in PJM’s Regional Transmission Expansion Plan include four in American Electric Power’s zone, one in East Kentucky Power Cooperative, three in Duke Energy Ohio/Kentucky, one in Rochelle Municipal Power’s zone in north-center Illinois and one that crosses AEP’s and DEOK’s zones on the border of Ohio and Indiana.

This month’s IPSAC meeting included an estimated timeline for approval of interregional market-efficiency transmission projects between PJM and MISO. | *MISO, PJM*

The nine projects in MISO’s 2017 MISO Transmission Expansion Plan include two in ITC Transmission’s zone, three in ITC subsidiary Michigan Electric Transmission Co.’s zone, one in Consumers Energy, one in American Transmission Co. and two in MidAmerican Energy.

Interregional reliability projects are analyzed on the basis of avoided costs. Comparisons of the MISO and PJM plans “have not identified any high potential areas for an interregional reliability project,” the RTOs said at the March 24 Interregional Planning Stakeholder Advisory Committee meeting.

PJM is expected to open a proposal window for interregional projects around May. MISO will accept proposals at any time.

Market Efficiency Projects

Meanwhile, the RTOs are evaluating eight market efficiency project proposals submitted in the window that closed Feb. 28. The grid operators received proposals for three upgrades and five greenfield projects from six respondents. The projects ranged in cost from $1 million to $198 million. (See “2017 MEP Identification Underway,” FERC Signals Bulk of NIPSCO Order Work Complete.)

PJM is currently updating its PROMOD model for 2017 and plans to begin calculations around May 1. Stakeholders who have critical energy infrastructure information (CEII) clearance and been approved to receive the model should expect access somewhere around the end of April or the beginning of May, PJM’s Chuck Liebold said.

The project benefits will be compared during the summer to determine interregional cost allocation, and the best projects will be identified in the fall. Recommendations to the respective boards will be made in November or December.

FERC Filings

On Dec. 30, the RTOs filed joint operating agreement changes defining the study process, benefits and interregional cost allocation for targeted market efficiency projects (TMEPs) (ER17-718).

Related tariff filings, defining the new TMEP project type and how costs of such projects would be allocated regionally, are due from each of the RTOs by April 29.

PJM’s Transmission Owners Agreement-Administrative Committee (TOA-AC) closed a 30-day comment window on March 23.

MISO is considering its regional cost allocation rules for such projects in the Regional Expansion Criteria and Benefits Working Group. Stakeholders discussed a proposal based on congestion contribution at the February and March working group meetings. Another working group meeting is tentatively set for April 7 to continue discussions.

The RTOs are considering as many as five TMEPs. (See MISO-PJM TMEP Projects Drop to Five.)

March 28, 2017

ERCOT Says DER not yet a ‘Reliability Concern’

By Tom Kleckner

AUSTIN, Texas — The growth of distributed energy resources is not yet causing reliability problems, and accurate mapping and localized pricing signals should address concerns in the future, ERCOT said last week.

Based on installed capacity and current growth rates, DER does not pose “an immediate or near-term reliability concern,” the Texas grid operator said in a report released Thursday.

The report says ERCOT’s DERs are “characterized by a combination of low energy prices and an absence of regionwide regulatory incentives, leading to a penetration growth rate” much slower than in California and other regions.

“[We] are making sure we don’t have any reliability issues,” COO Cheryl Mele told members of the Technical Advisory Committee during its monthly meeting. “No current issues exist. That’s not the driver here, other than trying to stay ahead of what can be a growing resource in the ERCOT grid.”

Mele said the ISO’s first priority is to begin discussions with transmission and distribution service providers (TDSPs) about mapping resources larger than 1 MW. Those discussions will take place within the TAC’s Reliability and Operations (ROS) and Wholesale Market subcommittees.

ERCOT estimates there were 900 MW of DER interconnected with the grid as of December 2015, based on annual reports filed at the Public Utility Commission of Texas by TDSPs in competitive-choice areas. Another 200 MW are thought to be deployed in non-opt in entity (NOIE) service territories (those not competing in the ERCOT market).

The ISO said there were about 90 registered DER units, primarily diesel generators and some rooftop solar, as of March.

ercot localized pricing signals — | *Meridian Solar*

“As these resources grow, deployment of DER with capacity greater than 1 MW could result in some reliability concerns, depending on their location and level of concentration on the grid,” the report said.

ERCOT currently compensates DERs with zonal prices. Mapping those resources will allow for locational pricing and result in their more appropriate response to transmission constraints.

Definitions

The report said DER can be anything from large, fossil-fueled reciprocating engines to small rooftop solar systems. It includes an updated definition of DER: “Generation, energy storage technology or a combination of the two that is interconnected at or below 60 kV and operates in parallel with the distribution system.”

Further discussion will be needed if the definition is expanded to include demand response, ERCOT said.

The ISO said it believes “the foundation to the reliable and efficient management of this future distributed grid is visibility” through more detailed collection of DER data from TDSPs. It does not propose to model or operate the distribution system, leaving that to the distribution providers.

However, ERCOT said it will work with market participants through the stakeholder process to develop a standardized method for mapping DER units to their loads. The ISO said this will improve situational awareness of DER activity on the grid and “allow for stakeholder consideration of localized pricing signals” to support reliability.

The ISO also proposes working with stakeholders on a process for competitive choice and NOIE distribution providers to monitor the accumulation of clusters of unregistered DER (less than 1 MW). It estimates there are more than 11,000 such facilities in its market and more than 12,000 in NOIE territories.

When the combined connected capacity of these smaller units exceeds an agreed-upon threshold, the TDSPs would work with ERCOT to determine the best method for mapping them.

The new report updates a concept paper published in August 2015 that laid out a potential framework for DER participation in the wholesale market, which identified reliability concerns from a large deployment of DER.

The TAC is expected to refer the report to the ROS and WMS at its April meeting.

March 28, 2017January 17, 2024

State Officials Brief NE Roundtable on Renewables Plans

By Michael Kuser

BOSTON — The nation’s smallest state doesn’t get to crow very often. But at the New England Restructuring Electricity Roundtable on Friday, Commissioner Carol Grant of Rhode Island’s Office of Energy Resources basked in applause as moderator Jonathan Raab said the state deserved to take a “victory lap” for putting into operation the first offshore windfarm in the U.S.

Not just the U.S., Grant corrected: “The first in the Western Hemisphere.”

The 30-MW Block Island Wind Farm, which began commercial operations in December, is a small step toward meeting the state’s “strategic goal” of 1,000 MW of “clean energy” by 2020, announced by Gov. Gina Raimondo on March 1. The state currently is little more than one-tenth of the way, with 138 MW operational, Grant said.

Although the governor’s challenge is not a legislative mandate, Grant said the legislature has enacted policies that will get Rhode Island halfway to the goal.

“The success of the Block Island Wind Farm is a big help in persuading people that anything is possible,” she said. “The reason we’re really fortunate in this region is that we actually have the ability to collaborate across states. In a small jurisdiction like Rhode Island, that helps because there’s brain power just across the border to the north.”

Grant joined Massachusetts Secretary of Energy and Environmental Affairs Matthew Beaton and Connecticut Deputy Commissioner for Energy Mary Sotos in briefing an audience of policymakers, stakeholders and analysts on how their states are attempting to transition to clean energy with minimal market disruption.

“I wouldn’t underestimate how much the rest of the country looks to New England for our experience in renewable energy and a lot of this thought leadership, experience with regional gas transmission,” Sotos said.

“The core of our energy strategy boils down to three elements: cost, carbon and reliability,” Beaton said. “We have some of the highest costs in the nation and we have to be cognizant of that in the commonwealth. … We have some of the most aggressive carbon reduction goals, the legislature having mandated a 25% reduction by 2020 and 80% reduction by 2050.”

After his presentation, Beaton left for a meeting with Gov. Charlie Baker, while his deputy, Undersecretary Ned Bartlett, stayed behind to answer questions. The first came from Raab, who asked for the main ingredients in the “secret sauce” for a sustainable renewable energy policy. Bartlett answered that “the challenge is to bring the reality of time-differentiated pricing into the solar market,” adding that open and inclusive markets create choices.

ISO-NE Previews Economic Study

A second panel at the roundtable featured Bob Grace, president of consulting firm Sustainable Energy Advantage; Jamie Howland, director of climate and energy analysis for the Acadia Center think tank; and Michael Henderson, ISO-NE director of regional planning and coordination.

Henderson presented a draft version of the RTO’s 2016 Economic Study, soon to be finalized before the grid operator’s Planning Advisory Committee. Phase I of the report analyzes production costs and related metrics, while Phase II discusses several market and operational issues.

Henderson referred his listeners to “a lot of great work being done by the U.S. Department of Energy, and particularly [the National Renewable Energy Laboratory], in modeling what the ISO needs to use in terms of wind and photovoltaics. A lot of those databases are essential to the planning process. But I leave it to you and the developers to come up with the costs. We don’t do that at the ISO.”

Responding to Henderson’s slideshow, Richard Levitan of Levitan & Associates asked, “It looks like there’s an annualized transmission [cost] of $1.5 [billion] to $2 billion to accommodate the build of clean energy and green energy in northern New England. … That transmission result [locks] onshore wind in northern New England.”

Henderson acknowledged that a “very, very large-scale wind development” in northern New England would require a “quite expensive” transmission expansion. “To facilitate it in some of the first steps, the ISO is doing a number of cluster studies now where we’re looking at inputs on the order of 2,400 MW in the north country. … Whether or not it’s economical — the way we want to go in the region — [I] leave that for others: someone who wants to consider policy, costs or metrics other than what we considered in this report.”

Grace used his own metrics to show the increase in renewable supply entering the New England market. “This is the wind projects coming online, this is increasing imports, this is biomass refurbishment. It’s a lot of different things hitting us at once, but it puts us in a new place.”

Howland discussed the potential of incorporating distributed resources into planning through “active load management, which is our term … for smaller-scale demand management that is more flexibly dispatched and automatically dispatched.

“So it could benefit hot-water heaters … and then energy storage in the region,” he said.

The last question of the day went to Henderson: Have you looked at the effect of pricing pressure from solar and wind?

Henderson said the RTO’s analysis found that even with a large-scale development of renewables, “there are still very, very, very significant periods of time when natural gas remains on the margin” in the region.

The analysis also showed renewables on the margin, particularly in light-load periods like May. “And by the way, all that load occurred in the middle of the day, so … there were many days when [energy storage] would be feeding the network at night and drawing from the network during the day, which is kind of the opposite of the way we think of storage operating today,” Henderson said.