Capital spending to comply with the Obama administration’s environmental regulations is dinging the credit outlook for Alliant Energy, parent company of Wisconsin Power and Light and Interstate Power and Light in Cedar Rapids, Iowa.
Moody’s Investors Service has changed its outlook for Alliant to negative from stable. “The negative outlook on the Alliant family’s ratings reflects financial metrics that are weak for their ratings and likely to deteriorate over the next few years as its utility subsidiaries incur incremental debt to finance their extensive, multi-year capital expenditure plans,” analyst Lesley Ritter said. If trends continue, Moody’s said, Alliant’s A3 senior secured rating “would likely be more appropriately reflected in a Baa1 rating.”
Since 2011 Alliant has invested $1 billion in environmental retrofits and is projected to spend up to $1.8 billion more to build gas-fired generating units to replace aging coal and gas units.
DTE Energy is planning to build a 2,800-panel solar farm in Ypsilanti, Mich., by the end of next year. The 800-kW facility would power about 150 homes.
DTE says it’s the largest solar developer in Michigan, with 10 MW from 22 sites in the southeast part of the state. The utility said it has now met a state-mandated renewable portfolio standard.
The company did not release the estimated cost of the Ypsilanti project.
Duke Energy’s South Carolina Transmission Project Draws Angry Opponents
A Duke Energy proposal to build a 45-mile transmission line and a new substation in South Carolina to serve growing demand in western North Carolina drew about 800 people to a public hearing.
Most of the speakers at the South Carolina Public Service Commission’s hearing oppose the project. Their objections include the line’s location, the technique or type of transmission line or the very fact of its planned existence.
Bill Mills of Caroland Farms in South Carolina said he has studied all of the options and concluded that “the best solution for the Carolinas is to have this project canceled.”
Philadelphia Businessmen Buy Retired Exelon Plant for Hotel Project
Two Philadelphia businessmen, operating under the moniker Delaware Station LLC, have put down $3 million for the old Delaware Generating Station, formerly operated by Philadelphia Electric Co. They hope to convert the 16-acre property on the Delaware River to one or more hotels, as well as a shopping and catering complex.
Joseph Volpe and Bart Blatstein are the listed owners. Although there remain some small gas-fired turbines on the site, the main generating equipment at the station was retired decades ago.
FirstEnergy Starts Demolishing Cleveland’s Lake Shore Plant
FirstEnergy has begun tearing down its retired Lake Shore Generating Station in Cleveland, a process that is expected to take about 16 months. The first steps are a full site survey and the demolition of several smaller outbuildings.
The former coal-fired power plant went into service in 1911 and was officially retired earlier this year. FirstEnergy plans to retain the property for alternative uses, a company spokeswoman said. While all generating equipment will be removed, some transmission equipment will remain on the site.
BP restarted a crude distillation unit at its giant Indiana refinery near Chicago last week, a move that is expected to put the brakes on spiking gasoline prices in the Midwest.
The unit at the Whiting, Ind., refinery was shut down Aug. 8 for repairs, which took longer than expected. The extended outage of the 413,500-barrel-per-day refinery, BP’s largest in America, caused fuel shortages that sent pump prices skyward.
Dominion Resources, owner of Millstone Station nuclear plant, has reached a settlement with the Nuclear Regulatory Commission for its decision to halt the use of a safety-related pump in the event of a severe accident.
NRC on Thursday cited a “willful violation” for changes Dominion made without regulatory approval at its Millstone Unit 2 plant in Waterford, Conn. A Millstone spokesman said Dominion does not agree that the violation was deliberate.
Dominion agreed to change plant procedures governing the operation and testing of the charging pumps and provide complete and accurate information. Regulators said they became aware in September 2011 that Dominion submitted requests for approval of changes to the Unit 2 operating license that were incomplete and inaccurate.
Two studies released last week came to opposite conclusions on the need for additional natural gas pipeline capacity in New England.
The results were unsurprising: One study was funded by domestic natural gas producers; the other by a liquefied natural gas importer.
GDF SUEZ
One report, funded by GDF SUEZ Energy North America, which operates an LNG import terminal in Everett, Mass., concluded that the region has adequate pipeline capacity to meet winter power demand, especially if contributions from dual-fuel-capable generation and LNG are expanded.
Studies sponsored by domestic gas producers and a gas importer came to unsurprisingly opposite conclusions about the need for additional pipelines in New England.
The report, written by international consultant Energyzt Advisors, is highly critical of the proposal embraced by several New England governors to help fund added natural gas infrastructure with a tariff assessed on electricity ratepayers. (See New England Governors Revise Energy Strategy.)
“The proposed electricity ratepayer funding of additional gas pipeline capacity is an expensive and dangerous proposition in terms of ratepayer cost and healthy market function in New England,” the report says.
ANGA, API
The second report, sponsored by America’s Natural Gas Alliance and the American Petroleum Institute, which represent domestic oil and gas producers, says that the region will pay $5.4 billion in higher energy costs (2014 dollars) between 2016 and 2020 unless more pipelines and other infrastructure are built.
“The $5.4 billion in added costs will ramp up from 2016 through 2020, increasing the region’s electricity and natural gas costs by 9% in 2020, according to forecasted energy demand and costs,” says the report, written by Boston-based LaCapra Associates and the Economic Development Research Group.
It was issued by the newly formed New England Coalition for Affordable Energy, which also includes business groups, real estate interests and a utility workers union.
New England’s governors and ISO-NE have said existing pipelines are inadequate to supply the generation base, especially as more natural gas generation enters the power plant portfolio and older coal-fired plants retire.
The GDF SUEZ report says pipeline projects already underway are enough to meet peaking needs. It cited several projects, including Spectra Energy’s Algonquin Incremental Market Project and the Atlantic Bridge Project, which are expected to increase capacity by 600 million cubic feet per day by the winter of 2017-2018. (See Hearing on Algonquin Pipeline Expansion Highlights Local, National Issues.)
Winter Reliability Program
ISO-NE has used a winter reliability program the past two years to combat tight natural gas supplies that are diverted to heat homes and businesses on the coldest days. The program has created incentives for LNG use and for power generators to store oil on-site for plants that can burn either fuel. The GDF SUEZ report also cites ISO-NE’s Pay-for-Performance program, set to debut in 2018, as another reason additional pipelines are not needed.
“The issue is not lack of infrastructure but insufficient commercial contracts to access existing energy,” the report says. “The market is responding with dual-fuel capability and LNG contracts. This past winter 2014/15 has demonstrated the powerful ability of competitive natural gas and electricity markets to respond to price signals,” it adds.
The ANGA/API report counters that energy infrastructure constraints have cost the region at least $7.5 billion over the past three winters. “Pipeline infrastructure has not kept pace with this increased demand and is reaching maximum capacity, especially during the winter months, to meet both electricity generation and space heating demands,” it said.
The authors said their study is more comprehensive than other analyses that considered only a single type of infrastructure. It includes a scenario in which no new additional infrastructure investments are made and an “unconstrained” case assuming $9 billion in spending for natural gas pipelines, electric transmission and generation.
A federal district court judge in North Dakota has blocked the Environmental Protection Agency’s new water pollution rule just hours before it was to go into effect. Judge Ralph Erickson issued a preliminary injunction blocking implementation of the rule in 13 states that had joined the suit. But a day earlier, a judge in West Virginia ruled in favor of the Obama administration and declined to interfere with EPA’s rule.
The lawsuits are among 10 court challenges against the water rule filed by 29 states, along with groups representing the energy industry, real estate developers, farmers and others. The cases have been consolidated into one lawsuit at the Court of Appeals for the Sixth Circuit in Cincinnati, but Erickson argued that he could still issue his injunction.
The so-called Waters of the United States rule redefines and expands EPA’s jurisdiction under the Clean Water Act. An EPA spokeswoman said the rule would go into effect in the states that did not join the suit blocking the rule. The 13 states where the rule is on hold are: Alaska, Arizona, Arkansas, Colorado, Idaho, Missouri, Montana, Nebraska, Nevada, New Mexico, North Dakota, South Dakota and Wyoming.
US Economic Growth at 9-Year High, If You Ignore Energy
The U.S. economy grew at the fastest rate in nine years — if you don’t count energy, according to Bloomberg Business.
The plunge in oil and natural gas prices, along with the bleak outlook for coal, show an energy sector under pressure.
Investment in oil and mining projects by corporate investors fell 68% between April and June, following a 44.5% plunge for the January to March period.
Penn State Gets $2.9 Million to Study New PV Panels
Electrical and mechanical engineering teams at Pennsylvania State University are working with experts at the University of Illinois and a photovoltaics company in Durham, N.C., to develop the next generation of solar panels, inspired by technology used in spacecraft.
The teams have received $2.9 million from the Department of Energy’s Advanced Research Projects Agency-Energy (ARPA-E) to work on what they call “fixed-tilt photovoltaic cells.” The cells use plastic “lenslets” and a tracking system that follows the sun to concentrate sunlight at 400 times intensity. The panels are constructed of common materials, such as Plexiglas, which reduces construction costs.
The technology aims to exploit the high-efficiency solar cells installed on spacecraft to generate power.
President Obama used his platform at last week’s National Clean Energy Summit in Las Vegas to urge further investment and research on renewable energy. “This is not the time to pull back” on working on renewable technology and implementation, he said.
“We refuse to surrender the hope of a clean energy future to those who fight against it,” he said. He noted that some firms that used to be concentrated on fossil fuel technology, such as Southern Co., are beginning to make serious investments in renewable energy.
Increasingly, individuals are driving the movement, he said. “People are beginning to realize they can take more control over their own energy — what kind they use, how much and when,” he said.
Appeal of EPA Clean Power Plan on Accelerated Timetable
The D.C. Circuit Court of Appeals panel hearing challenges to the Environmental Protection Agency’s Clean Power Plan have agreed to an expedited pace for the case and ordered both sides to file their major legal arguments before the Labor Day weekend.
Those challenging the plan — state and industry groups — say the expedited schedule puts them at a disadvantage. States challenging the Clean Power Plan said the Aug. 3 promulgation of the rule is forcing them to develop sweeping regulatory changes before the legal challenges to the rule are heard.
Some observers say EPA’s push for a hurried schedule can be attributed to the planned global summit on climate change to be held in December in Paris. The Obama administration’s EPA says it wants the rule in place before the summit so that it “shows the world that the United States is committed to leading global efforts to address climate change.”
Schumer Proposes Extension, Changes to Solar Tax Credit
Schumer
Sen. Charles Schumer (D-N.Y.) is proposing changes to the federal solar investment tax credit that would extend the credit and make it apply to more businesses.
The tax credit, scheduled to phase down from 30% to 10% after 2016, would be extended “beyond 2016,” he said. One reason for the longer timetable is to allow large-scale solar projects to develop. A phase-down of the credit is making it difficult for developers to secure financing.
Schumer also wants the tax credits to apply earlier in a project’s life than currently allowed, which provides that solar-panel owners can get tax credits only when the system is placed in service. In contrast, wind tax credits are applied as soon as a project begins construction.
ST. PAUL, Minn. — MISO has a pile of 22 active recommendations made over the years by its Independent Market Monitor, all in various stages of progress.
One, which would optimize the interchange and improve price convergence with PJM and SPP, dates back to 2005.
“We are working through all those,” Jeff Bladen, MISO’s executive director of market design, said at last week’s Markets Committee of the Board of Directors. Bladen said action on some items has been delayed by technology upgrades and others by the need to reach agreement with neighboring regions.
His update on the status of Monitor David Patton’s State of the Market recommendations was instructional about the roadblocks that can stand in the way of even what arguably are the best ideas.
Dependencies
Of 15 past recommendations through the 2013 State of the Market Report, MISO is working to implement six. Two are “externally dependent” and the other two are “infrastructure-dependent.” Five are still being evaluated: one from 2008 and two each from 2010 and 2012.
Perhaps the best-known externally dependent recommendation is to eliminate the hurdle rate involving transfer of power between MISO’s southern and central regions, the subject of settlement talks with SPP. The IMM has recommended collecting transmission costs that may be payable to SPP and other parties under the settlement through a fixed charge. (See related story in MISO Market Committee Briefs.)
As an example of an infrastructure-dependent recommendation, Bladen cited a five-minute real-time settlement for generation, which he said is dependent on rule changes and replacement of the RTO’s settlement software. A virtual spread product is another example.
Board Chair Judy Walsh called for urgency on technology upgrades needed to address some recommendations, saying they should be identified by staff and vetted by the board “sooner rather than later.”
Director Baljit “Bal” Dail said he was curious if MISO tracks the time it takes to “close out” a recommendation. “I’m just trying to get a sense of [whether] things are progressing at the pace they should be progressing,” Dail said.
Bladen said MISO does not have such a metric but that it might be worth considering.
ELMP
Director Paul Feldman noted a past recommendation that has come to fruition — extended LMP — and asked whether it has achieved expectations.
ELMP allows fast-start resources that are either scheduled at limits or offline to set price, an effort to smooth price spikes and minimize uplift. (See “Extended LMP Starts” in MISO Board of Directors Markets Committee Briefs.)
Bladen said ELMP “has met our rather modest” expectations since it was initiated March 1. “We’ve seen noteworthy changes in price that reflects the kind of change we would have thought should occur given the design,” he said.
Bladen said MISO staff would provide a fuller report at the November Markets Committee meeting, when it will have eight months of operating data under the new rules.
Director Michael Curran drew laughter when he recommended that MISO provide a “scientific, wild-ass guess” as to when a recommendation might be completed.
Curran also recommended that staff include a chart indicating what recommendations have already been implemented. “Otherwise you’re just looking at backlog and not really getting the credit you should for the successes you’ve had,” he said.
The owner of the Cayuga power plant near Ithaca last week filed its second revised proposal to repower the 312-MW facility from coal to natural gas (12-E-0577).
Cayuga Operating Co. had previously sought to mothball the facility in 2012, but the New York Public Service Commission determined the plant was needed to maintain system reliability. The company also has a reliability support services agreement from 2013 with New York State Electric and Gas that runs through June 2017.
Cayuga filed its first repowering proposal in February 2015 after negotiations with NYSEG failed to produce a joint agreement. NYSEG has maintained that a transmission alternative is less costly.
Under the new proposal, Cayuga would have NYSEG contribute $49.5 million toward the plant construction and another $96 million over the next 10 years.
The deal faces opposition from locals and environmentalists, as well as the authors of an economic analysis.
“Not only does a ratepayer-subsidized repowering of the Cayuga plant fail to address long-term reliability or economic development needs, it also would be antithetical to New York State and the commission’s ambitious and groundbreaking effort, Reforming the Energy Vision of New York,” Earthjustice told the PSC.
“If Cayuga’s revised repowering proposal is approved, by the 2027 end of the 10-year repowering period, NYSEG customers will have paid more than $265 million to keep the plant operational. There also is a serious risk that ratepayers will be called upon to provide continued subsidies to the facility even after the 10-year term of the proposal ends,” said the Institute for Energy Economics and Financial Analysis in its report.
Entergy has also filed protests in the Cayuga proceeding, using the same arguments it made against the Dunkirk project, saying subsidized payments interfered with FERC’s jurisdiction over the wholesale market.
ST. PAUL, Minn. — FERC Commissioner Tony Clark told the MISO Board of Directors meeting last week that the biggest surprise in the Environmental Protection Agency’s final carbon emission rule was that it put a “bull’s-eye” over MISO and SPP, giving their states the toughest compliance targets.
Clark said he was optimistic that the electric industry will ensure reliability but that the Clean Power Plan will result in “hundreds of millions [of dollars]” in stranded generation that will be forced to retire before the end of its operating life. There’s “only expensive and really expensive” ways to comply, he said.
Claire Moeller, executive vice president of transmission and technology, said the final rule reduced MISO’s overall carbon limit, tightening caps for eight states and relaxing them for seven. “So most of the input assumptions in [MISO’s modeling based on the draft rule] were dead wrong,” he said. (See MISO: EPA Carbon Rule Will Mean ‘Multibillion Dollar’ Transmission Build-Out.)
Moeller said, however, that the modeling helped planners understand “the intersection” of the gas and electric industries and determine whether the lowest cost compliance means more gas pipelines or more electric transmission. “Unsurprisingly it’s a combination of those things,” he said.
Moeller said EPA’s two-year delay in the interim compliance targets “really didn’t take the pressure off” states because of the long lead time needed for compliance measures.
He questioned EPA’s prediction that the rule will result in a “dramatic” load reduction that will result in reduced end user bills despite the compliance costs. “Lots of people worry about that assumption,” he said to laughter from the audience.
Director Baljit “Bal” Dail agreed, noting that many consumers in MISO’s footprint struggle to pay their day-to-day bills. “The notion that they’re going to go out and upgrade their appliances [to more energy efficient models] is highly unlikely,” he said.
Moeller also criticized the “vagaries” of EPA’s modeling, which will credit existing wind turbines differently from new generators.
He said it is impossible to estimate now what the cost of the rule will be to end consumers because much will depend on how states choose to comply. Moeller noted that Arkansas has no renewable portfolio standard, and little wind power. “Will they build wind or will they retire coal and build new gas [generation]?” he asked.
He said staff will share its plan for analyzing the impact of the final rule at the October board meeting.
Board May Slow Term Limit Transition
MISO’s board is considering slowing the transition to the term limit rule it enacted in June, concerned that a rapid transition could leave it without enough “institutional knowledge.”
Chairman Judy Walsh called on the board last week to amend the rule, which limits directors to three three-year terms.
“Without some thoughtful transition, we will very shortly find ourselves with a majority of our directors who will have three years of experience or less,” Walsh said. “The implementation of term limits will work out that three directors could easily term out in the same year. So I would like to request the Governance committee to consider a transition … to keep greater institutional knowledge on the board and ideally to have only one director terming out each year.”
Corporate Governance & Strategic Planning Committee Chairman Eugene Zeltmann said the committee is already considering the request.
Directors Michael Evans and Michael Curran had expressed misgivings about the term limits at the June meeting. (See MISO Sets Term Limits for Board.)
The three-term limit already comes with a caveat: Directors may petition for a waiver allowing a single additional term upon the determinations by the board and the Governance committee “that a director’s continued service is necessary to retain his or her skills or expertise, to maintain geographic or other diversity of the board, or is otherwise in the best interest of” MISO.
In a related matter, the board discussed guidelines for the Nominating Committee process. Walsh asked for revisions to make it clear that the document “should be helpful to the Nominating Committee but not [too] prescriptive.”
Director Dail said the Nominating Committee is reviewing 29 resumes of director candidates.
TOs Make Joint Order 1000 Filing with PJM
MidAmerican Energy’s Dehn Stevens noted that MISO and its transmission owners made their most recent Order 1000 interregional compliance filing jointly with their counterparts in PJM. The filing was submitted July 31 (ER13-1943).
“This time around we were able to bridge the gap,” Stevens said, calling it “a pretty significant accomplishment.”
Consumers Energy Joins TO Sector
Consumers Energy, which sold off its high-voltage transmission in 2001 to what is now ITC Holdings, was approved last week as MISO’s newest member of the Transmission Owners sector.
The company sold about 5,400 miles of 345-kV and 138-kV transmission and 80 substations in Michigan’s Lower Peninsula, while retaining its radial 138-kV lines.
Jim Anderson, Consumers’ executive director of electric transmission and high-voltage engineering, said the shift in the company’s MISO membership reflected the North American Electric Reliability Corp.’s reclassification of Consumers’ 138-kV transmission as part of the Bulk Electric System (BES).
WILMINGTON, Del. — The Illinois Municipal Electric Agency, which had been working with PJM staff all year to find a way to continue using external capacity to fulfill its internal resource requirements, finally received the approval it had been seeking last week.
Its relief was short-lived, however.
Because the clearing price for the ComEd locational deliverability area separated from out of the RTO’s footprint in the Base Residual Auction last month, the new rules approved by the Markets and Reliability Committee on Thursday only exempt IMEA until the next auction.
“IMEA will be considering how best to manage its resources and its loads over the next several months,” Troy Fodor, vice president and general counsel, told RTO Insider.
“The [reliability assurance agreement] provisions approved by the MRC … solve a problem with the [fixed resource requirement] alternative that IMEA believes needed to be fixed,” he said. “The fact that the auction prices for the ComEd LDA have now separated for the first time does affect IMEA’s ability to fully benefit from the revised RAA provisions, but they are still a positive improvement.
“Moving forward, IMEA will continue to watch for opportunities to have a voice on future decisions regarding self-supply and the proper treatment of external resources.”
The rule change allows load-serving entities to meet their internal capacity requirements using historic resources under certain conditions: The percentage internal resource requirement is enforced only if the LDA has been separately modeled due to certain triggers; an FRR entity is permitted to terminate its FRR alternative election prior to meeting the minimum five-year commitment period requirement under certain conditions; and first-time elections of the FRR alternative are due four months prior to a Base Residual Auction instead of the current two-month deadline. (See “Members OK Rule Change on External Capacity Transfer Rights” in PJM Market Implementation Committee Briefs.)
Stu Bresler, PJM senior vice president for markets, said that while ComEd did bind as a constrained LDA in the auction, “Making these changes puts FRR entities on equal footing if this happens anywhere else. It still has applicability in the near term.”
FERC in January rejected IMEA’s request for an extended waiver that would allow it to use generation resources outside the ComEd LDA to meet its internal resource requirement in serving its Naperville, Ill., load. (See FERC Denies IMEA Request for Extended Waiver on Capacity Obligation.)
That waiver had been granted in May 2014 for the 2017/18 delivery year after the ComEd LDA was modeled for the first time with a separate variable resource requirement curve.
WILMINGTON, Del. — Stakeholders will continue to debate changing the $1,000/MWh energy offer cap at a special four-hour Markets and Reliability Committee meeting called for Sept. 9, but few who weighed in on the issue at last week’s meeting were hopeful that consensus would be reached before the RTO’s board makes a unilateral filing with FERC as early as October.
One proposal, presented by Marji Philips of Direct Energy, would raise the cap to $2,700/MWh for cost-based day-ahead offers and price-based real-time offers — 50% more than the highest offers reported by PJM last winter.
Independent Market Monitor Joe Bowring offered an approach that would allow cost-based offers to exceed $1,000/MWh when short-run marginal costs of a unit top that cap. Market- or price-based offers would have to be less than or equal to such cost-based offers.
“The IMM approach addresses the issue of market power when the overall market is tight,” Bowring said. “That is essential — to address market power — when modifying these rules, which were implemented to address market power concerns.”
Old Dominion Electric Cooperative backed a plan presented in November to the Members Committee that would allow cost-based offers up to $1,800/MWh and permit them to set LMPs.
David “Scarp” Scarpignato of Calpine said a group of suppliers also is drafting a proposal “to help get the discussion going even further” that is expected to be brought to the next Market Implementation Committee.
PJM Backs Proposal
PJM said last month that it would support the Direct Energy proposal. In March, the RTO proposed a $2,700 cap on price-based offers and removing the cap on cost-based offers in a FERC docket on price formation (AD14-14). (See PJM Stakeholders Seek ‘Miracle’ to Break Offer Cap Standoff.)
The effort to raise the cap is intended to ensure that gas-fired generators can recover costs above the cap when fuel prices spike during periods of extreme temperatures, like the polar vortex of 2014. That January, FERC granted a temporary waiver allowing make-whole payments for costs incurred above the $1,000/MWh cap. In January 2015, FERC granted the RTO another waiver that allowed it to compensate generators for offers of up to $1,800/MWh, but PJM made it through the winter without having to invoke it.
PJM’s Board of Managers asked stakeholders to make another attempt to reach consensus after efforts last year fell short.
Philips told the MRC the board wouldn’t wait forever for stakeholders to reach agreement. “The PJM board told stakeholders they were going to file something if we couldn’t get our act together. The last time we did that it was called [Capacity Performance]. As talented as the PJM staff is, we didn’t want them filing for us.”
Philips said the Direct Energy proposal contained “generous” numbers in a “desperate attempt to bring generators on board.”
She said the proposal would create “rational, transparent pricing. … Everyone’s a winner because the market produces the right results.”
Day-Ahead vs. Real-Time
Joe Wadsworth of Vitol said he supported the philosophy of the proposal but was concerned about having different rules for the day-ahead and real-time markets. “I would want to further explore: Does this present a market design issue? … Will having different offer caps have any adverse effects?”
Philips said the difference was justified. “There are very few reasons your gas prices should pop if you are chosen by day-ahead dispatch,” she said. “In real-time we’re willing to have no cost-cap on bids,” as long as everything is reviewed by the Market Monitor, she said.
Susan Bruce, representing the PJM Industrial Customer Coalition, urged caution.
“It is a daunting prospect here to think of two months and redesigning the energy market,” she said. “Our primary concern is market power being exercised during times of high demand. … That has to be addressed in order for us to get comfortable with it.”
John Farber, a staff member of the Delaware Public Service Commission, questioned the benefit to consumers of reducing uplift.
“Uplift serves as a circuit-breaker function for consumers that is worthwhile,” he said. “Bypassing that by putting all the costs in the LMP … the benefit is doubtful to consumers.”
Philips noted that because uplift is not hedgeable, it must be captured in risk premiums.
She also expressed frustration with members saying they appreciated her effort but hadn’t had time to consider the proposal.
“You’ve had over three weeks,” she said. “Coming here today and saying you’ll consider it — that’s a ‘no’ vote. You haven’t had a chance to think about it? We have one month, and you’ve had it for nearly a month.”
‘No Incentive to Compromise’
Gloria Godson of Pepco Holdings Inc. said the board’s intention to make a unilateral filing undermined the stakeholder process.
“The lack of willingness to negotiate is a sad commentary on what happens when the board steps in on issues like this,” she said. “There’s no incentive whatsoever for you to discuss with any other person if you like what the board plans to file. It breaks down the discussion — there is no incentive to compromise.”
Outgoing PJM CEO Terry Boston, ever an outspoken supporter of consensus, urged members to hash out the issue.
“We had this conversation last year, and summer’s almost gone and winter’s coming on,” he said. “We were sitting at this same place last fall, and it is a serious issue.
“I made this comment last year: The California energy crisis was a financial crisis first. … I think we have to get to a point where people know their costs are going to be recovered. It is not something that can just wait on the table, because of the potential of it causing a financial crisis.”
ST. PAUL, Minn. — Registered wind capacity in MISO is projected to rise 50% by the end of 2019 — and that’s not even counting more turbines likely to sprout due to the Clean Power Plan.
MISO’s wind capacity has grown to about 14,000 MW, from 1,200 MW in 2005. Wind represents about 13% of MISO’s installed generation capacity — higher than the 7.5% for nuclear power but still well below that for coal and natural gas.
By 2019, based on its generation interconnection queue, MISO expects to have about 21,000 MW of wind in service.
“The growth of wind has been really, really steady, actually, over time. Projections continue to show similar growth as we experienced over the last five years,” Joe Gardner, vice president of forward markets and operations services, told the Markets Committee of the Board of Directors last week.
MISO officials said it’s too early to tell how the wind projections will change as a result of the Environmental Protection Agency’s final carbon emission rule, released last month. But “it’s going to be a lot bigger,” CEO John Bear said.
While MISO expects 25 GW of wind will be needed to meet existing state renewable portfolio standards, EPA’s modeling assumes the RTO’s wind portfolio will grow to 40 GW, said Claire Moeller, executive vice president of transmission and technology.
Forecasting Improves
Gardner told the board that staff is continuing efforts to improve its forecasting of wind availability, which he said is already “best in class.”
“On any given day we could have close to zero megawatts of wind … and on other days we can have 11 GW of wind. And from one day to the next you can have a swing of 6 or 7 GW,” Gardner said. “So it’s very important to try to get [the forecast] accurate. The more accurate the forecast is, the better our unit commitment is going to be and the lower our production cost is going to result and the more reliable we’re going to be.”
(Click to zoom.)
MISO staff uses an hourly forecast that looks seven days into the future in the reliability unit commitment process and to evaluate outage requests.
A five-minute forecast that extends six hours is used in real-time economic dispatch and look-ahead unit commitment. It also uses wind generators’ own forecasts in economic dispatch, although those are available for only about one-third of wind farms.
Gardner said MISO’s day-ahead wind forecasting accuracy has improved by about 2.5 percentage points since 2009, reducing the error rate to about 5%. The improvement is due in part to the incorporation of weather-prediction modeling; MISO added a fourth weather model in the second quarter.
Gardner said that’s better than the estimated error rate of other grid operators, including PJM’s 4 to 8% error rate, ERCOT (8%) and CAISO (10%).
“Does this forecasting accuracy give you comfort … that we’re not seeing drastic, unexpected shifts in the wind in a short period of time that causes impacts to reliability because of ramping capability in other units in the system?” Board Chair Judy Walsh asked Gardner.
“[It’s] not a huge amount of risk,” Gardner replied. “It’s not so much because of how accurate our forecast is. I think it’s more a result of geographic diversity and where the wind is located.”
He also said MISO plans a number of additional forecasting enhancements, including improved distribution of locational wind forecasts and replacement of vendors whose forecasts have persistent errors.
Solar Outlook Needed
Forecasting also will be needed to accommodate the rise of solar power generation. Gardner said an in-front-of-the-meter solar project is expected in MISO’s footprint in 2017. “So we’re preparing to be able to forecast that and I expect there will be some more [solar] beyond that,” he said.
ST. PAUL, Minn. — MISO officials last week outlined proposals to boost its capacity resources, winning some support for efforts to streamline the generator interconnection process and redraw its zonal boundaries to reflect constraints.
But its proposal to switch from annual to seasonal procurement ran into stiff opposition from the Independent Power Producer and Power Marketers sectors, and states balked at a proposal to replace the interconnection queue with the auctioning of generator sites.
“We don’t have consensus, which shouldn’t surprise everybody, but I think we’re getting very good input,” CEO John Bear said afterward.
Seasonal Procurement Idea Receives Push Back
Bladen said the proposal for seasonal procurement was driven by concerns over the year-round availability of resources such as demand response and generation imports. Bladen said seasonality was one of the top three concerns cited by stakeholders in discussions.
“It goes well beyond demand response. There’s lots of different resource types that have either limitations in terms of the times of year they can offer to commit to MISO or have limitations in terms of the economics of how often they want to be available. Examples might include … imports from other regions that might need to be committed to the other region in some parts of the year.”
Mitch Myhre of Alliant said he was “supportive of what MISO has proposed so far.”
Exelon’s Marka Shaw, of the Power Marketers sector, questioned the need for the change, saying there is a greater need for a long-term price signal to incent generator construction.
“You may have solved a problem with Canada and may have created a problem with PJM because the PJM market doesn’t have a seasonal construct,” she said.
Representing the Independent Power Producer sector, Dynegy’s Mark Volpe agreed, calling PJM MISO’s “most important seam.”
“They’ve got an annual construct there, and [seasonal procurement in MISO] would seem to be at odds with talk of trying to converge capacity products,” he said.
Bladen noted that MISO’s just-in-time capacity procurement is already different from PJM, in which resources commit three years in advance.
“It’s hard to see how that would preclude resources from making the same kinds of decisions in the future that they make today on whether to commit to PJM three years in advance or to think about committing to MISO,” he said. “The perspective we’ve taken so far is having a better price signal that reflects the real loss-of-load expectation in the seasons might actually draw resources to” MISO.
Representing the Public Consumer sector, Nancy Campbell of the Minnesota Department of Commerce backed MISO’s initiative. “We don’t think that the seams issue should [prevent] going forward with the seasonal resources. In fact maybe that’s something we should encourage PJM to do as well.”
NRG Energy’s Tia Elliott, of the IPP sector, questioned why MISO was citing the 2014 polar vortex as justification for the change after saying it was not sufficient for changing the day-ahead energy schedule. “I think that MISO might be talking out of both sides,” she said.
John Moore of the Sustainable FERC Project also supported the effort, saying winter wind should have a higher capacity factor than the year-round 14.7% it is currently assigned.
“In MISO, a 13 to 14% annual capacity factor for wind, and also a relatively low capacity factor for solar, just doesn’t make sense to us. Where wind does very well it’s higher than that. So we think that a seasonal construct would help address that and bring more value to the resources that are out there.”
Calpine’s Brett Kruse said that NYISO and ISO-NE incorporate seasonality in their capacity procurement, with “pros and cons.”
But he said it would do little to make MISO more attractive to generators. “If you honestly think this is going to help with price signals on the capacity side, I got $100 that I’ll bet you right now that it doesn’t do anything,” he said.
The discussion gave Market Monitor David Patton an opportunity to offer a plug for his recommendation that MISO adopt a sloped demand curve similar to that used by PJM and recently adopted by ISO-NE.
Referring to Kruse’s comment in an earlier discussion about the potential for some combustion turbine owners to move them from MISO, Patton said, “It sounds crazy, but it’s not.”
Patton said seasonality wouldn’t necessarily reduce overall capacity costs but could allow efficiencies for owners of some older generators who would like to reduce plant staffing during shoulder months. “Those are good cost savings because they don’t cost other generators money,” he said.
Bladen said the discussion will continue at Thursday’s meeting of the Supply Adequacy Working Group, where stakeholders will discuss how many seasons to consider.
“We haven’t gotten into the details of what the makeup would be: whether it’s a single auction; whether it’s multiple auctions that are prompt; whether it’s two seasons or more than two seasons. We’ve tried to stay a little bit above that at this point, with a recognition that we will need to tackle that,” he said.
State Officials Wary of New Zonal Boundaries
MISO’s proposal to establish local resource zones based on physical constraints also sparked some opposition, even after RTO officials promised any new zones would respect state boundaries.
Michigan Public Service Commissioner Sally Talberg, representing the Organization of MISO States, said OMS favors keeping the existing zones.
Several speakers, including Indiana Utility Regulatory Commissioner Angela Weber, said they feared basing zones on physical limitations would result in “volatility.”
Chris Plante of Wisconsin Public Service Corp. said the Transmission-Dependent Utilities sector does not have “perfect alignment” in their position on the issue. But he said the sector did agree there is a problem in using “snapshot” power flow analyses to determine zones, because new generation, retirements, new transmission and loop flows can impact the results.
“Our concern is if you try to design those zonal boundaries based on those constraints every year, you’re going to have stakeholders coming to you and saying we need to redraw the boundary because something has changed,” he said. “We see already with the [capacity import and export limits and loss-of-load expectations]. They vary from year to year — sometimes dramatically.”
Dynegy’s Volpe said, however, that much of that volatility is due to recent improvements in LOLE analysis, including the lowering of the threshold from 230 kV to 100 kV. “We haven’t had stability in the ground rules around the LOLE study,” he said.
Patton said while the uncertainty caused by continually changing zonal boundaries can be “damaging,” price changes that signal shifts in the supply-demand balance are valuable.
“Defining interfaces that create potential deliverability problems [that] may bind or may not bind … has a huge benefit over a structure like in New York where you’re continually fighting about … whether you’re going to define a new zone.” Failing to define zones consistent with physical transmission limits can result in not purchasing enough capacity on the right side of the constraint, he said. “So you’re exposing yourself to resource adequacy or transmission security problems that would potentially have been easy to avoid if you just quantify how much capacity you have to have on this side of the constraint versus that side of the constraint.”
Patton said creating additional zones to reflect state boundaries is not a problem. “You can’t have too many zones. If you define zones you don’t need, they just don’t bind and the prices equilibrate. The idea that Amite South and WOTAB are not separately recognized as places where we need generation seems really hard to justify.”
Stakeholders Agree on Need to Reduce Interconnection ‘Churn;’ States Oppose Auction of Generator Sites
MISO’s call for reforms to the generator interconnection process drew wide support, but its proposal to replace the interconnection queues with the auctioning of pre-qualified generation sites drew opposition from Indiana’s Weber, who said auctioning might undermine state jurisdiction.
Dehn Stevens of MidAmerican Energy said the Transmission Owners support measures to reduce “churn.”
“There’s nothing more frustrating than to have something like three of every four projects we look at as owners … never actually get built,” he said. “It’s a very inefficient use of our internal resources.”
“If you’re providing cost certainty to a generator that’s interconnecting, but the costs differ [because of other generators dropping out of the queue], you can be basically moving costs onto the transmission owner or its … customers.”
Beth Soholt of Wind on the Wires said she was concerned that MISO proposals to increase the cash at risk for those in the generation interconnection queue could be a barrier to entry.
“In each queue reform process, we have put different mechanisms in place for the different milestones. So we’ve gone from really a portfolio option, or a smorgasbord of options, for interconnection customers on readiness — site control and the whole raft of things they can do to prove readiness to move through the queue — we’ve really gone to [requiring] a large pile of cash at risk.”
Soholt added that wind developers are willing to put more cash at risk if it leads to more certainty about costs of transmission upgrades they would be required to pay. “But that certainty has been elusive through several rounds of queue reform,” she said.
Next Steps
MISO and stakeholders will refine the seasonal and locational proposals in joint meetings of the SAWG and the Loss of Load Expectation Working Group through December with hopes to make changes effective for delivery year 2017/18.
The interconnection changes will be discussed by the Interconnection Process Task Force with a projected implementation in August 2016.
MidAmerican Energy’s Stevens said MISO’s timeline is “very aggressive” for such large changes.
“I would question the supposition that the sky is going to fall in two or three years with the reserve margins. I think we saw in this last update [to the MISO-OMS survey] that the shortfall moved out a year or two. Sure seems like you might see that again in a year that the shortfall is moved out,” he said. “You are going to be better served getting it right and having fewer than 150 people fighting you at FERC.”
Capital spending to comply with the Obama administration’s environmental regulations is dinging the credit outlook for Alliant Energy, parent company of Wisconsin Power and Light and Interstate Power and Light in Cedar Rapids, Iowa.
DTE Energy is planning to build a 2,800-panel solar farm in Ypsilanti, Mich., by the end of next year. The 800-kW facility would power about 150 homes.
A Duke Energy proposal to build a 45-mile transmission line and a new substation in South Carolina to serve growing demand in western North Carolina drew about 800 people to a public hearing.
Two Philadelphia businessmen, operating under the moniker Delaware Station LLC, have put down $3 million for the old Delaware Generating Station, formerly operated by Philadelphia Electric Co. They hope to convert the 16-acre property on the Delaware River to one or more hotels, as well as a shopping and catering complex.
FirstEnergy has begun tearing down its retired Lake Shore Generating Station in Cleveland, a process that is expected to take about 16 months. The first steps are a full site survey and the demolition of several smaller outbuildings.
BP restarted a crude distillation unit at its giant Indiana refinery near Chicago last week, a move that is expected to put the brakes on spiking gasoline prices in the Midwest.
Dominion Resources, owner of Millstone Station nuclear plant, has reached a settlement with the Nuclear Regulatory Commission for its decision to halt the use of a safety-related pump in the event of a severe accident.
