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November 1, 2024

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Eversource CEO Gives Update on Offshore Wind Sale

Eversource expects to reach a deal this quarter to sell off its offshore wind interests.

CEO Joe Nolan last week said negotiations are far along with two potential buyers.

But the sale will not end its involvement in the offshore sector, he said. Eversource expects to concentrate on the transmission of power generated by fleets of offshore turbines, rather than the turbines themselves.

Nolan’s remarks came Wednesday during a call with industry analysts to discuss the company’s first-quarter earnings.

The question-and-answer portion of the call returned repeatedly to Eversource’s plans to offload its assets in the offshore wind sector, which has experienced rising costs as the first of thousands of megawatts of planned capacity is developed off the Northeast coast.

In Massachusetts, Commonwealth Wind and SouthCoast Wind have both said their projects are now untenable under their existing power purchase agreements, though only Commonwealth has formally attempted to back out.

Eversource teamed up with Denmark’s Ørsted, the largest offshore wind developer in the world, in a 50/50 joint venture to develop South Fork Wind, Revolution Wind and Sunrise Wind. Construction has begun on South Fork and is expected to start later this year on Revolution.

The two have also proposed Sunrise Wind 2 and Revolution Wind 2.

Eversource said over a year ago that it was considering sale. Nolan said Wednesday that negotiations on its leases and contracts are now in late stages.

“Our transaction will involve two parties. It is very far along in the process; that’s why we can tell you with a very high degree of confidence that you will have an announcement in the second quarter,” he said.

Nolan said they will bring a good price.

“These are very mature projects; these are not just concepts on paper … so for that I think we’ll recognize good value for those projects. … I think that at the end of the day it will be a very good outcome for Eversource and for Eversource’s shareholders.”

An analyst asked if the company might retain a smaller ownership share than 50%.

“We see a path for a clean exit from this, so that is definitely not the case,” Nolan said.

Another analyst asked whether Eversource is planning to move into transmission of power from offshore generators.

Nolan replied that the company sees great opportunity to work with Ørsted and other developers to import clean energy to the ISO-NE and NYISO grids.

“That was one of the points that had us make the pivot because we think there’s so much opportunity in both the land aspect of it and the investment around not only the projects that we were involved in, but the projects that everybody else is involved in,” he said. “We are very well positioned in this region at load centers, and people want to get to them. … We see a tremendous opportunity for investment in offshore wind as it relates to our regulated business and that’s really what our focus is — de-risking and focusing on our regulated assets.”

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Inslee Signs Raft of Washington Climate, Energy Bills

A good chunk of Washington’s 2023 climate change legislation was signed into law Wednesday, including a plan to make the state a center for producing sustainable aviation fuel.

“The world is looking at Washington state to lead a clean energy revolution,” Gov. Jay Inslee said Wednesday at a signing ceremony for seven clean energy bills at Energy Northwest’s Horn Rapids Solar Farm in Richland, Wash., a project that in 2020 received financial assistance from the state’s Clean Energy Fund. “What you see behind me is good paychecks for good jobs.”

Inslee noted that Washington’s solar capacity has increased 460% during the past five years.

One passed bill that was noticeably absent from Wednesday’s signing ceremony was House Bill 1173, sponsored by Tri-Cities Rep. April Connors (R), which would limit the blinking red lights on wind turbines to times when low-flying aircraft were near rather than leaving them on through the night. This legislation was the result of many residents objecting to a plan to build a large wind farm in the scenic Horse Heaven Hills area south of the Tri-Cities. There are rumors that wind power interests have been lobbying Inslee behind the scenes to veto the bill.

“I think it is a grand idea, assuming it will work,” Inslee said. “We are just making sure that it does. But we really appreciate everyone looking for a way to minimize the visual disturbance. We think this will be a tremendous benefit.”

Successful Climate Bills

Here is a rundown of climate-related bills passed in the 2023 session, which ended in late April:

Senate Bill 5447, which is intended to make Washington more attractive to the sustainable jet fuel industry.

The new law sets a business-and-occupation tax rate of 0.275% for any plant that would produce at least 20 million gallons a year of low-carbon jet fuel. The rates for most Washington B&O taxes — a levy on a business’ gross receipts — range from 0.47% to 0.9%.

SB 5447’s purpose is to set up a second West Coast alternative jet fuel plant in Washington. A few years ago, the predicted cost of building such a plant was at least $1 billion.

“Air travel is one of the hardest areas to address (in trimming greenhouse gas emissions),” said Senate Majority Leader Andy Billig (D) at the bill signing. “The production is what brings the economic benefits of the jobs. … That’s the promise of the green economy.”

House Bill 1181, which would add climate considerations to city and county land-use planning.

This law changes Washington’s Growth Management Act, which regulates long-range, land-use planning for city and county governments. It requires local governments to review and, if needed, revise their comprehensive plans and development regulations every eight years.

The law requires climate change to be considered in land-use and shoreline planning for the 10 largest of Washington’s 39 counties and in cities of 6,000 residents or larger. The 10 largest counties cover Puget Sound, Spokane, the Yakima River Valley and the Washington-side suburbs of Portland.

Senate Bill 5165, which requires utilities to begin transmission line planning 20 years in advance, along with some technical changes to transmission planning.

A major driver behind this law is that Washington will transition from being a net exporter of power at present to a net importer by 2050 if it is to reach the goal of weaning itself from fossil fuels, according to calculations by the state’s Department of Commerce. As a result, the state needs to dramatically increase its transmission capacity while simultaneously developing more alternative power sources.

House Bill 1216, which creates an interagency council to improve the siting and permitting of clean energy projects.

It also directs the Washington State University Energy Program to develop a pumped storage siting process. Washington has one pumped storage project in the works, which is controversial because part of it would be on land that the Yakama Nation of Indians considers culturally sacred. (See Wash. Bill Seeks to Accelerate Renewable Buildout.)

Rye Development of Boston is hoping to build Washington’s first pumped storage project for $2 billion in southern Klickitat County near the John Day Dam and have it in operation between 2028 and 2030.

That project would include two lined, 600-acre water reservoirs that are 60 feet deep and separated by 2,100 feet in elevation. One reservoir would be on the river shore and the other at the top of a cliff. An underground pipe would connect the two reservoirs with a subterranean electricity generating station along the channel.

House Bill 1176, which creates the Washington Climate Corps Network to develop climate-related service opportunities for young adults and veterans.

House Bill 1416, which requires “market” — or nonresidential — customers of consumer-owned utilities to comply with the greenhouse gas-neutral standard and the 100% clean electricity standard under the Clean Energy Transformation Act.

House Bill 1236, which authorizes all public transit agencies to produce, distribute, use, or sell green electrolytic hydrogen and renewable hydrogen. “Every transit agency has signed on to this bill,” said Rep. David Hackney (D).

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FERC Rejects Protest of SPP PRM Increase

FERC last week rejected a complaint by SPP members seeking to overturn the RTO’s decision last year to increase its planning reserve margin (PRM) from 12% to 15%.

In a 3-1 vote Wednesday, the commission ruled that American Electric Power (AEP), Oklahoma Gas and Electric (OG&E) and Xcel Energy failed to show SPP’s PRM process was unjust, unreasonable, or unduly discriminatory (EL23-40).

Commissioner James Danly dissented from the order, saying FERC had failed to grapple with the complainants’ core point: What must SPP be required to include in its tariff and what can the commission allow to be consigned to business practices or external processes?

The three utilities filed their complaint in February under Section 206 of the Federal Power Act. They argued that the new PRM’s implementation gave them only six months to procure additional capacity necessary to comply with the increased resource adequacy obligations ahead of the 2023 summer season. The utilities said the PRM’s value and calculation is not in SPP’s tariff and asked the commission to require the grid operator to include the methodology in the tariff and file it for the commission’s review.

SPP’s board approved the change last July over opposition from stakeholders, who advocated for phasing in the PRM over a three-year period. Load-responsible entities unable to meet the requirement can incur financial penalties from the RTO. (See SPP Board, Regulators Side with Staff over Reserve Margin.)

In rejecting the protest, FERC ruled that the utilities failed to meet their Section 206 burden to show that exclusion of the PRM left SPP’s tariff as unjust. It disagreed with their argument that SPP’s PRM decision constituted an “impermissible collateral attack” on a 2018 resource adequacy order and assessed the complaint on the record before the commission.

“Complainants’ core argument is that the rule of reason, filed rate doctrine and due process require SPP to include its planning reserve margin value in its tariff,” FERC wrote. “Granting this relief would go beyond merely adding new details about SPP’s existing process, which is a common remedy to a rule of reason claim.”

The commission said Attachment AA to SPP’s tariff, which it accepted in 2018, describes the process through which the RTO reviews and revises the PRM.

“We find that this level of detail is sufficient to satisfy the rule of reason,” the three approving commissioners wrote. “Our determination here is consistent with relevant commission precedent, including specific precedent regarding the establishment of planning reserve margins in resource adequacy programs.”

FERC also denied the utilities’ alternative request that it direct SPP to remove the deficiency payment mechanism from its tariff, saying it continues to exercise jurisdiction over the deficiency payment mechanism and the grid operator’s PRM process.

Danly said in his dissent that while the PRM value doesn’t necessarily need to be in the tariff, “it nevertheless represents a rather important part of SPP’s rate.”

“Perhaps the lesson to be drawn from this proceeding is not to focus on whether the existing tariff provisions accord with the rule of reason but whether responsible administration and regulation of RTOs is even possible,” he wrote. “As the complexity and uncertainty of our markets increases, it becomes ever more difficult to implement rational policies and to assure ourselves, even in the face of a particular complaint, that a tariff remain just and reasonable.”

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PJM MC Preview: May 11, 2023

Below is a summary of the agenda items scheduled to be brought to a vote at the special PJM Members Committee meeting Thursday. Each item is listed by agenda number, description and projected time of discussion, followed by a summary of the issue and links to prior coverage in RTO Insider.

RTO Insider will be covering the discussions and votes.

Endorsements (9:05-10)

1. Capacity Performance Penalties (9:05-10)

The Members Committee will consider endorsement of a proposal from American Municipal Power to modify the Capacity Performance (CP) penalty rate, performance assessment interval (PAI) trigger used to determine when generators pay penalties and the stop-loss limit defining how much a facility can be penalized. (See “Capacity Performance Penalties,” PJM MRC Briefs: April 26, 2023.)

The committee will be asked to endorse the proposed solution and corresponding tariff revisions.

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Western Plan to Add 13 GW by Summer Comes with Risks

Up to 13 GW of new generation and storage resources are planned to come online in the Western Interconnection by the end of this summer, helping to ensure the West remains resource adequate, but supply chain disruptions and other problems could undermine those plans, analysts said Thursday in the latest installment of WECC’s resource adequacy discussion series.

The West has been expecting “exponential growth” of clean energy resources, and this year could be the “turning point where we start seeing a huge ramp up,” said Matthew Elkins, WECC’s principal analyst for reliability assessments. But 13 GW by this summer is “a lot of resources to bring online with supply chain issues and things like that.”

Last year, new solar installations in the West fell nearly 3 GW short of expectations because of tariffs on solar panels from Southeast Asia and supply chain constraints, said Amanda Sargent, WECC senior resource adequacy analyst.

“There are always deviations from the plan year to year, usually small ones, but you can see in 2022, there was a large deviation in what was planned for solar capacity to come online in 2022 versus what did,” Sargent said. “We also saw an increase in the energy storage that was not able to come online, in part because it was usually a hybrid resource with the solar.”

In June 2022, President Joe Biden ordered a two-year waiver of the solar tariffs, and he is expected to veto a Senate resolution passed Wednesday to override his waiver. (See related story, Biden to Veto Bipartisan Rollback of Solar Tariff Moratorium.)

Most of the new resource additions will be solar, battery storage and wind, with some natural gas and biogas generation, WECC said.

Supply chain constraints could delay commissioning new generation and transmission resources and put off scheduled maintenance. For instance, 3.5 GW of new batteries are planned to come online by July and another 2 GW by September, but supply chain problems with battery components could reduce those amounts, Sargent said.

On the upside, retirements of existing generators through the summer should be minimal, she said.

WECC’s resource adequacy analysis gathers data from 38 balancing authorities in four regions of the Western Interconnection: California and a small part of Mexico; the Desert Southwest (Arizona and New Mexico); Canada (Alberta and British Columbia); and the Northwest, which covers the Pacific Northwest, the Rocky Mountain states, Utah and Nevada.

The results of WECC’s analysis showed no significant resource adequacy concerns except for short periods in California and the Northwest later this summer as hydroelectric power wanes. The analysis assumes the availability of imports and that thousands of megawatts of the new resources will come online.

The resources and imports are needed to cover the so-called net peak, after solar drops offline but demand remains high on hot evenings.

“All areas are resource adequate on the peak hour,” Sargent said. “However, we are seeing demand at risk outside of the peak hours. That is mediated if the resources that are planned come online on time, and if there is market availability for imports when it’s needed.”

In addition to supply chain problems, fuel constraints could reduce generating capacity, she said. A spike in natural gas prices drove up demand for coal, limiting supply, she said.

“We heard very loud and clear from our stakeholders that there are significant ongoing supply chain issues and fuel constraints that could impact connecting new resources, scheduling needed maintenance before summer and potentially the availability of transfer capabilities,” Sargent said.

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National Grid Proposes Quebec-New England Transmission

National Grid (NYSE:NGG) is proposing a 1.2-GW transmission project to carry power from Quebec hydroelectric plants to southern New England through Vermont and New Hampshire.

The Twin States Clean Energy Link has a preliminary cost estimate of $2 billion. It would entail a new HVDC line running 75 miles underground from the Canada-Vermont border to a retired converter station in Monroe, N.H., that would be repurposed as part of the project.

The existing 110 miles of above-ground AC infrastructure would be upgraded between Monroe and a new 345-kV substation Londonderry, N.H.

National Grid is partnering with the nonprofit Citizens Energy on the project. The Northeastern Vermont Development Association would aid in programming the estimated $100 million of community benefits associated with the project, and the International Brotherhood of Electrical Workers would support construction.

The company is promoting the project as a way to reduce dependence on fossil fuel generation when variable wind and solar power output lag. It would reduce New England’s carbon emissions by millions of metric tons per year and save ratepayers billions of dollars over the first 15 years, developers said.

National Grid said it has submitted the proposal to the U.S. Department of Energy’s Transmission Facilitation Program (TFP), a $2.5 billion funding stream created by the Infrastructure Investment and Jobs Act.

The company said federal investment and initial cost recovery through TFP is critical to Twin States moving forward on the planned timelines. A spokesperson said Friday the earliest construction could begin would be in late 2026.

The line would be bidirectional, able to export power to Quebec if the profusion of solar and wind projects being planned and built in southern New England should generate a surplus of electricity in a period of low demand.

There will be demand for it on the other side of the border: Quebec is mounting a clean-energy transition just as New England is, and Hydro-Quebec in its recent strategic plan forecasts a more than 50% increase in demand for its electricity through 2050.

The government-owned utility reported record income in 2022, thanks to high electricity prices and heavy exports, but reports by Bloomberg and other media outlets suggest its aggressive marketing will soon leave it short of power for Quebec’s own needs. It has begun planning to add generation from solar, wind and other renewable sources.

Slow Process

Building transmission lines to carry Quebec’s hydroelectric power south to the U.S. grid has proved challenging at times.

There has been strong local opposition from people who do not want to look at power lines or see trees cleared to build them; criticism from activists that hydropower is not as benign for the environment as advertised; and extensive regulatory processes to navigate.

New Hampshire shot down Eversource Energy’s plan to build the 1.09-GW Northern Pass line in 2018. (See New Hampshire Rejects Permit for Northern Pass.)

Avangrid’s 2017 proposal for the 1.2-GW New England Clean Energy Connect line in Maine has stalled amid multiple legal challenges. (See New England Clean Energy Connect Wins Court Battle.)

The 1.25-GW Champlain Hudson Power Express, first proposed in early 2010, finally began construction in New York early this year. Its projected completion is in 2026. (See Champlain Hudson Power Project Receives Landmark Delivery.)

National Grid is emphasizing that construction of the Twin States line would have a light impact and heavy benefit for the communities through which it would pass. The underground portion of the line would run along state roads, reducing its visual and environmental disruption. The above-ground portion would mostly entail replacing existing wires and reinforcing existing structures.

National Grid and its partners did not formally announce the proposal, but it gained public attention last week when New Hampshire Gov. Chris Sununu (R) threw his support behind it.

“New Hampshire is always looking to put solutions on the table that lower energy rates for consumers, and the Twin States Clean Energy Link makes use of clean, renewable energy to do just that,” Sununu said. “With a low-impact plan that utilizes already existing infrastructure, this project is a win-win for families and businesses across the Granite State.”

In a letter to U.S. Energy Secretary Jennifer Granholm, Sununu endorsed the project for inclusion in the TFP and said it would have the added benefit of allowing small renewable energy projects to be developed in northernmost New Hampshire.

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Dominion Sees Earnings Drop, but CEO Blue Predicts Bright Future

Dominion Energy (NYSE:D) on Friday said warm weather in the first quarter of this year led to lower operating earnings of 99 cents/share, compared to $1.18 a year earlier.

Despite the mild winter weather, Dominion CEO Robert Blue said the firm was in a good position given projected demand growth and the new Virginia law on regulations, providing it with certainty to make needed investments going forward. (See Virginia Legislature Passes Utility Regulation Bills Backed by Dominion.)

“With nearly unanimous bipartisan support, the legislation provides the certainty we need to fund and execute critical energy investments in support of the commonwealth’s robust electric demand growth, long-term energy security and reliability, leading decarbonization goals and impressive economic growth,” Blue said on a conference call with analysts.

Blue said the new law will lead to lower customer bills through the elimination of $350 million in riders and the securitization of fuel costs, cutting the average residential customer’s bill by about 10%, which positions the company’s Virginia utility about 21% below the national average.

“The law prescribes certain regulatory parameters for use in rate-setting for the next few years and establishes an authorized ROE of 9.7%, up from 9.35% currently,” said Blue.

The new law compliments previous legislation — such as the Virginia Clean Economy Act, which set up decarbonization goals for the utility in midcentury — to create a regulated utility framework that balances customer benefits, regulatory oversight and Dominion’s need for capital to invest in its system for decades to come, he added.

“That stability and certainty is especially critical now, as we ramp into the very substantial and growing multidecade utility investment required to address resiliency and decarbonization public policy goals,” said Blue.

The decarbonization policy comes on top of fast load growth in Dominion’s system, which is dominated by data centers in Northern Virginia. PJM’s load forecast for Dominion’s territory this year calls for 5% growth, compared to 2.1% last year, and the RTO is projecting a 2033 peak demand of 35.8 GW, a 39% increase over last year’s projection of 25.8 GW.

“This isn’t hypothetical growth. It’s demand we’re seeing and investing to serve every day,” Blue said.

Dominion is working on a business review, but the exact plans are still being worked out. Blue and other executives offered no real details beyond their schedule. The firm plans to discuss the review at an investor day in the third quarter.

While the firm said recent developments in Virginia set it up for future success, exactly who will be helping to implement the new law is still unclear because the State Corporation Commission is down just one member.

Former commissioners have been stepping in to help vote out orders as needed, and the commission has been able to issue several orders on Dominion cases recently, including approving a transmission line needed to serve growing load from data centers and the company’s request to procure 800 MW of solar and storage. (See Virginia SCC Approves 800 MW of Renewables for Dominion.)

The Virginia Constitution gives legislators the right to appoint new members to the SCC, though if they are out of session, then the governor can make temporary appointments, Blue said.

“If you look just at where we’ve been in Virginia: We’ve got low rates; we’ve got strong reliability; we’ve got a clear mandate from policymakers for energy security within an energy transition,” Blue said. “And as our [integrated resource plan] indicates, we’ve got very strong load growth. So, we’re sitting in a very good spot moving forward in the Virginia regulatory process.”

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Biden to Veto Bipartisan Rollback of Solar Tariff Moratorium

With nine Democrats crossing the aisle, a joint resolution (S.J.Res.15) rolling back a two-year moratorium on tariffs on solar panels and cells from four Southeast Asian countries passed the Senate on Wednesday.

Following a 56-41 vote, the measure now goes to President Joe Biden, who intends to veto it.

The resolution passed in the House of Representatives on April 28, 221-202, with both Democrats and Republicans crossing the aisle. In that case, 12 Democrats joined the GOP majority, while eight Republicans opposed the measure.

Biden ordered the waiver on tariffs on solar panels and cells imported from Cambodia, Malaysia, Thailand and Vietnam in June 2022, after the Commerce Department announced an investigation into whether panels and cells from those countries contain components from China that would be subject to tariffs. (See Biden Waives Tariffs on Key Solar Imports for 2 Years.)

Because neither house is likely to muster the two-thirds majority needed to override a veto, the House and Senate votes and the resolution itself were mostly political posturing, giving Democrats and Republicans cover to appear tough on China and the solar industry’s ongoing reliance on overseas suppliers. About 80% of solar panels used in the U.S. come from the four Asian countries in question, according to the Commerce Department.

“We cannot continue to let China get away with laundering solar energy components through other nations with absolutely no consequences,” Sen. Joe Manchin (D-W.Va.), chair of the Senate Energy and Natural Resources Committee, said in a statement announcing his decision to vote for the resolution. “American manufacturers — some of the most innovative in the world — are more than ready to rise to the occasion and help realize the goals of the [Infrastructure Investment and Jobs Act] and the Inflation Reduction Act to onshore our energy supply chains.”

The other Democrats voting for the resolution in the Senate were Sherrod Brown (Ohio), Ron Wyden (Ore.), Bob Casey (Pa.), Jon Tester (Mont.), Debbie Stabenow (Mich.), Gary Peters (Mich.), John Fetterman (Pa.) and Tammy Baldwin (Wis.).

An analysis of the vote from ClearView Energy Partners suggested that “many of the key defections against party lines … came from notionally ‘at-risk’ members up for re-election in 2024.”

In response, both the administration and solar advocates have said that the moratorium was intended as a “bridge” to allow for the buildout of a domestic solar supply chain while also ensuring ongoing demand for solar projects is met.

“More than 90 GW of private sector investments in solar manufacturing have been announced since the president took office, with about half of that coming in just seven months since the passage of the Inflation Reduction Act,” according to a White House statement announcing Biden’s decision to veto.

A recent report from the American Clean Power Association (ACP) lists 26 new solar manufacturing facilities and another 10 factories for energy storage announced since the IRA was signed into law.

ACP CEO Jason Grumet called the congressional resolution “misguided” in the face of an “American solar industry [that] has announced billions of dollars in investments in domestic solar manufacturing and energy production facilities.”

“The attempt to impose punitive retroactive tariffs on U.S. companies would harm American workers and once again cede ground to China and other nations,” Grumet said in a statement released after the Senate vote. “Congress should work to protect existing clean energy jobs, not undermine a growing American industry that is harnessing abundant domestic resources.”

“Any legislation that threatens 30,000 American jobs and weakens our nation’s energy security to this degree should be dead on arrival,” said Abigail Ross Hopper, president and CEO of the Solar Energy Industries Association (SEIA). “Demand for American solar products far outpaces what we can build now. Curbing supply at this critical time will hurt American businesses and prevent us from deploying clean, reliable energy in the near term.”

The Clock Is Ticking

Prior to the passage of the IIJA and IRA, tariffs on Chinese solar panels and cells were not particularly effective in kickstarting a domestic supply chain. Even after former President Donald Trump approved the tariffs on Chinese solar panels and cells in 2018, the solar industry continued its dependence on Southeast Asian and Chinese manufacturers. Despite heavy lobbying by the solar industry, Biden extended the tariffs in February 2022, with an exemption for bifacial panels.

But the announcement of the Commerce Department investigation the following month threw the industry into a panic, with more than 300 projects delayed or canceled, according to SEIA. Biden’s moratorium, and the IIJA’s and IRA’s tax credits, finally provided the impetus for companies to start investing in new facilities in the U.S.

“The IRA unlocked the U.S. market for us,” said Scott Graybeal, CEO of Caelux, a California startup that has developed a new technology using perovskite, a nanomaterial, that could boost solar panel performance while cutting costs. “It’s been instrumental in shaping our business plan.”

A solar industry veteran who has worked in Southeast Asia, Graybeal expects to launch the company’s first products by the end of 2024. But, he said, imposition of tariffs could “impinge on plans for manufacturing expansion if there isn’t a healthy market.”

He also sees a potential knock-on effect that could make solar projects riskier and therefore harder to finance, which again could affect efforts to build out a manufacturing supply chain.

The ACP report notes that “in the last eight months, over $150 billion in domestic utility-scale clean energy investments have been announced. This amount is equivalent to five years’ worth of American clean energy investments, surpassing total investment into U.S. clean power projects commissioned between 2017 and 2021.”

But the onslaught of optimistic figures from the White House and solar advocates may not translate into an adequate domestic supply chain that is up and running by June 2024, when the current moratorium on tariffs on panels and other components from the four countries runs out.

The Commerce Department issued a preliminary finding in the investigation in December, stating that “certain Chinese solar panel manufacturers were indeed attempting to bypass the [tariffs] via transport through these investigated Southeast Asian partners.” A final decision has been pushed back from May to August, and while Biden has pledged to veto the resolution rescinding the moratorium, he does not intend to extend it.

In other words, the clock is ticking, and figures from solar industry analysts Clean Energy Associates (CEA) provided to NetZero Insider suggest that not all the recent announcements of new solar manufacturing will turn into factories employing thousands of U.S. workers.

A plant producing solar panels can be built and reach mass production within two years, according to CEA, but the upstream supply chain — specifically the factories needed for ingots and wafers, critical components for panels — could take three to four years. Standing up plants to produce the polysilicon needed for the ingots and wafers could take five years.

CEA expects that only about half the announced panel factories and 40% of cell production facilities will actually come online. Building a domestic source for ingots and wafers could be even more challenging, as U.S. companies simply do not have the necessary experience, CEA says.

The analysts expect only three of 20 announced ingot and wafer facilities to come online by 2027, and with IRA tax credits tapering off in 2030 and disappearing after 2032, they say, building new polysilicon plants may not pencil out.

A recent report from SEIA said that rebalancing the solar industry’s “dangerous overdependence on China for equipment and raw materials” would still require an “ethical global supply chain. … Allowing necessary and ethical imports to continue” as the U.S. builds out its own supply chain will be critical, it said.

Graybeal agreed that timelines will need to be staggered for the wafer and polysilicon supply chain in the U.S. “These are capital-intensive projects, particularly manufacturing polysilicon,” he said. “We’re going to have to go through a learning curve. …

“It will be easier to do modules; the next will be cells, and then further up the chain, getting into wafers and polysilicon manufacturing, that’s probably the more complex endeavor,” he said. “Building in the U.S. is more complicated than it is in certain parts of Asia. We have permitting requirements; environmental impact issues. … Often times these are local issues that need to be managed.

“We have to give it some breathing room,” he said. If and when tariffs are levied on solar imports from Southeast Asia, he would like to see them phased in over time.

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AEP Continues to ‘De-risk’ its Businesses

American Electric Power (NASDAQ:AEP) said Thursday that it plans to sell its AEP Energy competitive retail business in PJM as it continues to simplify and de-risk its operations.

CEO Julie Sloat told analysts on a quarterly earnings call that the company has completed a strategic review of AEP Energy, which serves 700,000 electricity and gas customers in six states and D.C. She said AEP will include its unregulated distributed resources business in the sale, which she expects to close in the first half of 2024.

“We’re focused on our core regulated utility operations and continue to evaluate all value additive potential activities to enhance their performance and look for opportunities to recycle capital,” Sloat said.

To that end, AEP is selling its 50% share in the solar-focused New Mexico Renewable Development joint venture with Public Service Company of New Mexico. Sloat said AEP is also pursuing a strategic review of its ownership interests in three non-core transmission joint venture businesses, Prairie Wind Transmission, Pioneer Transmission and Transource Energy, to determine whether they fit with the company’s long-term plan.

“Active review of our portfolio allows us to continue prioritizing investment in our regulated utilities to enhance service for our customers,” Sloat said.

AEP in February reached an agreement with IRG Acquisition Holdings to sell 1,365 MW in unregulated contracted renewable assets comprising 14 large-scale projects. The sale is pending FERC approval, but AEP hopes to close the transaction by July.

Sloat said $1.2 billion of the sale’s cash proceeds will be funneled into AEP’s regulated businesses as the company transforms its generation fleet.

“Actively managing our portfolio also means staying flexible and being ready to change our focus and adapt our strategy when it becomes clear that certain transactions or initiatives may no longer be viable,” she said, a nod to AEP’s termination last month of its Kentucky businesses’ sale.

AEP is renewing its focus on the Kentucky region, Sloat said, saying that Kentucky Power’s first-quarter return on equity of 2.9% “does not reflect a financially healthy utility.” She said AEP will be addressing the utility’s underperformance over the next year and will file a base case with Kentucky regulators in June to take effect in January.

AEP reported first-quarter earnings of $397 million ($0.77/share). That compares unfavorably to the same period a year ago when earnings were $714.7 million ($1.41/share). The company’s operating earnings per share of $1.11 fell short of the Zacks consensus estimate of $1.14.

AEP’s share price gained 57 cents during the day, closing at $91.44.

OGE Earnings Miss Expectations

OGE Energy (NYSE:OGE), Oklahoma Gas & Electric’s parent company, reported earnings Thursday of $38.3 million ($0.19/diluted share), compared to last year’s first quarter of $279.5 million ($1.39/diluted share). Earnings just missed financial analysts’ expectations of $0.20/diluted share.

“We’re off to a really strong start for the year,” CEO Sean Trauschke said, pointing out that the first quarter typically represents less than 10% of utilities’ earnings. “However, this quarter does provide momentum for the year. And I really like what I see.”

OGE is working through three requests for proposals to meet its capacity needs. Trauschke said not all the responses have delivered full value, so the company will issue a new integrated resource plan later this year with updated planning assumptions.

“Our goal is to implement a generation plan that supports our customers and business smoothing investments in the steady incremental way without large spikes or bumps,” he said.

OGE’s share price closed at $37.33 after the earnings release, a gain of 52 cents for the day.

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PG&E’s Distribution System Needs Replacing, Monitor Says

The independent safety monitor that keeps watch on Pacific Gas and Electric said much of the utility’s distribution system is “stressed” with age and needs to be replaced for reliability and to avoid wildfires, but that the utility has greatly reduced the number of fires its equipment starts by quickly de-energizing lines when faults occur.

The findings were part of a 38-page report drafted by Filsinger Energy Partners and released Tuesday by the California Public Utilities Commission, which hired Filsinger last year to monitor PG&E’s safety work and report back every six months. (See CPUC Orders Independent Safety Monitor for PG&E.)

Filsinger, a Denver-based advising firm, filed its first report Oct. 4. (See PG&E Slow to Replace Old Equipment, Monitor Says.)

Its second report, dated April 3 but made public May 2, covers PG&E’s activities from October to March.

During that time, the independent safety monitor (ISM) “participated in meetings where several PG&E managers reported that a shift in strategy is required as the PG&E distribution asset base ages more towards its end of life, and that elevated investment levels will be required to adequately control and mitigate the associated risks,” the report says.

PG&E’s 70,000-square-mile overhead distribution system includes 161,500 miles of power lines, 2.25 million wooden poles and more than 669,000 transformers, the report notes.

Much of the system serves high-risk fire areas, where PG&E equipment started major wildfires each year from 2017-2021.

Parts of the utility’s vast distribution system “are currently stressed or are forecast to become stressed,” and a third of its overhead conductor qualifies for “asset health replacement in the next 10 years,” the report says.

“While half of the distribution circuits have good reliability, approximately 20% of the circuits are responsible for 50% of the average customer outage duration across the distribution system,” it says. “There is a considerable backlog of distribution asset maintenance and/or upgrade items needing to be addressed, including approximately 120,000 poles tagged for replacement.”

PG&E’s annual spending on reliability-oriented projects plunged from more than $180 million in 2013 to less than $5 million in 2020, in part because of spending on wildfire mitigation since 2017, it says.

From 2015 to 2020, PG&E’s System Average Interruption Duration Index (SAIDI), a measure of the duration of unplanned outages, increased by 53% while reliability spending fell, the report says.

The outage index rose when PG&E began using public safety power shutoffs (PSPS) in 2018 and when its Enhanced Powerline Safety Settings (EPSS) program took effect in 2021, it says. EPSS increases the fault detection sensitivity on power lines and quickly de-energizes them when it senses a change in current.

“During the current ISM reporting period, the ISM observed that PG&E’s unplanned distribution SAIDI increased by an additional 66% since 2020, and PG&E sits in the fourth quartile for SAIDI as compared to all other U.S. based electric utilities,” the report says.

Maintenance Backlog

PSPS and EPSS have angered many residents and endangered those who rely on plug-in medical equipment, but they have been effective at reducing ignitions by PG&E equipment.

The report says that, since 2017, the number of ignitions in high fire-threat districts “attributed to PG&E equipment failure has been in steady decline.” There were 59 ignitions in 2017 and 14 in 2022 — a 76% decrease, it says.

“The largest contributing factor for this decrease in the last two years has been the introduction of EPSS enablement across all of PG&E’s HTFD [high fire-threat district] distribution circuits in 2022,” it says.

PG&E believes that “wire down rate is a key indicator of public safety,” the report says, quoting the utility. “Wire downs per year have stayed steady over the past five years. However, [PG&E expects] the number of wire downs to increase as conductors are aging faster than the replacement rate.”

PG&E, which has been criticized for its lack of record keeping, has age data on only 47% of its primary conductors and 12% of its secondary conductors, the report says.

Using an alternative methodology, PG&E determined that it should replace approximately 800 miles of overhead conductor per year, but “over the past seven years, the miles of proactive replacement of deteriorated conductor have averaged approximately 40 miles per year,” the report says.

PG&E said in a statement Wednesday that it “has made significant progress in the areas of safety and risk reduction, including in the focus areas identified by the ISM team,” but that its wildfire mitigation efforts have created a maintenance backlog.

“Our increased inspections, which exceed CPUC General Order requirements and better address wildfire risk, created a build-up of repair work,” the utility said. “In our 2023 Wildfire Mitigation Plan, we committed to providing targets for addressing repairs found during inspections [and] prioritizing work with the most ignition risk within the high fire threat districts.”

The utility said it has refocused its efforts on “addressing … asset replacement, including developing strategies for managing wear-out failures.”