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November 6, 2024

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Trib Fest Panel: Let ERCOT Market Work

Pat Wood 2022-09-24 (RTO Insider LLC) FI.jpgPat Wood, Hunt Energy | © RTO Insider LLC

AUSTIN, Texas — Pat Wood, former chair of both FERC and Texas’ Public Utility Commission, put his street cred to the test Saturday during one of The Texas Tribune Festival’s more non-political panel discussions.

Jumping at the chance to advise Texas lawmakers on what they should do with the state’s proposed market changes, Wood referenced requests by legislators during recent testimony by ERCOT and PUC representatives that they be given a chance to weigh in on the market design before the grid operator begins to implement it. (See Texas Lawmakers to Vet ERCOT Market Redesign.)

“That disturbed me the most,” Wood said. “If anybody out here walks away with any message, it’s that we’ve got to get that investment signal out now. If we’ve got to wait a year … we’ve kicked that can a year or two down the road. It was my hope that the PUC would lock and load here by Christmas.”

Wood said that when Texas deregulated the ERCOT market in 1999, “people were already putting steel in the ground” when the legislation became law, resulting in some 30 GW of natural gas-fired facilities being built.

“It was clear from that from [then-Gov. George W. Bush’s] signature [on the bill] that this is the law of the land, and we’ve got this open market and the old utility inefficient power plants are going to be shut down … and everybody came in. So that investment signal is just absolutely important.”

Caitlin Smith 2022-09-24 (RTO Insider LLC) FI.jpgCaitlin Smith, Jupiter | © RTO Insider LLC

“I think they need to focus on the incentives that bring things to the market,” said Caitlin Smith of energy storage-provider Jupiter Power, who was previously an attorney with ERCOT’s Independent Market Monitor.

“It’s a competitive market, right? It’s a marketplace,” Smith said. “We’ll have wind, solar, bitcoin mining, all of that. I think it’s much better to let the market incentivize that than to legislate that kind of like anything else. I think you really want the input of the people investing in ERCOT because we rely on those investment signals to provide reliability. So you don’t want to put something too prescriptive. You need to encourage the correct incentives for the energy-only market.”

ERCOT’s energy-only market was designed by the industry to send pricing signals to attract new generation; the theory being that $9,000/MWh LMPs during times of scarcity — since reduced to $5,000/MWh by the PUC — would prompt new builds. It has, but the resources have mostly been renewables that are much cheaper to build than thermal generators.

“We believe that we need changes to [the market], but not because the market is didn’t deliver,” said Vistra CEO Jim Burke, the panel’s third member. “It’s because the world is changing, the asset base is changing, and the incentives in the markets are changing, and we’re still using a design that really is from over 20 years ago.”

“We had the ability to be settlers. The saying goes the pioneers got shot, the settlers got the land,” Wood said. He explained the market’s designers used the best practices from other deregulated markets around the world, including Chile, South Australia, England and Pennsylvania.

“So we got to kind of pick and choose with the resources we’ve been blessed with from the good Lord, with sun and wind. With innovation, we kind of unlocked the market structure we embraced here 25 years ago,” Wood said. “The future of the world grid will be decided right here because of the increase of renewables, their integration, the large customer base. Everything you’ve got is a microcosm of the global power system. I think our unique status as an independent grid gave us the ability to move faster and to move in a more creative way.”

Wood acknowledged the February 2021 winter storm was a “major setback” for ERCOT. He used another of his endless supply of analogies by saying boxers can get knocked out “but those good boxers get back in the ring and show people how to win again.”

Referencing the 88th Texas Legislature that will take over Austin in January, Wood said lawmakers “need to remember what I just said, which is Texas will be the innovator if we stay out of the way and let [the competitive market] make the changes.”

“It’s a work in progress. I don’t believe we’ve decided how we’re going to fix it or if it’s needed to be fixed,” Smith said, noting that price spikes have been addressed, but not the details around how costs are allocated. The recent surge in gas prices, which fuels most of the ERCOT generating fleet, has made it more difficult to reduce costs on the supply side.

All the while, demand continues to grow within Texas as transplants and businesses continue to settle in the state. However, reducing customer demand is not high on the list of market solutions.

Thus, the panel’s title: “Power Struggle. No, seriously: Is the grid fixed?”

“The cost of electricity, in theory, is based on the value to the customer, so you can get that sort of demand-side response,” Smith said. “There are certain things you can do just on the electricity side. I think we’re trying to get to a market solution that would get us a combination of that customer response and the supply response.”

Told by moderator Russell Gold that her comments were scaring him about ERCOT’s ability to handle another winter storm, Smith replied that it was not her intention to frighten anyone.

“We’re in sort of the interim right now,” she said. “We have taken a lot of operational steps with weatherization, gas supply, coordination [with the gas industry], but can we sustain those without a market change or going back to kind of a more energy-only market to make sure that those generators can pay for those operational steps?”

Jones Nears End of ERCOT Tenure

Brad Jones 2022-09-24 (RTO Insider LLC) FI.jpgBrad Jones, ERCOT | © RTO Insider LLC

Appearing solo on a separate panel Friday, ERCOT interim CEO Brad Jones reflected on his tenure with the grid operator, which began shortly after the 2021 winter storm and is now in its last week. A 90-day temporary assignment that was extended a year ends this week, when Pablo Vegas takes over as permanent CEO on Saturday.

Vegas replaces Bill Magness, who was fired by the Board of Directors after the grid nearly collapsed during the 2021 storm. (See ERCOT Board Chooses Jones as Interim CEO.)

“So why did you want this job?” Jones was asked as the room erupted in laughter.

“I didn’t expect much laughter out of that,” responded Jones, who previously served as ERCOT’s COO before becoming NYISO’s CEO. “To be quite honest, I love Texas and I really do love ERCOT and what [its] mission is. There was an opportunity to step in and carry them through to when it was a more stable environment … to get them to winter.”

He said he was glad he was asked to stay through the summer as well “because it was such a rough summer.” Record heat and demand led to several scares during the summer, but the grid held up thanks to voluntary conservation measures and a conservative operations posture that left 5 GW of capacity in reserve.

As Jones approaches the moment when he will shed his “interim CEO” title, he said the word “interim” has become very important to him.

“My team calls it my superpower because it really has been good to say, ‘No,’” he said. “There’s some things we just simply will not do. …

“Now’s a great time to hand off to the next person,” Jones said. “My goal was three-fold. First, to fix the things that needed to be fixed that I knew needed to be fixed. And part of the reason why I knew it is because I was sitting on my couch when it happened, and I was getting calls from everybody that I’d known for the last 30 years, telling me everything that needs to be done, and I started writing it down. Everybody had a five- or six-point list and by the end of it, I had 60 points.”

Jones’ second goal was to prepare ERCOT for the future. That entails adding dispatchable generation for “when the sun doesn’t shine and the wind doesn’t blow.” He said ERCOT’s massive number of renewable resources have been highly effective in bringing down energy costs, but “we have to solve both problems for both benefits to work for us.”

Rebuilding trust in ERCOT is Jones’ third and final goal.

“Trust is not that hard to build at the beginning, but if you’ve lost trust, it is extremely hard to rebuild,” he said, noting no amount of listening tours he has conducted or public appearances will regain the public’s confidence overnight in ERCOT.

“It’s not a year, it’s not five years, maybe it’s 10 years — but doing the right thing over and over and standing up for reliability. Doing those functions that will make sure that we keep the lights on for all Texans,” he said.

Jones agreed he started from scratch, but he has made inroads. “Trust me,” he joked, “everyone knows who ERCOT is today.”

“We still have a lot of work to do there,” he said.

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Electric Commuter Plane Takes Flight in Wash.

A Washington aviation company’s all-electric prototype commuter plane flew for the first time Tuesday.

At 7:10 a.m. PST, the prototype “Alice” aircraft lifted off at an airfield at Moses Lake, Wash., on a “proof of concept” flight. It circled for eight minutes at 3,500 feet moving at 149 knots and landed according to plan.

“The mood at Eviation is electric,” said company CEO Gregory Davis at a virtual press conference.

Eviation plans to build three models of the two-pilot Alice — one for nine commuter passengers, one for six executive-level passengers, and one capable of carrying 2,600 pounds of cargo. The plane has a maximum speed of 250 knots and a range of 250 nautical miles. Davis declined to say what the sales price would be for an individual aircraft. Commercial use is projected for 2027.

Massachusetts-based Cape Air has signed a letter of intent to buy 75 commuter planes, and Miami-based Global Crossings Airline has signed a similar letter for 50 commuter planes. Germany-based DHL Express is interested in buying 12 cargo planes. Manufacturing will take place in Arlington, Washington, where Eviation is based. (See Electric Aircraft Company Lines Up Major Deal.)

In a press release, Cape Air founder and board Chairman Dan Wolf said: “We currently fly more than 400 regional flights per day, connecting more than 30 cities across the United States and Caribbean. Alice can easily cover 80% of our flight operations, bringing sustainable, emission-free travel to the communities we serve.”

In the same press release, Geoff Kehr, senior vice president for global air fleet management at DHL Express, said: “Alice is the true game-changer by enabling long distance air transport for the first time with zero emissions.”

At the press conference, Davis said deliveries to the airlines will likely occur in 2027.

Over the next few weeks, Eviation will analyze data collected in the first flight. A special focus will be on data from the batteries powering the flight and the propulsion system. The company plans to build three additional test planes to conduct more tests. 

Davis expects the certification process by the Federal Aviation Administration to begin in 2025 and last two years. Using batteries to power a plane will likely be a major concern by the FAA, he said. “The biggest tech challenge is the development of the batteries … Developing an all-electric passenger plane is hard,” he said.

An unresolved question is setting up charging infrastructure at airports serving the Alices. A full charge would take 35 minutes. Davis said Eviation and the airlines cannot pay for all the infrastructure costs, saying the airports and federal government need to become involved.

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Collaboration Crucial to Create Trucking Fleets of the Future

PITTSBURGH — Truck makers, fleet owners, utilities and governments working together here and in Europe are developing what they believe will be the least disruptive way to gradually replace conventional diesel trucking fleets with electric fleets in the coming decades.

All of them, along with experts on every conceivable clean energy issue, were represented last week at the Global Clean Energy Action Forum (GCEAF), a three-day conference hosted by the U.S. Department of Energy and Carnegie Mellon University that drew more than 6,000 participants to the David L. Lawrence Convention Center in the city’s downtown.

Electrification of transportation was only one of the issues examined in dozens of seminars in between major announcements by Energy Secretary Jennifer Granholm aimed at explaining the Biden administration’s comprehensive efforts to decarbonize transportation, industry and power generation.

In the U.S., the transportation sector accounts for 27% of carbon emissions, according to EPA, and about a quarter of European emissions, according to the EU. Strategies to reduce transportation emissions through electrification are emerging on both continents.

The Global Logistics Emissions Council, a coalition of more than 150 organizations including trucking fleets, developed the first electrification guidelines in Europe as early as 2016. That led, in part, to the creation in 2021 of the Sustainable Freight Buyers Alliance (SFBA) and organization of multinational freight shippers interested in sorting out the emerging and sometimes conflicting national policies.

In the U.S., CALSTART — California’s 25-year clean transportation effort — and the California Air Resources Board have worked to create standards and implementation guidelines. CALSTART is active in other states as well.

Representatives of the three organizations joined spokesmen for a global freight company, another representing a U.S. electric vehicle charging company and a third representing a global truck and bus manufacturer in a panel discussion during the GCEAF
marathon of seminars.

Jennie Cato, representing Scania, a Swedish maker of trucks and buses with a presence in 100 countries, said the problem is “not a chicken-or-egg situation anymore.”

“The vehicles are not the bottleneck,” she said.

As if to prove her point, several North American truck makers parked 13 battery electric trucks — from local delivery vehicles, to over-the-road Class 8 semi-trailers — on the roadways under the convention center.

Scania is planning to offer a new electric truck annually for the rest of the decade, she said. “The goal is to have 50% of our sales volumes coming from battery electric vehicles in 2030.

“We can’t do this alone. And we need to have enabling conditions. We need to work in partnerships, both with policymakers and decision-makers; also with peers in our industry, sometimes with competitors,” she said.

Electric trucks are not the only way to build clean fleets, said Roger Libby of the DHL Group, a global delivery company. The company has had to deal with three challenges, he said: availability and timing; cost; and the density of infrastructure, whether it is for charging or refueling.

DHL began electrifying its fleet in 2006, starting with light-duty delivery trucks, which it special ordered because there were no truck makers producing electric delivery vehicles.

“We have 20,000 vehicles in our network. Our goal is to have 80% of our last-mile fleet electrified by 2030, across the world and all 220 countries and territories where we operate,” said Libby.

DHL has tried hydrogen fuel cell vehicles at its Cincinnati hub but ultimately chose battery electric. It has also tried compressed (CNG) and renewable natural gas (RNG) to replace traditional distillate fuels.

“California has done a great job at putting in renewable natural gas and compressed natural gas refueling infrastructure, and so in some corridors, you might not have the charging infrastructure, but you have the RNG refueling infrastructure, and so we might look at trucks there to use that infrastructure,” said Libby.

Vehicle availability is another issue. “If you want to buy a diesel truck, it’s in the market today. If you want to buy an electric delivery, heavy-duty or medium-duty truck, it’s 25 weeks,” he said, adding that ordering a CNG vehicle might take as much as 56 weeks.

As for cost, Libby noted that an electric truck is one and a half to twice as expensive as a conventional diesel. But tax incentives could eventually “pencil out” the extra costs.

At this point, the company is committed to using EVs for its local delivery fleet and installing charging stations at its depots. But using electrics for long-haul trucking is not possible without a charging infrastructure open to competitors as well, he said.

One company designing, building and operating charging stations is ChargePoint, a California company that has built a network of “hundreds of thousands” of charging stations in North America and Europe.

Kevin Miller, a director of public policy, said all the company’s chargers are “smart,” enabling fleet owners whose businesses are located on smart networks to charge EVs at the best price of the day.

“We work with electricity providers [and] utilities every day to help them think about how their product — electricity — is a … part of the transportation system now, and how that can be best leveraged to send an effective price signal. What’s most exciting about fleet operators is that outside of a university economics textbook, a fleet operator is the closest thing in real life that you get to a rational economic actor.”

Alycia Gilde of CALSTART agreed that working with utilities has become another key effort in the switch to electric trucking.

“We’re encouraging our fleets to start with infrastructure, getting to know and working closely with their utility. Let’s make sure that the infrastructure is in the ground by the time that vehicles are deployed,” she said.

Another CALSTART goal is to make sure small fleet owners are not left out of the switch to cleaner fuels. “And we are working very closely with our fleets, working with our drayage community,” Gilde said in a reference to the trucks that move shipping containers from and around California’s ports. Many of those drayage trucks are operated by small companies.

“We’re going to be in the process of kicking off a very thoughtful planning process. We need to understand where … all these truck movements are happening. How are we coordinating with our [utilities] to understand what the power requirements are? Where do we need to be scaling the grid in order to make this transformation happened in Southern California, and how we can use this project as a template for replication?”

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After Lull, California Sees Uptick in New Hydrogen Fueling Stations

Growth in the number of retail hydrogen fueling stations accelerated in California over the last year, with 56 stations now open, although the state is projecting that it will meet a 100-station target in 2024 rather than 2023.

The state’s 56 retail hydrogen stations open at the end of June marked an increase of eight in the last year, according to a report from the California Air Resources Board (CARB).

In mid-2020, the number of open hydrogen fueling stations was 42, an increase of only one station compared to 12 months earlier. CARB blamed the COVID-19 pandemic for the slow pace of station development in that period.

Meanwhile, about 11,134 fuel cell electric vehicles (FCEVs) were registered in the state as of April 1, up from 7,993 FCEVs in April 2021, the report said. The number of FCEVs on California roads is projected to reach 34,500 in 2025 and 65,600 in 2028.

Annual Evaluation

CARB prepares a report each year on deployment of FCEVs in California and development of hydrogen fueling stations. The report is required by Assembly Bill 8 of 2013.

AB 8 instructed the California Energy Commission (CEC) to fund the development of hydrogen fueling stations until there are at least 100 publicly available stations operating in the state. And a 2018 executive order from Gov. Jerry Brown set a statewide goal of 200 hydrogen stations by 2025.

The eight new hydrogen fueling stations identified in the 2022 report include two stations in the Los Angeles area, three in Orange County and three in the San Francisco Bay Area. Those are also regions where FCEV registrations are concentrated.

Station development isn’t going quite as fast as CARB predicted a year ago. At the time, the forecast was for 97 stations to be open by the end of 2022; now it appears that 79 stations will be open this year. The 100-station milestone has been pushed to 2024.

Station developers say they’re being slowed down by the permit review and approval process, the wait for electric utility connections, and delays in getting equipment.

Still, CARB said, 79 stations by year’s end would be “a significant increase.”

“If achieved, [it] will be the fastest pace of station openings in California history,” the agency said.

CARB noted that station development is becoming more difficult to track because not all projects are receiving state funding. CARB’s current analysis doesn’t include a plan that Iwatani and Chevron announced in March to build 30 hydrogen fueling sites in California by 2026. The stations would be in addition to those that Iwatani is developing under an agreement with CEC.

Renewable Content Calculated

The report also analyzes the renewable content of hydrogen transportation fuel. An estimated 59% of the fuel was renewable in 2021 and the figure was 65% in the first quarter of this year. Those numbers exceed state requirements, including a 40% renewable minimum in the hydrogen refueling infrastructure (HRI) program within CARB’s low-carbon fuel standard (LCFS).

HRI allows station operators to receive extra LCFS credits based on the difference between station capacity and fuel sales. Sixty-three stations are now approved to receive HRI credits.

While the recent figures exceed state requirements, they’re less than the 90% or more renewable percentage in the first half of 2021, CARB said.

The reduction may be due to station operators diversifying their hydrogen supply following past supply constraints, the agency said.

CARB’s 2022 report on hydrogen fueling stations, and reports dating back to 2014, are available here.

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NJ Seeks Stakeholder Input for 3rd OSW Solicitation

New Jersey’s Board of Public Utilities (BPU) is seeking stakeholder input to help craft the state’s third offshore wind solicitation, for 1.2 GW, in the first quarter of 2023, as it reaches for its goal of 11 GW of wind power by 2040.

The agency is asking stakeholders for insight into more than 40 questions for which the answers will help the state shape the Solicitation Guidance Document on issues such as project design requirements, the economic impact of the winning project and different aspects of the environmental and fisheries mitigation plans.

The questions include: whether the BPU should seek only projects of 1.2 GW or offer flexibility to diverge from that; whether the board should accept storage proposals as part of the solicitation; what strategy might ensure that the economic benefits pledged in a proposal are met; and how to ensure the full project pitched is constructed.

The board’s solicitation on Sept. 16 preceded a flurry of announcements by the Murphy administration to mark Climate Week, including plans to spend $10 million on green job creation and $3.125 million on researching the impact of the wind projects on marine wildlife.

The request for information is the first of two, according to the BPU. The second will be released after the board makes its decision on its transmission solicitation made under the State Agreement Approach (SAA) with PJM. The board received about 80 suggestions for how enhance the state grid in preparation for the increase in offshore wind power and expects to make a decision in October on which ones, if any, to adopt. (See NJ Seeks Efficiency, Savings in OSW Transmission Process.)

With that completed, the board expects to issue a draft of the third solicitation incorporating stakeholder comments in November.

Extreme Events

The solicitation, following the BPU’s award of 3.758 GW of power in solicitations in 2019 and 2021, will be the next step toward the 11-GW goal set out in an executive order signed by Gov. Phil Murphy on Sept. 21. The new goal is nearly 50% higher than the previous goal of 7.5 GW by 2035, which Murphy rescinded in the order, and the state has not yet set its final goal. The order added that “the BPU shall undertake to study the feasibility and benefits of further increasing the goal.”

“Extreme weather events and severe flooding across the country leave no room for doubt: The effects of climate change are becoming more impactful and more aggressive, and we must do the same,” Murphy said in a release announcing the signing of the executive order. In a speech at Climate Week in New York City the same day, Murphy called it an “aggressive target, but an achievable one,” adding that the task will be assisted by “technological advancements that are making turbines more and more efficient, almost literally by the day.”

The shift elevates New Jersey’s goal above that of New York’s OSW target of 9 GW by 2035. Both states will also see additional OSW power created from the federal auction in which six bidders pledged to create projects totaling 5.6 GW in the New York Bight, the coastal zone that straddles the two states. (See Fierce Bidding Pushes NY Bight Auction to $4.37 Billion.)

Yet the state’s expanding offshore wind strategy comes amid concern among Republicans and business groups at the potential — and so far, unknown — cost of shifting the state away from fossil fuels and toward electricity.

Readiness Questioned

A spokesman for Affordable Energy for New Jersey, a coalition of business groups and building trade unions that has expressed concern about the cost of implementing New Jersey’s Energy Master Plan, questioned whether the state could handle an increased amount of the OSW production.

“The state has yet to plot exactly where in the ocean these turbines are going to go,” spokesman Michael Makarski told a regular quarterly meeting held by the BPU to seek public input Friday. He called the wind expansion plan “delusional.”

“We are not sitting on a stockpile of materials to construct these turbines, and the board doesn’t know exactly where these transmission lines are going to make landfall,” he said. “These are massive issues.”

“If we think that the siting process is going to be smooth sailing, then we should think again,” he said. “If we install one state-of-the-art 13-MW turbine every week, each week, for the next 18 years, we’ll hit that 11,000-MW goal. Now, that’s if we started today.”

The offshore wind projects — Ocean Wind 1 in the first phase; Ocean Wind 2 and Atlantic Shores in the second — have been warmly received by some environmentalists and public officials. But they have faced opposition from the fishing industry, which fears that the turbines will disrupt fishing areas and create a dangerous environment for boats pulling nets, and recreational fishermen. The tourism sector also has voiced concern that the sight of turbines could reduce the number of visitors coming to the state’s coast. Local residents and property owners are worried about the impact on properties resulting from construction to install cables and other equipment.

Some of those concerns are likely to emerge again Thursday when the BPU will hold a public hearing into a request by Danish developer Ørsted’s request for an easement across land owned by Cape May County on which to lay cables connecting the wind project with onshore load stations.

Tracking Marine Impact 

Along with the wind goal announcement, Murphy released a report, Green Jobs for a Sustainable Future, last week that outlined recommendations and pathways for growing a demographically representative and inclusive green workforce. He also highlighted $10 million in new investments to guide and support the state in generating well paying jobs in the growing green economy.

“Today’s announcements underscore our determination to not only double our efforts in the fight against climate change, but to ensure that every New Jerseyan can reap the benefits of transitioning to a clean energy economy,” said Jane Cohen, executive director of the governor’s Office of Climate Action and the Green Economy.

The BPU and New Jersey Department of Environmental Protection (DEP) also announced Thursday that they would spend $3.125 million on four projects on research and monitoring of the impact of offshore wind projects on marine life. The funding, the second round of marine life research funding, will “study potential impacts to the recreational fishing industry, use acoustic telemetry to track fish movements, deploy passive acoustic technologies to monitor whale movements, and evaluate offshore wind infrastructure as potential platforms for long-term environmental and ecological monitoring,’” the agencies said.

The money will come from a fund of $26 million that is administered by the state with funds from the developers of the second-phase solicitation, Ørsted and a joint venture between EDF Renewables North America and Shell New Energies US.

“This round of projects will gather critical baseline scientific information that will help ensure the responsible development and operation of offshore wind facilities that protect our coastline and its natural resources that are precious to all of us,” DEP Commissioner Shawn LaTourette said.

The projects include:

  • $440,000 to assess the potential impacts of offshore wind energy on New Jersey’s recreational fishing industry, to be conducted by the Clean Energy and Sustainability Analytics Center at Montclair State University.
  • $1.9 million to track fish movements along New Jersey’s coastline and in offshore wind lease areas with acoustic telemetry. The work will be conducted by Monmouth University and the New England Aquarium.
  • $500,000 for deployment of passive acoustic monitoring systems on the seafloor to record the calls of baleen whale species, including the endangered North Atlantic right whale, to better understand the movements and behaviors of these animals. No contract yet awarded.
  • $285,000 for Rutgers University, Monmouth University, the National Renewable Energy Laboratory, and the Special Initiative on Offshore Wind to explore the potential use of offshore wind farms turbines, foundations and substations as potential environmental and ecological monitoring platforms.
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FERC Denies NYISO MOPR Complaint from Gas Generators

FERC last week denied a complaint by two natural gas-fired plants that sought to have NYISO implement a “clean” minimum offer price rule (MOPR) for all new and existing resources receiving out-of-market subsidies in New York.

FERC voted 4-1 to reject the complaint by the 1,016-MW Cricket Valley Energy Center (CVEC) and the 635-MW Empire Generating facility, with Commissioner James Danly dissenting (EL21-7).

The October 2020 complaint by CVEC and Empire alleged that state subsidies were suppressing prices and distorting price signals in NYISO’s installed capacity market (ICAP).

FERC’s majority, however, reiterated its support for the ISO’s narrowed buyer-side mitigation (BSM) rules, which the commission accepted on May 10. (See FERC OKs NYISO Capacity Market Changes Stemming from NY Climate Law.)

The change, which exempted from the BSM rules new capacity resources required to satisfy the goals of the state Climate Leadership and Community Protection Act, “appropriately focused buyer-side market power mitigation on those resources that behave uncompetitively through the exercise of buyer-side market power,” FERC said.

Expanding the BSM rules, as suggested by the complaint, would reverse these changes, according to FERC, and upset the balance between “the need to mitigate the potential exercise of buyer-side market power against the harms of over-mitigation.”

Profitability Damaged

Empire and Cricket Valley complained that their profitability was damaged by the uneconomic retention of state-subsidized generation, including New York’s award of zero-emission credits to nuclear plants. Empire said its plant, which went into service in 2010, was forced into bankruptcy proceedings because it was unable to earn sufficient energy and capacity payments in the NYISO markets to cover its costs.

Empire-Generating-Plant-Empire-Alt-FI.jpgThe 635-MW Empire Generating facility in Rensselaer, N.Y. | Empire

But the commission said it was not required “to shield NYISO’s market from the indirect effects of state policies to ensure that commission-jurisdictional rates remain just and reasonable.

 “… We have already found the BSM rules to be just and reasonable … and neither the complaint nor the complainants’ financial performance provide a basis to undermine that finding,” it said.

In the May 10 ruling, the commission acknowledged that prior FERC orders — when the commission was under Republican control — “treated state policy choices as equivalent to anti-competitive conduct.”

But it said the current Democratic majority “no longer believes it appropriate to presume that states’ exercise of their reserved authority over generation facilities is the equivalent of anticompetitive conduct, simply because of the inevitable, albeit indirect, effect on ICAP market prices.”

Republican Commissioner Mark Christie issued a concurrence last week, saying he supported NYISO’s BSM proposal because the costs of New York’s policies would be limited to that single state ISO and not impact other regions. “The chief recourse for New York consumers and businesses who do not like the costs and consequences of that state’s public policies is to the ballot box,” he said.

Danly: Return to Cost-based Rates?

James-Danly-(FERC)-FI.jpgFERC Commissioner James Danly | FERC

Danly, also a Republican, reiterated his opposition to the narrowed BSM rules in his dissent last week, warning that, “When the inevitable price suppression caused by unmitigated state subsidies results in the premature retirement of generators with needed attributes, resource adequacy will be compromised.”

As states “continue to place their finger on the scale in order to favor certain resources,” FERC should consider returning to “cost-based ratemaking to protect ratepayers,” Danly said. “Doing otherwise perpetuates the notion that our markets are competitive and, therefore, capable of incentivizing investment in the necessary type and quantity of resources, when, in fact, they are not.”

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California Electric Rates Impede Clean Tech Adoption, Study Finds

Billions of dollars in add-ons to California’s electric bills are slowing the adoption of electric vehicles, heat pumps and other clean energy technologies, says a new study by CAISO Governor Severin Borenstein and two of his colleagues at the University of California, Berkeley.

Customers of the state’s three large investor-owned utilities — Pacific Gas and Electric, Southern California Edison and San Diego Gas & Electric — shoulder the “residual costs” of wildfire prevention and victim compensation along with rooftop solar subsidies and other big-ticket items, the study found.

The add-ons amount to an “electricity tax” that hits lower-income households hardest, it says.

“Customers across the three IOU service territories contribute $678 per year on average toward the residual cost burden,” the study says. “For PG&E and SDG&E customers, residual cost burdens are more than two-thirds of their total bills, whereas SCE customers pay slightly more than half of their bills towards residual costs. As a result, how California chooses to recover these costs is the primary driver of electricity costs.”

That, in turn, “discourages efficient substitution from natural gas and gasoline … towards electricity,” it said. “As such, high electricity prices act as a deterrent to electrification of transportation and buildings.”

Released Thursday, “Paying for Electricity in California: How Residential Rate Design Impacts Equity and Electrification,” was written by Borenstein and professors Meredith Fowlie and James Sallee at the Energy Institute at UC Berkeley’s Haas School of Business. Nonprofit think tank Next 10 commissioned the report.

The study is a follow-up to last year’s publication by the same authors, “Designing Electricity Rates for An Equitable Energy Transition,” which dealt with California’s strategy of recovering fixed utility and social program costs through “increased per-kilowatt hour (‘volumetric’) prices.”

“With nearly all fixed and sunk costs recovered through such volumetric prices, the price customers pay when they turn their lights on for an extra hour is now two to three times what it actually costs to provide that extra electricity — even when including the societal cost of pollution,” it said. (See Calif. Worries High Rates Could Hurt Climate Efforts.)

Last week’s report expanded on the prior study by analyzing, for the first time, detailed billing data from 11 million households and examining the consequences of the “electricity tax.”

It found that higher-income households pay a greater share of residual costs, “but lower-income households pay much more as a fraction of their annual income on average, so much so that the effective electricity tax is more regressive than the state sales tax.”

In PG&E and SDG&E territories, for example, the lowest-earning households pay more than 3% of their annual incomes in residual costs while those in the highest income group pay less than 1%.

Net Metering

The state’s controversial net metering system for rooftop solar owners “makes the effective electricity tax substantially more regressive,” it says. “This is because wealthier households are much more likely to have rooftop solar.

“The effect is strongest in SDG&E, where rooftop solar in 2019 already provided over 20% of residential electricity under net metering, thus offsetting a majority of the cross-subsidy created by the California Alternative Rates for Energy (CARE) program” for low-income households.

The California Public Utilities Commission issued a draft decision in December to reform net metering, which credits rooftop solar owners for surplus electricity exported to the grid but backed away from the plan amid protests from the solar industry and rooftop solar owners. (See CPUC to Delay Net Metering Decision for a Year.)

In its initial proposal, the CPUC said net metering “negatively impacts nonparticipating customers, is not cost-effective and disproportionately harms low-income ratepayers.” Utilities including PG&E estimated that net metering shifts up to $4 billion a year in costs from households that can pay for rooftop solar to those that cannot.

Solar subsidies and other components of the electricity tax are hampering electrification because “customers considering electrification face much higher operating costs if they electrify,” the study says.

“For California households considering purchasing an electric vehicle, the effective electricity tax raises the annual operating cost of an EV by around $600 per year on average,” and by $900 for average SDG&E customers, it says. “Recent research suggests that this could be reducing EV adoption by somewhere between 13% and 33%.”

For households considering electric space and water heating, “the effective electricity tax raises the annual cost of doing so by around $600 per year,” it said. “Recent research suggests that eliminating this tax could increase the fraction of new homes that are built with electric heating by around one-third.”

The authors said they do not dispute the need for utilities to recover costs but believe it could be done in different ways to promote equity for lower- and higher-income households.

One possible solution, the report says, would be to move “some costs that contribute to the residual cost burden onto the state budget, to be funded by increases in the sales or income tax.” That “would increase equity and improve efficiency because it would reduce the effective electricity tax.” Another solution could be to introduce a “system of income-based fixed charges.”

The authors said their primary aim was to provide useful facts and potential rate-design fixes, “guided by the twin objectives of fostering decarbonization and improving equity.

“All possible reforms create some manner of trade off, and as such should be debated in the broader policy context in the state,” they said.

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NERC Staff, Stakeholders Feeling Work Crunch

The NERC Standards Committee on Wednesday appointed additional or supplemental members to three of the ERO’s 19 ongoing standards development projects’ drafting teams, as the organization works to catch up on some behind-schedule work.

The appointments were only a small part of a packed agenda for the committee, which met at the Texas Reliability Entity headquarters in Austin. It also authorized the initial postings of three draft standards; appointed two standard authorization request (SAR) drafting teams as the standard drafting teams for those projects; approved another SAR; and appointed the roster for another SAR drafting team.

In opening the meeting, Chair Amy Casuscelli, of Xcel Energy, noted that she had the day before attended a meeting of the Project Management and Oversight Subcommittee, which monitors the projects.

“I was just struck by the number of the projects that are open. There are more on the horizon that were discussed at the RSTC [Reliability and Security Technical Committee] meeting last week. There’s just a lot of work that’s coming up,” Casuscelli said. “All of those projects touch a really large number of our subject-matter experts … not to mention NERC staff, and there’s a really tremendous resource obligation that is wrapped up into all of those projects. … We are all definitely feeling the resource constraints that we have. … That means we all need to challenge ourselves to work smarter and work as efficiently as possible.”

Latrice Harkness, NERC manager of standards development, previewed the committee’s next three months, including the schedule for when draft standards would be voted on and posted for comment. The posting schedule listed projects for nearly every week through the end of October.

“That’s a lot of work coming down very quickly,” Kent Feliks, manager of NERC reliability assurance at American Electric Power, commented in response. “My people are already screaming that we already have a lot on our plate.”

“Our standards staff is meeting weekly … to look at this posting schedule a little more closely to make sure we’re not overwhelming industry with those project postings,” Harkness said.

“I know internally we’ve got some protests at the sheer number of things that we’re looking at too,” Casuscelli said with a chuckle. “So I think we’re all feeling it.”

8th Nominee Added over NERC Protest

The SC appointed eight additional members to the SAR drafting team for Project 2020-02 (Modifications to PRC-024 – Generator Ride-through), one more than NERC recommended, to join the team’s current five members.

The goal of the project is to replace PRC-024-003 “with a performance-based ride-through standard that ensures generators remain connected to the bulk power system during system disturbances,” according to a staff presentation. “From a risk-based perspective, the goal of the standard is to mitigate the ongoing and systemic performance issues identified across multiple interconnections and across many disturbances analyzed by NERC and the regions.”

The project stems from the general concern of retiring synchronous generators and their replacement with nonsynchronous resources. But the presentation also notes that “these issues have been identified in inverter-based resources as well as synchronous generators, with many causes of tripping entirely unrelated to voltage and frequency protection settings as dictated by the currently effective version of PRC-024.”

Several stakeholders expressed concern that most of the team was represented by generators, with a lack of reliability experience. When questioned about the one volunteer not recommended by NERC, Harkness said that staff had found the person would “not be a good fit.”

Feliks, however, noted that the committee “typically very much encourages people to be on drafting teams and encourages their participation. So looking at this particular drafting team — and quite honestly I don’t have a dog in this fight — but leaving one person off that’s volunteering; that, based on the resume, has some pretty deep experience in this, it doesn’t seem to make real logical sense.” He moved to include the candidate

Harkness clarified that in interviewing the nominee, staff discovered they were “totally against the project, and so there was no support for the SAR as it was. … When you think about team dynamics, you want to be able to build consensus. … If you jump out of the gate with someone against it, you may not get anywhere.”

Candidates for SAR drafting teams are nonpublic, so committee members could not speak about certain details that would identify the nominee in question, including specifically why they were against the project. Harkness would only say that the person did not think the standard was needed.

Feliks returned to his original point that “anyone who raises their hand [i.e., volunteers], given the fact that we’re running pretty thin, I’m pretty happy with.” But he also said that “part of this vetting process is to make sure industry thinks a standard revision is needed. … So a contrarian opinion on the SAR drafting team: isn’t that kind of the point of this? … The idea that NERC is picking a candidate based on what they want, I kind find a lot of concern with. It’s supposed to be up to the industry.”

This prompted Howard Gugel, NERC vice president of engineering and standards, to chime in. “Hopefully nobody [thinks] that NERC would ever try to stack a drafting team. That is not the intention [with this project] and not anything we would ever do.” The goal in assembling a team is “ensuring a successful project.”

“So while we quite often [recommend] people who have differing opinions, we find that it may be counterproductive to recommend somebody at the onset who is against the project itself,” Gugel said. Based on prior experience, “that tends to get the drafting team bogged down on issues in almost every call that they take.”

He also reminded the committee “of the speed at which we should be adapting to these newer technologies and getting standards out, and I would hate to put someone on a standard drafting team that would cause a year or two[-year] delay on these resources that are causing definite impacts to reliability.”

Other stakeholders voiced agreement with Feliks that there should be a difference of opinion on drafting teams and expressed doubt that the one person could derail an entire project. The committee ended up approving the eighth addition to the team, with five abstentions but no one opposed.

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Focus on People, Not Just Technology, GCEAF Panel Says

Discussion of the clean energy transition focuses too much on technology and not enough on the people who will make it work, speakers at the Global Clean Energy Action Forum said Thursday.

Leaders need to ensure the transition is just, the panelists said, and they also need to make it inclusive.

AFL-CIO President Liz Shuler said it is important to bring the voice and perspective of working people into the conversation and that it needs to be planned in advance rather than backfilled afterward.

“The term ‘just transition’ means different things to different people,” she said. “In the past we’ve seen transitions that have gone badly. I would argue the deindustrialization of the Midwest in the U.S., where manufacturing left, we didn’t have the right policy solutions in place, we didn’t have a proactive strategy to ensure that people transitioned into good jobs. People felt abandoned, left behind, angry and frustrated, and that has become destabilizing to our democracy. We can choose to do better this time.”

Angela Wilkinson, CEO of the World Energy Council, said the energy transition is not the destination but the process for reaching the destination; there needs to be a hopeful vision for what the destination is and what it means to people.

“Humanizing energy was an agenda we chose because we think the biggest gap in closing the implementation is the challenge of involving more people and very diverse communities in moving further, faster and fairly together,” she said.

The panelists broadly defined the goal as equal access for all to good-paying jobs carrying out the transition and equal benefits to all from completion of the transition.

Reuters reporter Valerie Volcovici, moderating the discussion, asked the panel about their thoughts on preparing a large skilled workforce for the epic task ahead. Electricians, she said, will be driving the transition in many ways; they are already in short supply on the cusp of a great expansion in their field.

“We have lots of technology, there is a lot of money available, but actually we have to create this mechanism for moving faster,” Wilkinson said. “And it’s communities that create … the pull for those technologies. So, the capabilities of the community are also what we need to think about. What’s the capability a community needs to be able to move its transition?”

Shuler said organized labor has been training skilled workers for more than a century and has been involved in multiple transitions during that time. It is important that the jobs created be good jobs, so that people will aspire to them, and also that there are multiple pathways to good careers.

“We are very centered around higher education and college being the solution for everyone, particularly in high schools,” she said. “And now we’re starting to see a resurgence in, ‘Yes, we do need electricians; we do need people with skills who can actually rebuild our nations across the world.’ Unions can be the pathway through apprenticeship and pre-apprenticeship — they’re almost like the other college degree. Four [to] five years it takes to grow a highly skilled electrician.”

Jonathan Wilkinson, Canada’s minister of natural resources (and no relation to Angela Wilkinson), said to bridge the labor gap, his country will need to rely on new immigrants and to include those it has historically excluded, particularly indigenous communities.

In Canada, 70% of the buildings standing today will still be standing in 2050 and will need a significant retrofit to meet decarbonization goals.

“That means you’re going to need tens of thousands of electricians and plumbers and construction workers, and those are occupations right now where we are struggling to find enough young people, given the demographics where lots of folks are retiring,” he said.

Volcovici asked how leaders can gain support and prevent fear in communities as the energy transition progresses, given the disruption caused by previous large-scale transitions.

Angela Wilkinson suggested involving communities so that they are helping direct the transition rather than sitting on the sideline hoping they won’t be left behind.

Shuler said specific details of the change are needed, so that people can see themselves in it.

Jonathan Wilkinson said the clean energy transition will be a hard sell for anyone who fears it will leave them behind, and said fear is stoked by widespread ignorance of what the transition is.

“[We need to] paint a much clearer picture for folks about what the energy transition actually means,” he said. “When people think about it, they think it means a solar panel on the roof or a wind turbine on the prairies. But obviously it’s a lot more than that, and I don’t think that policy makers have done a particularly good job of actually communicating that.”