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October 30, 2024

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GM to Invest $650M in Controversial Nev. Lithium Project

General Motors plans to invest $650 million in Lithium Americas’ proposed lithium mine in northern Nevada — funding that depends on the resolution of a lawsuit environmentalists filed against the project.

GM and Lithium Americas announced the deal on Tuesday, calling it the largest-ever investment by an automaker to produce raw materials for batteries.

Thacker Pass, in Humboldt County, Nevada, is thought to be the largest lithium resource in the U.S. Lithium from the mine could be enough to produce up to 1 million electric vehicles per year, Lithium Americas said.

“It’s a landmark transaction, and it certainly won’t be the last major supply chain announcement for GM,” CEO Mary Barra said during an earnings call Tuesday.

But environmental groups are challenging the Thacker Pass project in court, saying the Bureau of Land Management broke federal law in approving an operations plan for the mine in January 2021. Plaintiffs include Western Watersheds Project, Wildlands Defense, Great Basin Resource Watch, and Basin and Range Watch, as well as tribes and a Thacker Pass area rancher.

The environmental groups said in a statement that environmental review of the project was fast-tracked under the Trump Administration “despite the enormous environmental impact to the nearly 18,000 acres of public land that would be affected by the operation.”

“The reckless permitting of the Thacker Pass lithium mine sets a bad precedent for the energy transition,” said John Hadder, director of Great Basin Resource Watch.

BLM has denied the suit’s allegations. Lithium Americas said the project has been designed to avoid environmentally sensitive terrain.

The parties presented oral arguments in U.S. District Court in Nevada on Jan. 5. They’re now awaiting a decision from Judge Miranda Du.

Two Funding Phases

Under GM’s agreement with Lithium Americas, funding from the automaker will be split into two phases. An initial $320 million investment is conditioned on a federal court ruling that does not overturn the BLM’s record of decision approving the plan. GM expects to release the first phase of funding by the end of this year.

In a second funding phase, GM will provide $330 million after Lithium Americas splits its U.S. and Argentine businesses into separate companies.

Through the agreement, GM would become a Lithium Americas shareholder and have exclusive access to Phase 1 lithium production at Thacker Pass.

Construction at Thacker Pass is scheduled to start later this year, with lithium production expected in the second half of 2026.

Other Lithium Sources

GM said it would use lithium carbonate from Thacker Pass in its Ultium battery cells. The automaker is launching a broad portfolio of vehicles using the Ultium platform, including the GMC Hummer EV pickup and SUV, Cadillac Lyriq and Chevrolet Silverado EV.

But General Motors isn’t focusing solely on Thacker Pass for a domestic lithium supply.

The automaker is also a strategic investor in Controlled Thermal Resources, a company working on extracting lithium from geothermal brine near the Salton Sea in Southern California. In 2021, GM announced a multi-million investment in CTR that will give the automaker first rights to lithium from the first stage of CTR’s Hell’s Kitchen lithium and power project. (See GM Invests Big in Calif. ‘Near Zero’ Lithium Project.)

Last year, GM and CTR expanded their collaboration to extend delivery of lithium hydroxide beyond 10 years. CTR is now recovering lithium from its Hell’s Kitchen optimization plant, the company announced last month.

Other lithium projects are making progress in Nevada.

Last month, the Department of Energy announced a $700 million conditional loan offer to Ioneer for the company’s proposed Rhyolite Ridge lithium-boron project in Esmeralda County. Funding would be through DOE’s Advanced Technology Vehicles Manufacturing (ATVM) loan program. (See Nev. Lithium Project Close to Securing $700M DOE Loan.)

The Rhyolite Ridge project is still in the permitting process; lithium production is expected to start in 2026.

Lithium Americas has applied to DOE for funding under the ATVM program for its Thacker Pass project. The loan would provide “a significant portion” of initial capital costs for the first phase of Thacker Pass, the company said.

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When is A MWh Not A MWh?

Anthony Clark (Wilkinson Barker Knauer) FI.jpgTony Clark | Wilkinson Barker Knauer

The energy policy hive is having a healthy discussion of late taking up a question we raised 18 months ago. (See Is Decarbonization an ‘Existential’ Challenge for RTOs?) Can the single marginal price construct in ISO markets continue to work effectively given important changes to generation technologies?

ISOs and proponents of the status quo have risen to defend the single locational marginal price (LMP), at least when applied in energy and related ancillary service markets. They assure that reform and expansion of the construct is possible to meet new challenges, and they quickly dismiss any notion of a fundamental rethinking. Their arguments extolling LMP are not wrong; they’re misplaced.

And they’re the same arguments raised since LMP was introduced. Indeed, a recent report, prepared by Professors William Hogan and Scott Harvey for the NYISO, walks step by step through more than 30 years of LMP history to conclude that:

economic theory and extensive practical experience demonstrate why the real-time locational marginal price is the only real-time pricing system that supports an efficient wholesale electricity market.

Vince-Duane (PJM) Content.jpgVince Duane | PJM

In comments this month to FERC and in reply to our prior writings, PJM’s market monitor endorses Hogan and Harvey’s recent paper. Much of the paper and comments in support simply recite (once again) the benefits that LMP offers as an efficient mechanism to dispatch, balance and schedule generation resources, price transmission congestion and reveal locational incentives and signals. We don’t disagree.

LMP is great — let’s get that out of the way. Our criticism is not with LMP in theory. Instead, we’re seeking a dispassionate assessment of how LMP is actually performing today and its prospects for success in the future. Since its inception, the single marginal price market for energy has delivered on much of its promise, although only a zealot would deny its limitations, as evidenced by what our initial paper calls those “compensating fixes” (typically complex, imperfect and contentious) that tinker with or supplement LMP prices depending on circumstance. But can this delicate construct effectively manage a transforming grid?

Our writings pose several questions, most ignored in rebuttal, suggesting why past performance might not be indicative of future results. But on one point we seem to be talking past each other.  

Electricity today is physically injected onto the grid by an array of generating and storage technologies having disparate operating attributes. These injections vary in character from one another (not to mention they’re poles apart from “virtual injections” offered by financial traders and demand response providers). Although these various injections each present a different profile to the system operator charged with keeping the lights on, from a market settlement perspective all are regarded as equal and paid the same. As the physical and virtual supply stack further evolves, can we continue to treat these injections as sufficiently homogenous in character to justify a single market, with a single clearing price paid to all?  As we have said previously, the only thing fungible (or in the parlance of economists, “perfectly substitutable”) when it comes to electricity is the electron itself. But no buyer, including particularly the system operator, is buying mere electrons. The megawatt-hour is in fact a highly bundled product with varying operational attributes such as its constancy (or variability) over time, its ramping and load following attributes, its stability and inertia properties, its on-demand availability/dispatchability, etc. All these properties, in the right balance, are critically important to the operator in maintaining system reliability.

Some dismiss the question of megawatt-hour fungibility or substitutability as an empty formalism. And if we insisted on perfect fungibility, we’d agree with the characterization. Although treating electricity in LMP markets as fungible has always been a problematic exercise in applying “compensating fixes,” it’s been workable enough to unlock much of the benefit summarized by Hogan, Harvey and others. But make no mistake, the very basis underpinning the law of single price is a presumption of commoditization.

Here lies the problem. The debate isn’t about the merits of LMP.  It’s about whether the penetration of new and transforming supply-side technologies (and demand response resources) permits us to continue to hold to a necessary predicate underlying LMP.   

The following statement to RTO Insider from Professor Severin Borenstein, board member at CAISO, illustrates the communication gap:

The idea that everybody gets paid a uniform price is how commodity markets work, not just for electricity — for natural gas, for gold, for oats, for everything. There’s a market price, and people will get paid that market price because they’re selling a homogeneous good.

Similarly, Hogan and Harvey’s paper includes the oft-repeated admonition about the 1970s-era misadventure in pricing “new” and “old” oil differently. These responses miss the point. Of course, commodities should transact at a uniform price — assuming they are commodities, which is to say essentially homogenous like oil, gold, oats or anything else meeting the definition of a commodity. But equally, a market that pays the same price for different things has a problem.

Presuming we can treat equally all injected megawatt-hours regardless of the unique operational attributes associated with these injections deserves scrutiny considering changing technologies. Comments filed recently with FERC in Docket No. AD21-10 by Professor Leigh Tesfatsion offer the same, but expanded, explanation for why electricity is not like oil, gold and oats and thus why:

all attempts to justify the (day-ahead/real-time market) two-settlement system (based on LMP pricing) by means of the efficiency and optimality properties of competitive commodity spot markets (based on competitive marginal cost = marginal benefit pricing) are conceptually unsupportable.

As the legion of rulemakings pending before FERC attest, there’s no shortage of argument and opinion about the type of institutions/structures, electricity market design and transmission policy we need to facilitate grid transformation. Which is why it’s puzzling to see the intellectual architects and master builders of the current ISO structure avoid engaging on this question of electricity as a commodity. Yes, the consequences that follow from finding that a bedrock presumption no longer holds will be profound and provoke a wholesale rethinking. Here again we say read Professor Tesfatsion’s comments where she explains — ironically given how economists largely populate the field of electricity market design — that we might be ignoring the dictum of “sunk costs as sunk.” Her comments introduce the “Ptolemaic Epicycle Conundrum,” drawing on history’s long and difficult road in accepting a Copernican sun-centric solar system by thinkers (and institutions) invested in Ptolemy’s earth-centric system.  This conundrum arises once we’ve all invested heavily in a certain model and layered on fix after fix as problems present, only to arrive at a sad place where “the correction of the fundamental conceptual inconsistencies in the core design principles is persistently deemed to be too costly to correct.”

So, let’s challenge the leading lights of energy economics and academia to prove that single clearing price LMP energy markets have not become “too big to fail.” Let’s examine the many ways electricity is being injected onto the grid today and the different operational attributes attendant to these injections, to ask whether a bedrock principle that directs us to pay all injections the same marginal price (varying potentially only by location) continues to hold.  Answering this question is what we’re looking for from these folks — rather than a rote repetition of LMP benefits.

Former FERC commissioner Tony Clark, a senior adviser at Wilkinson Barker Knauer, has represented several vertically integrated utilities in matters regarding utility deregulation and has authored several papers critiquing retail restructuring of the electric utility industry. 

Vincent Duane, the former SVP for law, compliance and external relations for PJM, is principal of Copper Monarch, which provides advice on electricity market design, governance and strategy for system operators and companies that work with them. He also is a senior adviser to Market Reform, an international consultancy.

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PJM CIR Cap Unlikely to End Accreditation Dispute

PJM members’ vote last week to limit resources’ capacity interconnection rights is not likely to end the dispute over how the RTO accredits intermittent resources.

Economist Roy Shanker, who filed a FERC complaint on Nov. 30, said Monday that members’ vote to change the rules was insufficient (EL23-13).

Shanker’s complaint alleged that PJM has been improperly permitting energy above renewable resources’ capacity interconnection rights (CIRs) to be entered into the Reliability Pricing Model (RPM) auctions as capacity, a practice he says is in violation of the RTO’s Reliability Assurance Agreement (RAA) and the interconnection service agreement (ISA) for each generator.

The result of the alleged over-accreditation, Shanker said, is diminished reliability, load overpaying for “phantom capacity” that does not meet reliability standards, artificial reduction of capacity prices for other resources; and inefficient economic decisions from market participants acting on potentially inaccurate information.

In response, PJM on Jan. 17 argued that the complaint stems from a mischaracterization of its standard ISA, which states that “to the extent that any portion of the customer facility described in section 1.0 is not a capacity resource with capacity interconnection rights, such portion of the customer facility shall be an energy resource.”

PJM said Shanker attempted to link this language to its accreditation of unforced capacity (UCAP), where no connection exists. Instead, it says the section is “a simple acknowledgement that a device is physically capable of providing energy above its CIR value, up to its maximum facility output level.”

Roy-Shanker-(RTO-Insider-LLC)-FI.jpgRoy Shanker | © RTO Insider LLC

Pointing to FERC’s 2021 approval of its effective load-carrying capability (ELCC) construct, PJM argued that the protest constitutes a “collateral attack” on the commission’s past ruling and called it to be rejected as an “attempt to revive arguments rejected in prior proceedings.” (See FERC Accepts PJM ELCC Tariff Revisions.)

PJM also said Shanker did not demonstrate that the complaint is in response to an injury and that, as such, he lacks standing.

Shanker argued that FERC’s order accepting the ELCC methodology was partly based on testimony in which PJM presented “incomplete and misleading” information about ISA provisions, as well as the difference between test conditions and normal transmission relating to accreditation. He also said FERC’s approval of the accreditation methodology was never codified into PJM’s governing documents.

He noted that in its order accepting the ELCC construct, FERC wrote that PJM had stated that it will account for “historically binding transmission constraints by considering each variable resource’s historic performance, including instances of curtailment due to transmission constraints.” This has not been the case, he argued, writing that when defining CIR levels and deliverability requirements, PJM does not look at dispatch, system operation and the relative price of resources.

“PJM previously presented incomplete information to the commission in terms of the underlying facts related to this issue in material ways. When this is recognized, the entire prior conclusions of the commission become ‘flipped,’ and it becomes clear that output from an energy resource (defined as effectively ‘not capacity’) should be excluded in accreditation of variable resources with respect to the amount of AUCAP [accredited UCAP] they can sell (or should even be considered in any ELCC calculations),” Shanker wrote.

In comments defending PJM’s practice, a group of environmentalist and clean energy organizations jointly argued that Shanker’s complaint is based on a misreading of PJM’s tariff that each megawatt of capacity must equal 1 MW of deliverable power. With this interpretation, they write that FERC’s findings in the 2021 ELCC filing were well-informed and correct.

“The commission was not misinformed, but instead reached a well considered decision that it agreed with PJM on a disputed issue — a determination for which Dr. Shanker’s client in that matter did not seek rehearing,” said the Sierra Club, Natural Resources Defense Council, American Clean Power Association and Solar Energy Industries Association.

They also argued that the current practice does not introduce any reliability risks, as repeat PJM analysis has not identified any transmission upgrades required for existing intermittent resources. Citing information from PJM’s Data Miner portal, they also noted that wind resources delivered energy 350% times their CIR level during the December winter storm.

Stakeholders’ Accreditation Proposal may not Address all Issues

The Markets and Reliability and Members Committee endorsed a proposal last week addressing some of the same issues in Shanker’s complaint, including language that would cap the hourly output of resources to their CIR rating when using the ELCC analysis to set their accreditation. Shanker told RTO Insider Jan. 30 that the proposal would not, however, resolve the issue of hourly input above CIRs being entered into the accreditation for resource classes, leading to resource types being allocated inflated capacity payments to be divvied between generators in that category.

The proposal would limit the slice of the pie that an individual generator can receive but would continue to allow intermittent resources to have an overly large portion reserved for them, Shanker said. He also noted that the endorsed language remains a proposal and still requires the approval of the PJM Board of Managers and FERC.

“It never goes away once it gets into the database,” Shanker said of energy output above CIRs being included in resource class accreditation. “The pie increases, and it will always get allocated to someone.”

The complaint also asks that FERC order PJM to change its accreditation methodology immediately and potentially provide a form of retroactive relief. This would effectively eliminate the transition methodology included in the endorsed proposal, which would create a system for generation owners to submit uprate requests and seek access to available headroom on the transmission system until PJM processes their request for higher CIRs in the interconnection queue. Without the formal execution of an ISA recognizing the higher CIRs, Shanker argued that PJM does not have the power to grant a resource a claim on any available transmission headroom.

In comments on the complaint, the Independent Market Monitor agreed that PJM’s tariff dictates that the ELCC methodology must cap the hourly output for a generator at its CIRs when determining accreditation for both individual units and resource classes. The impact of PJM’s current practice has been overstated intermittent capacity suppressing the final clearing price in recent Base Residual Auctions (BRAs).

“PJM has, to date, based on a mistaken interpretation of the market rules, based on an initial oversight, included energy deliveries above the level of CIRs obtained for intermittent resources in defining the ELCC values for those resources, affecting both the capacity value of individual resources and the capacity value of the total ELCC resources and therefore capacity auction clearing prices,” the Monitor wrote.

Had the correct accreditation been used for solar resources in the 2022/23 BRA, the IMM estimated the resource class average derated MW would have been 20% lower, while for wind resources it would have been 48.9% lower. Ultimately the IMM estimates that generator revenue would have been 4.4% higher with the proper ratings.

The Monitor called on FERC to require that PJM correct its definition of the capacity available from intermittent resources for the 2025/26 BRA and to not permit that auction to go forward until the issue has been resolved. The auction is currently scheduled for June 14, 2023.

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NJ Bills Push Rooftop Solar, EV Chargers, Grid Upgrades

The New Jersey Senate Environment and Energy Committee advanced bills Monday that would variously require new state buildings to facilitate distributed energy resources, provide business tax credits for the retrofit of warehouses to take solar panels and clarify the space needed for electric vehicle chargers at multiunit dwellings.

The spate of climate change-related legislation also included a bill that would set increasing targets for food recycling in an effort to reduce the methane produced when organic food is dumped in landfills. And a fifth bill would require the New Jersey Board of Public Utilities (BPU) to study how to upgrade the state’s transmission and distribution systems to interconnect more DERs.

Sen. Bob Smith, the committee chairman and a sponsor of four of the bills, said the BPU is “generally in favor” of the grid study.

“We all agree this is a really good bill. So, I think we should get it moving,” Smith said shortly before the committee approved the bill. “Just by way of background, our grid really stinks,” adding that addressing the issues is “really the key to … renewables.”

The bill, S3489, would require the BPU to “study means of allowing grid segments to host more distributed energy sources and improving the reliability of the grid.”

The areas of research suggested in the bill include: using substations to transmit electricity from the distribution system to the grid; the use of solar inverters to “to autonomously control the reactive power passing through the inverter”; and the impact of requiring the use of storage systems that can allow the input and output to vary depending on the power demand on the grid.

The BPU would be required to file a report on the study within a year. It would have another year to draft rules and regulations that would implement the findings of the report, which would be the basis for a pilot program and eventually perhaps a statewide program.

Doug O’Malley, director of Environment New Jersey, said the key elements of the bill are those that plan for pilot testing of the solutions unearthed in the study, and the adoption of rules and regulations needed to implement the solutions.

“The reason why this bill is so critical is because our energy grid obviously needs to be modernized and updated,” he said.

S1533 would require any new building used solely for state government that is larger than 15,000 square feet to include a DER that could be switched on “when the normal source of electricity is disrupted due to a power outage.”

The bill defines a DER as “one or more electric power generation, management or storage technologies, excluding diesel fuel technologies, located at or near the point of energy consumption, which are capable of providing the standard energy needs of a building or structure, or group of buildings or structures.”

Smith said the bill should be called “do what you are asking everybody else to do.”

“We’re the ones who are trying to make our state more sustainable, more renewable; all that kind of stuff,” he said. “We should be setting the standard and the example.”

EV Charging and Warehouse Solar

Smith said he drafted the EV charger bill, S3490, to amend a law that mandated the allocation of spaces set aside for EV charging stations in certain buildings. The law, enacted in July 2021, had left some confusion as to what was required, he said.

The bill would exempt multiunit low- or moderate- income housing dwellings from the law’s requirements to install “make-ready” parking spaces: those with the cables and support equipment ready to hook up to EV charging equipment. It would also clarify how many make-ready spaces are required by, for example, exempting off-street spaces that are incapable of supporting chargers from the total number.

Jeff Kolakowski, CEO at New Jersey Builders Association, said the bill still needs refinement to clarify how many spaces are needed in the multitude of different scenarios faced by builders.

“There’s a lot of different parking situations in residential communities out there,” he said.

S427 follows a law enacted in June 2021 that required new warehouses of more than 100,000 square feet to be ready to install rooftop solar in the future. (See NJ Bill Would Require Warehouses to be Solar Ready.) It would provide a tax credit for a warehouse that installs solar panels on a building with a “solar ready” zone. The credit would pay for 50% of the cost of the retrofit or $250,000, whichever is smaller. And the total amount of tax credits allocated to pay for the retrofits would be no more than $25 million.

The bill drew support from the Chamber of Commerce of Southern New Jersey, the New Jersey Conservation Foundation and Environment New Jersey. Alison McLeod, policy director of the New Jersey League of Conservation Voters, urged legislators not to overlook the rapid pace of warehouse development in New Jersey. The state is seeing a dramatic expansion of the warehouse sector, often on farmland, driven by the need for e-commerce companies and logistics providers serving the Port of New York and New Jersey.

“As warehouses continue to sprawl across the state, anything that we can do to help minimize their environmental impact is helpful,” she said.

Cutting Organic Waste Emissions

Turning to the bill designed to reduce the volume of organic waste disposed in landfills, S421, Smith said, “It’s looking like it might have as much or more of an impact on global climate change than carbon dioxide and fossil fuels, which is huge.”

Several speakers took issue with elements of the bill, however.

The bill would require the state by Jan. 1, 2027, to reduce by 50% the level of organic waste disposed in the state from 2016 levels, and by 75% by Jan. 1, 2032. The statement explaining the bill defines organic waste as “biodegradable waste that derives from organic material, and includes food, paper and cardboard, yard trimmings, animal waste, bio-solids, and sludge.’”

“The vast majority of organic waste that is generated in New Jersey is deposited into landfills, where it breaks down and releases methane, a potent greenhouse gas,” according to the statement. “While a percentage of this methane is collected by landfills and used to provide energy, much of it escapes into the atmosphere, contributing significantly to climate change.”

The bill would also require, within 18 months, the Department of Environmental Protection (DEP) to adopt rules and regulations for the program. Among them would be rules on how local governments direct the behavior of organic waste generators and suggestions for potential penalties for noncompliance.

The rules also would set out how the state by 2030 can recycle 20% of the “excess, unused and edible food that is currently disposed of” for human consumption, the bill states. It would also require the DEP by July 2027 to submit a report for the governor documenting the state’s progress toward the targets.

Gary Sondermeyer, vice president of operations at Keasbey-based Bayshore Recycling, told the committee that he generally supports the bill but does not believe that New Jersey could reach the 75% target.

“The real problem is we have woefully inadequate composting infrastructure in the state,” said Sondermeyer, who also represented the Association of New Jersey Recyclers. “Municipalities and counties are very eager to set up and develop composting programs to drive material away from landfills, and from resource recovery plants. But, to use the old cliche, we’re all dressed up and nowhere to go. We need infrastructure.”

Mary Ellen Peppard, vice president with the New Jersey Food Council, echoed the sentiment, adding that the council is committed to food waste reduction.

“A really big concern is the lack of food waste recycling facilities,” she said. “We actually have a couple of members at the moment who have been trying for several years to build some food waste recycling facilities, and they’re running into a lot of challenges.”

Ray Cantor, a lobbyist for New Jersey Business and Industry Association, said his group agreed with the goal of cutting food waste disposal but was concerned that the bill gives too much power to the DEP.

“Our major concern is there’s just an awful lot of delegation to DEP as to how to implement those goals,” he said. “We don’t necessarily have a tremendous amount of faith that DEP is going to do the right thing or will not come up with regulations that may be too onerous or too burdensome.”

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FERC Ends MISO Compensation for Reactive Power Supply

FERC last week approved MISO’s Transmission Owners’ request to eliminate reactive power compensation for generators, rejecting multiple protests.

The commission’s Jan. 27 order cited Order 2003, which said generators do not have to be compensated for providing a standard range of reactive power because they’re simply meeting a condition of interconnection (ER23-523).

MISO Transmission Owners in December filed to eliminate reactive power and voltage control charges from their own and unaffiliated generation resources. TOs said the revisions will result in a rate decrease for transmission customers. They argued that the number of unaffiliated generators collecting reactive power compensation has grown to a $220 million annual revenue requirement and climbing. (See MISO TOs File to End Reactive Supply Compensation.)

Under Schedule 2 of MISO’s tariff, most generation owners can apply to receive separate compensation for their reactive supply. The TOs asked FERC to eliminate separate charges to pay for reactive service supplied within the standard power factor range of 0.95 leading to 0.95 lagging.

Several clean energy generation owners accused the TOs of using their agreement with MISO in an “abusive” manner. Groups including the Coalition of Midwest Power Producers, American Clean Power Association and Clean Grid Alliance said MISO TOs lacked the authority to make the change, gave stakeholders just 19 days’ notice that it intended to make the change and failed to vet the proposal in the stakeholder process.

EDF Renewables and Vistra Energy argued many independent power producers in the footprint will suffer harsh financial effects. The Solar Energy Industries Association and Wolverine Power Supply Cooperative contended that eliminating reactive supply compensation could lead to generation developers installing reactive power capabilities only to the bare minimum standard power factor range, setting off a possible shortfall that could keep MISO from returning to reliable operations during an emergency.

The protestors also said the removal of Schedule 2 wasn’t fair because generation-based reactive power won’t be eligible for compensation while MISO TOs will continue to be paid for their transmission-installed reactive devices in their rate bases. They noted that MISO’s 2022 Transmission Expansion Plan includes $146 million of new reactive support and voltage control devices on which the MISO TOs will earn cost recovery plus a rate of return.

But FERC said a reliance on reactive supply compensation isn’t a good enough argument to continue its practice. It said new interconnecting generators must provide standard reactive service as a condition of interconnection and aren’t entitled to payment for doing what’s mandatory.  

The commission waved away concerns that MISO’s system reliability could suffer without the compensation. It said other wording in MISO’s tariff allows MISO to compensate a resource if it has to direct it to provide reactive power outside of the standard power factor range.

FERC also said it found no discrimination against independent power producers in the proposal. It said the IPPs are free to try to recover lost reactive power revenue through increased power sales rates, just as TOs’ generating units can through retail rates.

Finally, the commission rejected arguments that TOs can unfairly continue to collect reactive power payments through transmission-installed reactive devices. The commission said the issue at hand related to generation-based reactive power payments, not transmission. It said TOs proposed to treat affiliated and unaffiliated generation alike.

Commissioner James Danly disagreed with the commission’s decision, writing that MISO TOs did not meet their burden of proof that the current rate was unreasonable, given the “substantial unrebutted evidence of the negative rate impacts that this will have on generators not affiliated with the MISO TOs.”

Danly said it was unsatisfactory for MISO TOs to simply cite Order 2003 and previous orders where the commission decided that generators don’t have to be paid for reactive power within the standard range.

Danly argued that in prior cases, FERC “eliminated reactive power compensation when only a handful of unaffiliated generators were receiving — or still seeking — it.”

“The situation in MISO clearly is distinguishable where scores of generators are recovering reactive power compensation and it has been a part of the MISO tariff for years,” Danly wrote.

Commissioner Allison Clements concurred in a separate statement, writing that she would have preferred the MISO TOs use a “different procedural approach” that incorporated more stakeholder input.

She said MISO TOs’ filing is evidence that FERC’s current cost-based methodology for reactive power compensation “is poorly suited for newer technologies and non-synchronous generation like wind, solar, and storage.” She said FERC should act on its Notice of Inquiry opened in 2021 to examine the current regulations associated with reactive power compensation (RM22-2). The commission has not acted in response to comments filed in the docket early last year. (See FERC Seeks Comments on Reactive Power Compensation.)

“Whether or not generators located in MISO were justified in relying on continued reactive power compensation, parties have stated in the record that this decision will cause financial disruption,” she said.

Clements encouraged MISO stakeholders to “consider more effective alternatives to cost-based reactive power compensation.”

“Services should be appropriately compensated for the benefits they provide, and reactive power plays an important reliability function… [S]takeholders may wish to consider market solutions and/or compensation models that are based on the performance of the generators in providing reactive power when called upon, or that incentivize reactive power generation to be located where additional reactive supply is most needed from a reliability perspective,” Clements wrote.

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Solar Trade Group Challenges MISO Ban on Renewable Ancillary Services

The Solar Energy Industries Association on Tuesday lodged a complaint at FERC against MISO’s practice of blocking intermittent resources from its ancillary service market.

SEIA, represented by Earthjustice, asked that the commission find as unjust and unreasonable MISO’s tariff provisions and business practice procedures restricting wind, solar and battery hybrid resources from providing regulation service, spinning reserves and supplemental reserves.

The organization said the RTO prevents its dispatchable intermittent resources (DIRs) from ancillary services participation “despite the fact that [they] have the operational capability to provide such services.”

“No other FERC-jurisdictional RTO or ISO codifies this explicit discriminatory prohibition,” SEIA said in its filing, noting that PJM and CAISO explicitly state wind and solar resources’ eligibility.

SEIA also pointed out that MISO never meant for its ban on renewable ancillary services to be permanent. In a 2010 filing with FERC, the grid operator said it needed “to gain experience with this new method of modeling and dispatching” before allowing renewable energy to supply operating reserves. SEIA said FERC’s ultimate agreement with MISO’s prohibition hinged on its temporary nature. To date, MISO has never provided a “technical justification” for its ban, the organization said.

It argued MISO’s market rules discriminate against some resources because they’re tailored to the large, centralized power plants of the past.

“MISO’s discriminatory and unjustified tariff provisions that prohibit DIRs from providing ancillary services in MISO’s wholesale market is a prototypical example of how outdated tariff provisions can result in unnecessary and deleterious market barriers,” the organization said.

SEIA said lifting the ban would increase competition and allow new resources to “provide the critical grid-stabilizing services that MISO will need.” It said that though MISO “fundamentally agrees” that renewable resources should be able to provide all the services they’re capable of, the grid operator hasn’t acted on a longstanding suggestion that it extend its ancillary service market to renewable energy. According to SEIA, the issue was raised as part of MISO’s 2018 market roadmap improvement ideas; staff last year recommended putting the idea to rest without action.

The complaint comes as MISO has announced plans to ban dispatchable intermittent resources from providing ramping needs, saying they’re historically unhelpful. (See MISO Plans to Bar Intermittent Resources from Ramp Capability.)

“Rather than doubling down on nonmarket-based blanket prohibitions, MISO ought to be focused on facilitating technology-neutral, operations-focused solutions that properly establish criteria for when a resource is called upon to provide ancillary services,” SEIA said.

In a press release accompanying the complaint, Earthjustice attorney Aaron Stemplewicz said his organization is prepared to challenge MISO’s “attempts to strip wind, solar and battery hybrid resources from providing ramp capability.”

“Any backsliding will be rigorously challenged with regard to the eligibility of renewable resources to provide all the services they are capable of providing,” he said.

SEIA Energy Markets Director Melissa Alfano added that energy markets must keep pace with a changing grid.

“Renewable assets like solar, storage and wind have more than proven themselves as reliable, and we need to recognize the full scope of their benefits if we want to rapidly decarbonize in the next 10 years,” she said.

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Transmission Project Would Span Across Interconnection Divide

A Midwestern utility and an independent transmission company are teaming up to build a first-of-its-kind line that would span across the Western and Eastern interconnections and through three different electric regions.

ALLETE (NYSE:ALE), a Minnesota-based energy company, and Grid United, a competitive transmission developer, announced their plans this week to build the North Plains Connector, a roughly 385-mile HVDC transmission line between North Dakota and Montana.

The developers say their project would be the first transmission connection between three “regional U.S. electric energy markets”: MISO, SPP and the Western Interconnection. It would create 3,000 MW of transfer capacity between the regions.

SPP spokesperson Meghan Sever said that Grid United has been conducting a feasibility study on several transmission projects with the grid operator’s staff and the Transmission Working Group, the scope of which was approved in September.

“Several merchant HVDC developers have approached SPP about projects in various stages of development. As with every project, SPP follows our stakeholder-approved study practices when evaluating the impacts of these projects on the SPP system,” Sever said.

The project is still in the development stage, with permitting expected to start this year and a planned in-service date of 2029. Its unique nature has captured attention from the energy world, earning praise for its ambitious goals to connect the regions.

Grid United is run by Michael Skelly, a prominent clean energy executive whose past portfolio includes building transmission and wind projects at Clean Line Energy and Horizon Wind Energy.

“It is no secret that the U.S. is in desperate need of new electric transmission capacity, and the North Plains Connector will provide resiliency and reliability benefits for decades to come,” Skelly said in a statement.

ALLETE owns utilities in Minnesota and Wisconsin, as well as energy production subsidiaries in North Dakota, Minnesota and Maryland. Its CEO and president, Bethany Owen, called the project “innovative” and said its an “important step toward a resilient and reliable energy grid across a wide area of the country.”

The collaboration between a utility and an independent transmission company is also an innovative part of the project that energy experts have called out.

“It’s starting!” tweeted Rob Gramlich, an energy consultant and former FERC official. He predicted that “joint ventures, joint ownership and joint [transmission companies] will join forces to build infrastructure, serve specific utility load and upsize to serve wider market demand.”

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Murphy Signs NJ Low-carbon Concrete Law

New Jersey took a big step in promoting the use of low-carbon concrete Monday when Gov. Phil Murphy (D) signed a law that will provide business tax credits to producers who supply state projects concrete made with lower greenhouse gas emissions.

The law, S287, gives state corporation business and gross income tax credits to producers that provide more than 50 cubic yards of low-carbon concrete under a state procurement contract or to a private contractor contracted by state government. It enables the supplier to earn credits for up to 5% of the cost of the concrete if it is “low-embodied-carbon concrete.” The credits can be up to 3% if the concrete’s production incorporated “carbon capture, utilization and storage technology,” according to a legislative explanation of the bill.

Some producers may deliver concrete that meets both criteria, and so be eligible for up to 8% of the cost, an analysis by the state Office of Legislative Services said.

The law targets a major source of carbon emissions from one of the most widely used construction materials and could yield significant emissions reduction if low-carbon concrete is widely embraced, analysts say.

The Natural Resources Defense Council, which tracks low-carbon concrete initiatives, said the law is the first of its kind in the U.S.

“It’s a model for other states,” said Sasha Stashwick, NRDC’s director of industrial policy. The law is “a really unique policy that combines performance standards with performance incentives.”

“We hope to see a lot more states adopt it,” she said.

The bill’s enactment comes 14 months after New Jersey enacted a law, S3091, that provides builders with tax credits for using unit concrete — pre-fabricated concrete that is delivered in ready-to-use form, often as pavers or concrete blocks — produced in a low-carbon method. (See New Jersey Lawmakers Back Low-carbon Concrete.)

The International Energy Agency (IEA) has said that the cement sector, which provides a key ingredient of concrete, is the second largest industrial emitter of carbon emissions, generating about 7% of worldwide emissions.

Murphy, who has set a target for the state to reach net-zero emissions by 2050, said in a statement that the tax credit law is an example of the state’s “nation-leading innovation and cross-sector collaboration.” He said it shows that the benefits of clean energy extend beyond the environment and added that the law will “further support the construction of greener, cleaner buildings and roadways in New Jersey.”

“As our efforts to decarbonize our economy become more urgent, we must also ensure that they become increasingly more economically attractive,” Murphy said. “It’s bills like these that prove that the steps we take to combat climate change can — and will — stimulate economic activity and growth in the industries that remain key to our climate solution.”

Bipartisan Support

The law limits the amount of tax credits awarded to $10 million a year, and no producer can receive more than $1 million a year.

It requires the Department of Environmental Protection (DEP), working with the Department of Treasury, to create a process by which concrete producers can certify that their concrete is low-embodied-carbon concrete, or that its production used carbon capture, utilization and storage technology. The agency must produce a report three years after the program is implemented that contains a “cost-benefit analysis of the tax credits.”

The bill drew bipartisan support in the legislature, with a 74-4 vote in the General Assembly and 39-0 in the Senate. It was embraced by both environmentalists and business groups, such as the New Jersey Business & Industry Association (NJBIA), which is often at odds with some of the Murphy administration’s clean energy efforts.

“We must also incentivize the business community to further use innovative products and processes,” said Raymond Cantor, the NJBIA’s deputy chief government affairs officer. “This bill does exactly that, by providing tax incentives to developers to use low-carbon concrete.”

Reducing Cement Use

Stashwick said it’s not yet clear the extent to which the use of low-carbon concrete cuts emissions, in part because much of that depends on the specifics of each project.

Cement accounts for about 90% of the carbon emissions associated with concrete, and reducing the amount of cement in the concrete mix and replacing it with other ingredients can achieve a significant cut, perhaps by 50%, she said. But deeper cuts in emissions require changes upstream in production and in the plants that make it, with retrofitting and new technology, which can be expensive, she said.

“Cement kilns run at very high temperatures. So, you’re burning a lot of fossil fuels because you’re heating up the raw material,” she said. “So, the more we can reduce demand for cement with these types of policies like we have in New Jersey, the greater we will be able to reduce emissions associated with the final product, which is concrete.”

The governments of New Jersey, New York state and New York City are among the largest procuring low-carbon construction materials, with leaders in New York signing executive orders to do so, according to NRDC.

New York Gov. Kathy Hochul in January signed the Low Embodied Carbon Concrete Leadership Act (LECCLA), which established guidelines for procurement but was not as “robust” as the New Jersey law, Stashwick said. The New York law requires the Office of General Services to create a stakeholder panel to make recommendations for low-carbon concrete procurement policies, with that work set to start next month, she said.

“And now they have a real-world example of a type of policy that they could recommend for New York to adopt,” she said, referring to New Jersey’s new law.

In New York City, Mayor Eric Adams signed an order stating that “capital project agencies shall make their best efforts to incorporate low-carbon concrete specifications for all batch plant ready-mixed concrete used in capital projects and for concrete sidewalks.”

The Port Authority of New York and New Jersey also has made a point of using low-carbon concrete. The agency — which operates bridges, tunnels and the Port Authority Trans-Hudson, as well as three airports — enacted the Clean Construction program to promote low-emission construction, which included a requirement to use “low-carbon concrete mixes.”

The authority followed that in 2021 by enacting the Low Carbon Concrete Program, in which it put together a project with New York University and Rutgers University to develop and test new low-carbon concrete mixes.

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House Energy Panel Talks Permitting in First Hearing

The partisan divide was clearly visible at the House Energy & Commerce Committee’s first hearing of the new Congress Tuesday, but witnesses on both sides suggested they might find common ground on permitting “reform.”

Cathy McMorris (House Energy Commerce Committee) FI.jpgChair Cathy McMorris Rodgers | House Energy & Commerce Committee

“Energy is foundational to every aspect of our lives, whether it’s making energy more affordable and reliable, securing our supply chains, beating China, protecting the environment, addressing climate change, or putting energy security back at the center of policymaking,” new Committee Chair Cathy McMorris Rodgers (R-Wash.) said at the start of the hearing. “These should be bipartisan goals.”

So far, Republicans have proposed a couple of energy bills in the House that deal with the strategic petroleum reserve, and while those won some support among Democrats, ranking member Frank Pallone (D-N.J.) was not among them. One of the bills would limit the president’s ability to draw down the reserve just to lower prices, requiring that such a move be paired with additional leases for drilling on public land.

Pallone argued the oil companies were interested in keeping the price of their product “artificially high” and said that the committee should move forward on new sources of energy as it did last Congress.

“Let’s keep in mind that encouraging renewables — as we did with the Inflation Reduction Act, as we did with the Bipartisan Infrastructure Law — this is the way to go in the future,” Pallone said.

Maximizing those two laws’ impact will require an expansion of the transmission grid, both by building new lines and upgrading existing ones so that they can transport more power, said Ana Unruh Cohen, who was the Democrats’ staff director for the House Select Committee on the Climate Crisis until Republicans ended the committee when they took over the chamber.

“I think there does need to be more focus on grid enhancement,” said Cohen, the Democrats’ only witness. “Actually, Sen. [Joe] Manchin’s [permitting] proposal had some language on the grid that I think Energy and Commerce staff also liked to help deploy more things, deal with cost allocation.”

While Manchin’s (D-W. Va.) bill failed late last year, Congress did provide agencies up to $1 billion to improve their permitting processes and help get needed projects out the door, Cohen said. That initiative needs to be implemented quickly, she added.

Paul Dabbar, a former undersecretary of energy in the Trump Administration, also called for permitting reform and singled out FERC and its two biggest governing statutes — the Federal Power Act and the Natural Gas Act — for changes.

“FERC needs significant legislative reform to make them do their statutory obligation to ensure there is enough energy supply of all types,” Dabbar said in his written testimony. “They need to be required to approve transmission projects for all types of energy. And they need to radically overhaul ISO rules to encourage baseload power that is being shut down faster than new intermittent plants are being built.”

Neither the FPA nor the NGA are “definitive enough” to make FERC meet its statutory obligation to deliver energy of any type, Dabbar said. He suggested adding more time limits for FERC approval of infrastructure projects.

Dabbar said permitting relief is urgently needed because inflation is interfering project developers’ ability to predict their costs. Project approvals can take so long that by the time they win approval, the initial estimates the regulators relied on are too low and the infrastructure becomes uneconomic.

“We’re seeing that in, for example, Massachusetts, actually, with offshore wind right now,” Dabbar said. “They propose a contract, approvals have taken so long, and then the inflation topic is on top of it, all of a sudden the offshore wind projects, they withdraw them because they don’t make economic sense anymore.”

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BOEM Continues Planning Process for Gulf of Maine OSW

The concept of floating wind power in the Gulf of Maine continues to take shape.

The U.S. Bureau of Ocean Energy Management on Tuesday wrapped up a series of informational sessions online and in person in Maine, Massachusetts and New Hampshire, seeking feedback as it develops a map of potential wind farm sites.

The eight-step process is intended to refine and shrink the initial planning area into individual lease areas, eliminating millions of acres less suited for wind power for reasons as varied as lobsters, pipelines, whales and commercial shipping.

There is more to come: Fisheries data, for example, have not been incorporated into planning yet.

The current “draft call area” is only Step 3 along the way and, at 9.9 million acres, is already 27% smaller than the area initially outlined.

“We recognize that this still a large area with significant conflict, and that’s really what we’re now turning our focus toward, looking toward the fishing effort, marine mammal and avian hotspots and any additional concerns that exist within this area,” BOEM project coordinator Zack Jylkka said Tuesday.

An audience member at the virtual meeting asked if a tract eliminated from the area of consideration could later be added back.

It typically would not be, Jylkka said. The process is slow and deliberative in hopes of avoiding the need for changes. But the ocean is a dynamic environment, so changes are sometimes needed, and BOEM is not precluded from making them, he said.

Has there been coordination with grid operators on the best interconnection points for electricity from offshore wind?

“One of the variables there is distance to shore, distance to interconnection points,” Jylkka said. “So, we’re certainly looking at that to inform some of the suitability of potential areas. But ultimately, we’re still asking a lot of questions ourselves.”

Is impact on endangered species weighted more than impact on nonendangered species?

The methodology has evolved in the last couple of years, said James Morris, a marine ecologist with the National Oceanic and Atmospheric Administration’s National Centers for Coastal Ocean Science. “We’ll essentially assign a score to each one of those species, based on its status and trend.”

A species with small and declining numbers would get a very low score for compatibility with a wind project, for example. All the scores for all the species are combined to produce a single data layer, to be added to the map with layers for the various other potential impacts.

The U.S. Department of the Interior in 2021 said it hoped to hold a lease sale in the Gulf of Maine by 2025. Jylkka said Tuesday that the auction is currently projected to be in the third quarter of 2024.

The offshore wind industry is still in its very early stages in the U.S., and the projects now being built and planned on the East Coast entail towers on seabed foundations. But the areas targeted for development in the Gulf of Maine, like those off the California coast, are deep enough to require anchored floating wind turbines, a technology still being developed and refined.

Five companies so far have expressed interest in potentially developing wind power in the gulf, Jylkka said: Avangrid Renewables, Hexicon USA, Pine Tree Offshore Wind (RWE Renewables and Diamond Offshore Wind), TotalEnergies SBE US (TotalEnergies and Simply Blue) and US Mainstream Renewable Power.

As large-scale commercial wind power is considered in the Gulf of Maine, the state of Maine is pressing forward on a related track: It has applied to BOEM for a research lease on 9,700 acres about 45 dozen miles southwest of Portland for up to a dozen floating turbines with a combined capacity of up to 144 MW.

The University of Maine has been designing and developing a floating concrete hull technology for offshore wind for more than a decade. A research array would advance that technology and give insight to the interaction floating wind turbines would have with fishing, shipping and other maritime activities and ecosystems.

On Jan. 19, BOEM announced a “determination of no competitive interest,” moving the state’s application to an environmental review of potential impacts from such a project.

The university, in a partnership that includes RWE and Diamond, is planning to anchor a single 10-MW floating turbine close to Monhegan Island in 2024. It is an up-scaled version of a turbine that was tested off the coast at Castine a decade ago.

Kelt Wilska, energy justice manager for Maine Conservation Voters and Maine’s lead representative in New England for Offshore Wind, told RTO Insider later Tuesday that he likes the progress being made.

“I view this through the lens of urgency,” he said. “We need to move very quickly to meet our climate goals both at the state and federal level.”

But there is value to a deliberative process, Wilska added.

BOEM was not required to hold the series of public meetings, he said. The fact that it did so indicates the agency is committed to a just and inclusive process, which is important to him and those he works with.

“I am pleased with the amount of care they are putting into winnowing down this area,” Wilska said.

The draft version of Maine’s own offshore wind roadmap shows the results of extensive outreach and collaboration, he added. “We want to really build on that.”