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November 1, 2024

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NYISO’s Latest Queue Overhaul Draft Confuses Stakeholders

RENSSELAER, N.Y. — NYISO left members of the Transmission Planning Advisory Subcommittee bewildered and dissatisfied on Monday when it presented another revised proposal for overhauling its interconnection study process.

Mark Younger, president of Hudson Energy Economics, summarized the mood: “You have succeeded in totally confusing me,” he said to laughter in the room.

NYISO’s new concept incorporates previous stakeholder feedback but still left many wondering if the revised proposal would solve existing project backlogs, reduce delays plaguing the queue and address stakeholder concerns. (See “Queue Window Comments,” NYISO Shares Details of Potential Long Island Tx Projects.)

NYISO has been investigating ways to improve its interconnection process, which has been getting longer and more complicated as projects with more advanced technologies enter the queue.

Thinh Nguyen, NYISO senior manager of interconnection projects, said the ISO “wants to create a process that improves interconnection studies by reducing time and increasing efficiency while maintaining system reliability and providing sufficient incentives and disincentives to commercial projects.”

Overview of Approach

The approximately three-year-long class year queue window (CYQW) concept keeps parts of the interconnection study process that are popular, such as the class year study but gives developers more opportunities to exit the queue without significantly compromising their finances or impacting other queued projects.

For example, the proposal would maintain current class year structures with a defined application phase and a clustered feasibility study that replaces individual system reliability impact studies, but it would use a two-staged class year study with more stringent validation requirements and run queue window groups in parallel.

NYISO’s presentation to the TPAS on Monday delved broadly into the three portions that constitute the CYQW: the application phase, the clustered feasibility study and the two-stage studies.

The application phase would be a 90-day period when project applications are submitted and validated, developers post their preliminary study deposits, and the initial interconnection diagrams are provided.

The next stage, the cluster feasibility study, would be when projects in a group are initially evaluated. During this 180-day period, NYISO would conduct environmental review, perform multiple sensitivity analyses, identify any system upgrades necessary to accommodate a project and give nonbinding cost estimates. Afterward, project developers would have 15 days to decide whether they want to either move forward to the class year study or leave the queue if they are found to be infeasible. Projects electing to leave the queue would see 75% of their study deposit refunded.

The class year study would consist of two eight-month stages where two project groups (i.e., Group A and B) are studied. Each stage would be followed by a 30-day decision period.

In stage 1, NYISO would perform localized analyses, which developers can use to inform their decision about whether to move ahead. Projects that take this initial offramp would lose only 50% of their application deposit.

In stage 2, study results would be refined based on projects that left, and remaining analyses would be conducted to identify any system upgrades required to install the proposed projects. Projects withdrawing during stage 2 would forfeit their entire deposit, while developers who accept their cost allocations would post security for any system upgrades identified for their projects.

NYISO asked stakeholders to address several open issues left unanswered in the proposal, including definitions, penalty determinations and whether prioritization processes should be established for projects proposing to interconnect at a similar location.

The ISO will spend the summer with stakeholders discussing and refining the CYQW proposal and hopes to begin vetting tariff language in the fall. It requests stakeholder comments on the proposal be sent to stakeholder_services_IPsupport@nyiso.com before June 16.

Stakeholder Comments

Stakeholders expressed discomfort about many aspects of NYISO’s proposal, but their focus was on the interactions between different groups of projects in the queue and dissecting the graphic that the ISO created to explain the construct. Many stakeholders were confused by how all the groups interact and impact one another.

Mark Reeder, representing the Alliance for Clean Energy New York, was concerned about how projects in Group C or D could simultaneously conduct their own feasibility studies as earlier CYQW projects (i.e., Groups A and B) conduct class year studies, even though there may be potential interactions.

Anthony Abate, lead energy market adviser with the New York Power Authority, sought to clarify, saying, “If you’re in Group C or D and are worried about potential interactions, what’s key to me is that the feasibility work for Groups A and B have likely already vetted or weeded out any surprises. So theoretically, this design should result in fewer dropouts because projects have already gotten feasibility evaluations.” Nguyen said Abate gave a nice summary.

Nguyen would expand on this issue in response to later questions posed by Hudson’s Younger, who asked how CYQW timelines overlap and what the graphic’s different colors represent.

“These are parallel processes where a transition class year study is ongoing, and at the same time, we have Group A and B undergoing their cluster’s feasibility studies,” Nguyen said. “Then, once those [feasibility studies] are complete, we start the class year for Group A and B, and as that class year study begins, we start the next group of feasibility studies for Group C and D.”

Given the novelty of the CYQW proposal, a swarm of questions was perhaps inevitable, but the complicated styling of the graphic seemed to make the proposal even harder to understand for stakeholders.

“I am having trouble understanding Group A and B interactions because [the graph] seems to show no overlap and just sequential pieces,” Younger said. “And so I don’t understand the benefit of having a Group A and a Group B if you’re going to do Group A’s analysis and then just wait to proceed to the class year for Group B’s analyses.”

Ngyuen responded, “Let’s say a developer in Group A cluster discovers some issues in the feasibility study; [developers] have the opportunity to submit a new interconnection request for Group B, so that’s why we have two groups. Then we also want to make sure that the class year does not run into any problems; therefore, as we conduct Group B’s feasibility analyses, we include Group A’s results in the baseline to allow us to consider potential interactions.”

Ngyuen clarified that Group B constitutes a separate cluster queue window that includes both projects from Group A that found out about problems and resubmitted an application and other potential projects not already studied.

Howard Fromer, who represents Bayonne Energy Center, asked why projects in Group A that already completed their feasibility studies had to wait for projects in Group B to move ahead to class year studies.

NYISO attorney Sara Keegan responded that “whether or not there’s a Group B, Group A cannot enter into the class year until the start date and so are stuck pending the subsequent class, so [NYISO] is just taking advantage of that time between class years to do as much as we can.”

Multiple stakeholders requested NYISO redo the graphic and come back to stakeholders with a picture that more explicitly shows the interactions and the timing between both different groups and windows.

NYISO did not explicitly promise to redraw the graphic but said it will return with updates after considering stakeholder feedback.

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OSW Developers Seeking More Money from New York

Almost all of New York’s offshore wind portfolio may not be able to move forward under the terms negotiated, developers said Wednesday.

In petitions submitted to the state Public Service Commission, they asked permission to amend their offshore wind renewable energy certificate (OREC) agreements with the New York State Energy Research and Development Authority.

NYSERDA is leading the state’s aggressive climate-protection efforts, which include a goal of 9 GW of offshore wind capacity online by 2035. The projects in question would get New York almost halfway to that goal by 2028.

But as with major wind projects in New England, developers of the New York projects say the cost to create the power generation infrastructure has grown, while the value of the power generated has not.

The petitions submitted Wednesday cover 4,230 MW of the 4,360 MW of offshore wind infrastructure under active development to feed the New York grid: the 924-MW Sunrise Wind project by Ørsted-Eversource, and three projects by the Equinor-bp partnership: Beacon Wind (1,230 MW), Empire Wind 1 (816 MW) and Empire Wind 2 (1,260 MW).

NYSERDA estimates commercial operation dates ranging from 2025 to 2028.

The only other project in New York’s pipeline is the 130-MW South Fork Wind. Construction of the Ørsted-Eversource venture is now underway, and it is expected to start generating power this year.

Six development teams submitted proposals totaling 8 GW in New York’s most recent offshore wind solicitation, which closed in January, but they are not in the pipeline yet. NYSERDA will announce awards this summer and execute contracts this autumn.

This latest solicitation included a provision for inflation-related revision of financial terms. The developers point out that they had no such provision and, as a result, are suffering amid the spiraling costs of recent years.

Sunrise said the negotiated $110.37/MWh payment from NYSERDA for the ORECs it generates is no longer enough.

Sunrise Project Development Director Ryan Chaytors told NetZero Insider via email:

“New York’s most recent solicitation made available to future projects inflation adjustments and interconnection cost-sharing mechanisms that more appropriately reflect today’s market conditions. We believe applying comparable inflation and interconnection cost-sharing adjustments now available to future projects to Sunrise Wind is fair, transparent and sufficient to advance the project.”

Sunrise in its petition notes the remarkable series of events that started soon after it signed its OREC agreement with NYSERDA in October 2019: COVID, decades-high inflation, decades-high interest rates, the worst war in decades, material shortages.

“These unanticipated, extraordinary economic events beyond Sunrise Wind’s control have upended its careful financial and developmental planning for the project. The project’s capital budget has increased from approximately $[X] billion to approximately $[X] billion. Without incorporating inflation and interconnection cost adjustment mechanisms into the OREC agreement, Sunrise Wind believes it would not be able to obtain a final investment decision allowing it to fully construct the project.”

As with other offshore wind projects, the cost of Sunrise is a trade secret, redacted from publicly viewable documents.

Empire and Beacon make a similar plea in their petition: “Despite petitioners’ cost control efforts and advances in permitting and interconnection, these unforeseeable events have substantially reduced the projects’ ability to attract the approximately $[X] investment necessary to support their construction and operation in a globally competitive market.”

The developers say in their petitions that they remain committed to completing the four offshore projects and delivering the promised benefits of the new clean energy source.

In a statement to NetZero Insider on Wednesday, Teddy Muhlfelder, vice president of Equinor Renewables Americas, said Equinor and bp did not take this step lightly but saw no alternative.

“Empire Wind and Beacon Wind remain on track to support thousands of jobs and billions of dollars of economic activity while helping New York meet its renewable energy goals,” he said. “Equinor and bp remain strongly committed to our projects and our partners in New York, and we are optimistic that together we can find a path forward in the weeks and months ahead.”

NYSERDA had limited response Wednesday.

“NYSERDA is aware of the petitions filed with the Public Service Commission and is reviewing the petitions,” a spokesperson said.

Also Wednesday, the trade organization Alliance for Clean Energy New York (ACENY) petitioned PSC for something it has long sought informally: an inflation adjustment mechanism for previously contracted large-scale onshore wind and solar projects in New York, many of which languish in permitting and interconnection processes for years between execution of contract and start of construction.

Here again, ACENY noted that recent contracts have such an adjustment mechanism, but older contracts do not.

The New York Offshore Wind Alliance, which is part of ACENY, represents offshore wind developers working in New York, associated companies, organized labor and environmental groups.

Director Fred Zalcman told NetZero Insider he had not seen Wednesday’s offshore petitions but is familiar with the issues they raise.

“All these projects are subject to the same macroeconomic pressures that we’ve seen manifested in the New England projects,” he said, referring to the SouthCoast and Commonwealth offshore wind projects, which are seeking to exit their Massachusetts power purchase agreements for the same reasons.

“So, it’s not very surprising to see. For better or worse, these projects are subject to fixed-price contracts. We do recognize the need for relief for these projects.”

If NYSERDA agrees to higher strike prices, Zalcman said, the cost will trickle down to ratepayers. But it would be unfortunate, he said, if NYSERDA refused and the nascent industry lost the momentum it has started to build after several years in New York. Offshore wind developers have begun to make progress toward building workforce development pipelines, shoreline infrastructure, and a local manufacturing and supply chain in New York, he added.

The three petitions filed Wednesday are part of PSC Case No. 15-E-0302, the proceeding to implement a large-scale renewable energy program and a clean energy program.

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Va. Air Board Approves RGGI Withdrawal

Virginia Gov. Glenn Youngkin’s (R) bid to remove the state from the Regional Greenhouse Gas Initiative (RGGI) passed its final regulatory hurdle as the Air Pollution Control Board narrowly approved ending the state’s participation in the program.

The board voted 4-3 at its meeting Wednesday to repeal the regulation implementing Virginia’s participation in the 11-state cap-and-trade program, a proposal first approved by the board and published for public comment in December. (See Va. Air Panel Votes to Exit RGGI.) Youngkin’s administration argued in a report last March that RGGI constituted a “direct carbon tax” on residents and businesses, saying that none of Virginia’s revenue from the program has been used to provide rebates to customers. (See Youngkin Report: RGGI a ‘Direct Carbon Tax’ on Va. Ratepayers.)

Withdrawing from RGGI was one of Youngkin’s campaign promises, and the governor began the process just hours after taking office through an executive order directing Virginia’s departments of Environmental Quality (DEQ) and Natural Resources to draft emergency regulations that would allow the Air Board to repeal its 2019 rule allowing the state to join.

But even as representatives of Virginia’s energy industry urged the board to pass the measure during the comment section of Wednesday’s meeting, the majority of commenters called the repeal misguided at best and illegitimate at worst.

Only those who submitted comments during the public comment period earlier this year were allowed to address the board; the meeting agenda noted that about 1,600 of the 2,500 comments received were in opposition to the proposal.

Nate Benforado, a senior attorney with the Southern Environmental Law Center, joined many other presenters in arguing that the board was overstepping its authority because Virginia’s participation in RGGI is mandated by a state law passed in 2020.

“The law requires DEQ to issue this regulation in the first place; it mandated this regulation be issued. It used the word ‘shall.’ It’s not optional,” Benforado said, listing instances where the law specified actions to be taken by state regulators. “Does this really sound like a law that … envisions a world in which we are not in RGGI [and] that punted the decision of whether to participate in RGGI … to DEQ or this board? … This is a thorough, comprehensive framework that told DEQ and the other agencies involved exactly what they are required to do.”

William Stiles, executive director of environmental advocacy group Wetlands Watch, echoed Benforado’s argument that “a regulatory body does not have the authority to reverse a legislative decision.” He also put forward an economic case for RGGI, pointing out that participating in the initiative “has generated many hundreds of millions of dollars for Virginia” by providing funding for energy efficiency and flood resilience projects.

“It’s been said that RGGI is a bad deal for Virginia. The bad deal for Virginia was the status quo that existed before RGGI, where the only money available to localities for planning was a few thousand dollars a year out of [the Department of Conservation and Recreation’s] dam safety and floodplain management program,” Stiles said. “So we’re very strongly advocating that we stay in RGGI, not just because you can’t get out of it by regulation, but because of the benefits that it produces.”

Although board members made no response to these points during the meeting — other than to thank the participants for their input — the DEQ did provide rebuttals to public comments in the agenda. The department pushed back on assertions that withdrawing from RGGI by regulatory action was “unlawful,” arguing that its regulation for voluntary participation in the program predated the legislature’s mandate and that no “provision of law [limits] the board’s discretion to repeal the regulation and thereby withdraw from RGGI.”

Regarding the funding for energy efficiency and flood projects, the DEQ pointed out that “RGGI is not the only possible source of funding [or] the most efficient or transparent means of obtaining this type of funding.” Adopting a legalistic argument of its own, the department said that “appropriations and funding distributions for these types of projects are rightly the purview of the General Assembly and not a third-party organization.”

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MISO Poised to Extend Missouri Coal Plant’s Life

MISO said Tuesday that it will likely be forced to renew a Missouri coal plant’s operating extension for almost two more years.

Ameren Missouri’s (NYSE: AEE) 1.2-GW Rush Island Energy Center has been operating under a system support resource (SSR) designation since September, when FERC approved a one-year SSR agreement. (See FERC: Rush Island Plant’s Extension Essential to MISO Reliability.)

During a Central Subregional Planning meeting Tuesday, MISO’s Grant Larson said staff reanalyzed the system without Rush Island’s assistance and again found transient voltage recovery and steady state voltage violations if it is allowed to suspend operations. Larson said Rush Island’s SSR status will have to be renewed for another year Sept. 1 unless stakeholders can suggest generation or transmission alternatives by June 20.

“MISO likes to consider SSRs a last resort,” Larson told attendees, but he said the RTO has “unfortunately” not found any reconfiguration, redispatch or demand-response alternatives to avert another extension.

“Transient voltage recovery violations, that result in cascading outages and instability, cannot be mitigated,” he told stakeholders. He said more than 1,000 MW of load is at risk due to the violations.

MISO restudies system conditions annually to assess the need for SSR agreements.

Larson said transmission upgrades in the area that negate the SSR won’t come online until mid-2024 and 2025. He said the wind, solar and battery storage projects proposed in Illinois and Missouri won’t be available in time either.

While some system upgrades that will be completed by September have improved reliability performance and mitigated a few of the issues since 2022, Larson said, it won’t be enough to allow Rush Island to suspend operations. He also said the SSR’s cost allocation to load won’t be “drastically” different, though some elemental pricing nodes will change.

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ERCOT TAC Endorses Agreement on ‘Exceptional’ Fuel Costs

ERCOT stakeholders on Monday unanimously endorsed a protocol change that requires resources to file exceptional fuel costs that include contractual and pipeline-mandated costs, following negotiations between consumer representatives and a generator.

The Technical Advisory Committee had tabled the nodal protocol revision request (NPRR1177) during its regular May meeting to give the two groups an opportunity to work out their differences. They said their edits allow ERCOT to determine ineligible costs, clarify that exceptional fuel costs are distinct from fuel adders, and codify some of the attestation’s language. (See “Fuel-cost Discussion Tabled,” ERCOT Technical Advisory Committee Briefs: May 23, 2023.)

“I think we’ve landed in a good place,” Eric Goff, a member of TAC’s consumer segment, said during the virtual meeting.

“We’re supportive of the consumer comments,” said Constellation Energy Generation’s Andy Nguyen, the NPRR’s sponsor. “NPRR1177 is a vast improvement to what we have today.”

Constellation modified the attestation’s language to add that fuel costs be “accurate and variable” so that it is based on the resource’s actual dispatch. However, Nguyen said the NPRR still does not address a gap in the protocols where a mitigated resource has no cost recovery mechanism if it is uneconomically dispatched.

The revised version accepts ERCOT’s draft language presented during the May meeting. It also removes from the NPRR the complex task of developing standardized contract language. That has been referred to TAC’s Wholesale Market Subcommittee for additional discussion with the ISO’s staff.

A 2027 sunset date was modified to Jan. 1, 2025, to allow a permanent solution for the standardized contract.

TAC also re-visited NPRR1169, which expands the qualifications for generation resources that may be a firm fuel supply service resource or an alternate.

The Public Utility Commission urged additional discussion of the issue during its May 25 open meeting. The commissioners and ERCOT staff deliberated over safeguards to prevent facilities from being inappropriately disqualified if the qualified scheduling entity serves public needs through a gas distribution company elsewhere in the state.

The two staffs are working to ensure that pipelines providing firm gas supply to generators aren’t curtailed should the gas be designated for residential customers first.

Attorney John Arnold, who represents gas suppliers Kinder Morgan and Enterprise Products before both the PUC and the Railroad Commission, proposed an alternate definition for qualifying pipelines that addresses their deliverability at individual generators instead of systemwide.

TAC’s members declined to add comments to the NPRR, but ERCOT plans to file additional comments for the Board of Director’s consideration during its June 19-20 meeting.

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PJM MRC/MC Briefs: May 31, 2023

Markets and Reliability Committee

Stakeholders Reject PJM Synch Reserve Manual Change; RTO Overrides

VALLEY FORGE, Pa. — The PJM Markets and Reliability Committee voted 54% to reject manual changes that sought to clarify how the RTO can exercise unilateral power to increase the synchronized reserve requirement, with stakeholders opposed arguing that such action should require a FERC filing and doesn’t address the root cause of underperforming reserve resources.

On May 11, PJM announced that it would be doubling the requirement, but the increase was removed May 16 and replaced with a smaller 30% increase May 19, which PJM Senior Vice President of Operations Mike Bryson said was done to reflect stakeholder feedback regarding the initial increase. (See “PJM Doubles Synchronized Reserve Requirement,” PJM OC Briefs: May 11, 2023.)

The proposed language would have specified that “PJM may schedule additional contingency reserves on a temporary basis in order to meet the largest single contingency, as necessary to account for resource performance” to meet ReliabilityFirst requirements. Senior Vice President of Market Services Stu Bresler said it was hoped stakeholders would be in consensus with PJM but that PJM plans to move forward with implementing the manual changes and the 30% increase unilaterally.

The response rate from synchronized reserve resources fell by an average of about 20% following the implementation of an overhaul of the reserve market in October that consolidated the Tier 1 and 2 products, according to a previous presentation to the Markets Implementation Committee. Bryson said PJM has a responsibility to procure reserves that can match the largest single contingency the grid faces, and it is working with Independent Market Monitor Joe Bowring to identify other solutions to address the low performance, including possibly referring resources to FERC for tariff violations.

Senior Dispatch Manager Donnie Bielak said the poor performance could be responsible for a potential violation of NERC disturbance control performance standards during the December 2022 winter storm, when PJM took just over the 15-minute window to recover from a drop in the area control error. The response rate has been stronger from former Tier 1 reserve resources, which were online through economic dispatch and able to increase output within 10 minutes, but PJM said their response will fall off in the future as their operations reflect that they are not receiving added compensation for that response above the going LMP.

The 30% increase is composed of 20% to account for the nonperformance, plus a 10% increase for uncertainty around the future response from uncommitted reserve (former Tier 1) resources. The increase amounts to a synchronized reserve reliability requirement of 2,080 MW, an increase of 480 MW. PJM’s Phil D’Antonio said the 200% increase could be brought back if it is determined to be necessary to meet the contingency reserve requirement, but that PJM will not go above that mark.

Old Dominion Electric Cooperative’s Mike Cocco said increasing the amount of reserves procured to account for underperforming resources is an “inelegant solution” and questioned what a long-term solution looks like. D’Antonio said PJM plans to bring a problem statement and issue charge around August.

Gregory Carmean, executive director of the Organization of PJM States Inc., said he believes the change would affect rates and thus requires FERC authorization, to which Bresler said the PJM tariff sets out a formula including synchronizes reserves and authorizes the RTO to set the reserve requirement.

Paul Sotkiewicz, president of E-Cubed Policy Associates, questioned if the response rate could be affected by an interaction between the October market change and PJM’s software, data input or the ancillary service optimizer. He said it doesn’t make sense that reserve resources aren’t responding to LMPs but noncommitted resources are.

“There seems to be a mismatch between what you’re describing and what’s actually going on here,” he said.

Presenting the Monitor’s perspective on the proposed language, Bowring said he doesn’t believe PJM has the authority to make the changes on its own and the focus should be on perfecting supply, rather than increasing demand. Resources providing synchronized reserves have stated to him that they have issues with the supply curve and that they’re not able to provide what they’re being committed and paid for. While he said the must-offer requirement needs to be enforced, which could include FERC referrals, that is not the optimal way of getting the desired performance.

Bowring cited as possible reasons for the low performance the accuracy of PJM’s ramp rates, ambient rates, fuel availability, demand response performance, resources failing to follow dispatch, incorrect eco max and spin max parameters, and discontinuities in the offer curves.

Stakeholders Discuss Way Forward on Circuit Breaker

PJM presented a first read of its proposal to create a “circuit breaker” to limit high prices over an extended period, continuing deliberations on a topic that divided stakeholders and yielded a half dozen proposals before the frontrunners were rejected by the MRC in December. (See “Two Proposals on ‘Circuit Breaker’ Fail,” PJM MRC/MC Briefs: Dec. 21, 2022.)

The proposal unveiled Wednesday was built off PJM’s previous Package F, which was formed in the Energy Price Formation Senior Task Force and would administratively cap LMPs to $2,000 after PJM has been in an RTO-wide operational emergency, defined as a NERC Level 3 energy emergency alert (EEA) event, and shortage price is in effect because of manual load dump or a voltage reduction. The trigger also includes a step in which PJM will evaluate how activating the circuit breaker would affect reliability and will not implement it if any concerns are identified. The circuit breaker would end once PJM is no longer under EEA 2 or 3 conditions and the shortage pricing is no longer in effect.

PJM’s previous proposal did not include an administrative review as part of the price cap trigger, and it would have terminated after a five-day period. Senior Director of Market Design Becky Carroll said the changes were made to ensure the circuit breaker didn’t harm operations and would not end while an emergency was potentially ongoing.

“We really are concerned about creating adverse impacts to system operations, and we don’t want to do that,” she said.

Carroll said the proposal is still in flux, and additional details on components, such as when the circuit breaker would be triggered, could change by the time tariff language is drafted. Bresler said PJM plans to bring the language directly to the Board of Managers without a stakeholder endorsement, as the issue has already been brought through the full stakeholder process without being able to reach consensus.

Greg Poulos, executive director of the Consumer Advocates of the PJM States, said the impact of the February 2021 winter storm on ERCOT underscored the need to create a price cap for many advocates, and he encouraged PJM to consider how other regions have reacted. He also said PJM should consider the components in the joint stakeholder package, sponsored by ODEC, Southern Maryland Electric Cooperative and Northern Virginia Electric Cooperative, given that the PJM proposal never advanced to the senior committee level. The joint package and a competing proposal from Calpine were both rejected by the MRC on Dec. 21, while five other proposals did not advance from the EPFSTF. (See “Support for Circuit Breaker Remains Mixed,” PJM MRC Briefs: Oct. 24, 2022.)

David “Scarp” Scarpignato said that under the status quo, the scarcity adder gives a buffer over the inflexibility of incorporating fuel costs into offers, which wouldn’t be possible under the uplift provided by the circuit breaker based on those offers. Most generator offers don’t fully represent fuel costs because of how that would administratively burden resource owners, he said. The circuit breaker could create a disparity between the pricing run and the dispatch run, creating a challenging reliability situation for PJM if it’s not sending the proposal signals for generators on how to operate.

The board called for the continuation of the process of creating a circuit breaker in a March 10 letter and asked that a proposal be brought to it by July.

PJM, Monitor Review IROL-CIP Proposals

PJM’s Darrell Frogg presented a first read of the RTO’s proposal to create a cost-recovery mechanism for investments required under NERC’s interconnection reliability operating limits (IROLs) under its Critical Infrastructure Protection (CIP) standards. The proposal was endorsed by the Operating Committee on March 9, receiving 89% support, while the Monitor’s proposal receive 11%. (See PJM OC Briefs: March 9, 2023.)

The proposal would function similarly to PJM’s existing black start cost-recovery mechanism, with generators submitting costs to the RTO and Monitor to review and reviews collected through charges to market participants. Supporters speaking during the OC argued that having a facility declared critical by NERC and required to make reliability upgrades is outside of their control, can carry significant costs and is unpredictable.

The MRC is slated to consider voting on the proposal during its June meeting. Assuming stakeholder endorsement, PJM plans to file a Federal Power Act (FPA) Section 205 filing around August.

Members Committee

PJM Launches Webpage for Tracking Resource Adequacy Concerns

PJM Vice President of State and Member Services Asim Haque told the Members Committee the RTO is planning to launch stakeholder processes on many of the issues discussed during a panel on reliability at its annual meeting.

A page on the RTO’s website has been created to track ongoing studies and detail how it plans to address future reliability and resource adequacy. (See “Panel Discusses Future Reliability Landscape,” PJM CEO, Panelists Address Reliability During Annual Meeting.)

Haque discussed the three timelines the overarching concerns fall into: the immediate need to support resource performance, the near-term need to ensure resource adequacy, and the upcoming concern for maintaining and attracting essential reliability services.

Public Power Decries Override of MC Endorsement on CP

Representing the PJM Public Power Coalition, Customized Energy Solutions’ Carl Johnson said it’s concerning that the PJM board has opted to disregard stakeholders’ endorsement of a proposal to revise the Capacity Performance (CP) construct to reduce the penalties generators face for not meeting their obligations during emergencies.

The MC voted May 4 to endorse a proposal redefining the penalty rate and annual stop-loss limit as being derived from the Base Residual Auction clearing prices, rather than the net cost of new entry, as well as tightening the circumstances under which PJM can declare a performance assessment interval (PAI). Later that month, the board announced that it would only be including changes to the PAI trigger in a FERC filing. (See PJM Board Rejects Lowering Capacity Performance Penalties.)

Johnson expressed his displeasure that PJM chose pieces of a larger package supported by stakeholders to present to FERC, particularly as work continues in the Critical Issue Fast Path process to create proposals overhauling the capacity market.

“It puts groups like mine in a really difficult position when we’re looking to build consensus on a proposal in the future,” he said.

American Municipal Power’s Lynn Horning said there’s open space for stakeholders to consider rules and more specificity around when packages can be partially advanced to FERC.

Avangrid Renewables’ Kevin Kilgallen said the proposal would have injected uncertainty into delivery years for which capacity auctions had already been run. The language would have been effective through the 2024/25 delivery year.

“To change the product definition without there being an urgent need to do so … between the auction and the delivery year, we thought that’s very bad policy, and it adds another level of uncertainty,” he said.

PJM CEO Manu Asthana said staff and the board don’t take the decision to override stakeholders lightly, but the RTO holds the authority to make changes under FPA Section 205 and has an obligation to make filings it believes will uphold reliability.

“I don’t want to keep doing this, but I think it’s a two-way street: We recognize where the stakeholders have … rights, and we give deference as much as we can,” he said, noting that stakeholders hold the rights to make changes related to the Operating Agreement.

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DOE Kickstarts Build-out of Uranium Supply Chain Needed for Advanced Reactors

The Department of Energy on Monday released two draft requests for proposals aimed at building out a U.S. supply chain for the specialized uranium fuel needed for the next generation of advanced nuclear reactors that it is also helping to build.

The RFPs will allow DOE to acquire high-assay, low-enriched uranium (HALEU), which it will then distribute or sell to companies that are part of its HALEU Consortium of industry stakeholders, to be used “for civilian domestic research, development, demonstration and commercial use.”

HALEU has higher levels of the radioactive U-235 isotope — up to 20% versus the 3-5% low-enriched uranium used in commercial reactors now in operation — allowing for smaller and more efficient reactors that may not need to be refueled as often and produce less nuclear waste.

Two advanced reactors being developed with more than $3 billion in DOE funding — TerraPower’s Natrium reactor and X-energy’s Xe-100 reactor — will need HALEU, but the U.S. currently does not have the ability to produce the special fuel at scale. The only commercial facility producing HALEU is in Russia, and with the outbreak of the war in Ukraine, U.S. companies like TerraPower have had to look for other sources of the fuel.

The lack of a domestic HALEU supply could delay completion of the Natrium reactor in Wyoming by two years, according to a December announcement from TerraPower CEO Chris Levesque. When the DOE originally selected TerraPower and X-energy for the demonstration projects in 2020, the advanced reactors were supposed to be online in seven years.

“We must jump-start a commercial-scale, domestic supply chain for HALEU,” said Kathryn Huff, DOE’s assistant secretary for nuclear energy. “Spurring the nation’s capability to produce HALEU will set the stage for larger, commercial scale production. This will bring us closer to deploying advanced nuclear technologies in communities across the country.”  

“This is … a really important first step in getting this market going,” said Patrick White, project manager at the Nuclear Innovation Alliance. The need to build out the HALEU supply chain “is something we’ve known about for years, but we just haven’t had the right economic conditions.”

The war in Ukraine, coupled with $700 million in the Inflation Reduction Act earmarked for U.S. production of HALEU have provided some of the momentum.

According to the DOE announcement, more than 40 metric tons of HALEU may be needed by 2030, with additional amounts required each year, to meet President Joe Biden’s goal of decarbonizing the U.S. electric power system by 2035.

At present, the only facility licensed to produce HALEU in the U.S. is a DOE-funded demonstration project at a Centrus Energy facility in Piketon, Ohio, which is on schedule to begin production at the end of this year, according to Lindsey Geisler, director of corporate communications.

Incentivizing the Market

The existing U.S. commercial nuclear fleet of 92 reactors provides 20% of all the electric power in the country and 50% of zero-emission electricity. While still controversial for some, maintaining and expanding nuclear capacity is part of Biden’s and DOE’s clean energy agenda.  

DOE is dividing its efforts to build the HALEU supply chain into two key and complementary initiatives. The first of the two RFPs is focused on the enrichment process, taking mined and milled uranium and stepping up its enrichment from the 0.7% of U-235 that occurs in nature to between 5% and 20%, White said.

The process involves putting the milled uranium, called yellow cake, through a series of centrifuges that gradually step up the enrichment level, he said.  

U-235 is a “fissile” isotope of uranium, which means it can sustain the kind of nuclear chain reaction needed to power a commercial reactor and produce electricity. Weapons-grade uranium is about 90% U-235.

The second RFP seeks companies for a process called “deconversion,” which takes the stepped-up uranium and puts it through a chemical process that turns it into a pure metal or other solid feedstock that can then be turned into the fuel that can power a reactor.

“The availability of HALEU is a bit of a chicken-and-egg problem,” White said. “It’s hard to set up an industry and make significant capital investments if you don’t know what the long-term demand is, and it’s hard to have long-term demand if you don’t know what your supply is.

“And so, by the U.S. DOE coming in and guaranteeing purchases for these first amounts of HALEU, it can hopefully incentivize private companies to stand up their production capabilities and then allowing private companies to start buying what comes off the line,” he said.

The release of the draft RFPs on Monday began a month-long comment period ending on July 6.

DOE is also launching an environmental review of the proposed HALEU supply chain buildout in compliance with the National Environmental Policy Act. A notice of intent for the review was published Monday in the Federal Register.

White noted that the environmental review could slow down the supply chain buildout. In particular, the RFP focused on enrichment only allows for initial planning, permitting and licensing until the environmental review is completed.

The RFPs also limit DOE’s ability to award contracts related to the $700 million for HALEU authorized in the IRA, but both White and Geisler said additional funding will be needed.

“The Inflation Reduction Act represents a strong initial down payment, but there is broad agreement in the industry that additional funding will be required to establish the domestic HALEU supply chain necessary to commercialize the next generation of advanced reactors,” Geisler said in an email to NetZero Insider.

With long lead times for building out each part of the supply chain, “getting this process started and making sure it keeps moving is really critical,” White said. “Let’s get through the draft solicitation process, provide feedback that allows DOE to quickly iterate and then move forward with it because the last thing we want is for this RFP process to take another six months or a year.”

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ISO-NE Market Monitor Reports Decreased Winter Energy Costs

ISO-NE wholesale market costs were down 23% for the winter of 2023 compared to 2022, said the RTO’s Internal Market Monitor (IMM) at the Markets Committee meeting on Tuesday. The decrease was driven by a 29% drop in energy costs, which was largely a result of the 37% decrease in natural gas prices compared to the previous winter.

While wholesale costs declined, capacity market costs increased by 18%, or nearly $100 million, due to the supplemental payments to the Mystic 8 and 9 generators — the main customers of the Everett LNG import terminal — which totaled $213.5 million.

ISO-NE entered into an agreement in 2022 with Constellation Mystic Power to keep the generators operating through May 2024. The RTO justified the agreement to bolster fuel security in the region, but the agreement has been subject to intense criticism from a range of stakeholders.

“The net costs passed through the agreement so far have been astronomical: more than $436 million over the first ten months of the two-year term,” per a May FERC filing on behalf of a group of New England consumer-owned utilities (ER18-1639). “Most of those costs have resulted from [Constellation] buying — and then selling at a loss, burning uneconomically, or otherwise disposing of — fuel that Mystic did not need.”

The IMM noted in its presentation that relatively high winter temperatures led to lower average and peak loads for 2023. The average load was down by about 4% compared to the winter of 2022.

The region did experience two major cold snaps Dec. 24-27 and Feb. 3-4. On Dec. 24, the region faced its first pay-for-performance (PfP) capacity scarcity conditions since 2018, due to a combination of factors including low temperatures, a reduction in net imports, and several gas and dual-fuel generation plants failing to supply power.

“Most resources that tripped were older generators that run infrequently,” said Kathryn Lynch of the IMM. Lynch said these resources totaled approximately 2,180 MW of capacity.

The IMM said PfP credits and charges totaled $35.9 million during the scarcity conditions, with most charges incurred by gas and dual-fuel generators, while most credits went to imports, nuclear and pumped storage.

Generation from oil spiked during the two periods of extreme cold weather, making up 20-26% of generation during these stretches. Overall, oil generation decreased relative to 2022 and made up a small fraction of overall generation.

Technical Difficulties

ISO-NE said it has paused discussions on its Resource Capacity Accreditation (RCA) project due to a software error related to how it models LNG inputs for gas generation plants.

“The software significantly restricted LNG available to the gas resources,” said Tongxin Zheng of ISO-NE.

The RTO is developing the RCA modeling to project the reliability and availability of energy resources, and it will use the modeling to determine the amount of capacity a resource could receive in the Forward Capacity Market.

“The preliminary evaluation after correcting the software effectively results in negligible reliability risk in the model for winter under FCA 16 assumptions,” Zheng said. “Further evaluation is needed to determine whether the winter risk level in the initial results containing the error [nearly complete elimination of LNG in the software] is reasonable.”

The RTO previously hoped to implement the RCA modeling for the 19th Forward Capacity Auction, which is scheduled for 2025 and will determine capacity obligations for 2028/2029. Zheng said the software will impact the project schedule.

“ISO is reviewing its options and plans to share further information with stakeholders ahead of the June NEPOOL Participants Committee meeting,” Zheng said.

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Nevada Lawmakers Pass Bills on Utility Market Risk, Clean Trucks

The Nevada Legislature wrapped up its 2023 regular session by passing bills related to integrated resource planning for electric and gas utilities, along with a bill creating a zero-emission truck incentive program.

Assembly Bill 524 passed on a 20-1 Senate floor vote just hours before the legislature adjourned at 11:59 p.m. on Monday.

Assemblyman Howard Watts (D) introduced the bill with the goal of reducing electric utilities’ reliance on the open energy market to acquire sufficient supply. That in turn might improve electric reliability and reduce consumer costs, he said.

The bill would require utilities to include in their integrated resource plans a scenario in which they acquire enough energy resources to close their open position. Although that scenario must be evaluated, it wouldn’t necessarily be the one chosen. (See Bill Would Require NV Energy to Examine Market Reliance.)

NV Energy opposed the bill, saying the legislature should go further by calling for utilities to quickly close their open positions.

AB 524, which previously passed unanimously in the Assembly, now goes to Gov. Joe Lombardo for a signature. In a March executive order, Lombardo called for the state’s “advancement of energy independence.”

The state’s legislature meets every other year in a 120-day session. Although the regular session has ended, Lombardo is expected to call a special session on unresolved budget issues.

The 2023 legislature also passed Senate Bill 281 by Sen. Rochelle Nguyen (D).

The bill would require natural gas utilities to file a plan every three years, similar to the IRPs filed by electric utilities. The bill aims to improve the transparency of gas utility planning. (See Nev. Bill Would Require Gas Company Efficiency, GHG Plans.)

The Senate and Assembly both unanimously passed the bill, which was backed by Southwest Gas.

Zero-emission Truck Incentive

Another bill introduced by Watts this year was AB 184, which directs the Nevada Division of Environmental Protection to work with the state Department of Transportation to establish a Clean Trucks and Buses Incentive Program.

The incentives would be funded through the federal Carbon Reduction Program, part of the Infrastructure Investment and Jobs Act.

Nevada will receive an estimated $57 million over five years through the federal program. Of that, 35% is flexible funding that could be applied to the incentive program, Watts said during a hearing this month before the Senate Natural Resources Committee. No state funding would go toward the incentives.

The incentives would be for the purchase of a zero-emission medium- or heavy-duty truck, including a battery electric or hydrogen fuel cell vehicle. Base incentive amounts would range from $20,000 for a Class 2b truck to $175,000 for a Class 8 truck.

Increases to the base incentive would also be available in some cases. For example, a small business could receive a 20% increase to the base incentive, and a disadvantaged small business, such as one owned by a minority, woman or veteran, would be eligible for a 5% increase. A truck buyer could combine up to two base incentive increases.

Independent truck operators would be eligible for a 33% increase to the base incentive amount, but they wouldn’t be able to add on the small business increase.

The incentives would be available to businesses, nonprofits, and state and local government agencies. Watts said the idea was to bring the cost of a zero-emission truck in line with that of its diesel counterpart.

Andrew MacKay, executive director of the Nevada Franchised Auto Dealers Association, said zero-emission trucks are cost-prohibitive for most independent truck operators and small operators.

“This bill’s transformative,” MacKay said during the committee hearing. “It’s going to put these people in a position … of being able to afford these vehicles.”

Another bill by Watts adds new requirements for state automobile fleets. AB 262 requires the state to give preference to vehicles that minimize emissions and give consideration to the lifetime cost of the vehicle when making purchasing decisions, “to the extent practicable.”

Lombardo signed the bill on Monday.

Ben Prochazka, executive director of the Electrification Coalition, said Tuesday that electric vehicles are typically less expensive to operate than those with internal combustion engines.

“AB 262 will save Nevada’s taxpayers money and signal that the state is demonstrating leadership as the U.S. rapidly accelerates toward transportation electrification,” Prochazka said in a statement.

Yucca Bill Fails

Bills that failed during the 2023 legislative session include Senate Joint Resolution 4, introduced by state Sen. James Ohrenschall (D). SJR 4 would have urged the federal government to use Yucca Mountain for the development and storage of renewable energy. The site, about 100 miles from Las Vegas, has been eyed as a disposal site for the nation’s high-level radioactive waste. (See Nevada Resolution Seeks to Bring Renewables to Yucca Mountain.)

But SJR 4 missed the deadline for passage from its first committee, Senate Natural Resources.

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Developer Seeks to Terminate SouthCoast Wind PPAs

SouthCoast Wind Energy is moving to end its offshore wind power purchase agreements with three Massachusetts electric distribution companies.

The company said it will continue developing the project in federal waters south of Martha’s Vineyard while the parties seek a solution, but that the terms of the PPAs they negotiated in 2020 and amended in 2022 are untenable, given rising costs.

SouthCoast, formerly Mayflower Wind Energy, is a joint venture of Shell New Energies and Ocean Winds North America. It holds an offshore wind lease area with the potential for up to 2,400 MW of power generation and was to supply 1,200 MW to Eversource Energy, National Grid and Unitil.

In October, SouthCoast asked the Massachusetts Department of Public Utilities to suspend the PPA proceedings for a month so the parties could consider recent economic changes — including inflation, interest rates and material shortages — that made the PPAs financially untenable.

Around the same time, Avangrid made a similar request for the 1,200 MW of PPAs with the same three utilities for output from the Commonwealth Wind project it is developing.

The utilities declined to negotiate, and the DPU rejected the requests.

Avangrid dug in its heels and moved to terminate the PPAs, setting in motion a process that landed in Suffolk County Supreme Judicial Court four months ago. The company says it remains committed to Commonwealth and would like to rebid the project in Massachusetts’ next offshore wind solicitation.

SouthCoast backed down after the DPU rejection, at least publicly. It maintained that the financials were untenable but said it would work toward a solution. Apparently, it did not find one.

As of press time, there still were no official filings posted by the DPU, but SouthCoast CEO Francis Slingsby on Friday submitted testimony to the Rhode Island Energy Facility Siting Board, which is considering SouthCoast’s request to run one of the project’s export cables underwater and underground through Rhode Island on its way to Massachusetts. Slingsby argued that the board should not suspend its consideration of the transmission line application until new PPAs are in place because doing so would delay or jeopardize the project.

Even as it seeks better financial terms, SouthCoast has secured interconnection queue positions for the offshore wind farm and continues preparatory work, with more than 75 full-time employees on the job and a roughly $100 million development budget for 2023, Slingsby said. He expects the U.S. Bureau of Ocean Energy Management to issue a Record of Decision on the project in December.

But SouthCoast cannot attract financing with the existing PPAs, he said, because they are low-priced and have no indexation. The latest Massachusetts offshore wind solicitation addresses those concerns by allowing for inflation-indexed pricing, Slingsby said. SouthCoast plans to compete in that and/or other future rounds of bidding in New England, he said.

In a statement SouthCoast said it is open to solutions other than terminating the PPAs. But even after factoring in the cost of termination, any resulting penalties and lost tax incentives, terminating the PPAs is a better option than proceeding with them as written, it said.

Economic Headwinds

This latest development will not help Massachusetts reach its statutory goal: 5,600 MW of offshore wind online by 2027.

Gov. Maura Healey last month announced the draft of the state’s fourth offshore wind solicitation would seek proposals totaling up to 3,600 MW of generation capacity.

That — combined with the 800-MW Vineyard Wind 1 now under construction and SouthCoast — would reach the desired number of megawatts, if not the deadline.

Without SouthCoast or Commonwealth, Massachusetts falls short.

A spokesperson for Healey’s Executive Office of Energy and Environmental Affairs on Tuesday said, “We encourage all parties to find clarity on the next steps before the fourth offshore wind solicitation becomes active.”

The U.S. is late to the offshore wind sector: 32 years after the first commercial offshore wind farm went online in Denmark, U.S. waters host just 42 of the 63,200 MW of offshore generation installed worldwide.

As the public and private sectors try to create an industry almost from scratch, costs and logistics are proving to be challenges. The Northeast coast is the early focal point of development efforts, and the projects and proposals there are feeling the brunt of headwinds facing the industry.

Besides SouthCoast and Commonwealth, recent examples include:

      • Rhode Island’s latest offshore wind solicitation attracted just one proposal, and the wording of Rhode Island Energy’s public response indicated it might be expensive.
      • Avangrid has said it would ask Connecticut for a PPA adjustment on its Park City Wind project.
      • Ørsted has said it would take a $365 million cost impairment on its Sunrise Wind project in New York and has said returns on its Ocean Wind 1 project in New Jersey were not what it had hoped for.

On a brighter note, Avangrid has said Vineyard Wind 1 locked in supply contracts before the economic headwinds rose, averting a financial crunch.

The Electric Power Research Institute told NetZero Insider the financial problems experienced by SouthCoast and other projects are not unique to them or to the offshore wind industry but are exacerbated by the newness of the sector in the U.S.

“Offtake agreements are negotiated when the project is in the relatively early stages of permitting, with a five- to seven-year lag before permits are approved and an eventual final investment decision is made,” Offshore R&D Lead Curtiss Fox said via email Tuesday. “With the continuous and dramatic cost declines for offshore wind over the past decade, it would be reasonable to assume those would continue with some limited risk. However, the implications of economy-wide inflation seen over the past two years have changed those underlying assumptions.”

Fox said last year’s Inflation Reduction Act will likely boost momentum in the U.S. offshore wind industry and expand its supply chain, but the rest of the world will be attempting to do the same thing at the same time.

“The global demand for offshore wind continues to expand dramatically, with Europe alone looking to expand capacity in the North Sea to 120 GW by 2030, up from nearly 28 GW today, and to reach 300 GW by 2050,” he said. “With the initial tranche of U.S. projects heavily leveraging EU supply chain capacity, the U.S. may not be able to rely on global excess capacity and will need to continue investments into offshore wind manufacturing, vessels and port infrastructure to achieve a sustainable offshore wind industry.”

[This story has been corrected. A previous version incorrectly identified the developer of the Commonwealth Wind project.]