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January 7, 2025

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ISO-NE in 2025: Capacity Reforms, Tx Solicitation and FERC Orders

ISO-NE’s multiyear effort to overhaul its forward capacity market likely will continue to dominate ISO-NE and NEPOOL work in 2025. The RTO’s workload also will feature a first-of-its-kind transmission procurement, compliance with FERC Orders 2023 and 1920, the development of an energy shortfall threshold and a myriad of other efforts focused on balancing affordability, reliability and decarbonization.  

The capacity market already is a major revenue source for generators in the region and is poised to gain value as renewables supported by long-term contracts reduce prices in the energy market. 

The RTO anticipates total revenue from the capacity market and power purchase agreements surpassing the value of the energy market by 2035. The capacity market was valued at $1.8 billion in 2023, while the energy market was valued at $4.8 billion.  

Meanwhile, resource capacity accreditation changes, which have been under development since 2021, could significantly affect capacity revenues for different resource types. 

ISO-NE has broken up the capacity auction reform (CAR) project into two phases, with the first phase focused on reducing the time between the auction and the capacity commitment period from years to months, and decoupling the resource retirement process from the capacity market. 

The RTO plans to ramp up work with stakeholders on the detailed design for the first phase in early 2025, targeting a FERC filing by the end of the year. (See NEPOOL Markets Committee Briefs: Dec. 10, 2024.) 

The second phase of the CAR project will focus on accreditation and seasonal reforms, which would split CCPs into distinct seasons with separate auctions. ISO-NE plans to begin discussions on these changes at a high level in 2025 before moving into more detail by the end of the year. It plans to file the second phase with FERC in late 2026.  

The RTO reached an advanced stage with its accreditation reforms in early 2024 before pausing this work to widen the project scope. (See ISO-NE: RCA Changes to Increase Capacity Market Revenues by 11%.) ISO-NE told stakeholders in December that it plans to “explain and discuss all proposed changes to capacity accreditation … as if they are being presented for the first time.”  

New Transmission and Aging Infrastructure

Also in 2025, the RTO is set to roll out its first request for proposals (RFP) for its longer-term transmission planning (LTTP) process, and likely will have to devote significant resources to complying with FERC Orders 1920 and 1920-A.  

The LTTP process was developed by the New England states and ISO-NE and approved by FERC in July. It creates a process for selecting and paying for transmission projects to fulfill long-term needs identified in ISO-NE studies. (See FERC Approves New Pathway for New England Transmission Projects.) 

In December, the states officially directed ISO-NE to develop the first LTTP RFP, which will be focused on increasing the north-to-south transmission capacity in Maine. ISO-NE plans to issue the RFP by March. (See ISO-NE to Work on State-backed RFP for Northern Maine Transmission.) 

The LTTP process mirrors many of the requirements of FERC Orders 1920 and 1920-A, which direct transmission providers to adopt long-term transmission planning procedures and establish cost-allocation methods with the states. Order 1920 compliance filings will be due in the summer of 2025.  

| Vineyard Wind

Prior to the release of Order 1920-A, ISO-NE paused stakeholder discussions on Order 1920 compliance, citing uncertainty regarding the pending rehearing order. It has yet to resume compliance discussions and has not announced whether it will pursue an extension of the compliance deadline. (See ISO-NE Announces Pause of Order 1920 Compliance Discussions.) 

The orders do not directly require changes to the LTTP process. However, using parts of the LTTP process to comply with the orders would “require extra justification and could result in commission modification to those processes on compliance,” Day Pitney LLP, counsel for NEPOOL, said in a December presentation.  

“The LTTP provisions might be better as an entirely separate supplemental process under the tariff,” Day Pitney added. “ISO, the [relevant state entities], the [participating transmission owners] and NEPOOL will need to consider.” 

2025 also will bring continued scrutiny of asset condition projects, which are intended to address deteriorating transmission infrastructure. Asset condition spending by the region’s transmission owners has ballooned in recent years, and states and consumer advocates have raised alarms about a lack of transparency and oversight into the investments.  

The region’s transmission owners have introduced over $3 billion in asset condition investments since the start of 2023, arguing that the investments are necessary to maintain the region’s aging grid. The states have pushed for reforms to the asset condition project review processes to ensure the investments are prudent, and also have expressed interest in right-sizing projects to capture long-term cost reductions when possible. 

Interconnection

ISO-NE and stakeholders still are waiting for a response from FERC on their compliance filings for Orders 2023 and 2023-A. The RTO submitted its compliance filing in May, requesting that FERC approve the proposal by Aug. 12 to preserve the compliance timeline.  

However, FERC has yet to rule on the RTO’s compliance filing for Order 2023, and ISO-NE has paused its work to implement its compliance with the order.  

This delay has created significant uncertainty for projects in the interconnection process. The queue is closed for new projects, and likely will reopen only after the completion of the first cluster study, which will take about a year to complete after its initiation. If FERC requires significant revisions to ISO-NE’s proposal, this could further delay the start of the first interconnection study. (See New England Clean Energy Developers Struggle with Order 2023 Uncertainty and With FERC Inaction, ISO-NE Delays Order 2023 Implementation.) 

“A commission order on the compliance proposal is sorely needed to help alleviate existing interconnection challenges and to provide certainty to both stakeholders and ISO-NE,” the New England States Committee on Electricity (NESCOE) wrote in a letter to FERC in late November.  

“The continued uncertainty around the timing of an order places ISO-NE on a tightrope where it is forced to balance the need to be postured to move quickly toward compliance once an order is issued with the need to continue to process resources under the currently effective tariff,” NESCOE added. 

At the state level, Massachusetts Energy Secretary Rebecca Tepper has said interconnection reform will be a major focus for Bay State energy officials in 2025. (See Overheard at Raab Electricity Restructuring Roundtable: Dec. 13, 2024.) 

Reliability Backstops and Fossil Resources

ISO-NE also aims to establish a regional energy shortfall threshold (REST) in 2025, which likely will be a key factor in potential future out-of-market reliability actions to retain resources or ensure an adequate supply of stored fuel. 

In November, the RTO said it plans to base the REST on two key metrics: normalized unserved energy over a 72-hour period — intended to capture the intensity of an energy shortfall — and total shortfall duration. (See ISO-NE Details Regional Energy Shortfall Threshold Metrics.) 

ISO-NE plans to finish discussions on the REST metrics in early 2025 before proposing an initial risk threshold to stakeholders in March or April. These discussions could pose difficult questions about how much the region is willing to pay for reliability, and to what extent it will keep fossil resources online to support reliability as renewable generation increases. 

The RTO’s inventoried energy program, which compensates fossil resources for maintaining fuel storage on-site in the winter, is set to expire in the spring of 2025. The RTO has yet to announce whether it plans to bring the program back for future winters. 

In 2024, New England saw the closure of the 1,400-MW Mystic Generating Station, while Granite Shore Power announced its plans to retire Merrimack Station, the region’s last remaining coal plant, by 2028. While the coal generator struggled to pass an emissions test throughout 2023, one of the station’s two units passed the emissions test in July 2024. The other unit is not allowed to run until it passes the test.  

Carbon emissions from electricity generation across New England likely increased in 2024 relative to 2023, according to ISO-NE data calculated through Nov. 25. The added emissions came from increased gas generation and do not account for gas system methane leaks, a key driver of climate change. (See Climate Activists Ask ISO-NE Board Members for More Transparency.) 

ISO-NE has faced continued pressure from activist groups at public meetings to take a more activist approach to reducing power sector emissions. ISO-NE has said frequently it favors putting a price on emissions in the wholesale markets but would need unanimous state support to pursue this mechanism.  

Consumer and environmental advocates also criticized for a lack of transparency into the proceedings of NEPOOL and the RTO’s board of directors. NEPOOL meetings remain closed to nonmembers, which has been a major point of contention for some environmental groups. 

State Clean Energy Policy

To ensure resource adequacy amid the clean energy transition, new capacity additions must keep pace with resource retirements and load growth. ISO-NE projects peak demand to grow from about 24,800 MW in 2024 to 25,700 MW in 2030. The RTO expects load growth to accelerate after 2030, projecting peak demand reaching up to 57 GW in 2050.  

New renewables are on the horizon — Vineyard Wind 1 and the New England Clean Energy Connect transmission line could come online by the end of 2025, potentially adding about 2 GW of combined generation capacity to the system. However, the subsequent wave of offshore wind projects likely will not be online until 2030.  

The obstacles to large-scale renewable deployment are daunting; state policymakers and advocates face a less friendly federal administration, increasing costs and long delays for offshore wind projects and transmission lines, and mounting affordability pressures on ratepayers. 

Two offshore wind projects, New England Wind 1 and SouthCoast Wind, remain in contract negotiations following their selection in the 2024 tri-state offshore wind solicitation. Connecticut declined to buy any offshore wind capacity from the solicitation amid worries about costs. (See Connecticut Closes the Door on 2024 OSW Procurement.)  

New England states likely will pursue major new procurements in 2025, potentially building on the 2024 multistate coordinated offshore wind procurement. Massachusetts is authorized to pursue multistate clean energy solicitations through the end of 2025 and may pursue an additional offshore wind solicitation. 

Maine is considering procurement of onshore renewable generation in the northern part of the state and also is developing its first offshore wind solicitation. Its first offshore wind RFP is scheduled to be finalized in January 2026. 

New England officials have discussed the possibility of more transmission lines to Canada, which may be bolstered by an agreement in December between Eastern Canadian provinces that could lead to a significant increase in the country’s hydropower capacity.  

With additional transmission capacity, Canadian hydropower could help balance renewable resources in New England, reducing reliability costs and renewable curtailment. While political and technical challenges remain, top energy officials in both Massachusetts and Quebec have expressed an interest in exploring the potential of new interregional transmission lines to unlock this potential. (See Overheard at Raab Electricity Restructuring Roundtable: Dec. 13, 2024.) 

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Uncertainty Clouds NJ Clean Energy in 2025

Amid nationwide concern about the impact on clean energy initiatives of President Trump’s return to the White House, New Jersey in 2025 faces the added uncertainty of a governor’s race to replace clean energy champion Gov. Phil Murphy and his release of a new energy master plan.

Murphy (D), who will step down in January 2026, has in his seven years in office aggressively pushed solar and offshore wind projects and the adoption of electric vehicles. His energy master plan could help shape the state’s energy use for years.

Yet the lack of clarity over what leadership comes next could complicate the state’s efforts to keep on track Murphy’s ambitious goals, which include developing 11 GW of ocean wind capacity by 2040, adding another 130,000 EVs on the road by the end of 2025 and launching a new Storage Incentive Plan (SIP) this year to provide stability to the state’s growing reliance on electricity.

“It is still, definitely a race to the finish line for the Murphy administration’s clean energy priorities,” said Doug O’Malley, director of Environment New Jersey. “There’s a real moment in the Trump era for gubernatorial candidates to talk about their plans for climate action and clean energy.”

The state’s last master plan, issued in 2020, formed the foundation of Murphy’s energy policy based around electricity. To date, that has included four solicitations of offshore wind projects and the adoption of the Advanced Clean Cars II act and the Advanced Clean Trucks rules, which took effect Jan. 1. Murphy also promoted the transformation of building heating and hot water systems to run on electricity.

Offshore Wind Challenges

The state’s biggest challenge in 2025 could be maintaining momentum in the state’s OSW projects. Since Ørsted abandoned two of the state’s three most advanced projects — Ocean Wind 1 & 2 — in October 2023, the state’s leading project has been the 1,510-MW Atlantic Shores, which received its Construction and Operations Plan approvals from the Bureau of Ocean Energy Management in October 2024.

To help the developer adjust to the changing OSW financial and supply chain environment, it submitted a rebid in the New Jersey Board of Public Utilities’ fourth solicitation. The BPU, which was scheduled to announce the solicitation outcome in December 2024, has yet to do so. And the BPU also expects to launch a fifth OSW solicitation in early 2025.

In addition, another project — Leading Light Wind, one of two projects totaling 3,742 MW of capacity endorsed in the state’s third solicitation in January 2024 — is struggling to advance. After the developer said it was looking for a new turbine manufacturer, the BPU extended by two months to the end of 2024 a deadline by which the developer should make “significant financial obligations.” (See New Jersey BPU Approves Invenergy Offshore Wind Delay.)

On Dec. 19, developer Invenergy Wind Offshore filed a motion with the BPU asking for an extension of the delay until May. The project supported its request by saying the “wind equipment market continues to experience significant price volatility, and the company has not yet identified a solution to that volatility.”

Vigorous Debate

Elsewhere, the Murphy administration is striving to reach the governor’s goal, set in February 2023, of electrifying 400,000 more dwelling units and 20,000 more commercial spaces or public facilities by December 2030. And the governor, after announcing in December that the number of EVs in the state has doubled since 2022 to 208,000, continues to push for more growth and more charging points. The state currently has 4,000 chargers in place, he said.

Those plans likely will be subject to debate in the gubernatorial race, said Sen. Bob Smith (D), who heads the Senate Environment and Energy Committee, which shapes many of the Legislature’s clean energy bills. Six Democrats and eight Republicans have announced their intent to seek the governor’s office.

“There is going to be a very vigorous discussion of energy policy and where New Jersey gubernatorial candidates see our energy policy going” on both sides of the aisle, he said.

Even if a pro-clean-energy governor is elected, he said, Trump’s presence in the White House “would mean New Jersey would have to do more on its own and not in partnership with the federal government.”

Master Plan Divisions

The state’s current master plan calls for the state to reach 100% clean energy by 2050, mainly by improving energy efficiency and shifting to wind and solar generation. The new plan was scheduled to be completed by the end of 2024, ready to form the cornerstone of a state “comprehensive climate action plan” to be released in 2025, Murphy’s Office of Climate Action in the Green Economy has said.

The release of the report is likely to be contentious, as were the four public hearings held by the BPU in the spring, when environmentalists said the last master plan had been too weak and the next one should be tougher. Business groups, who have long complained that the last master plan did not include an analysis of the cost of implementing the plan, said that should be a priority in the next report. (See NJ Wrestles with Clean Energy Priorities.)

As in many states, clean energy supporters say the state’s grid needs to be strengthened to handle a future electricity demand surge that BPU officials predicted in October 2024 will increase by 20% by 2034. (See NJ Offshore Infrastructure Plans Spark Electromagnetic Fears.)

“We have a grid that doesn’t work,” said Smith. “We’re not investing enough in it. … As a result, even if we get wind moving at a decent rate, and that hasn’t started yet, you’re going to have some trouble in getting the renewable energy where it needs to be.”

Ray Cantor, a lobbyist for the New Jersey Business & Industry Association, agreed the state needs to “ensure our electrical grid has adequate resources and remains reliable.” His organization, one of the state’s largest business groups, wants it done in a “manner that is affordable and reliable,” he said.

Yet there is little agreement on how to do it. A bill sponsored by Smith to appropriate $300 million for grid upgrades has not moved since leaving his committee in March. He said he thinks public sentiment may not be ready to endorse the necessary investment in 2025 until the state suffers even more extreme weather impact than the recent run of storms, wildfires and heat waves.

Stimulating Storage

Also on the state’s agenda is the BPU’s SIP initiative, which is designed to help the state reach 2,000 MW of installed storage in the state by 2030 and provide stability to an energy system based on the vicissitudes of wind and solar power.

The proposal, for which the state gathered stakeholder input in November and December, seeks to stimulate storage development through two programs: one to be launched in 2025 that would offer fixed incentives for grid supply projects; and another to offer fixed incentives for distributed energy projects, with a 2026 launch date. (See Developers Seek Deadline Extension in NJ Storage Plan.)

Solar supporters see the storage program, and new remote net metering rules, as important for continued solar growth. The state, with a goal of 12.2 GW of installed capacity by 2030, was expected to reach 5 GW of capacity in 2024. But the latest BPU figures, for the first 10 months of 2024, show the state installed 201,935 kW in the period. At that rate, the full-year capacity installed would fall short of the 447,697 kW installed in 2023.

Fred DeSanti, executive director of the New Jersey Solar Energy Coalition, estimated the state’s residential solar installations in 2024 were 25% lower than the year before, commercial projects were down 50% and community solar was down 66%.

A key issue to be addressed in 2025, he said, is that the “solar sector is still struggling with utility interconnection cost issues and the number of circuits now closed or severely restricted to new solar installs statewide.” Those issues can be addressed by electric delivery companies, he said, adding that to make those changes there also needs to be a “rational split of costs between ratepayers and solar developers.”

“Ratepayers need to make some meaningful contribution toward grid modernization,” he said.

EV Advance

In the EV sector, the New Jersey Coalition of Automotive Retailers is skeptical the governor’s 200,000 EV milestone means the state can reach its 330,000 EV goal.

President Laura Perrotta said New Jersey consumers in 2024 bought fewer than half the 100,000 EVs sold that is required by the ACCII rules. The rules require that 23% of vehicles sold in 2024 in the state are EVs, far larger than the actual figure of 11.2%, she said. Sales were hampered by the state’s decision in 2024 to remove a sales tax exemption on EV purchases and to add a registration fee of $250 a year for four years on the purchase price of an EV to pay for road repairs.

Pam Frank, CEO of ChargEVC, a nonprofit coalition that promotes the sustainable growth of the EV market, said the state has passed through the “early adopter” phase to the “mass market” era. Despite the added fee, the sales tax loss and the state’s reduction of incentives for all buyers except those on a low income, “the good news here is that the industry is moving along pretty well,” she said.

The state in 2025 should see the rollout of EV chargers along the New Jersey Turnpike and Garden State Plaza, which at present host mainly Tesla chargers, she said. Applegreen NJ Welcome Centres in 2023 committed to installing chargers on the state’s two highway arteries, with 80 installed by the end of 2025. (See NJ EV Charger Plan Advances as Enviros Demand ACC II Adoption.)

In addition, she said, her organization is helping put together the state’s first ever EV car show, a four-day event in April that will be held at the state’s largest mall, American Dream in East Rutherford.

“We’re hoping to make it the largest gathering of EVs on the East Coast,” she said.

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SMR Manufacturer, Texas and Utah Sue NRC Over Licensing Requirements

Two Republican state attorneys general and micro nuclear reactor firm Last Energy filed a lawsuit in federal court seeking an easier regulatory hand from the Nuclear Regulatory Commission on small reactors. 

Attorneys general in Texas and Utah signed onto the lawsuit that was filed Dec. 30 in the U.S. District Court’s Eastern District of Texas, Tyler Division (6:24-cv-00507). 

“With a preference to build in the United States, Last Energy nonetheless has concluded it is only feasible to develop its projects abroad in order to access alternative regulatory frameworks that incorporate a de minimis standard for nuclear power permitting, limiting requirements with a consideration of proportionality to the risk embodied in the technology,” the lawsuit said. 

Last Energy builds very small reactors of 20 MW that operate inside fully sealed containers with 12-inch-thick steel walls and thus have “no credible mode of radioactive release even in the worst reasonable scenario,” said the complaint. 

The firm has deals to build more than 50 reactors in Europe and has invested $2 million to set up a factory in Texas. But unless the NRC dials back regulatory requirements for small reactors, the lawsuit argued, its business would never get off the ground in the United States. 

The NRC, despite its name, does not really regulate new nuclear reactor construction so much as ensure that it almost never happens, the lawsuit said. The NRC’s interpretation of its regulations goes against congressional intent, which the lawsuit argued was to exempt small reactors that do not use significant amounts of nuclear material from federal licensing requirements. 

“The NRC imposes complicated, costly and time-intensive requirements that even the smallest and safest SMRs and microreactors — down to those not strong enough to power an LED lightbulb — must satisfy to acquire and maintain a construction and operating license,” the lawsuit said. “These requirements threaten the health and prosperity of Texans by hindering the rollout of safe and reliable power — precisely the sort of thing that Last Energy could provide.” 

The Atomic Energy Act of 1954 authorizes the NRC to require licenses only for reactors “capable of making use of special nuclear material in such quantity as to be of significance to the common defense and security, or in such a manner as to affect the health and safety of the public.” 

As written, the lawsuit said the Atomic Energy Act appropriately requires licensing for large nuclear power units, but those that use only a little nuclear material should be exempt, the lawsuit said. 

“To be clear, this regime hardly gives free rein to operators of even small, safe reactors,” the lawsuit said. “Such operators still must comply with the NRC’s stringent oversight of the special nuclear material that fuels reactors, not to mention state regulation, export controls, restrictions on nuclear weapons production, and prohibitions on weapons- grade nuclear material. Further, state governments would retain, and likely exercise, their traditional power to regulate power generation within their borders.” 

An earlier version of the act passed in 1946 gave atomic regulators licensing authority over “any equipment or device capable of making use of fissionable material,” but the lawsuit argued that in 1954, Congress deliberately narrowed that authority with thresholds related to national security, and health and safety. 

When NRC’s predecessor agency implemented the new law in 1956, it kept the broader licensing requirements in place and did not explain why any reactor used enough material to “be of significance to the common defense and security, or in such manner as to affect the health and safety of the public.” 

NRC has exempted tiny research reactors like the five-watt reactor at Texas A&M University, which is barely strong enough to power a small LED lightbulb. 

The lawsuit wants the court to require the NRC to implement a new rulemaking that considers the statutory limits around smaller reactors, and to declare that Last Energy’s proposed small modular reactors and microreactors “are not utilization facilities” under the Atomic Energy Act. 

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Data Centers and Demand Growth Top 2025 Agenda

Apart from the November election, the issue that has been utterly inescapable is data centers and their insatiable appetite for power. 

From conferences to utility earnings calls to state and federal regulatory meetings to a growing library of reports and research papers, the electric power industry has debated, discussed and wrestled with how to provide the gigawatts of demand from the data centers that are sprouting like mushrooms across the country.  

These increasingly mammoth facilities used for new artificial intelligence services are disrupting traditional utility and regulatory planning models and could accelerate the pace of change across the industry. 

Former FERC Chair Neil Chatterjee noted that winning the AI race with China has become a national security imperative. Consequently, demand growth from data centers is “going to totally upend energy policy and the conventional wisdom that Republicans are for fossil fuels and Democrats are for green energy,” Chatterjee said Dec. 5 at the U.S. Department of Energy’s Deploy 2024 conference. 

“We’re going to need every available electron and … every available megawatt,” he said. “We’re going to figure out energy efficiency, demand response, virtual power plants. How can we get grid-enhancing technologies [online]? How can we get greater optimization for our current grid? All of this will be essential to winning the AI race while simultaneously bringing down the cost of electricity for consumers.”  

The data center dilemma centers first on a familiar mismatch of timescales. Utilities and their regulators tend to plan based on the small, incremental demand growth that has been the norm over the past two decades at least. Planning, approving and building new generation can take three to five years or more. New transmission can take a decade.  

But data center development moves at ever-increasing digital speed, with tech giants like Google, Amazon and Microsoft planning and building new “hyperscale” facilities in two years or less. These companies also have committed to powering their operations with clean energy and have started looking for carbon-free electricity outside established business and regulatory models. 

Google has been on the cutting edge, with recent announcements of a new “clean transition tariff” in partnership with NV Energy, bringing major amounts of previously untapped geothermal power to Nevada’s grid. The company also rolled out a first-ever power purchase agreement for nuclear power from small modular reactors being developed by Kairos Power. 

Microsoft made headlines with its agreement with Constellation Energy to reopen a reactor at the shuttered Three Mile Island nuclear plant in Pennsylvania and its plan to buy 500,000 metric tons of carbon dioxide removal credits over six years from 1PointFive, a carbon removal developer. 

Just how much power will be needed is a moving target. A much-cited figure, traceable to a May 2024 analysis from Goldman Sachs, is that a ChatGPT query can consume nearly 10 times as much electricity as a standard Google search. Also released in May, a report from the Electric Power Research Institute estimated data centers would consume 9% of U.S. power by 2030.

More recent figures from the Lawrence Berkeley National Laboratory show that data centers, which accounted for 76 TWh, or 1.9%, of U.S. energy demand in 2018, hit 176 TWh, or 4.4% in 2023. LBNL predicts future growth ranging from 325 to 580 TWh by 2028, or 6.7 to 12% of total U.S. energy demand.  

The numbers for individual utilities are equally dramatic. As part of a new “Silicon Prairie” region attracting hyperscale development, the Omaha Public Power District put 1 GW of additional capacity online in 2024 and expects to almost double its generation capacity, from 3.6 GW to 6.8 GW, in the next five years, according to CEO Javier Fernandez.  

Georgia Power estimates a threefold increase in power demand from data centers and other economic development by mid-2030, from its current 12.2 GW to 36.5 GW. In April, the utility won approval from state regulators to update its 2022 Integrated Resource Plan, adding three new methane gas- and oil-burning power plants, totaling 1.4 GW of capacity, while also importing 750 MW of coal-fired power from Mississippi and pledging to add 10 GW of renewables by 2035.  

Pivoting the Message

Georgia Power’s IRP update represents what has become a typical response to the data center dilemma: delaying the previously planned closures of coal-fired and nuclear plants and adding new natural gas-fired plants to short-term expansion plans, along with renewables. 

PJM stirred controversy with its proposed Resource Reliability Initiative to meet demand growth by allowing new resources with 24/7 power to jump its historically clogged interconnection queue, a strategy that likely would favor fossil fuel plants over renewable projects that have been waiting in line for years.  

The industry argument for such fast and familiar solutions is simply that SMRs, enhanced geothermal and other emerging clean technologies supported by the tech giants are not yet at scale and may not be for five or 10 years. In the interim, new, dispatchable power will be needed, and existing generation ― including coal, natural gas and nuclear plants ― should be kept online, or in the case of the Three Mile Island and the Palisades nuclear power plant in Michigan, brought back online after a previous closure. 

But the clean energy industry is framing demand growth as a major opportunity to provide new solutions that build on its strengths, such as flexibility and innovation, and to use demand management strategies to reposition data centers as grid assets. 

Since the election, a range of industry leaders have shifted their messaging to align with President-elect Donald Trump’s priority of U.S. energy dominance, and big tech CEOs, including Jeff Bezos of Amazon and Sundar Pichai of Google, have made million-dollar contributions for Trump’s inauguration.  

The takeaway here is that while concerns with climate change may not lessen over the next four years, they likely will not appear in companies’ and trade associations’ public statements and policies.  

Speaking at Deploy 2024, Heather Reams, president of the right-leaning Citizens for Responsible Energy Solutions, said, “You’re not changing your business but pivoting the words you use.” She advised the industry to come with solutions to demand growth and talk with the White House and lawmakers on both sides of the aisle in Congress. 

The Solar Energy Industries Association set the tone Dec. 12 with its 10 policy priorities for the new administration, beginning with an “all-of-the-above” approach to U.S. energy dominance that includes solar and storage. Nos. 2 and 3 on the list are eliminating U.S. dependence on China for a range of clean energy technologies, including solar, and “surging” U.S. manufacturing. 

With the tech giants seeking clean energy, SEIA’s list also promotes solar as a key to unlocking the new power needed to meet data center and AI demand. 

The EPRI report recommends that data centers optimize their computational load by moving certain operations to off-peak hours, to reduce strain on the grid and their own electricity bills.  

Such strategies “could evolve to incorporate real-time energy market dynamics enabling data centers to not only adjust their operations based on grid demands but also actively participate in energy markets to optimize their benefits and support grid stability,” the report says. 

Permitting and Transmission

After AI and data centers, permitting and transmission planning were the other top issues for the clean energy industry in 2024 and will be a critical part of any solutions to demand growth going forward. 

But whether Trump and the Republican-controlled Congress can advance the bipartisan problem-solving needed is an open question. 

Certainly, Trump and North Dakota Gov. Doug Burgum (R), nominated as secretary of the Interior, are expected to come into office prioritizing the rollback of a range of environmental regulations. 

For example, the Biden administration has placed a strong emphasis on community engagement as an essential part of environmental reviews and permitting, to prevent ongoing legal challenges to new projects. Will such requirements be maintained, weakened or dropped in rollback and reform efforts? 

The bipartisan Energy Permitting Reform Act (S. 4753), authored by outgoing Sen. Joe Manchin (I-W.Va.) and Sen. John Barrasso, incoming Senate Republican whip, fell victim to post-election politics during the lame duck session of Congress. Both parties agree that energy infrastructure permitting needs to be streamlined and accelerated, but sticking points include the extent to which any new law should change environmental reviews under the National Environmental Policy Act and whether reform should include transmission. 

For Republicans, permitting reform could be targeted primarily at increasing drilling on federal lands and building out more natural gas pipelines. A new permitting bill could prioritize allowing companies to pay for expedited NEPA reviews, while cutting the time frame for legal challenges to final permitting decisions from its current six years to six months or less. Such changes likely would meet fierce opposition and legal challenges from environmental groups.  

Many Republicans also link action to increase interstate transmission as supporting the deployment of renewable energy, specifically the 2,600 GW of solar, wind and storage sitting in RTO and ISO interconnection queues across the country. 

With Barrasso as Republican whip, EPRA could be used as a starting point for a permitting reform bill that Republicans could try to pass via budget reconciliation, which would require only a simple majority vote. Democrats are countering that this approach would not pass parliamentary muster since budget reconciliation measures, by law, must be related to the federal budget.  

While Congress debates, however, the tech industry continues to move much faster than lawmakers, utilities or regulators and has shown itself adept at circumventing politics. The new buzzword in data center development is “co-location,” meaning that data centers are planned with their own supplies of clean energy, if not behind the meter, then inside the fence. 

A critical question is whether the hyperscalers ― like Google, Amazon and Microsoft ― will backtrack on their clean energy commitments as they continue aggressive expansion of their data centers, and whether others, including cities and states, will follow suit. 

Will Microsoft’s purchase of carbon removal credits be used to offset or rationalize continued fossil fuel use at some of their facilities? Maryland boasts one of the most aggressive emission reduction goals in the U.S. ― 60% below 2006 levels by 2031. But the state passed a law (S.B. 474) in 2024 allowing data centers to use fossil fuels to power backup generators without going through a standard regulatory approval process, a policy supported by Gov. Wes Moore (D). 

As competition grows between states to attract hyperscalers and their data centers, will such workarounds become a new norm or just one of many possible solutions that will emerge as the demand growth landscape continues to evolve in 2025? 

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Measured Praise for Clean Hydrogen Tax Credit Rules

The IRS has issued final clean hydrogen tax credit rules that balance the contentious and complicated matter well enough that industry and environmental advocates alike can find something positive in the details. 

But the Jan. 3 announcement — more than two years in the making — landed less than three weeks before the inauguration of a president whose policies and priorities may reshuffle the landscape for the U.S. clean hydrogen industry. 

The Fuel Cell and Hydrogen Energy Association hailed policy changes incorporated in the final rules but described its issuance as a milestone rather than the destination in an “extremely complex” matter. 

“There are also multiple areas where implementation and timing will be up to the incoming Trump-Vance administration,” CEO Frank Wolak said in a prepared statement. 

The section 45V Clean Hydrogen Production Tax Credit was authorized in the Inflation Reduction Act, which was signed into law in August 2022. The proposed guidance for 45V was not issued until late December 2023. Final guidance took an additional year to land, as 30,000 public comments were submitted, and multiple federal agencies collaborated intensively. 

Building up a clean hydrogen industry in the United States was among President Biden’s signature initiatives, but progress was slow during the two-year wait for the final rules and the key clarifications they provide on what qualifies as “clean.” 

Producers will need to wait a few more weeks for the Department of Energy to issue its updated 45VH2-GREET model so they can calculate the section 45V tax credit. (GREET is the Greenhouse gases, Regulated Emissions and Energy Use in Technologies life cycle analysis suite developed by the Department of Energy’s Argonne National Laboratory.) 

Hydrogen holds promise as a fuel that does not generate carbon emissions, but it is expensive to produce. The Biden administration’s push is to lower the price of producing clean hydrogen while also lowering carbon emissions associated with its production. 

Environmental advocates pressed for tight rules on the emissions-free energy used to generate clean hydrogen and industry representatives pressed for looser controls that would help make green hydrogen more economical. 

In their Jan. 3 news release, the U.S. Department of the Treasury and Internal Revenue Service promise clarity, safeguards and flexibility in the rules, which drill down to grid regions, hourly accounting, upstream methane leakage, carbon sequestration, fugitive methane use and temporal matching of electricity generation and hydrogen production. 

The guidance stretches 379 pages. Wolak noted that it is extremely complex, “and will require intense evaluation by project developers to understand all the nuances and how they will apply to their specific facilities.” 

It is scheduled to be published Jan. 10 in the Federal Register. 

John Podesta, senior adviser to the president for international climate policy, said in the news release: “The extensive revisions we’ve made in [these] final rules provide the certainty that hydrogen producers need to keep their projects moving forward and make the United States a global leader in truly green hydrogen.” 

Wolak said the final rules are not the final word: “This issuance of final rules closes a long chapter, and now the industry can look forward to conversations with the new Congress and new administration regarding how federal tax and energy policy can most effectively advance the development of hydrogen in the U.S.” 

Other organizations had mixed reactions, but most had something good to say about the rules, even if they also offered some criticism. 

Clean Air Task Force senior U.S. director Conrad Schneider said: “We appreciate Treasury moving toward better hydrogen policy in its final rule for clean hydrogen production. … We hoped to see stricter guardrails around the use of existing clean electricity to make hydrogen, but we are glad the final guidance includes criteria for determining the incrementality of existing clean electricity, especially existing nuclear energy, that accounts for the unique circumstances of each plant. We are, however, disappointed in Treasury’s decision to push hourly matching from 2028 to 2030, and we worry that this could cause at least some increase in emissions in the short term.” 

Constellation Energy Corp., the nation’s largest nuclear reactor operator, applauded a change from the tentative rules that will allow existing nuclear plants to claim tax credits for powering clean hydrogen production. But the company stopped short of any commitment. “Constellation is carefully reviewing the impact of the final rules as well as newly proposed electric transmission charges on the feasibility of its proposed clean hydrogen project at the LaSalle Clean Energy Center and Constellation’s role in the MachH2 Hub,” the company stated in a news release. 

CEO Joe Dominguez added: “While any incrementality limit is incompatible with the conclusion that clean hydrogen customers should be able to use reliable nuclear energy from America’s fleet of plants, the final rule is an important step in the right direction.” 

Investment firm Jefferies said Jan. 3 that it does not expect operators of existing U.S. nuclear plants to pursue the clean hydrogen market because data center contracts are more lucrative and less risky. 

Business Council for Sustainable Energy President Lisa Jacobson said: “The release of the final rules will allow project developers and investors to better assess credit eligibility and open investment opportunities in the U.S. hydrogen industry. The rule provides clarity and flexibility in several areas but will also require continued engagement with the Trump administration and Congress on a number of critical open implementation issues.” 

The Environmental Defense Fund said 45V presents an opportunity to reduce pollution while building new markets. “Clean hydrogen can help clean up parts of the economy that are hard to decarbonize any other way, but only if we do it right,” said Beth Trask, EDF vice president for global energy transition. “Proper implementation of the production tax credit could help catalyze private investment, lower costs and drive global demand for American-made hydrogen. But risks remain that public incentives for clean hydrogen could go toward fossil fuel-based projects that offer no real climate benefit and undermine the integrity of the U.S. hydrogen market.” 

The National Resources Defense Council took a similar stance. “The final guidance is an important step towards a truly clean hydrogen industry. The rule provides much needed certainty for the industry and positions U.S. producers to be competitive in the global market,” NRDC hydrogen advocate Erik Kamrath said. “The extra flexibilities granted to the green hydrogen industry are not perfect from a climate perspective. But the rule maintains key protections that minimize dangerous air and climate pollution from electrolytic hydrogen production while also protecting U.S. taxpayers and electricity consumers.” 

Earthjustice was less complimentary. “The Biden administration’s tax guidance supports clean hydrogen projects that by and large do not worsen climate and health-harming pollution, but more protections are needed,” legislative director for climate and energy Chris Espinosa said. “The administration included several significant loopholes for dirty hydrogen producers to enjoy the benefits of this important climate program.” 

CNX Resources, an independent company extracting natural gas from shale in the Appalachian basin, said the 45V rules do not work for its purposes: “The Department of Treasury’s recognition of captured waste coal mine methane (CMM) as a feedstock for hydrogen production is validation of its inherent environmental and economic benefits and an important step in continuing to monetize the value of this unique asset. However, we believe that the final 45V implementation rules are overly restrictive across a range of feedstocks and do not currently appear to create sufficient economic incentives for the company to expand its CMM capture operations for hydrogen end use.” 

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Nickell: SPP’s Culture Paves Way for its 2025 Success

In the waning hours of his first full day as SPP’s CEO-in-waiting, Lanny Nickell was deep into a phone conversation with a reporter and laying out his plans for 2025.

He said his success, and that of SPP, will be based on its stakeholder driven approach with its members — in other words, its corporate culture.

“Culture is our secret sauce. That’s what’s allowed us to be successful, and that’s what’s going to allow us to be successful in the future,” Nickell said. “To me, our culture is the foundation upon which I plan to build pillars of ambitious strategy, high visibility and operational excellence.”

Told that sounded like an answer from his interview for the CEO’s job, Nickell said, “It was.”

Having nailed the interview, he now prepares to take over the reins full-time following a three-month transition period with his predecessor, Barbara Sugg, before facing the “enormity of the task ahead.” (See SPP Names COO Nickell to Replace Sugg as CEO.)

“I think we can do it in a way that presents a tremendous opportunity to provide a lot of value,” he said. “Continuing to work on this ‘grid of the future’ is a big goal for me. That goal includes enabling quicker connection of more generation and helping our members interconnect large loads that are seeking service in our footprint. We have to do this in a way that’s very quick and reliable, continuing the progress we’ve already made on improving resource adequacy.”

With its Grid of the Future initiative, SPP looks beyond normal planning horizons to determine what the future holds for the grid operator and its stakeholders, region and industry. An addendum to the RTO’s 2023 Grid of the Future report includes recommendations to address artificial intelligence, grid-enhancing technologies and the load of the future that will be incorporated into various working group plans in 2025 and beyond.

“The future of the electric grid is vitally important to our stakeholders, and this research sets the stage for the many discussions that will occur among stakeholders to prepare SPP to meet the needs of its members,” Sugg told stakeholders in December.

The author of both documents, the Future Grid Strategy Advisory Group, said the addendum is intended to capture the grid’s future needs as they continue to “evolve at a rapid pace.” The advisory group is collaborating with the Resource and Energy Adequacy Leadership (REAL) Team to host a Load of the Future Symposium March 3-4.

The REAL Team has been charged with assessing SPP’s current resource adequacy (RA) construct and “anticipated challenges resulting from resource mix changes, extreme weather impacts, increased demand and evolving consumer behaviors.” It plans to work with several stakeholder groups and state regulators in providing feedback on 2025’s loss-of-load expectation study and effective load-carrying capability, seasonal RA requirements analysis and the future resource mix/expected unserved energy study.

Nickell made it apparent he places a lot of importance on the REAL Team’s work when he told its members in December that “this is the right committee … resolving those challenges, because that’s where the majority of our challenges are.” (See “Nickell Looks Forward as CEO,” SPP Briefs: Week of Dec. 16, 2024.)

“We’ve done a lot of work in that regard. We have more to do, and we want to make sure that that we continue that focus,” Nickell told RTO Insider.

The challenges are daunting. SPP says excess generating capacity in its footprint is shrinking to “dangerously” low levels and it increasingly is dependent on more variable resources — including the nation’s largest wind generation fleet with more than 33 GW of installed capacity — as thermal generators retire. With large loads and electrification continuing to increase, the RTO says demand could increase by 25% before 2030.

Despite its members building $12.4 billion in transmission upgrades between 2006 and 2023 and another $3.5 billion of additional upgrades in progress, the grid operator says it still needs significant amounts of new generation and transmission.

Having streamlined the current generator interconnection queue — average study time has been reduced from seven years to four — SPP staff is reinventing it as an integrated part of the annual transmission planning process. SPP says that will result in a fairer sharing of upgrade costs, more financial certainty for developers, better transmission solutions, and more reliable and affordable energy sources.

Nickell called the consolidated planning process “a big deal” and said he wants to move it forward.

SPP also will move forward with its development of a new approach to allocating GI costs. It says requiring all GI customers to pay a fee contributing to the overall system transmission buildout will bring regional planning and interconnection studies together, making both processes more efficient and leading to a better system expansion.

That has bolstered SPP’s case for expanding its RTO footprint and standing up a day-ahead market offering in the Western Interconnection.

SPP’s service offerings and proposed markets in the Western Interconnection | SPP

“Continuing our growth of SPP’s services and footprint is another high priority,” Nickell said. “Just to continue that progress in a way that’s as beneficial to current and future members.”

The expansion of its RTO footprint into the Rockies is proceeding in the background, as did the previous additions of Nebraska public power districts in 2009 and the Integrated System in 2015. A strike team of the seven western organizations interested in SPP membership is working with staff on joint operating agreements with the western RTO’s neighbors; a final version is expected by the end of 2025.

Potential Markets+ participants will open the year in January in Tempe, Ariz., where they will consider the remaining protocols that need to be approved as Phase 2 of the market’s development begins in earnest. SPP lists nearly three dozen entities participating in the work, many of which must agree to funding agreements for the second phase.

“There are many utilities in the West that really appreciate how we do what we do,” Nickell said. “They love our governance model and having a voice in the stakeholder process. They’re going to love the immense benefits they can get out of leveraging a diverse set of resources available in the Pacific Northwest, Desert Southwest and the current SPP market, as will our members.”

The Bonneville Power Administration, the big dog in the Pacific Northwest, has said that is the reason it is following through on its $25 million funding commitment to Markets+’ development, despite several studies that claim CAISO’s competing Extended Day-Ahead Market offers more benefits. BPA says it is following the wishes of its customers and preserving a choice between the two markets, literally mirroring remarks by SPP staffers who say they just want Western utilities to have a choice. (See BPA: Funding Markets+ Phase 2 Preserves Choice.)

The Pacific Northwest’s congressional delegation twice has sent letters to BPA saying the agency has failed to make a financial case for joining Markets+. (See BPA Has not Made ‘Business Case’ for Markets+, NW Senators Say.)

BPA plans to issue a draft decision on which market it will join in early March. That will open a public comment period, after which the agency will make its final decision in early May.

SPP also is waiting on word from FERC over its response to the commission’s deficiency letter. The grid operator filed its response in September, asking for an answer by Nov. 20. Arizona Corporation Commissioner Nick Myers told several of his fellow Western commissioners during a Dec. 20 conference call that after recent discussions with FERC staff, he believed a decision is imminent.

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How FERC Under Trump Might Advance Energy Affordability in 2025

The direction FERC takes under President-elect Donald Trump’s second term is up in the air, but between his campaign promises and a major complaint filed just before the holidays, the commission may spend some of its time on cutting costs to consumers. 

During an election year in which the cost of living was a major theme, Trump promised to halve energy bills — including electricity, gas and transportation — within one year of his second term by expanding domestic resources and infrastructure.  

Then in late November, consumer groups filed a complaint seeking greater oversight of local transmission planning, which they claim has contributed to higher bills consumers have faced in recent years. (See Consumer Groups Seek Independent Oversight of Local Tx Planning.) The complaint and a recent RMI report claim that local transmission lines can fall into a gap, with RTOs more focused on regional plans and many states assuming the RTOs and FERC will oversee them. 

Transmission is the fastest-growing part of customers’ bills, with the Energy Information Administration reporting in November that spending on distribution and transmission has been responsible for overall higher industry spending in recent decades.

In an interview with RTO Insider, FERC Commissioner Mark Christie pointed to J.D. Power & Associates’ most recent survey of residential customers, which reported the highest average bills in the survey’s history at $182/month and a fourth straight year of declining customer satisfaction.  

FERC gives transmission developers a presumption of prudence when they file for cost recovery under its formula rate rules, meaning opponents have a higher burden of proving any overspending. “It’s another part of many things that FERC does that have contributed to this rapidly rising cost of transmission,” Christie said. 

Curtailing that presumption, as well as transmission incentives for lines that do not go through a “credible” certificate of public convenience and necessity process, would lead to states starting to review transmission more often, as it would align the utilities they oversee with that goal, he argued. 

“What’s happened over the last 20 years with the advent of RTOs is that the various states have either removed or taken away or restricted the ability of their state utility commissions to vet these local projects as well as regional projects,” Christie said. 

Some states like Virginia, where Christie was a regulator, kept their transmission oversight. PJM, meanwhile, does a good job on planning regional transmission lines, he said. 

“Where they do not do [a good] job is on the local projects, which in PJM are called supplementals, and … about 80% now of the transmission costs in PJM are coming from these local projects,” Christie said. (See Rising Transmission Costs in PJM Concern Consumer Advocates, Enviros.) 

The best place to review local projects, which are by definition only inside the territory of one utility and often involve more basic grid upkeep like replacing old infrastructure, is at the state level. 

“FERC cannot change state laws, obviously, but what FERC can do is stop giving a presumption of prudence for projects that are coming out of states where they’ve not been given a thorough vetting,” Christie said. 

WIRES Weighs in

WIRES Executive Director Larry Gasteiger pushed back against the consumer groups’ complaint and defended local transmission planning generally in an interview. 

“This complaint is a distraction from all the work that really needs to get done on getting transmission that we need today built more efficiently and faster,” Gasteiger said. “It’s going to be a distraction from compliance with Order 2023. It’s going to be a distraction for compliance with [Order] 1920 because it’s going to pull on resources from the commission; from the transmission developers; from all the stakeholders to deal with an issue that’s, frankly, unnecessary.” 

Local transmission planning already is adequately overseen, with stakeholders given a chance to review plans in detail, Gasteiger argued. While the issue has been brought up repeatedly over the years, Gasteiger said none of the critics can point to specific projects in which the industry overbuilt transmission because of a lack of oversight. 

“There’s been a longstanding openness towards reasonable transparency and reasonable access to information,” Gasteiger said. “I think my sense is that transmission owners are generally open to that. But that’s not what this is about. This is really about adding a lot more process, a lot more requirements now around local transmission, further burdening it. It’s only going to make it take longer. It’s only going to make it become more costly, and it’s only going to make projects riskier for transmission developers to get done.” 

Local transmission development is a necessary process, WIRES argued in a report in 2021. 

“What we don’t want to see is jeopardizing success stories where you have been able to get transmission developed like in local transmission,” Gasteiger said. “It’s not an either-or. The fact of the matter is, if you want to have more regional transmission development, it’s only going to create requirements for more local transmission development.” 

It’s not All Local

With FERC issuing Order 1920-A, which won more support from states as it gave their regulators a larger role in regional planning, opinions are split on whether it will save money if it survives legal review. 

Christie filed a dissent against the initial Order 1920 but supported the move to give state regulators a more formal role. However, he still feels that 1920-A has its shortcomings, including a failure to do anything about local transmission. 

“It’s not going to do anything to lower costs. It’s a bizarre argument,” Christie said. “It’s going to actually increase costs because the whole goal of 1920 was to increase transmission spending by $3 [trillion] or $4 trillion. … How can that lower costs?” 

Joshua Macey — associate professor at Yale Law School, where he teaches energy law — said the answer to Christie’s question is by increasing competition. 

“When you look at the history of electricity regulation in the last 30 years, there’s overwhelming evidence that competition has driven down costs,” Macey said. “There’s been countless studies showing that transmission constraints reduce competition, increase generator market power and lead to congestion that drives costs.” 

The political discussion around transmission expansion has focused on expanding access to renewable energy, which is tied to liberal states’ energy policies, he added. More transmission would help expand renewables, as well as make the grid more reliable and increase competition. 

“I think creating barriers to transmission would not be consistent with the Trump administration’s goal of reducing prices, though it might be consistent with the goal of protecting fossil resources,” Macey said. 

The Energy Markets

Increasing competition in the power markets also could help lower prices, with Macey suggesting an auction-based approach to radically reduce interconnection queues. 

“You would auction off positions in the queue to the highest bidder,” Macey said. “You would fix resource adequacy markets, which … includes raising offer caps in the energy market; having meaningful nonperformance penalties in capacity markets; and then essentially requiring that when conducting a regional transmission plan, you also assess the benefits of increasing regional transfer capability.” 

A major factor on electricity prices is the price of natural gas, which EIA reported has gone from an average of just over $2/MMBtu in November to well over $3/MMBtu by the end of year, with the agency expecting it to average that latter price the rest of the heating season. 

Impacts on natural gas prices were the main reason the Rhodium Group forecast price increases if the Trump administration rolls back the Inflation Reduction Act, which has been a goal of many in the Republican Party. Rhodium estimates full repeal would lead to higher energy bills of $489 annually for the average customer by 2035. 

The law is “transitioning a major source of natural gas demand, the power sector, away from natural gas,” Rhodium Associate Director Ben King said in an interview. “That has the impact of reducing the price of gas, so it just makes things a little bit cheaper.” 

Getting new supplies of generation onto the grid also can help the power industry hedge against the huge price spikes from abnormal events in the natural gas market, such as February 2021’s Winter Storm Uri, or Russia’s invasion of Ukraine and the subsequent scrambling of global natural gas supplies, he added. 

Increasing natural gas demand in the power sector has impacts that go much further afield than higher electricity prices. It also means higher prices for industries that use gas as fuel and end-use customers who rely on it for heating, King said. 

One can find the opposite argument from conservative groups, with a letter to Congress on the IRA’s two-year anniversary signed by Competitive Enterprise Institute, Americans for Prosperity and more than 50 conservative groups arguing its full repeal would save money. 

“The cost of these subsidies may reach $1 trillion or more, but the tax dollars squandered are only part of the burden,” the groups said. By favoring renewables over “conventional and reliable resources,” the “unavoidable result is costlier energy bills — the last thing the American people need.”

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FERC to Weigh in on Cost Recovery of Oak Creek’s Early Retirement

FERC has opened hearing and settlement procedures into the more than half-billion dollars We Energies is asking customers to foot for the early retirement of the coal-fired Oak Creek Power Plant in Wisconsin.

We Energies requested to recover $510.5 million of unamortized investment for the Wisconsin coal plant through its wholesale rates (ER25-316). The company said it will retire the remaining two of Oak Creek’s four units — first started up in the mid-1960s — at the end of 2025, leaving an estimated remaining expected composite life of about 17 years and $698.7 million in unamortized plant balance. The company said it has a retirement reserve of approximately $188.2 million to offset the amount.

We Energies said that even with the ratemaking treatment, wholesale rates are set to decline about 2.7% with the coal plant’s retirement and estimated overall savings between $817 million and $1.7 billion for its customers. The utility said it “no longer expects [Oak Creek] to provide net economic benefits to its customers due to the current regulatory climate.”

The utility told FERC its decision to retire the plant early and seek cost recovery is on par with the commission’s 1996 Yankee Atomic decision, in which it allowed the owners of the Massachusetts nuclear plant full recovery of unamortized investments and operations and maintenance expenses even though it shut down prematurely. We Energies said Oak Creek has operated “safely and reliably for nearly 70 years prior to retirement, and that it has performed consistently and at a reasonable cost compared to other coal plants” in the U.S.

However, Cloverland Electric Cooperative argued We Energies’ estimated savings exclude the cost of new generation the utility will need to replace Oak Creek’s output. The cooperative also said We Energies’ assessment of Oak Creek’s remaining useful life is overblown because it relied on “stale data” from a 2012 depreciation study.

The commission said We Energies’ accounting request might be unreasonable but that it could not make a determination based on the filing and protests alone. It placed the rates into effect subject to refund and conditioned on the hearing and settlement outcome.

We Energies requested an effective date of Dec. 31, 2024, for recovery on Oak Creek Units 5 and 6, which were retired in mid-2024, and a Jan. 1, 2026, effective date to begin the amortization period for Units 7 and 8, which are planned to operate through the end of the year.

Units 1 to 4 were retired in the 1980s.

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How Much are Batteries Displacing Natural Gas on CAISO’s Grid?

More than 11,000 MW of battery storage resources are now deployed across CAISO’s grid — with much more on the way.

But how much are California’s batteries really displacing gas-fired generation?

Answering that question isn’t easy, according to CAISO staff and other electric industry experts, who say that while batteries are having a notable impact, several factors — including weather conditions and the behavior of storage resources — complicate the narrative that they are displacing gas on the grid.

“You can confidently say that batteries are displacing the need for natural gas energy production, but — and this is a large ‘but’ — batteries are not displacing the need for natural gas capacity just yet,” Carrie Bentley, CEO and co-founder of Gridwell Consulting, told RTO Insider.

Battery buildout has coincided with the need for additional capacity to ensure reliability, especially as 2024 saw another record-breaking year for high temperatures. Reliability modeling indicates that most, if not all, of the gas fleet is still needed, as well as all the current and planned batteries for the next decade, Bentley added.

“This is not as bleak for the environment as it sounds because batteries are displacing the gas fleet energy production and therefore lowering natural gas emissions,” Bentley said.

No ‘One-for-one Displacement’

Energy storage capacity on the CAISO grid grew from under 500 MW in the summer of 2020 to 11,200 MW as of June 2024, representing a “significant” pace of deployment, Sergio Dueñas Melendez, the ISO’s battery storage sector manager, said in an interview with RTO Insider.

CAISO’s Western Energy Imbalance Market includes an additional 3,500 MW of battery capacity, according to a July 2024 report from the ISO’s Department of Market Monitoring.

While Dueñas Melendez noted that the ISO does not currently have a metric to determine whether batteries have displaced the need for gas on California’s grid, the addition of energy storage has had an obvious impact.

“Now that we have way more batteries, we definitely are seeing that batteries are charging in periods of high solar radiation and discharging as the sun starts to set into the afternoon peak and the peak hours,” Dueñas Melendez said. “Earlier this year, the ISO broke a record of peak battery discharge, with over 7,000 MW in a given five-minute interval of battery discharge.”

Pointing to data from the DMM showing the change in hourly generation by fuel type between 2022 and 2023, “you can see how gas, on average, especially in certain hours, has reduced its output, and batteries have increased their output,” CAISO COO Mark Rothleder told RTO Insider.

But the behavior of batteries complicates making an exact calculation of the level of displacement.

“You will not see a one-for-one displacement because a four-hour battery is not going to perfectly displace a dispatchable gas resource over the day,” Rothleder said. “The capability of the batteries over four hours versus being able to ramp day-over-day and intraday of the gas fleet doesn’t allow you, at this point, to fully replace the gas fleet with batteries. But there is certainly energy displacement.”

Guillermo Bautista Alderete, CAISO’s director of market analysis and forecasting, added that a one-to-one replacement of gas with storage supply cannot be assumed because of the dozens of storage and gas resources with varying costs and locations. He also noted that, given the level of storage in the system, those resources can also be displacing of other types of supply, not just gas — the exact value of which is also unclear.

“Since the market determines the optimal dispatch of all resources based on their bid costs and attributes, it can’t precisely track in isolation the specific volumes of gas supply displaced by storage resources compared to other supply types,” Bautista Alderete said in an email. “Changes in the level of gas supply dispatched at any given time depend on various factors, including the relative bid costs of different technologies, demand levels, hydro conditions, renewable production, resource availability, gas prices, seasonal conditions, transmission congestion and broader supply/demand conditions in the WEIM that influence the level of transfers.”

Weather Impacts

The degree to which batteries displace gas can also depend on prevailing weather conditions.

A May 2024 blog post from energy data provider Grid Status contended that battery storage was the “standout performer” in CAISO last spring, saying that “batteries are displacing natural gas when solar generation is ramping up and down each day in CAISO.”

But the report only cited data from April, which does not show the full picture, according to Bentley.

“April is not indicative of the annual trend, because what’s happening in April is you have very low demand, but it’s starting to get sunny,” she said. “This is basically the perfect time for batteries.”

California successively broke records for summer heat in 2023 and 2024, which drove high — although not record —peak loads. While natural gas usage remained high, it decreased as batteries grew, even as peak demand increased.

According to CAISO data, the ISO’s 2023 peak demand occurred on Aug. 16 at 44,534 MW. In the early evening hours, as solar ramped down, natural gas peaked at 26,490 MW, with batteries dispatching at 927 MW. As the evening progressed, batteries ramped up, peaking at nearly 3,000 MW, while natural gas ramped down to just over 25,000 MW.

The 2024 peak of 48,353 MW occurred on Sept. 5. As solar ramped down in the early evening hours, both gas and batteries ramped up well into the night. Despite the increased net demand and record-breaking heat compared with the prior year, the natural gas peak topped out at just over 23,000 MW, while battery output rose to over 6,000 MW — reflecting a seasonal pattern that resulted in an “uneventful” summer despite periods of extreme heat, according to CAISO. (See Batteries, Energy Transfers Support ‘Uneventful’ Summer in West.)

When considering different periods and associated trends, all system conditions must be considered, Bautista Alderete added.

“The supply mix will inherently be lower across various technologies to meet the demand on a spring day with a peak of 30,000 MW, compared to a much higher supply mix needed to meet the demand on a summer day with a peak of 50,000 MW,” Bautista Alderete said. “Naturally, a higher level of supply is required to meet peak demand during the summer.”

The growth of battery energy storage in tandem with the decrease of natural gas is expected to continue. The California Energy Commission projected the need for 52,000 MW of battery energy storage by 2045, a goal that CAISO’s Dueñas Melendez said the state is on track to meet.

“We have more in the queue than that,” Dueñas Melendez said. “The real challenge — across the different agencies, for developers and for the ISO — is to be able to manage that influx in an orderly way to get to that goal.”

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CAISO Leaders Look Ahead to 2025 with Confidence

CAISO, California and other parts of the Western Interconnection are moving into 2025 with a heavy load of priorities: implementing a day-ahead market, developing the transmission and other infrastructure needed to meet ambitious climate goals, and moving forward with new and continuing initiatives to address some of the ISO’s biggest challenges.  

But the ISO is no stranger to ambitious workloads.  

“We’ve been in a heavy lift for several years, and we’ve already been anticipating this, and so we’ve been preparing,” CAISO COO Mark Rothleder said in an interview with RTO Insider.

Key among CAISO’s priorities: continuing the steadfast work required to implement the Extended Day-Ahead Market (EDAM) in time for the 2026 launch date.  

“2025 is going to be a major, major focus on implementation of EDAM,” CAISO CEO Elliot Mainzer said at a Dec. 18 joint meeting of the ISO Board of Governors and Western Energy Markets Governing Body.  

Several entities have committed formally to joining EDAM over SPP’s Markets+, including PacifiCorp, Portland General Electric, Los Angeles Department of Water and Power, and the Balancing Authority of Northern California. Others have indicated a leaning toward joining in the year ahead, including Idaho Power, NV Energy, Berkshire Hathaway Montana, and Public Service Company of New Mexico. 

Others, including the Western Area Power Administration’s Desert Southwest Region, along with Arizona G&T Cooperatives, have indicated strong interest. (See Arizona G&T Cooperatives Announces Pursuit of EDAM Benefits Study.) 

PacifiCorp’s “go-live” date is scheduled for the spring of 2026, and PGE’s is slated for that fall.  

“We’re going to be doing a lot of work this year to keep both of those entities on track for implementation,” Mainzer said. “I’m very confident that we’re going to continue making progress there.”  

But this won’t come without challenges. PacifiCorp, the first Western entity to begin taking steps to join EDAM, already faces scrutiny over its implementation process.  

During the Dec. 18 meeting, Carrie Bentley, a consultant representing the Western Power Trading Forum (WPTF), told the ISO board and Governing Body of WPTF’s intent to file a FERC protest in January over PacifiCorp’s proposed tariff changes to implement EDAM.  

“WPTF has significant concerns with this filing, specifically that PacifiCorp proposes to allocate virtually all congestion revenues it receives from … CAISO to measured demand,” Bentley said in the Dec. 18 meeting. “At the most basic level, PacifiCorp’s filing goes against a foundational aspect of the EDAM market design — that fundamentally, EDAM is a day-ahead market overlaid on OATT transmission rights, and it’s not a full ISO or RTO that includes congestion management instruments.”  

PacifiCorp’s filing, Bentley added, “hands opponents of EDAM a valuable weapon to undermine it, which is completely unwarranted,” and was not part of the EDAM design agreement.  

Mainzer validated Bentley’s concerns.  

“We are very aware of the nature of your concerns,” Mainzer said. “I think we share your optimism and hopefulness that this matter can be resolved in a mutually acceptable manner, and we will continue to work with PacifiCorp and others to support what they need to bring it to a satisfactory resolution.”  

‘In Good Shape’

In 2025, reliability will be — and always is — “job number one,” Mainzer said, emphasizing that the ISO already has begun planning for winter.  

CAISO’s forecast team expects above-normal temperatures across California and in the Desert Southwest from December through February, with the highest likelihood of above normal temperatures in the southern region. In contrast, there’s a greater potential for below-normal temperatures in the Pacific Northwest.   

Northern California saw above-normal rainfall through early December, Mainzer noted, which then “dissipated a bit” as the month progressed. Between December and February, there is a projected risk of below-normal precipitation for the Desert Southwest and a higher likelihood of above-normal precipitation in the Pacific Northwest.  

Current reservoir conditions across California and the West are at about half-capacity, so the expected precipitation in the Northwest could help the region recover some of its hydro storage, with the Desert Southwest expected to remain at greater risk of low water conditions, Dede Subakti, the ISO’s vice president of system operations, wrote in a Dec. 20 posting on the ISO’s Energy Matters blog. 

“We’re going to be keeping a close eye on the forecast, temperature and precipitation,” Mainzer said. “Fortunately, given this outlook, our operations team is reporting that all major transmission paths are expected to be fully available to support transfers across the region, allowing market participants in balancing areas to move energy across the system as needed.”  

Resource adequacy is “looking good,” Mainzer added, showing sufficient supply to meet firm demand through the winter.  

CAISO has intensified its winter readiness planning, with more time and resources being spent on forecasting, coordination and preparation around cold weather events, Subatki wrote in his post.  

That comes partly in response to the January 2024 cold snap that pushed multiple Pacific Northwest balancing authorities to the brink of rolling blackouts and provoked an extended debate about how the ISO managed power flows — and its markets — during the event. (See NW Cold Snap Dispute Reflects Divisions over Western Markets and CAISO Seeks to Dispel CRR ‘Myths’ Around January Cold Snap.) 

“The ISO is prepared and has been working hard to make sure all the customers and market entities we serve in California and the broader West are ready for winter,” Subakti wrote. “Mother Nature often has her own plans and weather predictions are never 100% accurate, regardless of what season we’re in. But with all of the work and preparation, we are going into the winter of 2024-2025 in good shape.”  

New and Continued Initiatives

CAISO is moving into 2025 with 10 active stakeholder initiatives, and several include sub-working groups dealing with some aspect of EDAM implementation.  

In the Greenhouse Gas Coordination Working Group, ISO staff and stakeholders are in the process of developing a process for accounting for GHG emissions in EDAM for states that don’t price carbon but have other policies to reduce emissions. (See Western Market Developers Compare Approaches to GHGs.) The ISO is expected to develop a policy in the first quarter of 2025 and make a decision in the second.  

In the Price Formation Enhancements Initiative, staff and stakeholders are, among other things, considering whether to include fast-start pricing in the EDAM design. (See CAISO Considering Fast-start Pricing for Extended Day-Ahead Market.) A straw proposal for this initiative is expected in Q2, with policy development in Q3.  

Other efforts, such as the Storage Design and Modeling Initiative, are new, but piggybacking on the work of prior working groups. This effort will continue to tackle an array of challenges related to the market participation of storage resources, including further addressing bid cost recovery issues and developing a default energy bid formula specifically for batteries. (See CAISO Launches New Initiative for Storage Resource Design.) 

‘We’ve Got to Push Through’

Rothleder reflected on the past four years, highlighting that since 2020, when the ISO faced challenges meeting demand, the state has stepped up to increase the amount of capacity being brought on, and that pace of development has increased.

Going into 2025, the pace must be sustained, Rothleder emphasized, to maintain reliability and meet the state’s climate goals.  

“Taking your foot off the gas pedal is not going to be helpful at this point,” Rothleder said. “We’ve got to push through, continue the development, continue the transmission and continue the collaboration across the region because the lack of not doing so will be both costly and create more operational challenges for not coordinating and collaborating across the greater West.”