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November 5, 2024

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MISO Exec, IMM Debate Next Steps After Capacity Auction Shortfall

A month after its capacity auction indicated a Midwestern supply scarcity, MISO’s Independent Market Monitor and a MISO vice president debated the path forward in front of Illinois regulators.

During a special policy session of the Illinois Commerce Commission (ICC) last Friday on MISO’s resource adequacy, ICC Chair Carrie Zalewski said the commission wanted “to gain a fuller understanding” of the 2022-23 planning resource auction (PRA) clearing at the cost-of-new-generation entry and to discuss steps to preserve reliability and affordability as the RTO’s resource mix transitions.

Zalewski said the $236.66/MW-day clearing price in MISO Midwest is a significant increase over the $5/MW-day clearing price during the 2021-22 capacity auction. The grid operator has told stakeholders to prepare for the possibility of temporary, controlled load sheds during the summer months because of a 1.2 GW capacity shortfall in the Midwest. (See MISO’s 2022/23 Capacity Auction Lays Bare Shortfalls in Midwest.)

Melissa Seymour, MISO’s vice president of external affairs for its Central Region, said members must build more capacity quickly. The IMM’s David Patton said the RTO is duty-bound to design an auction that results in higher clearing prices to prevent its existing thermal fleet from hemorrhaging more units.

Seymour said accredited capacity in MISO Midwest sank about 3.2 GW since the 2021-22 auction, primarily because of coal plant retirements. She said that though MISO continues to add more installed capacity year-over-year, retiring thermal generation has higher accredited capacity values than the accredited value of new renewable generation.

“Wind and solar do not get the same capacity credit as a traditional thermal unit,” Seymour told the ICC. MISO’s wind generation receives about a 15.5% capacity credit, while solar receives an approximately 50% capacity credit during summer peak times.

“We believe that unless more capacity is built over the next year, we’ll continue to see what we saw in this auction continue in the future,” she said. “We will do everything we can to make sure the overall grid stays reliable and dependable, and that the system won’t be compromised. But we do have less than a one-day-in-10 [year] loss-of-load probability because of the auction not meeting the requirements, so there is a chance that we might have to take actions to prevent blackout situations or rolling brownout situations.”

Seymour said MISO will likely take steps to increase visibility into the supply and demand picture ahead of capacity auctions.

She also said she thought that some market participants had more capacity that they could have offered, namely demand response resources. No market participants violated MISO’s 50-MW withholding threshold in the 2022-23 auction.

Seymour predicted high clearing prices will continue until MISO’s members bring more capacity online. But she also said the RTO’s proposed seasonal auction design — waiting on FERC approval — and new capacity accreditation calculations based on actual generation availability should help alleviate future shortages. (See MISO’s Seasonal Capacity Proposal Opposed at FERC.)

But Seymour also reminded commissioners that MISO’s capacity auction is a residual auction that functions like a “balancing market,” and that it isn’t meant for market participants to procure all resources to meet demand.

IMM: Capacity Auction Design the Culprit

Patton laid the shortfall’s blame squarely on “poor market signals” in the capacity auction.

“It’s not hard to understand how we got here,” Patton said. He told the ICC that the “unfortunate truth” is that MISO’s capacity market isn’t designed to signal when to stave off generation retirements or make investments. He said the vertical demand curve isn’t “aligned” with the reliability value of capacity and clearing prices have been “grossly understated” for years.

David Patton (ICC) Content.jpgMISO IMM David Patton speaks to the Illinois Commerce Commission | ICC

Patton said about 4 GW of MISO’s merchant capacity has retired over the past four years because of economic reasons. He said some of that generation would have remained online had clearing prices more closely reflected a unit’s going-forward costs of about $110-$175/MW-day. He said an efficient capacity price might even cover some of the units’ capital costs for new emissions controls to comply with environmental regulations.

“If we’re going to learn anything from this, we ought to learn that market signals really do matter and we ought to fix this market so that it will help the region maintain enough capacity to maintain reliability,” Patton said.

He urged the commissioners to support a sloped demand curve in MISO’s auction.

“That’s the only thing in the long term that’s going to solve this problem,” Patton said. “And I think the only reason MISO doesn’t have it is because the states have opposed it. And now, one-by-one, the states are starting to either be interested or support it. And I think the more states that voice their support for it, the more momentum there will be to come to a consensus.”

Illinois, as a retail choice state, should weigh in on the demand curve and persuade the Organization of MISO States to move the issue forward, Patton said.

He also pushed back on the argument that lower-accredited renewable energy is ousting higher-accredited thermal units.

“It’s not as if participants say, ‘I’m going to retire a 100-MW gas plant and replace it with 100 MW of wind,’ imagining in their minds that that’s a one-for-one tradeoff. The reality is the investment in renewables is happening independent of the decision to retire resources,” Patton said. “So, it’s true that they’re coming in at lower accredited values, but the real problem is that a number of the resources that retired really should not have retired, regardless of what was going on in the renewables side of the equation. It’s just that we didn’t give them the economic incentive to stick around.”

Seymour countered that MISO’s capacity auction is not designed to incentivize resources or bring new capacity online because states oversee their own resource adequacy planning.

She agreed that a sloped demand curve in previous auctions may have led to higher auction prices and driven some generation construction and prevented some generation from retiring. She also said MISO’s pending request at FERC to employ a minimum capacity obligation rule, where load-serving entities must procure 50% of their load obligation ahead of the auction, may assuage capacity deficiencies.

Patton said he didn’t see how a minimum capacity rule would increase supply. He said the rule would only have load-serving entities bilaterally contracting for the same stock of surplus.

“It’s hard to imagine that it’s going to increase the amount of physical supply that exists. It just moves some of the settlements from the PRA into the bilateral market,” he said. “Until you fix the price in the PRA, you’re not creating an incentive for anybody to build anything that would help you get out of the shortage.”

MISO expects about 11 GW of generation to retire over the next year, Seymour said.

“Excess is going away in most instances. We’re seeing people come more in balance or a little bit short of their total requirement, mostly because people are deciding to retire their older units … and not replacing [with] a one-for-one … whether it be thermal or wind and solar,” Seymour said.

She said federal environmental regulations and utilities’ own green goals are creating a “gap” between resource retirements and resource additions. MISO expects to be in a “mind-the-gap” situation in the 2023-2025 timeframe, Seymour said.

In a majority-renewable future, the RTO is probably going to have resources that don’t run very often to provide inertia, frequency response and voltage support, she said.

ICC Commissioner Maria Bocanegra said one of her biggest fears is repeating a blackout situation similar to ERCOT’s prolonged blackouts during the February 2021 severe winter storm.

Seymour said that unlike ERCOT, MISO is not an island and can import considerable amounts of power.

“That is one of the biggest things that we have going for us that ERCOT didn’t,” she said. “They had minimal access to anything outside of the ERCOT footprint to be able to import to serve their need.”

Seymour reminded commissioners that during the same winter storm, MISO was able to import supply from PJM and in turn, export power to SPP.

Patton Says Real Threat Begins Next Summer

Patton told commissioners that he doesn’t expect blackouts in MISO this summer.

“I think load shed in MISO is extremely unlikely this summer, because some of the resources that didn’t sell in the capacity auction are actually still going to be around during the summer,” he said. “They’re retiring after the summer. So, I don’t think the threat of load shed is very high for MISO for this planning year. I’m a little more worried about after some of these retirements that are in process disappear …  and they won’t be there next summer.”

The IMM allows retiring generators an exemption from offering into the PRA when they plan to retire and won’t be available for the entire planning year.

Late-spring heat paired with seasonal maintenance outages has already forced MISO to issue two emergency advisories before the June 1 start of the 2022-23 planning year.

MISO declared a maximum generation emergency alert Friday afternoon for its Central region. The grid operator said it was experiencing forced generation outages, above normal temperatures and higher than forecasted load. On Tuesday, the RTO declared conservative operations for its South region through Friday.

The Industrial Energy Consumers of America (IECA) sent a letter to FERC Chair Richard Glick, urging the commission to issue a notice of proposed rulemaking to overturn the state opt-out for demand response.

IECA CEO Paul N. Cicio said it is “of immediate importance” that FERC reverse the opt-out, which allows states within a regional grid to block distributed resources from participating in wholesale energy markets.

“This action will reduce inflation, electricity costs and improve reliability,” the IECA wrote. “We believe that your action will impact the next PRA in MISO and help to drive down prices of which all consumers will benefit. This could ensure that our factories continue to operate and maintain jobs at a time when our economy desperately needs the assistance.”

IECA argued a continuation of the rule has contributed to MISO’s capacity crisis.

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Port of Seattle Looks to Get into Hydrogen Business

The Port of Seattle is studying if and how it should get into the business of producing and distributing hydrogen.

Realistically, that move — if made — is a few years down the road.

The port wants to trim its carbon footprint and be a player in the fledgling hydrogen supply economy, Ryan Calkins, president of the port’s commission, told NetZero Insider. There is some urgency for the port getting into the field as medium- and heavy-duty trucks, plus ships are likely to switch to hydrogen fuels. “We really need to build this soon,” Calkins said.

For example, a handful of hydrogen-fueled ships, mostly ferries, are now in use in northern Europe and Japan. Calkins believes the shipping industry, which accounts for 2.2% of worldwide greenhouse gas emissions, could gradually expand more into using hydrogen as a fuel, which would mean those vessels will use ports where hydrogen is stored.

The Port of Seattle and some partners are conducting two studies covering whether the port should get into the hydrogen business and how, where to locate facilities, costs, potential customers and storage. The federal government has provided $2.12 million to the port to tackle the studies.

“This is to get a better understanding of what this will look like,” Calkins said. 

The port is one year into a two-year study on the big picture of getting into the hydrogen fuel business. Its partners on the study are Seattle City Light, Pacific Northwest National Laboratory and Sandia National Laboratory. 

A second two-year study by the port and Seattle City Light is expected to start soon and will look at hydrogen storage issues, such as types and sizes of tanks, and examine safety risks, such as the potential for explosions.

Washington officials are making a big push to have the U.S. Department of Energy select the state as one of four to eight national “hydrogen hubs” to be funded by $8 billion in appropriations from the Infrastructure Investment and Jobs Act. State lawmakers in March passed a bill to create a new Office of Renewable fuels to support the develop of hydrogen and other renewable fuels. (See Green Hydrogen Bill Passes Wash. Legislature.)

At a carbon policy forum held in Seattle last month, state Sen. Reuven Carlyle said, “This is a ruthless competition nationwide. It’ll be political malpractice not to leave everything on the field.”

Hydrogen efforts are already taking shape in other parts of the state. In Central Washington, Douglas County Public Utility District is constructing what will be the state’s first green hydrogen production facility near its Wells Dam on the Columbia River. The $25 million project is expected to go online in late 2022 or early 2023.

Last week, Australia-based Fortescue Future Industries said it would examine converting a disused Centralia, Wash., coal mine into a green hydrogen production facility. Centralia is located about 85 miles south of Seattle. (See Australian Company Eyes Closed Wash. Coal Mine as Green Hydrogen Site.)

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MISO, SPP Hold 1st Common Seams Initiatives Meeting

MISO and SPP staff and stakeholders discussed transmission reconfigurations and the search for smaller interregional transmission projects Tuesday during their inaugural Common Seams Initiatives (CSI) meeting.

The RTOs announced the biannual meetings last month as a means to better inform stakeholders on how they’re improving seams coordination. (See MISO and SPP Announce New Interregional Stakeholder Meetings.)

Staff said the meetings make sense because both RTOs list seams work as strategic priorities. They will replace the grid operators’ joint operating agreement meetings and no votes will be held.

SPP Senior Interregional Coordinator Clint Savoy said the virtual, informational meetings will span the RTOs’ planning, operations, markets and regulatory activity and serve as an “all-encompassing ‘here’s what we’re working on.’”

RTO staffs said they’re working to create web pages for CSI meetings. Savoy said the grid operators are open to hearing stakeholder-led presentations and that some meetings may be held in-person.

Tuesday, staff focused on five recommendations state regulators handed down to MISO and SPP in early 2021. The Organization of MISO States and SPP’s Regional State Committee’s Seams Liaison Committee (SLC) have advised the RTOs to consider creating targeted market efficiency projects (TMEPs), improve their respective generator interconnection queue processes, track and address rate pancaking at the seams, keep state regulators apprised of long-range planning efforts and devise coordinated transaction scheduling and market-to-market (M2M) interface pricing. (See MISO, SPP Regulators Call for Pancaking Fix, Smaller Projects.)

In February, the grid operators announced plans to conduct a TMEP study this year that will search for smaller, congestion-relieving cross-border transmission projects. (See MISO, SPP Take on 2nd Interregional Planning Effort.)

Savoy said MISO and SPP are aiming for an “easily repeatable” process that could be conducted every year, if necessary. He said the RTOs are compiling two years’ worth of seams congestion data to identify potential projects and will negotiate a cost-allocation design in 2023.

The two have also participated in the SLC’s Rate Pancaking Working Group to inventory instances of rate pancaking and develop solutions.

Debate on MISO Tx Reconfiguration

Savoy said SPP is conducting a constraint management analysis of its day-ahead handling of MISO market-to-market constraints “to see if anything needs to change.” The results will eventually be shared with MISO and stakeholders. (See SPP Reviewing its M2M Processes After MISO Monitor’s Comments.)

Meanwhile, MISO has formed the nonpublic Reconfiguration for Congestion Cost Task Team (RCCTT), which focuses on plans to reroute transmission flows during times of heavy congestion costs. Tony Rowan, senior manager of north reliability coordination, said MISO’s increasing transmission congestion caused some of its northern market participants and third-party vendors to suggest reconfiguration options. Rowan said the requests were unusual and that transmission owners rejected most of the recommendations over reliability concerns.

The RCCTT is maintaining a monthly list of MISO’s top congested constraints, including M2M flowgates. SPP staff said they have been meeting with RCCTT leadership to share their information on flowgate congestion.

EDF Renewables’ Arash Ghodsian pointed out that much of the RTOs’ work to address seams congestion is being done behind closed doors.

“We talk about urgency. Obviously near-term congestion is happening,” Ghodsian said. He asked for future educational sessions on staffs’ work on seams congestion.

Minnesota Public Utilities Commission staffer Hwikwo Ham asked the grid operators to research Iowa’s Interstate Power and Light’s recent transmission reconfiguration, which he said has lowered ratepayer bills.

“Southwest Minnesota is a total mess at this point,” Ham said of the need for reconfiguration. “We are leaving tons of money on the table given the level of congestion in Southwest Minnesota and Iowa.”

American Electric Power’s Jim Jacoby said he is concerned that MISO’s reconfiguration work might harm system reliability.

“I would think you’d want to fix a problem before reconfiguring the system,” he said.

Rowan said some the congestion may already have led to transmission projects. He said RCCTT members are working to avoid simply “masking” congestion problems and keeping them open for project opportunities.

“That is very much at the forefront of discussions in the RCCTT,” Rowan said.

WPPI Energy’s Steve Leovy said the reconfiguration work is focused on congestion caused by temporary, unusual conditions.

“We need to both improve the system and squeeze more out of the system if we can to operate the system as efficiently as we can. … I see room for both,” Leovy said.

Before closing the meeting, MISO’s Jack Dannis said the RTOs are monitoring a possible minimum transmission transfer capacity, as suggested by FERC’s Joint Federal-State Task Force on Electric Transmission.

Dannis said the November CSI meeting will focus on a possible transfer requirement between the regions.

Savoy said SPP intends to include a minimum transfer capacity with MISO in its five-year strategic plan. “This is something we should be discussing and determining how it will look,” he said.

American Clean Power Association’s Daniel Hall thanked the RTOs for teeing up the topic.

“I certainly think the tea leaves are such that FERC will do something in this arena. I think it behooves all of us for MISO and SPP to look into this,” he said.

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Rhode Island Advocates: Fund State Transit Master Plan to Reduce VMTs

Fully funding Rhode Island’s Transit Master Plan could reduce residents’ vehicle miles traveled (VMT) by 8% and should be a key recommendation in the state’s next greenhouse gas emissions reduction plan, Mal Skowron, transportation program and policy coordinator at the Green Energy Consumers Alliance, told state officials Tuesday.

Skowron made her recommendation during a listening session of the Rhode Island Executive Climate Change Coordinating Council (EC4) on priorities for reducing transportation emissions that should be in the update to the 2016 GHG Emissions Reduction Plan. Rhode Island’s Act on Climate, which Gov. Dan McKee signed last spring, directs the EC4 to submit the updated plan to the legislature by the end of the year.

Listening session attendee Hans Scholl agreed with Skowron’s call to fund the plan, saying that the “vast majority of Rhode Islanders live within 10 minutes of public transportation, but it’s just totally underutilized.”

Capital costs of the Master Plan would be $1.9 billion to $3.1 billion through 2040, with operating costs of $237 million annually.

Reducing VMTs is one of the actions recommended in the 2016 GHG plan to cut transportation emissions from fossil fuels. The EC4 is considering priority actions for the plan update that could further a VMT reduction goal, including increasing transit and share ridership.

The State Planning Council adopted the transit plan in December 2020 under the umbrella of a Long-Range Transportation Plan. Funding for some of the plan was in place at the time of its adoption, but full implementation isn’t expected until 2040. Since its adoption, additional funding has been moving more of the plan forward.

U.S. Sen. Jack Reed helped secure a $900,000 grant to study a major transit corridor expansion as recommended in the plan for services that provide high-volume markets with fast and frequent service. An additional $225,000 in matching funds for the study are included in McKee’s proposed FY23 budget.

The transit plan said high-capacity services could include rapid bus routes with limited stops and light rail featuring two-car trains.

Completion of the study will allow the state to take advantage of funding opportunities in the Infrastructure Investment and Jobs Act, Reed said.

Rhode Island’s 2016 GHG reductions strategy also recommends electrification of the Rhode Island Public Transit Authority’s (RIPTA) bus fleet and state passenger and freight rail systems.

“RIPTA has made a lot of progress with electrifying its fleet,” Carrie Gill, chief economic and policy analyst at the Rhode Island Office of Energy Resources, said during the listening session.

McKee and Reed joined authority officials Friday to break ground on the state’s first charging station for electric buses to use while on a route during service hours. The governor also announced Thursday that RIPTA has issued a request for expressions of interest to design a new transit center that would support transit growth as envisioned in the master plan.

The EC4 held a listening session on the electric sector in April to inform the GHG plan update, and another session is scheduled for the thermal sector (residential, commercial and industrial heating and natural gas distribution) in June.

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PJM Operating Committee Briefs: May 12, 2022

Balancing Operations Manual Changes Endorsed

PJM stakeholders at last week’s Operating Committee meeting endorsed manual changes related to the stability limits and intelligent reserve deployment in markets and an operation issue charge developed in the Market Implementation Committee.

The manual changes were endorsed in a rare acclamation vote that included eight objections and 11 abstentions.

Donnie Bielak, manager of reliability engineering for PJM, reviewed the conforming changes to Manual 12: Balancing Operations, highlighting the changes in two different sections of the manual.

In section 4.1.2: Loading Reserves, language was added stating that PJM dispatch will use intelligent reserve deployment (IRD) in security constrained economic dispatch (SCED) to initiate a synchronized reserve event by approving the latest solved IRD case if there’s insufficient regulation and economic generation to recover area control error (ACE).

Bielak said the change highlighted automated and manual methods for implementing contingency reserves.

“Under normal operating conditions, we would use the automatic method and go out with an IRD case,” Bielak said. “However, we did put provisions in there for PJM actions regarding if the IRD case was invalid and how we would deploy those reserves under that scenario.”

Section 5.5: Generator Stability Limitations is a new section highlighting stability-limited generation and clarifying PJM and member actions, Bielak said.

The PJM actions in the section state, “When stability issues are identified, PJM will confirm/calculate the stability limitation and communicate the limit value(s) as a stability limit, including the effective timeframe for same, to the impacted PJM generation owner(s). This includes any changes, including cancellation, around a given stability limit. For real power (megawatt) stability limits, limits will be translated into a corresponding generator output constraint (in megawatts) for a generator whereby the generator output constraints shall be respected.”

The section says generation owners should “respond promptly to specific requests and directions” of PJM dispatchers, and generators should honor dispatch basepoints based on stability limitations by following PJM dispatch.

Paul Sotkiewicz of E-Cubed Policy Associates said he wanted to make sure PJM dispatchers will consider switching options before the generator output construct is used and make it “very clear” in the manual so “there’s nothing left to the imagination” for dispatchers to interpret.

Bielak said PJM dispatchers will evaluate any other available types of switching solutions and make sure they don’t cause “adverse implications” to other generators or overloads on the system. He said there are “a lot of different factors” that must be evaluated to go ahead with a switching solution.

“We did a full review here of all the operations manuals, and we definitely believe that the existing language or the new language that we’re proposing here in Manual 12 is the best course of action moving forward,” Bielak said.

The manual language goes to the May 25 Markets and Reliability Committee for endorsement. PJM is looking for an effective date of June 1.

Outage Coordination Issue Charge Endorsed

Stakeholders will begin examining outage coordination processes and procedures after unanimously endorsing an issue charge.

Paul McGlynn of PJM’s system operations group reviewed the proposed issue charge and problem statement intended to address the RTO’s transmission and generation outage coordination.

The key work activities and scope of the issue charge include education and review of current procedures for submitting, classifying, evaluating, approving and scheduling transmission and generation outage requests. The review will look at current study timelines, analytical activities such as reliability and expected congestion studies and any adjustments to submitted outages based on PJM’s review.

McGlynn said PJM will review outage planning and coordination processes required for regional transmission expansion plan project implementation by focusing on projects that could require extended outages of existing facilities such as transmission line rebuild projects.

Work also includes “proposed modification and improvements to transmission and generation outage assessments, transparency and available tools.” McGlynn said discussion of outage assessments will include reliability and congestion assessments for the PJM system and a review of the impacts on the PJM system of neighboring region outages.

Out-of-scope items in the issue charge include modifying the transmission owners’ ability to “take necessary outages on their facilities” and any proposal that conflicts with the Consolidated Transmission Owners Agreement.

Work on the issues will be completed at the OC and is expected to take up to a year to complete.

Sotkiewicz asked for a possible friendly amendment to the issue charge calling for an education portion on how the issues being discussed will be brought to other committees, including the Planning Committee and the MIC, so that the communication portion “doesn’t get overlooked in the process.”

“These outages can affect everything from credit to market operations and everything else,” Sotkiewicz said.

McGlynn said PJM can touch on dissemination of information while going through the education process, but he said processes already exist in the manual to ensure information is passed along to other committees in the stakeholder process.

“I don’t know that it’s something necessarily that we need a lot of stakeholder input on,” McGlynn said.

Manual Endorsements

Stakeholders unanimously endorsed two different manuals as part of the periodic review. They included:

      • Manual 36: System Restoration, with minor changes such as replacing System Restoration Coordinators Subcommittee (SRCS) with System Operations Subcommittee (SOS) and updating the under-frequency load shed table with new data.
      • Manual 3: Transmission Operations, with updating stability limitation process language in accordance with FERC docket ER21-1802 and aligning language with the current TO/TOP matrix language.
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FERC Accepts PJM Historical E&AS Offset Compliance

FERC on Friday accepted PJM’s compliance filing restoring the historical energy and ancillary services (E&AS) revenue offset used in the RTO’s capacity market, clearing a potential hurdle for the 2023/24 Base Residual Auction scheduled for June 8 (EL19-58).

The commission on Dec. 22 reversed its May 2020 approval of PJM’s forward-looking E&AS offset, a key variable in calculating the net cost of new entry (CONE) for resources in capacity auctions, ordering the RTO to revert to the previous, backward-looking offset. (See FERC Reverses Itself on PJM Reserve Market Changes.)

PJM submitted tariff revisions restoring the historical E&AS offset for all Reliability Pricing Model (RPM) auctions going forward and limiting the forward-looking option only to RPM auctions for the 2022/23 delivery year, the only one in which the forward-looking offset was used.

“PJM states that, with these revisions and a Nov. 12, 2020, effective date, the tariff will properly reflect the applicable E&AS offset used in auctions for each delivery year,” FERC said.

The RTO also included revised rules for determining the E&AS offset used for minimum offer prices for each resource type and restoring the historical approaches provisions starting with the 2023/24 delivery year. The historical offset will also be used to determine avoidable-cost rates.

The RTO asked FERC to “expeditiously accept” its compliance filing to avoid delaying the2023/24 BRA.

In a 3-1 decision, FERC mostly accepted PJM’s compliance filing, with Commissioner James Danly dissenting and Commissioner Willie Phillips not participating in the order.

The commission said PJM’s filing did not properly restore all tariff language that existed prior to the May 2020 order, pointing to a section with an incorrect sentence that was not properly incorporated in the tariff in previous revisions. FERC also identified other minor changes, including deleting the phrase “capacity factors” in one section and revising the word “must” to “may” in another section.

PJM is required to file the revised tariff changes within 15 days to the commission.

Danly, who has dissented to several of the orders regarding PJM’s proposed energy price formation revisions, said he continued to object to the process and the merits of the filing. He said the order “implements profound changes to fundamental aspects” of PJM’s capacity market and was done “recklessly” without additional briefings or supplemental information on the impact of the changes.

The “protracted, unnecessary proceedings have caused unacceptable delays in PJM’s auction schedule,” Danly said. He hoped the commission will not cause any more delays to the auction with its actions.

“How can anyone expect a market to function correctly and efficiently in the face of the uncertainty the commission has created over the last year?” Danly said. “We cannot continue to take actions that will delay PJM’s auctions or throw its market rules into further chaos. Amidst such uncertainty, the promised benefits of the market will be diminished and will eventually be lost. PJM’s ability to ensure resource adequacy will be imperiled. Prices will rise and reliability will suffer. We cannot continue down this road and keep telling ourselves that the resulting rates are just and reasonable.”

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California Governor Proposes $5B ‘Reliability Reserve’

California Gov. Gavin Newsom said Friday that the state needs a $5.2 billion “strategic electric reliability reserve” to meet the challenges of extreme heat, wildfires, drought and the West’s changing resource mix.

Newsom proposed the reserve as part of the May revision to his FY 2022-23 budget, originally released in January.

He also cited supply-chain problems, including with imported solar panels, as contributing to potential supply shortfalls this summer and beyond.

“When you stack all these together, and you reflect those extremes on wildfire, heat [and] drought, we’re looking at potentially filling [supply] gaps that weren’t there even a year or two ago,” Newsom said in a budget briefing. “So how do we do that? We are requesting [that] the legislature … [create] a new strategic electricity reliability reserve, which is just a fancy way of saying ‘putting together 5,000 megawatts that’s available at a moment’s notice.’”

A summary of the governor’s budget plan says the reserve could consist of “existing generation capacity that was scheduled to retire, new generation, new storage projects, clean backup generation projects, diesel and natural gas backup generation projects … and customer-side load reduction capacity that is visible to and dispatchable by the [CAISO] during grid emergencies.”

Officials have not said whether the reserve funds would be used to keep the state’s last nuclear generator, PG&E’s Diablo Canyon Power Plant, operating beyond its planned retirement in 2024-25 for reliability, as some have urged.

In late April, Newsom told the Los Angeles Times editorial board that California would seek a share of $6 billion in federal funds intended to keep aging nuclear plants open. The Biden administration announced the program last month.

“The requirement is by May 19 to submit an application, or you miss the opportunity to draw down any federal funds if you want to extend the life of that plant,” Newsom said, according to the Times. “We would be remiss not to put that on the table as an option.”

His cabinet secretary, Ana Matosantos, told reporters at a May 6 briefing the state needs to consider all possibilities.

“We can’t keep any options off the table,” Matosantos said. “And we are clearly looking at planned retirements and making sure that we’re looking at all options associated with those planned retirements.”

During the briefing, officials from the governor’s office, CAISO, the California Public Utilities Commission (CPUC) and the California Energy Commission (CEC) said this summer’s potential shortfalls could range from 1,700 MW under strained conditions to 5,000 MW under extreme conditions.

Newsom said Friday that the state could face up to a 7,300 MW shortage, though it was unclear where he derived that figure, which was not cited by CAISO, the CEC or the CPUC.

CAISO, CEC Examine Reliability

The governor’s revised budget proposal followed reliability discussions by the CEC and CAISO on Wednesday and Thursday that delved into the likelihood of shortfalls this summer during harsh conditions.

CAISO’s 2022 Summer Loads and Resources Assessment found that the likelihood of having to order rolling blackouts — as the ISO was forced to do in August 2020 — is less this summer than last year, largely because of the addition of 4,000 MW of battery storage since the 2020 blackouts.

“However, available capacity continues to be impacted by well below normal hydro conditions as California is in its third year of drought,” Neil Millar, the ISO’s vice president of infrastructure and operation planning, told the CAISO Board of Governors in a memo prepared for the board’s meeting Thursday.

California’s mountain snowpack, which supplies water during the state’s six-month dry season, stood at 38% of average April 1 after the three driest winter months on record.

As in the past two summers, CAISO’s “greatest operational risk is during a widespread heat wave that results in low net imports due to high peak demands in its neighboring balancing authority areas,” the memo said. “The risk increases in late summer concurrent with the diminishing effective load-carrying capability of solar resources and the wane of hydro generation.”

“Under extreme weather and events such as wildfires that diminish larger amounts of supply, the ISO could still be faced with the necessity to shed firm load,” Millar wrote.

Using a new methodology, the resource assessment found the probability of CAISO declaring a Stage 3 energy emergency is 15% this year compared to about 6% last year, but the possibility of firm load interruption decreased from 4.6% in 2021 to 4% this summer.

More extreme weather than anticipated or procurement delays for anticipated new resources could worsen the outlook, CAISO cautioned.

In a briefing to the CEC, David Erne, with the commission’s Energy Assessments Division, said supply chain issues were especially problematic this year.

High lithium prices are affecting battery production, and the U.S. Commerce Department launched an investigation in April into allegations that Southeast Asian solar panel manufacturers are using Chinese parts while evading U.S. tariffs on China. The situation could interrupt solar panel delivery and the construction of solar arrays.

“What we’ve seen from last summer and moving forward is the energy industry is particularly impacted by supply chain issues, commodity prices and tariff issues, all of which cumulatively impact our ability to build out these new projects moving forward,” Erne said. “Our reliability is dependent upon new buildout, and that new buildout is affected by these particular issues.”

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Vt. to Adopt More Robust Regs for Heavy-duty ZEVs

Vermont is preparing to adopt four California vehicle emissions standards this year, three of which will be the state’s first substantive regulations for heavy-duty vehicles.

The Agency of Natural Resources (ANR) will file proposed rules with the Agency of Administration next month for Advanced Clean Cars II, Advanced Clean Trucks, Low Nitrogen Oxides Heavy-duty Omnibus and Phase 2 GHG Emissions Standards for Heavy-Duty Trucks and Trailers.

“Adopting the [truck rules] will be a significant build on our existing program in terms of adding regulations that address heavy-duty vehicles more robustly,” said Megan O’Toole, climate change mitigation coordinator at the ANR’s Department of Environmental Conservation.

To comply with the 2020 Global Warming Solutions Act, ANR must file the proposed rules, as recommended by the Vermont Climate Council in its initial Climate Action Plan, by July 1. The state first adopted California air emissions standards in the 1990s and has expanded those regulations over the years.

“If all of the vehicles that will be delivered to the State of Vermont, pursuant to these rules, are bought by Vermonters and fleet owners in Vermont and placed in service, that will get about a third of the way to our 2030 goal just for the transportation sector,” O’Toole said during a Climate Council meeting Monday.

Under the GWSA, transportation sector emissions must decline by 1.38 million metric tons of carbon dioxide equivalent by 2030.

Advanced Clean Cars II will amend ACC I, which Vermont adopted previously, to ensure that all passenger and light-duty vehicles sold in the state are zero-emission by 2035. The standard ramps up over time, starting with model year 2026.

Under Advanced Clean Trucks, at least 30% of medium- and heavy-duty vehicles delivered to the state must be zero-emission by 2030, starting with model year 2026 and ramping up to 40% or higher by 2035, depending on vehicle class.

Phase 2 GHG standards, which build on Phase 1 standards, are the first to cover certain trailers used with heavy-duty tractors and are based on technology requirements for manufacturers to reduce fuel consumption and emissions. The requirements will be effective starting with model year 2026. Low NOx, Heavy-duty Omnibus is a required companion standard to the Phase 2 program that does not relate directly to greenhouse gases. The California Air Resources Board expects the regulation to establish NOx emission standards that are 90% lower than today, effective for model year 2026.

ANR plans to have all four rules adopted by the end of the year so they will be effective for the 2026 model year, O’Toole said. The agency will hold rulemaking hearings in the late summer and early fall.

Climate Planning

While early Climate Council analyses showed significant GHG emission reductions can come from adopting the California regulations, ANR has not released final emissions data in its draft rules. The reductions could equate to 10% of the overall GWSA target of a 40% reduction below 1990 levels in 2030, Jared Duval, council member and executive director of the Energy Action Network, said during the meeting

Vermont also must reduce its GHG emissions 26% below 2005 levels by 2025 and 80% below 1990 levels by 2050.

As it stands, adopting the California regulations is the only action moving forward this year from the climate action plan that can achieve “double-digit” reductions, Duval said. The council had expected to recommend Vermont join the Transportation and Climate Initiative Program (TCI-P) last year, but that program has since stalled, leaving a significant gap in the transportation sector emissions reductions needed in the climate plan.

The state also is not moving forward this year with a climate plan recommendation for the state to adopt a clean heat standard to reduce emissions in the building sector. Earlier this month, Gov. Phil Scott vetoed a bill that would have directed regulators to develop a CHS. (See Vt. House Sustains Veto of Clean Heat Standard Bill.) Transportation and buildings are Vermont’s No. 1 and 2 top emitting sectors, respectively.

The climate plan “was already on thin ice with TCI-P not moving forward,” Duval said. “Without the clean heat standard, which we were counting on to be the largest single emissions-reduction measure in the plan, I don’t see how we can have any confidence that we will come anywhere close to the 2030 requirements.”

In vetoing the clean heat standard bill on May 6, Scott pointed to his $216 million climate-related budget package as evidence that he understands the importance of reducing GHG emissions. That budget, which the legislature amended and passed before adjourning last week, is a “short-term opportunity” to use federal and state funding to reduce Vermonters’ dependence on fossil fuels,” Duval said.

“It may help us meet the 2025 target, but it will likely be going away at exactly the time that we need to be ramping up significantly to have any chance, any hope, of meeting the 2030 requirements,” he said.

As passed, the state budget includes $80 million for weatherization, but Duval said that will only help an estimated 8,000 of the 90,000 homes the climate plan recommended for building sector emission reductions by 2030. And an additional $12 million for electric vehicle purchase incentives would put an estimate 3,000-4,000 EVs on the road of the 126,000 needed for transportation sector reductions by 2030, Duval said.

Short-term investments must be backed up by long-term policy and market clarity and the incentives residents need to make changes, according to Duval.

“We can’t keep pretending that we live in a pre-Solutions Act world, where it’s okay to be off track of the legal requirements without any serious, feasible plan to meet these requirements,” he said.

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SPP Reviewing its M2M Processes After MISO Monitor’s Comments

SPP staff said last week they are conducting internal discussions on how they manage MISO constraints in their RTO’s day-ahead market as part of their market-to-market (M2M) process.

Clint Savoy, SPP senior interregional coordinator, told the Seam Advisory Group on Friday that the MISO Independent Market Monitor’s recent comments on SPP’s M2M management has caused staff to review their processes.

“We’re doing an assessment on the impacts of changing our process and evaluating the impacts on price convergence of market-to-market settlements … the impact on uplifts and virtual payments,” he said. “We want to understand the impact of the changes before we make those changes.”

Savoy said members should expect more detailed presentations on the issue coming to the group and SPP’s Market Working Group.

MISO Monitor David Patton said last month that SPP is not properly recognizing M2M flowgate constraints with its seam neighbor in its day-ahead market. Patton told a MISO stakeholder group that the oversight must be costing SPP members several million dollars in balancing congestion. (See MISO and SPP Announce New Interregional Stakeholder Meetings.)

SPP has said that it does model MISO’s system and constraints in the day-ahead market and that it believes the market should best reflect expected real-time operating conditions and not necessarily create day-ahead congestion based on calculated firm flow entitlement (FFE) values.

The discussion came as SPP accrued another $24.1 million in M2M settlements from MISO during February, its second-highest monthly total since the process began in March 2015. That pushed the amount MISO owes its neighbor for congestion to $279.1 million.

Temporary flowgates accounted for $18.4 million in settlements during the month, binding for 2,064 hours. The two grid operators exchange settlements for redispatch based on the non-monitoring RTO’s market flow in relation to FFEs.

It was the 12th straight month M2M settlements have accrued in SPP’s favor and the 27th time in the last 29 months. SPP has piled up nearly $180 million in settlements since September 2020, despite more than $50 million in settlements to MISO during the severe winter storm in February 2021.

New Members Welcomed

The SAG welcomed three new members: ITC Holdings’ Raju Brahmandhabheri, Arkansas Electric Cooperative Corp.’s Rick Running and the American Clean Power Association’s Daniel Hall, a former member of the Missouri Public Service Commission.

American Electric Power’s Jim Jacoby, the group’s chair, welcomed the diversity the new members bring in representing their companies’ differing interests.

“I think it brings a different perspective to some of the issues that we’re dealing with,” he said, “So, thank you for putting your name into the hat and being part of the team.”

Staff gave the new members an overview of the different initiatives SPP and MISO are currently working on together. The newly created Common Seams Initiative met today, and the RTOs’ staffs this Friday plan to share a “very substantive” cost allocation proposal for their Joint Targeted Interconnection Queue study.

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Duke Files Carbon-reduction Plan for North Carolina Utilities

Duke Energy (NYSE:DUK) on Monday filed a proposal with the North Carolina Utilities Commission (NCUC) that presents four broad paths to reducing carbon emissions by 70% by 2030 and achieving net-zero emissions by 2050.

Under development for months in a process that included stakeholder discussions with representatives of more than 300 interested organizations, the plan does not go into specifics. The company noted that the lack of specificity in its “all of the above” mix offers “regulators multiple options that balance affordability and reliability for customers.”

Under the proposal, Duke’s remaining coal-fired plants in the state would be retired by 2035, replaced by wind, solar, battery backup, “hydrogen-ready” gas turbines and perhaps a small modular nuclear plant, though the cost of any of these plans is not specified.

The company does point out that in the next two years, any of the multiple options it offers will have limited impact on costs. But beginning in 2025, customer bills would increase by 1.9 to 2.7% through 2035.

“The plan’s first portfolio achieves the 70% target by 2030, while the other three portfolios achieve the 70% target by 2032 or 2034 through increased reliance on both onshore and offshore wind and/or small modular nuclear generation, leveraging the law’s flexibility intended to help advance cutting-edge, carbon-free generation. All four portfolios reach carbon neutrality by 2050,” the company said in a statement issued with its filing.

“In the near term, the plan focuses on aggressive energy efficiency and demand-side management, along with grid upgrades to enable significant growth in renewables. That includes between 7,600 MW and 11,900 MW of new solar by 2035, depending on the portfolio, on top of the 5,000 MW of solar expected online by year-end and an additional 1,900 MW of solar currently planned or under development.

“Approaching the 2030s, wind and small modular nuclear come into play to diversify the carbon-free energy mix. This diversity is key to meeting the least-cost and reliability mandates required by state law.”

A coalition of advocacy groups — the Natural Resources Defense Council, Southern Alliance for Clean Energy and Sierra Club, represented by the Southern Environmental Law Center, along with the North Carolina Sustainable Energy Association — issued a statement following the company’s filing, noting that the organizations are preparing for NCUC hearings over the next 60 days and have already “commissioned expert analysis of the proposed Duke plan that will be filed along with an alternative plan on July 15.”

The company’s proposal includes four public hearings in July and a virtual hearing in August.