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.
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.
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.”
The New England states aren’t challenging ISO-NE’s request to up its budget by 10%, but they are asking the grid operator to do a better job using metrics to measure its performance.
In a letter to ISO-NE earlier this month, the heads of agencies from each of the six states agreed that the $20 million budget boost, largely for new hiring and capital projects, is “necessary to improve ISO-NE’s function and performance.” (See ISO-NE Wants to Hike its Budget by 10% in 2023.)
They took issue, however, with what they say is a failure by the grid operator to comply with a year-old request to update its use of performance metrics to measure how that money is being spent. Specifically, the states wrote, ISO-NE is not using any of FERC’s common RTO/ISO performance metrics. The grid operator is also not using any performance metrics to determine the cost effectiveness of transmission fixes other than project costs, the states said.
“In both instances, ISO-NE appears to be limiting itself to narrowly defined and tailored metrics that foreclose comparisons across other entities or processes,” the officials wrote. “This limitation appears to have mitigated ISO-NE’s ability to learn from its one competitive transmission fix solicitation since its results cannot be compared with any other process.”
The grid operator defended itself in a reply last week, saying that it does in fact use metrics to measure its performance across a number of areas.
The common metrics that FERC uses, ISO-NE wrote, are less useful than those specifically tailored to the New England region. But the RTO said it will take another look at whether any of them could be useful.
As for transmission planning, ISO-NE noted that its tariff requires that new lines be built only as a last resort after other options have been considered. “The ISO will continue to monitor its performance in this area,” it said.
Decarbonizing the maritime industry entails much more than switching ships to zero-emission fuel, leaders in the sector said Thursday.
It will require creating the green corridors envisioned in the Clydebank Declaration — linked mini-ecosystems with participation of shippers, their support industries, ports, governments and others — they told an audience at the Global Clean Energy Action Forum in Pittsburgh.
Two dozen nations signed the Clydebank Declaration formalizing the green corridor concept at COP26, the United Nations Climate Change Conference in 2021.
U.S. Special Presidential Envoy for Climate John Kerry discusses green shipping at the GCEAF in Pittsburgh, Pa., on Thursday, Sept. 22. | Global Clean Energy Action Forum
Yet emissions in the shipping sector are still rising — not the trajectory needed to comply with the Paris Agreement on climate change, said John Kerry, the U.S. special presidential envoy for climate.
“If shipping were a country, it would be the eighth largest emitter of greenhouse gases in the world,” he said.
It’s not enough to have steel mills, automobiles and power plants decarbonize, he added. “We’ve got to have shipping at the table, in a serious way. The green shipping challenge will encourage everyone up and down the entire food chain.”
The food chain extends beyond the fuel that runs the ship, all the way to details such as how the cranes in the port are powered, Kerry said. It is “a continuity of effort, so that the entire corridor, from start to finish, becomes green.”
Rikke Wetter Olufsen, chief policy officer of the Danish Maritime Authority, said the first green corridors will “play an important role in their capacity to show how the green transition can work in practice.”
Bo Cerup-Simonsen, CEO of the Mærsk Mc-Kinney Møller Center for Zero Carbon Shipping, said the green corridor concept serves at least two purposes: “Getting the green value systems going to attract the initial customers and investors, and then aggregating demand to create a sustainable longer-term business model with greater demand.”
“I think that’s a working hypothesis of the green corridor which seems to hold,” Cerup-Simonsen said. “That’s a very strong proposition … that will [create] initial scale, and that should inform the global policy system.”
Eamonn Beirne, a deputy director in the United Kingdom’s Department for Transport, said he is encouraged. “In a sector with a reputation for rigidity or moving too slowly, we’ve been really thrilled with the momentum worldwide as the signatories and industry players alike have made green corridors a cornerstone of their respective journeys to zero-emission shipping.
“I think it’s crucial that the commitments at events like COP26 or this one today translate into action, and it’s been really great to see some of that happening.”
Because there are so many moving parts to the industry across the globe, there needs to be a playbook with common language and identified critical success factors, American Bureau of Shipping CEO Christopher Wiernicki said.
“One of the biggest things with green shipping corridors is you need data. Data is going to be so important in this process because without data you cannot make the right decisions,” he said.
Sandra Kilroy, senior director of engineering, environment and sustainability at the Port of Seattle, continued that theme, saying standardization is critical. She said the ports of Seattle and Los Angeles have begun collaborating for this reason.
“There’s a lot of differences, obviously, between what we’re doing,” she said. “But [the more] that we can be consistent in how we’re approaching the policy is going to be really helpful because we’re both picking up the phone and having meetings in D.C. trying to help institute the policies we need in place to move this forward.”
VALLEY FORGE, Pa. — The PJM Markets and Reliability Committee on Wednesday rejected two proposals intended to allow market sellers to represent a greater degree of the risk they take on when entering the capacity market.
The strongest support went to the PJM package, which would have sought to ensure that sellers are able to fully reflect the cost of their Capacity Performance (CP) risk when entering into the Base Residual Auction and provide further clarity around the market seller offer cap (MSOC) review process itself. Nearly 60% of stakeholders supported the package over the status quo, falling short of the two-thirds threshold required.
A secondary proposal, from LS Power, contained many of the same provisions as the PJM language, while also allowing sellers the opportunity to seek a must-offer exception after they get their MSOC numbers from PJM. Those suggested revisions received 57% support.
When the issue was last discussed by the MRC during its July 27 meeting, load interests had voiced their concerns over the impact the language could have on capacity prices. (See “Discussions Continue on Market Seller Offer Cap,” PJM MRC Briefs: Aug. 24, 2022.)
Independent Market Monitor Joe Bowring said the current MSOC structure already allows sellers to fully reflect risk when entering the auction. “PJM’s proposal would significantly change the definition of the offer cap based on avoidable costs because the proposal would not permit net revenues to offset the” CP quantifiable risk, he said.
Bowring also pointed out that PJM’s proposal would significantly change the review process and permit it to take on a market monitoring role. “There is no reason to change the substance or process associated with the capacity market offer caps that are designed to prevent the exercise of market power and will operate effectively to prevent the exercise of market power.”
Generation owners spoke in favor of both proposals, saying that the MSOC as it stands doesn’t reflect the true cost of their risk. Jason Barker, of Constellation Energy, called the revisions a set of much needed reforms to the capacity market.
“The most important thing to take away is that this proposal aids in having market sellers provide an accurate assessment of their capacity risk,” he said.
Paul Sotkiewicz of E-Cubed Policy Associates said the packages came with the potential to make it more attractive for renewable energy resources, which face greater CP risk, to participate in the capacity market.
“I think we would see much more of those resources participate in [the market] … if they were able to reflect those risks in their [market] offer,” he said.
MRC Secretary Dave Anders said the MSOC deliberations have held much of the Resource Adequacy Senior Task Force’s attention over the past year, with two different attempts to address the topic — just one of 10 work activities the task force is charged with examining. He said it’s likely that the task force will pivot to focusing on those other issues relating to the capacity market for the time being.
MRC Approves Bankruptcy Revisions
The committee also approved revisions to PJM’s governing documents to strengthen protections for members in the event of a market participant declaring bankruptcy. The proposal will now go before the Members Committee next month.
The changes would clarify language regarding cash deposits and require a participant declaring bankruptcy to address PJM’s rights immediately upon making their filing. The provisions provide that if a party fails to obtain the assurances for PJM, it would provide cause for the bankruptcy court to grant the RTO relief from an automatic stay.
The package would also modify language regarding financial transmission rights, clarifying that they’re entitled to special protections. The FTR market is an area of focus following the default of GreenHat Energy, which cost PJM members nearly $180 million. (See FERC OKs GreenHat Settlements.)
First Read on New Black Start Fuel-assured Generation Classification
The MRC got its first look at a PJM-proposed package of revisions coming out of a yearslong effort to increase the reliability of non-fuel-assured black start resources during a restoration event. The revisions would create a new “fuel assured” category of black start generators that can demonstrate a higher level of reliability through enhanced fuel availability.
The proposal would require that each transmission zone have at least one fuel-assured black start generator and identify regions where additional restoration capability may be required.
The package, drafted with Brookfield Renewable and the D.C. Office of the People’s Counsel, received the endorsement of the Market Implementation Committee and Operating Committee in a joint vote earlier this month, receiving 76% support over a competing proposal from the Monitor, which received 9%. (See Stakeholders Endorse PJM’s Black Start Fuel Reqs Proposal.)
Michael Bryson, PJM senior vice president of operations, said the change would classify 10 to 20 fuel-assured resources out of the approximately 150 black start resources in the RTO’s fleet.
Senior Engineer Dan Bennett said each zone already has at least one existing black start generator that qualifies as fuel assured, but there are eight “extreme outliers” in which fuel loss could delay restoration by 10 or more hours. The proposal would increase PJM’s annual revenue requirement for black start resources by about $28.2 million per year.
Intermittent, hybrid and run-of-river hydro resources would be permitted to contribute to black start capability, using historical data to create a calculation with 90% confidence to estimate how much capacity can be expected from them. Their inclusion has been a point of contention with Bowring, who says that black start resources should be guaranteed to be ready to supply their capacity should they be called out during a restoration event.
“It should be 100% confidence level; there should be no doubt about it,” he said.
Bowring said that black start planning should be done regionally by PJM and not zonally; that the RTO’s proposal could cause customers to pay twice for fuel-assured black start; and that transmission owners should not substitute for PJM at any point in the procurement process.
Gregory Poulos, executive director of the Consumer Advocates of the PJM States, said his members have shared many of the same concerns outlined by the Monitor, but PJM has struck a balance between fuel assurance and the cost to consumers in drafting its package.
“Overall, I would say this is one of the best processes where we’ve come together to find a balanced approach in the end,” he said.
Reserve Requirement Study Recommends Raising IRM and FPR
The MRC received a presentation on the preliminary 2022 Reserve Requirement Study results, which recommends increasing both the forecast pool requirement (FPR) and installed reserve margin (IRM) compared to last year’s study. The updated study resets the recommended figures for the next three years and sets a recommendation for 2026/27.
This year’s study results recommend an IRM of 14.9% for the 2023/24 delivery year, up from 14.8% for 2022/23, and a FPR of 1.093, compared to 1.0901. Both figures would continue to fall for the following three years on a similar slope to last year’s recommendations, just pushed out by a year. (See “Reserve Requirement Study Recommends Increasing FPR and IMR,” PJM Planning Committee Briefs: Sept. 6, 2022.)
Both the load and capacity model projections put downward pressure on the IRM and FPR, but those are outweighed by the upward pressure from the capacity benefit of ties. The new model used for this year’s study projects that PJM’s peak load will more closely coincide with the world peak, reducing the ability to import power.
The study also proposed winter reserve targets for the upcoming season, recommending 21% maximum monthly available reserves for December, 27% for January and 23% for February. The targets were set using RTO-aggregate outage data from the 2007/08 delivery year through last year.
The Planning Committee is set to vote on the FPR and IRM in October, after which the MRC and MC would review and vote on the proposal in the following month. The Board of Managers would consider granting final approval in December.
PJM Staff Seek Removal of CT Exception on Load Signaling
PJM staff gave a first read of a proposal to remove an exception that guarantees combustion turbines recover the costs of their actual generation, regardless of their load signal. Lisa Morelli, director of market settlements initiatives, said the rule is a vestigial holdover from when CTs provided a fairly invariable supply of power.
Advancements in turbine technology have given CTs a dispatchable range in their output, but PJM rules have not evolved alongside that, she said. While other generators are compensated for the lesser of either their actual generation or the amount they’re dispatched to provide, CTs currently can remain at their maximum generation and be fully compensated.
Removing the rule, which is codified by a single sentence in Manual 28, would subject CTs to the deviation charges other generators face for straying from their dispatch signal. Morelli said simulations show that uplift payments to CTs were about $1.3 million lower when recalculated without the exception over the eight highest CT uplift days in summer 2021, a 10% drop.
Streamlining Internal NITS Process Under Consideration
The MRC reviewed a set of suggested revisions to PJM’s internal network integration transmission service (NITS) process, which is aimed at streamlining the administrative process for transmission within the RTO’s network. Currently new agreements follow the same process as external, or cross-border, transmission agreements. (See “Issue Charge OK’d on Internal NITS Process,” PJM Operating Committee Briefs: July 14, 2022.)
The proposal would transition internal transmission to an “evergreen” model and remove the expiration dates and rollover notification requirement. The committee will be asked to endorse the package at its next meeting in October.
DR Proposal Brought Before MRC After MIC Rejection
A modified issue charge proposal from CPower, a curtailment service provider, to evaluate the use of statistical sampling for interval-metered residential customers came before the MRC after a similar initiative narrowly failed at the MIC on Sept. 7. Anders said CPower has the right to bring the package to the committee even after the MIC rejection, akin to an appeals process. (See “DR Data Proposal Rejected,” PJM Market Implementation Committee Briefs: Sept. 7, 2022.)
Stakeholders remained mixed discussing the first read, with some preferring that states take the lead on expanding demand response to residential customers and expressing concerns about utilizing statistical sampling instead of collecting data from households directly.
Bowring said that the proposal avoids the real issue of access to the meter data, which are essential to measure the actual impacts of DR.
E-Cubed’s Sotkiewicz said allowing DR to rely on sampling rather than interval meter data would treat one sector unfairly and discriminatorily, given the costs generators face in metering.
Sharon Midgley of Exelon said she was disappointed to see the initiative fail at the MIC and believes that the issue charge had been improved coming into the MRC.
The MRC is set to have its own vote on the proposal at its October meeting.
Issue Charge on Supplying PJM and IMM with Copies of FERC Filings
PJM Associate General Counsel Steven Pincus presented an issue charge to explore requiring members to provide copies of certain FERC filings to the RTO and Monitor.
The first read received a lukewarm response from stakeholders, who said all parties should do their own due diligence. Responding to Pincus’ assertion that he didn’t want the ask to become a “compliance trap,” they questioned the logic behind a requirement without consequences.
Members Committee
Board Member with Clean Energy Expertise
The Members Committee discussed amending PJM’s Operating Agreement to require that at least one of the nine members of the Board of Managers “have expertise and experience in the development, integration, operation or management of clean energy resources.”
Outlining the proposal, Albert Pollard, of the Illinois Citizens Utility Board, said that having leadership experienced in green energy could be helpful toward PJM’s clean energy commitments outlined in its strategic plan, goals shared by many utilities and stakeholders as well.
“It does say in a broader way that there’s a dedication to getting this right,” he said.
Pollard
noted that multiple serving board members already meet the qualification, meaning that no changes to the existing composition would be needed should the language be adopted.
PJM CEO Manu Asthana and General Counsel Chris O’Hara responded to stakeholder questions about how the requirement would be implemented, saying it would function as a qualification, rather than a dedicated board seat. So long as a seated member filled the qualification, it would not preclude an otherwise qualified candidate from being appointed, they said.
Sotkiewicz said he believes that requiring representation from one small subset of one sector of stakeholders would call into question the board’s independence.
LANSING, Mich. — Environmental, health and urban activists called last week for Michigan to up the ante on electric vehicles, saying the state should ban sales of new gasoline-powered cars by 2030 — five years earlier than the 2035 date set in August by the California Air Resources Board.
California’s decision could mean similar bans in 15 other jurisdictions — New York, Virginia, Connecticut, Delaware, Maryland, Maine, Minnesota, New Jersey, New Mexico, Nevada, Oregon, Pennsylvania, Rhode Island and Vermont, along with Washington, D.C. — which have tied their automotive rules to those in California. (See Calif. Adopts Rule Banning Gas-powered Car Sales in 2035.)
Michigan, the long-time home of the American auto industry, has never tied its automotive rules to those in California or any other state. And none of the participants speaking at the press conference Thursday mentioned California’s well-publicized action.
But in adopting its plan to be carbon neutral by 2050, Michigan already is calling for the state to have 2 million electric cars and trucks on the roads by 2030. Last year, General Motors (NYSE:GM) said it aspired to have 100% of its fleet electric, and Ford (NYSE:F) said it expected 40% of its vehicle sales would be EVs by 2040.
Having all new passenger vehicles sold in Michigan be EVs by 2030 shouldn’t be too far a stretch, said Amy Rogghe, chair of the Michigan Electric Vehicle Alliance.
“It will put Michigan in the driver’s seat” of leading other states to the same goal, she said.
The activists made their call for the state to allow only emission-free new car sales about one week after Democratic Gov. Gretchen Whitmer announced a new proposal, the MI Future Mobility Plan, that among other things calls for the state to install 100,000 electric chargers by 2030. The state’s Department of Transportation intends to use more than $100 million in federal funds to help finance the proposal.
While Rogghe acknowledged the price of electric vehicles is higher than gas models now, prices are coming down, more models are coming on to the market and the vehicles are cheaper to operate, when fuel and maintenance costs are factored in.
Many of the advocates speaking at the press conference touted the health benefits of a non-polluting fleet.
Kathleen Slonager, executive director of the Asthma and Allergy Foundation of Michigan, said switching to an all-EV fleet could reduce asthma in Michigan, where rates are higher than in other states. While improving gas mileage has helped reduce the levels of the disease, bringing rates down further must happen at a faster rate.
And Kareem Scales, executive director of the Greater Grand Rapids NAACP, said switching to all electric or other clean cars could have a big effect on the health of “black and brown areas” that suffer greater effects from air pollution. “We’re not asking people to give up their cars, just for cars to be carbon free,” he said.
No legislators were part of the press conference, and neither lawmakers nor Whitmer have endorsed the idea. Whitmer did back the state net-zero plan’s goal of 2 million EVs on the road by 2030 and called for the state to provide tax incentives to EV purchasers.
Participants said they have met with lawmakers to discuss legislation encouraging efforts to reach a 2030 goal, instead of promoting penalties for not reaching the goal.
Tim Minotas of the Sierra Club of Michigan and Charles Griffith, energy program director of the Michigan Ecology Center, also spoke in favor of the 2030 ban and Whitmer’s proposed tax credit.
California regulators last week approved a plan that sets a 2025 target date for enacting a ban on sales of new natural gas-powered space and water heaters.
If the California Air Resources Board (CARB) approves the ban on schedule, it would take effect in 2030. Sales of new space and water heaters in California would be restricted through a zero-emission standard for the appliances.
The measure wouldn’t require replacement of gas heaters in existing buildings. But all new space and water heaters sold in California, either for new construction or to replace appliances in existing buildings, would need to meet the zero-emission standard.
“It is expected that this regulation would rely heavily on heat pump technologies currently being sold to electrify new and existing homes,” CARB said.
The potential ban on gas heaters is part of the 2022 State Implementation Plan, which CARB’s board voted to approve on Thursday. CARB will submit the plan to the U.S. EPA to show how California plans to meet the federal air quality standard for ozone.
In California, 19 areas are designated as being in nonattainment for the ozone standard, according to CARB. That includes the San Joaquin Valley and the South Coast Air Basin — the only two areas in the nation that are considered to be in extreme nonattainment.
The SIP contains an array of ozone-reduction strategies. CARB has already started rulemaking for some of the measures, such as the Advanced Clean Fleets regulation, which aims to achieve zero-emission truck and bus fleets in the state by 2045, where feasible. The regulation is expected to go to the CARB board for possible adoption next year, with implementation beginning in 2024.
A few of the other proposed measures in the SIP are an in-use locomotive regulation, new emission standards for motorcycles, and updated commercial harbor craft rules that the board approved in March and that will be phased in starting next year.
The measures are expected to improve air quality while also reducing greenhouse gases, helping California meet its climate goals.
The SIP is a commitment from CARB to pursue each measure in the strategy. For measures that involve a regulation, CARB is committing to bring a proposed rule to its board in the stated timeframe or explain why a rule wouldn’t achieve the desired emission reductions.
Regarding a zero-emissions standard for space and water heaters, CARB would work with other agencies, including the U.S. Department of Energy, California Energy Commission and the state Building Standards Commission. Stakeholder feedback would be gathered, and the proposal would be “subject to a full public process,” CARB said.
In addition, the agency said it “would work carefully with communities to consider any housing cost or affordability impacts, recognizing that reducing emissions from space and water heaters can generate health benefits and cost-savings with properly designed standards.”
According to CARB, almost 90% of nitrogen oxides emitted from buildings are from space and water heating. The remainder comes from cooking, clothes drying and other uses. Nitrogen oxides react with other chemicals in the air to form ozone.
CARB said that as it crafts zero-emission standards for space and water heating, the measure could potentially be expanded to include other end uses.
Expanding SPP’s full RTO into the grid operator’s Western Energy Imbalance Service (WEIS) could produce up to $89 million in annual savings, according to a study commissioned by WEIS members.
The Brattle Group study evaluated adjusted production cost (APC) savings and reported potential market benefits for expanding the SPP RTO into the WEIS footprint. The study estimates adjusted production cost savings of $71 million per year under average hydrology conditions. Those savings increase to $89 million per year under severe drought conditions.
Summary of Brattle study’s APC, wheeling revenue benefits | Brattle Group
Westside benefits range from $68 million to $81 million a year, according to the study. Eastside benefits are $3 million to $8 million annually under the study’s base and low-hydro scenarios.
“We’re pleased that the study reinforces the promise of an organized power market and our partnership with [SPP],” Colorado Springs Utilities CEO Aram Benyamin said in a statement. “The benefits are clear — millions of dollars in annual savings by having access to regional energy producers and the reliable and cost-effective integration of additional carbon-free energy resources into our system. The future is exciting.”
The utility was one of several prospective SPP RTO West participants who asked for the studies. Others included Basin Electric Power Cooperative, Deseret Power Electric Cooperative, Tri-State Generation and Transmission Association, Municipal Energy Agency of Nebraska (MEAN), and the Western Area Power Administration’s (WAPA) Upper Great Plains and Rocky Mountain regions and its Colorado River Storage Project.
All participate in SPP’s WEIS, which has been in operation since February 2021. They also receive reliability coordinator services from the grid operator. Tri-State, WAPA UGP region, Basin Electric and MEAN are already SPP RTO members in the Eastern Interconnection.
The study used an integrated east-west model based on data from SPP and WECC. It updates a 2020 Brattle study for SPP that projected $49 million in annual savings for current and new members by using new modeling assumptions about participant footprints, generation portfolios, natural gas prices and projected hydrology conditions.
The utilities said the APC study did not quantify other potential operational and reliability benefits such as balancing authority operations, coordinated resource adequacy and an integrated wholesale market that optimizes real-time, day-ahead and ancillary services. They said SPP’s RTO processes could improve transmission planning and development needed to support growing electricity demand and add more generation resources, including renewables.
WAPA CEO Tracey LeBeau said the study will help inform the agency’s next steps at it evaluates SPP membership.
“As always, we are committed to collaborating with our customers and stakeholders as we assess this opportunity,” she said. “Any decision to move forward with final negotiations for SPP RTO membership will be consistent with our statutory requirements and involve the appropriate public processes.”
“SPP understands the need for prospective SPP RTO members in the Western Interconnection to perform a revised Brattle study with their unique sensitivities,” SPP CEO Barbara Sugg said in an emailed statement. “We’re pleased the results of the updated study show a continued value for all participants.”
The study does not mean the utilities will join the SPP RTO, they said. The participating organizations will each continue their internal review and approval processes to determine whether they will proceed on the next steps to RTO membership.
“The most critical thing we do for our members and consumer-owners is to provide reliable, affordable and responsible electricity,” Basin Electric CEO Todd Telesz said. “We are pleased that the savings outlined in the study align with what our experience has shown so far — participation in regional transmission organization markets brings increased value to our membership.”
Speakers at the Global Clean Energy Action Forum last week in Pittsburgh were almost giddy with excitement over Washington’s record climate funding commitments.
The conference followed a string of legislative actions: the CHIPS and Science Act, which could provide as much as $67 billion for climate research and zero-carbon energy development and deployment; the Infrastructure Investment and Jobs Act, which includes $8.5 billion to support battery supply chains and “clean” hydrogen manufacturing; and the Inflation Reduction Act, which includes almost $370 billion in energy and climate spending. Over the next decade, think tank RMI says, the three laws will more than triple the federal government’s historic climate spending.
It’s a stark turnabout from 2017, when President Donald Trump announced the U.S. would withdraw from the Paris Agreement, saying famously, “I was elected to represent the citizens of Pittsburgh, not Paris.” (See Trump Pulling U.S. Out of Paris Climate Accord.)
But the government funding will not ensure the transition needed to mitigate climate change, speakers at the conference said, without philanthropies continuing to provide grants, networking and expertise.
Mike Boots, Breakthrough Energy | Global Clean Energy Action Forum
Philanthropies will remain important in bridging funding gaps in the “innovation arc,” said Mike Boots, executive vice president of Breakthrough Energy.
In addition to the federal and state governments “providing more public money that’s ever been available … there’s a lot more private capital also in that mix,” he said during a panel discussion Thursday. “And yet, there is a need for philanthropic capital also to help [technologies overcome] technical … operational and engineering risks.”
Philanthropies also help connect governments with communities and help communities access funding, said Heidi Binko, executive director and co-founder of the Just Transition Fund. “It’s an incredible opportunity, where we’ve got billions of dollars available for transitioning energy communities through the American Rescue Plan; through the bipartisan infrastructure law; and now in a very exciting way through the Inflation Reduction Act,” she said. “But we also know that just because the money is there does not mean that it’s going to flow to the people who need it the most.”
Charities also are key to helping emerging countries skip fossil fuels in their economic development, said Ashvin Dayal, who leads the Rockefeller Foundation’s Power & Climate program.
“Internationally, there’s over 700 million people who still lack access to a basic electricity connection. There’s about 2.5 billion people who are considered energy poor, i.e., they need to consume significantly more, not less, energy in order to lift themselves up,” he said. “Even if the OECD [Organisation for Economic Co-operation and Development] economies and China achieve their net-zero ambitions … if the rest of the emerging world continues to grow their energy consumption on a business-as-usual fossil fuel-dependent path, we will not get anywhere close to 1.5 degrees [Celsius], let alone 2 degrees.”
‘Blended Finance’
Billionaire Bill Gates founded Breakthrough Energy — a network including investment funds, nonprofit and philanthropic programs — to scale the technologies need to reach net-zero emissions by 2050.
Boots said there are many emerging technology startups that have received venture capital and other private funding. “And yet, at the end of their venture capital run, often their product is still too expensive in the market to get the uptake. It needs to scale.”
The funding promised by Washington and European governments is “a significant amount of public money.”
“And yet, even with that public money, and even with some private money coming off the sidelines, there’s not often enough of the right flavor of capital … to fully flesh out that capital stack and to make those projects get over the finish line.”
Boots said the organization’s new initiative, Breakthrough Energy Catalyst, will be a “blended finance platform.”
“What we imagine is some of the money from the infrastructure bill and some of the money from the Inflation Reduction Act will capitalize part of that stack. We are going to come in then with a blend of some philanthropic capital — some very concessional equity that will allow those hydrogen projects and those [direct air capture] projects and those long-duration energy storage projects.”
Building ‘Capacity’ in Community Groups
Just Transition Fund’s Binko said philanthropies can help under-resourced communities overcome barriers to obtaining the funding becoming available.
She cited a $62.8 million Build Back Better Regional Challenge grant recently awarded by the U.S. Department of Commerce’s Economic Development Administration (EDA) to the Appalachian Climate Technology Coalition (ACT Now) in West Virginia.
Heidi Binko, Just Transition Fund | Global Clean Energy Action Forum
“Without philanthropy, they would have not built up the capacity to be able to access those federal funds. And so we’re in a moment where that’s needed now, but in a really coordinated and big way,” she said.
In recent months, Binko said, her group has been contacted by numerous federal agencies, including EDA, EPA, the Department of Energy and the Appalachian Regional Commission, a partnership of the federal, state and county governments. “They know that we’ve been working really closely with energy transition communities for over a decade. And they’ve reached out and they’ve said to us, ‘Who are the hardest hit? How do we reach them?’”
Binko said her organization is about to launch a Federal Access Center, which will share with the agencies recommendations it hears from its community partners. Among the plans: town hall listening sessions with agency leads “so they can hear the best and brightest of ideas from our communities,” Binko said.
Role in Emerging Markets
The Rockefeller Foundation’s Dayal said philanthropies have a crucial role in helping emerging markets deploy new technologies, provide capital to decarbonize coal and develop “the business models that can help scale up innovative distributed renewable solutions, or even get grid-tied renewables deployed at scale.”
“In economies like South Africa, Indonesia or my own country, India, that is going to require a momentous coming together of different types of capital,” he said. Philanthropy should be “at the base of that stack, providing that first loss; taking the highest risk possible to test and scale a solution.”
He cited the “de-risking” needed to build “metro grids” in a country like the Democratic Republic of Congo, where “100 cities could be electrified with off-grid large-scale solar.”
Ashvin Dayal, Rockefeller Foundation | Rockefeller Foundation
“But you don’t exactly have companies rushing in because there’s political risks; there’s demand risks; there’s contract risk — there’s all of these risks that have to be taken off the table,” he said.
To address the gap, the Rockefeller-funded Global Energy Alliance for People and Planet is seeking to bring together “different shades of investment capital” from private sources, philanthropies and development finance institutions like the World Bank and African Development Bank.”
“[We’re] trying to build an alliance that can go after transformational projects in a much more coordinated and accelerated way,” he said. “Because right now, it’s too slow; it’s too fragmented. And we’re not going to get there.”
Proving a technology in the OECD countries does not mean that it will be affordable in emerging nations, he said.
In Nigeria, which is 50% unelectrified, distributed diesel accounts for about 60 GW of generation, compared to only 10 GW on the grid. “So there’s a huge amount of interest in deploying solar microgrids, electrifying markets, businesses, small communities,” Dayal said. “But the cost of lithium ion … in Nigeria is still three times what it is here. The cost of even PV is still 20% or 25% more than what it is in the United States.”
In response, Dayal’s organization is working with local financiers and technology companies to create a “pool procurement vehicle.”
“We piloted it just last year, and even before the ink was dry, we were able to drop the costs by about 30%, because you brought 15 or 20 small developers together and do a single procurement,” he said.
Dayal said he is often asked why his foundation is contributing funding to the U.S.’ Net Zero World Initiative — which will match developing countries with DOE’s National Laboratories to create and implement climate solutions — when the government “has all of these resources.”
“And the answer is, because this is about building new types of partnerships that don’t currently exist. And that’s really the key to this: We have to really unlock the synergy. And that’s where I think philanthropy has to be more risk-taking and, frankly, be putting more of its resources into this space. It’s still woefully underfunded.”
