It could be another month before stakeholders and the public in New England find out the results of ISO-NE’s capacity auction from last week as the grid operator wrestles with the ongoing fallout of an 11th-hour court ruling over a Connecticut power plant.
In a filing to FERC on Tuesday, ISO-NE said that the Feb. 4 D.C. Circuit Court of Appeals ruling allowing the Killingly Energy Center to temporarily maintain its place in Forward Capacity Auction 16, which took place on Monday, could mean it is unable to announce the results of the auction until mid-March or later.
As of right now, there are two sets of auction results hanging in limbo, as ISO-NE calculated clearing prices and quantities both with and without Killingly participating.
That means the grid operator will also have to delay its preparations for next year’s capacity auction, FCA 17, which were supposed to begin this week. For example, ISO-NE is required to provide market participants that have existing capacity resources with their qualified capacity values for those resources on Thursday.
“The definitive calculation of those qualified capacity values cannot be made for all resources without final FCA 16 results,” ISO-NE said in the filing.
The grid operator considered moving forward with planning for next year’s auction using both sets of results but decided that approach would not be compatible with its systems and processes and would pose “extraordinary risk to all the downstream activities.”
ISO-NE is asking FERC for permission to delay establishing that and other dates as part of the FCA 17 timeline until the Killingly situation is clarified.
FERC still has an important role to play in ending the uncertainty. The agency has a rehearing request in front of it, filed by Killingly developer NTE Energy, which is appealing the agency’s decision to affirm an ISO-NE decision to terminate the capacity supply obligation for the project. (See Killingly Stays Alive After DC Circuit Halts FERC’s Termination Order.)
While FERC issued a notice denying rehearing “by operation of law” on Feb. 11, that was not sufficient to “resolve” the request, ISO-NE said.
The uncertainty could also mean that next year’s capacity auction is pushed back to March instead of February.
“Based on the analysis that the ISO has conducted to date, the ISO envisions that the qualification activities for FCA 17 will begin in April 2022, and FCA 17 will occur in March 2023,” the filing said.
The term “clean energy” has become a flashpoint in current debates swirling around decarbonizing the U.S. electric system.
Should it be defined solely in terms of renewable technologies — wind, solar, storage hydropower and, maybe, nuclear?
Or, with climate change intensifying extreme weather events across the U.S. and worldwide, is a broader view — encompassing hydrogen, natural gas and carbon capture — required to drive rapid and deep reductions in greenhouse gas emissions?
Speakers at the recent Energy Policy Outlook Conference of the National Association of State Energy Officials (NASEO) leaned strongly toward the latter approach, reflecting the broad range of political, economic and technical issues surrounding state-level plans for cutting emissions to net-zero by midcentury.
“Nearly all states that have set a goal of zero-carbon for their utilities define it in terms of 100% clean energy, not 100% renewables,” Karl Hausker, senior fellow for climate policy at the World Resources Institute, told conference attendees at a Feb. 9 panel on decarbonization pathways.
The reason, he said, is that “as a power system approaches 100% renewable, system costs increase sharply … and maintaining reliability becomes more difficult.”
Hausker argued for a five-point strategy for getting the U.S. economy to net zero, including deep efficiency, broad electrification and increasing electricity supply, while also commercializing carbon capture and sequestration (CCS) technologies and aggressively pursuing a range of research and development efforts.
“We are betting on solutions, and there is a big case for spreading our chips, like we do in Las Vegas,” he said. “The good news is that if we can do this smartly and efficiently and wisely, we can keep the cost of this transition to 1 or 2% of global GDP or 2% of U.S. GDP. That’s a pretty good price to pay for the damages [of climate change] that are already being felt in the world.”
Speaking on the same panel, Richard Meyer, vice president for energy markets at the American Gas Association (AGA), also called for a multipronged approach to net zero, but with a central role for natural gas to ensure reliability, affordability and minimum disruption for Americans who rely on gas for space and water heat.
Drawing on figures from the EPA and the Energy Information Administration, Meyer said that natural gas accounts for 13% of U.S. greenhouse gas emissions, most of which are produced by residential, commercial and industrial customers. A new report from the AGA outlines four key strategies for cutting those emissions: reducing the industry’s methane emissions, improving efficiency, decarbonizing the gas supply via renewable natural gas and hydrogen, and offsetting emissions with carbon capture and sequestration and direct air capture.
“There is no one single pathway to zero,” Meyer said. “Gas utilities, gas infrastructure can play crucial and enduring roles … Decarbonization planning, including the evaluation of gas and carbon mitigation strategies, have to be examined with regional-level assessments and evaluated by their ability to support tenets aligned with safety, reliability, affordability, resilience and feasibility.”
Net-negative emissions
The reality of climate change, and the realization that avoiding its worst impacts will require economy-wide, transformative decarbonization, is no longer a point of contention in the energy sector. Nor is the prominent role renewable technologies and electrification must play in the transition.
Rather, the debate now centers on what role, if any, fossil fuels — the main source of the greenhouse gas emissions driving climate change — can or should play, while also considering how deeply integrated they are in global power systems and economies.
Speaking on a later panel at the NASEO conference, Jennifer Wilcox, principal deputy assistant secretary for the Office of Fossil Fuels and Carbon Management at the Department of Energy, framed carbon capture technologies as a solution for hard-to-decarbonize industries, such as steel and cement.
The need for net-negative emissions | IPCC
“A big focus of what we’re looking at is not just the sectors that we’re dependent upon today that are sourced from fossil fuels, but those that are expected to be committed through midcentury,” Wilcox said. “And so, when we look at the power sector, it’s not that CCS is a blanket solution across all fossil fuel-fired power plants, but we look at what is the infrastructure that’s expected to persist through midcentury, and those are really good targets potentially for CCS.”
Hausker believes that despite ongoing efforts to curb GHG emissions, the U.S. will probably not meet the emission reduction targets needed to keep climate change to the 1.5-degree or even 2-degree target set in the UN Paris agreement and confirmed at the recent Climate Change Conference in Glasgow.
“So, beginning midcentury and continuing on for the rest of the century, we will have to get into a net-negative emissions posture,” he said. “We will have to take more CO2 out of the air than we may still be putting in midcentury and beyond.”
CCS and direct air capture could be critical in such a scenario, he said. Further, Hausker argued that while the costs of renewable wind and solar have dropped, the industry standard for comparing the cost of different fuels — the levelized cost of energy (LCOE) — “is a flawed metric.”
“It’s really important for policy makers and policy influencers to focus on system costs, not the LCOE,” which is based on the average cost of a megawatt-hour of power from a standalone plant, he said. The system cost is “the cost that consumers ultimately pay … including all the technologies needed to maintain a reliable grid.”
Thus, even if wind and solar are themselves cheaper than fossil fuels, system costs for a 100% renewable grid might be high.
Further, while existing storage technologies have solved the problem of the minute-to-minute variability of renewables, further research will be needed to ensure reliability across daily and seasonal weather patterns, he said. When wind or solar generation drops for days at time, “you better have something to turn on,” he said.
A Moral Hazard Question
The natural gas industry has long maintained that its resources are needed to back up the intermittency of renewables.
“Part of the value of what the gas system does for us today is its ability to store and transport large amounts of energy to meet seasonal and daily energy use,” Meyer said. “An integrated approach to decarbonization that leverages the advantages of the gas distribution system is likely to support a more effective, reliable and resilient transition to a net-zero energy system and minimizes negative impacts for customers.”
In the U.S., planning for decarbonization will also need to take “highly localized” regional differences into account. Such factors might include “climate and temperatures … energy prices,” he said. “What does the housing stock look like? What kind of businesses are using gas?”
The AGA report lays out four pathways to net zero by 2050, based on different combinations of efficiency, hybrid gas-electric heating, a mix of other technologies, and renewable natural gas and carbon capture technologies. A key finding, all four of the pathways would increase the number of customers served by natural gas utilities, Meyer said. “In other words, we don’t have to make a choice between adding new customers and helping them achieve ambitious environmental goals.”
Moderating the decarbonization panel, Joe Pater, director of the Office of Energy Innovation at Wisconsin’s Public Service Commission, provided a real-life example of the challenges his state faces as it increases renewable energy and storage, and explores electrifying home heating.
The state has heavily promoted “high-efficiency natural gas furnaces over the last few decades,” he said. “But now we are talking about heat pumps, and we’re talking about cold-climate heat pumps that are coming to market. From the contractor perspective, we’re kind of getting a little bit of pushback, so I think the reality here is that renewable natural gas is going to need to be a bigger factor in Wisconsin.”
Solving such problems will require a short list of regulatory actions, Meyer said, including expanding equity, energy efficiency and demand-side management programs and updating rate structures and cost recovery “so all parties are incented and support greenhouse gas emissions reductions.”
“Methods to compensate our customers for the services they provide to other parts of the energy system” should also be considered, he said.
In his closing remarks, Hausker acknowledged the environmental arguments against carbon capture — that it is too expensive, does not work and prolongs our dependence on fossil fuels. While he disagrees with the first two points, he said, the idea of prolonged dependence raises a “moral hazard question.”
“Just perfecting the technology, commercializing it, do we create a moral hazard where we’re just likely to keep burning fossil fuels? You can’t dismiss that,” he said. “We have to balance that moral hazard problem against the very physical hazard of what if we come to 2040 or 2050 and we have no means to take out of the climate the CO2 that we need to at that point?”
PJM delayed a vote at last week’s Market Implementation Committee meeting on a proposal addressing pseudo-modeled combined cycle minimum run time guidance after stakeholders asked for more time to review the changes.
Market sellers can model a combined cycle unit as multiple pseudo units composed of a single combustion turbine and a portion of a steam turbine. Hauske said the potential exists for one or more of the pseudo-modeled units to operate for a period beyond the minimum run time parameter limit for an identical non-pseudo-modeled combined cycle unit if the market units of a pseudo-modeled combined cycle unit are dispatched at different times on parameter-limited schedules (PLS).
The proposed solution calls for adding language to Manual 11 to require market sellers to update the minimum run time of any second and subsequent pseudo-modeled block to remove the associated steam turbine start-up time that is included in the parameter limit when it’s dispatched.
Hauske said PJM removed language calling for “hourly” updates of the minimum run time parameter in order to avoid creating a “compliance trap” for market sellers who have several pseudo-modeled combined cycle units.
Adrien Ford of Old Dominion Electric Cooperative said she would appreciate the opportunity to circulate the updated manual language with ODEC staff before a vote to see what potential impact removing the “hourly” language could have on operations.
“ODEC’s wholly supportive of not creating compliance traps,” Ford said.
Calpine’s David “Scarp” Scarpignato said he agreed with taking more time to circulate the manual language internally.
“It’s very different than last month’s language, so I would recommend a delay,” Scarp said.
Hauske said PJM wants to have final endorsements by the March 23 Markets and Reliability Committee meeting because the RTO’s unit-specific parameter adjustment process starts Feb. 28. PJM must provide a determination on the requests by April 15.
PJM staff agreed to delay the vote on the proposal but will proceed with conducting a first read of the language at the Feb. 24 MRC meeting.
Manual 27 Revisions Endorsed
Stakeholders unanimously endorsed manual revisions related to a recent FERC order in response to industrial customers’ protest of PJM’s proposed revisions to its administrative rates.
While FERC accepted it for filing, the commission in December ordered hearing and settlement judge procedures for PJM’s proposed tariff revisions changing its administrative cost recovery to monthly rates based on that month’s costs and that month’s billing determinations. (See FERC Sets Hearing on Industrials’ Challenge to PJM Administrative Rates.) The PJM Industrial Customer Coalition had protested the proposal.
Rebecca Stadelmeyer of PJM’s market settlement development department reviewed the revisions to Manual 27: Open Access Transmission Tariff Accounting, which include reorganized wording to distinguish between administrative rates and pass-through rates, and a new section to only be reconciliation for transmission owner scheduling system control and dispatch service.
The manual changes will now go to the Feb. 24 MRC meeting for final endorsement.
Manual 18 Revisions
Jeff Bastian, senior consultant in PJM’s market operations department, provided a first read of revisions to Manual 18: PJM Capacity Market to conform with several recent FERC orders regarding:
PJM’s revisions to the application of the minimum offer price rule (MOPR), which became effective by operation of law in September when the commission deadlocked (ER21-2582);
PJM’s October compliance filing to amend several sections of Attachment DD of the tariff establishing a replacement market seller offer cap (EL19-47);
restored tariff provisions related to the prior backward-looking energy and ancillary services (E&AS) offset for the 2023/24 Base Residual Auction and beyond (EL19-58); and
the removal of the 10% cost adder for the reference resource used to establish the variable resource requirement curve (ER19-105).
Bastian said language in section 3.3.2 was updated to reflect that the net E&AS of the reference resource combustion turbine will be calculated using the forward-looking methodology with application of the 10% adder for only the 2022/23 delivery year. The net E&AS will be determined using the historical approach and without application of the 10% adder for all other delivery years.
The revisions also delete language in section 5.4.5.2 describing the consequences of accepting a state subsidy after electing the competitive exemption or certifying that a resource is not state-subsidized.
Stakeholders will vote on the changes at the March MIC meeting, with a final vote planned for the March 23 MRC meeting.
Critical Gas Infrastructure
Jack O’Neill of PJM’s demand response department provided a first read of a problem statement and issue charge addressing the recommendation for demand response participation in a FERC and NERCreport on last February’s winter storm in Texas and other parts of the South.
The report included a key recommendation “to require balancing authorities’ operating plans (for contingency reserves and to mitigate capacity and energy emergencies) to prohibit use of critical natural gas infrastructure loads for demand response.”
PJM began discussions with curtailment service providers (CSPs) through the Demand Response Subcommittee to identify impacted loads for the 2021/22 winter season, O’Neill said, and it developed a preliminary definition of critical gas infrastructure loads.
O’Neill said CSPs have cooperated with PJM to identify impacted loads in the RTO’s DR Hub application so dispatchers have “operational awareness.” PJM estimates there are about 20 facilities of critical gas infrastructure load that participate as DR in the RTO’s wholesale markets, amounting to around 95 MW of winter capability and 190 MW of summer capability.
The key work activities of the issue charge include defining critical gas infrastructure loads and PJM market participation rules in compliance with FERC/NERC recommendations and developing a transition mechanism if new participation rules impact member’s capacity commitment.
PJM wants to assign the work to the Demand Response Subcommittee. Work on the issue is expected to last 12 months, and the goal is to file any necessary tariff changes with FERC in the first quarter of 2023.
“It’s not a huge issue for PJM considering our demand response fleet is roughly 6,500 MW,” O’Neill said. “But it’s still something that needs to be addressed.”
Stakeholders will vote on the issue charge at the March MIC meeting.
Operating Reserve Clarification
Phil D’Antonio of PJM’s energy market operations department provided a first read of a problem statement and issue charge addressing clarifications and potential enhancements to the rules for paying operating reserve credits to resources operating when requested by the RTO.
D’Antonio said PJM pays energy uplift to market participants under specified conditions to ensure that competitive market outcomes “do not require efficient resources to operate for the PJM system at a loss.” He said the uplift payments are intended to act as one of the incentives for generation owners to offer energy for dispatch based on short-run marginal costs and to operate units as directed by the RTO’s operators.
PJM wants to clarify the definition of “operating as requested by PJM” in both the tariff and manuals because it “lacks the type of systematic approach” found in the definition of “following dispatch,” D’Antonio said, which is used in assessing balancing operating reserve deviation charges. He said PJM and the Independent Market Monitor have had debates over the meaning of the definition.
“We feel the current definition isn’t as specific as we would want it to be and leads to different interpretations as we apply operating reserve credits and uplift payments,” D’Antonio said.
The key work activities in the issue charge include determining a definition of “operating as requested by PJM” as it relates to payment of operating reserve credits. It also seeks to establish alternative rules addressing the megawatt level to which balancing operating reserve credits should be paid to resources found not to be closely following PJM’s commitment and dispatch instructions.
The issue will be worked on at the MIC, D’Antonio said, with the potential for special MIC meetings to be scheduled as needed. Work is expected to last around nine months.
Calpine’s Scarp said he would like to see discussions include how renewable resources will get credits and an “explicit piece of the issue charge” on what renewable resource output is compared to determining credits or deviations.
Monitor Joe Bowring said he has been bringing up this issue for at least four years and was glad to see PJM and stakeholders deciding to tackle it. He also appreciated the opportunity to work with PJM in developing the issue charge and problem statement.
Bowring added, however, that they did not agree about the current rules or the appropriate solution. Bowring said the Monitor will continue to pursue parallel paths to address the issues associated with paying uplift to units not following dispatch, including making referrals to FERC’s Office of Enforcement.
“It’s essential to get these issues clarified,” Bowring said.
Panelists at the National Association of Regulatory Utility Commissioners’ (NARUC) Winter Policy Summit on Monday encouraged attendees to take an active role in pushing utilities to invest in cybersecurity.
“It’s really worrying about the weakest link here when it [comes] to cyber. … If our weakest link goes down, then we’re all in real trouble,” Deputy Secretary of Energy David Turk told the “Protecting the Homeland” panel at the summit’s general session. “And it strikes me [that] you all as commissioners … play an incredibly important role to make sure that you’re taking care of the weakest links … so people appreciate why we need to make the investments … from the get-go and build resilience [and cyber] in by design.”
Cyber the Responsibility of All
Turk and his fellow panelists said that recent high-profile cyberattacks such as the Colonial Pipeline ransomware attack and the hack of the SolarWinds Orion software have helped to shed light on the importance of cybersecurity. However, even as utilities that now say they are taking cybersecurity seriously, the leadership often still believes that addressing the threat means assigning it to specialists.
National Cyber Director Chris Inglis | NARUC
This is an outdated way of thinking that ignores the way hackers infiltrate organizations, National Cyber Director Chris Inglis said. He pointed out that the Colonial attack was possible because “a human being made a mistake [and] clicked on a link … not realizing that it’s somebody else’s code.” The lesson: No matter what kind of firewalls and other precautions a company’s security professionals put in place, the organization is still vulnerable unless every employee is committed to maintaining security.
“We still don’t have all the heads in the room … saying, ‘I have a role to play.’ Too often, we see this as the work of champions who have the word ‘cyber’ or ‘IT’ [information technology] in their job titles,” Inglis said. “Individuals making use of cyberspace make choices all day, every day, that then have … a heavy influence on how things proceed.”
Inglis acknowledged the difficulty and expense of adding new cybersecurity requirements to the existing grid but said that this is where regulators could play a role by ensuring that refusing the necessary investment is not an option for utilities.
“This is simply an investment we must make. No one doubts that there should be a third prong on the plug that you plug into the wall in a 110-volt system — we should have no less of a doubt that cyber should be built into everything that we do,” he said.
Private, Public Sectors Must Support Each Other
Berkshire Hathaway Energy CEO Bill Fehrman | NARUC
Bill Fehrman, CEO of Berkshire Hathaway Energy, agreed with the government representatives that “if a company cannot afford to properly protect their systems, then they should not be in business.” But he also observed that with the proliferation of cybersecurity threats, utilities — especially smaller municipal and rural electric providers — are facing heavier burdens than they have ever encountered before.
“We, across our networks, take about three and a half billion hits a day. About 10% of those are actual, legitimate business issues; the rest are the people … who are trying to get in and do things to us,” Fehrman said. “And today it’s much broader than just the hits on the network. It’s on our supply chain: we now worry about every single component that is in the … equipment that we buy. … Because of concerns of equipment coming, in particular, from China … we may have to spend more money to get equipment from more U.S.-friendly countries.”
The diversity of threats makes it paramount that utilities be able to share data quickly on security developments — a role that NERC’s Electricity Information Sharing and Analysis Center seeks to fill.
“We don’t need all 3,000 utilities in a room,” Fehrman said. “What we do need is a way to quickly come in, assess that information, and then through the information sharing mechanisms that we have get it pushed back out, so that even the smallest of the utilities have that information that they need, so that they can properly operate their systems.”
Inglis agreed with Fehrman that the electric sector occupies a unique position in national security, with private companies responsible for vital national infrastructure assets. He said that the government must recognize this and position itself accordingly to support the stakeholders in this space, rather than dictate how they ought to respond to the latest threats.
“In the realm of cyberspace, unlike just about every other national security issue of some consequence … the private sector is the supported entity,” Inglis said. “Most of the resources exist in the private sector: just about all the innovation … capacity building [and] operation is in the private sector. The government, therefore, if it’s going to be coherent, needs to be prepared for a particular purpose, which is to better support the private sector.”
A group of New York legislative committees are working together to establish whether the state has a clear electric vehicle charging deployment plan so residents will be comfortable buying clean cars.
To meet state climate goals, New York needs to incentivize EV adoption, but the lack of consumer confidence in being able to charge EVs “is still very problematic,” Rep. William Magnarelli, chair of the House Transportation Committee, said during a hearing on Thursday.
Four House committees convened the hearing to identify existing plans and programs for building EV charging facilities and what the state can do to expedite infrastructure development.
Currently, New York has 90,000 registered EVs and 9,000 charging stations to support them, said Adam Ruder, assistant director of clean transportation at the New York State Energy Research and Development Authority (NYSERDA).
“New York needs tens of thousands more charging stations in the coming years and hundreds of thousands more in the coming decades to serve the number of EVs that will be on our roads,” he said.
Gov. Kathy Hochul signed a clean cars law in September that sets a goal for all new passenger car and truck sales in the state to be zero-emission by 2035. The bill directs the Department of Environmental Conservation (DEC) to prepare an EV market development strategy this year.
“This effort will include a thorough evaluation of EV infrastructure needs and will be grounded in analytical work being done by NYSERDA to build upon the substantial investments and programs already in place,” said Jared Snyder, DEC’s deputy commissioner of air resources, climate change and energy.
Programs and Progress
State supported EV infrastructure development is spread out across different programs and agencies.
At the DEC, for example, the Climate Smart Communities program helps local governments with climate- and energy-related activities with grants and rebates. To date, the program has funded the installation of 650 public charging ports, Snyder said.
“In most cases, these are Level 2 chargers, but a few communities have invested in [fast] charging,” he said.
NYSERDA wrapped up its three-year Charge Ready NY program last year for Level 2 public charging stations, completing 3,000 charger installations and approving another 1,000 that are currently under development. The agency is also funding fast-charging station deployment in Upstate New York with a target of installing 92 stations over the next two years, Ruder said.
In addition, he said, state agencies are reviewing new federal guidance on how they can use an estimated $175 million for EV charging coming from the Infrastructure Investment and Jobs Act over the next five years. (See States to Get $615 Million for EV Charging from IIJA Funds.)
In November, Hochul announced that state utilities would begin implementing an EV charging make-ready program to deploy 50,000 Level 2 chargers and 1,500 fast chargers over the next four years. The utilities are on track to meet those goals, with active applications for more than 800 fast-charging ports and 20,000 Level 2 ports, said Zeryai Hagos, deputy director of the Office of Markets and Innovation at the New York Department of Public Service.
EV charging deployment efforts at the New York Power Authority (NYPA) have underperformed based on stated programmatic goals, a Feb. 4 State Comptroller report said.
“The authority’s very slow startup is of great concern,” Rep. Steve Englebright, chair of the House Environmental Conservation Committee, said during the hearing.
New York officials launched Charge NY in 2013 to be administered by NYPA, NYSERDA and DEC. An initial program goal of deploying 3,000 charging stations increased in 2018 to 10,000 stations by 2025. Under the Charge NY umbrella, NYPA launched a $250 million program in 2018 called EVolve NY to install fast chargers on major highways through 2025.
By the end of 2019, NYPA had not met its goal of installing 200 fast-charger ports, the report said. In total, NYPA had installed 140 charging stations with 499 ports under Charge NY and EVolve as of September 2020. Of those installations, only one was a fast charger for the EVolve program, the report said.
To date, NYPA has 60 fast chargers installed at 16 sites, Sarah Salati, executive vice president and chief commercial officer, said.
“Based on the audit, the numbers are abysmal, and I’m particularly upset about the fact that there’s really missed opportunities,” Rep. Keith Brown said during the hearing.
As part of its original EVolve program goal, NYPA expected to build 100 fast chargers in collaboration with the New York Thruway Authority. That work, however, was delayed by the thruway authority’s plan to update a group of rest areas, and Salati said the chargers project “was undertaken by a private sector entity.”
In addition, Salati said NYPA did not receive regulatory authority to install chargers at non-governmental sites until April 2019, which delayed buildouts at non-public sites. Pandemic supply chain issues have stymied more recent efforts to advance the fast-charging program, she said.
Exercising their new joint authority, the CAISO Board of Governors and the Western Energy Imbalance Market Governing Body last week adopted a new set of revisions to the resource sufficiency evaluation for WEIM participants.
The RSE test is meant to ensure that each WEIM participant enters a trading hour with enough capacity and ramping capability to supply its own needs and to prevent participants from “leaning” on the market to meet internal demand.
CAISO adopted RSE changes last year in its Market Enhancements for Summer 2021 initiative, which was intended to ensure resource adequacy after the prior summer’s rolling blackouts. Some WEIM participants, however, criticized several provisions affecting the ISO’s interstate market.
CAISO agreed to revisit the matter in a stakeholder initiative that culminated with the changes adopted Wednesday.
The enhancements, scheduled to take effect this summer, include provisions to measure a participant’s available supply and ramping capability more accurately. They also modify import-counting rules and allow demand response programs to be considered in the RSE.
“The newly adopted enhancements will increase transparency by providing the WEIM participants with more of the data used in the resource sufficiency evaluation, which will help each balancing authority understand how their schedules and bids performed and improve their ability to be successful in future evaluations,” CAISO said in a news release.
Uncertainty
Last year, participants raised objections to an “uncertainty” adder meant to account for the unpredictability of weather-dependent resources such as solar and wind generation, transmission outages and other variables. Some contended it skewed results and led to test failures, including by CAISO last summer.
CAISO suspended the uncertainty component effective Feb. 12.
“Concerns were raised regarding the existing methodology for calculating uncertainty,” CAISO said in a Feb. 8 update. “These concerns remain unresolved.”
Therefore, “the ISO is moving under its existing authority to suspend this provision from the capacity test,” it said. “The ISO will look to reconsider net-load uncertainty within the capacity test in a future phase of the [RSE] enhancements initiative.”
CAISO plans to work with stakeholders to assess additional changes, including the consequences if a WEIM member fails to pass the resource sufficiency evaluation — another contentious topic raised last year.
Cooperation
CAISO and WEIM approved a new power-sharing agreement last August and held their first meeting under the new relationship in December to discuss the RSE enhancements. (See CAISO Reevaluating WEIM Resource Sufficiency Test.)
Last week’s RSE decision was among their first joint actions under the new rules.
“I want to recognize the thoughtful collaboration and engagement with our market partners and stakeholders to improve and evolve the performance of the WEIM,” CAISO CEO Elliot Mainzer said in the news release.
“We also recognize that there is more work to be done on this topic to meet the goals of reliability, accountability, transparency and equity that must underlie a truly effective resource sufficiency evaluation and well-functioning WEIM.”
The consequences of FirstEnergy bribing a top Ohio lawmaker over several years to assure passage of a $1.1 billion state bailout of two Ohio nuclear plants continued last week, with the company agreeing to jettison six long-time members of its board of directors and subject the current top management team to new scrutiny.
Under a settlement with shareholders, six members of the company’s 16-member board of directors who have served at least five years would not seek re-election at the company’s annual meeting in May.
Their departure would not include two board members appointed last year who are employees of Icahn Capital. (See FERC Authorizes Icahn Employees for FE Board.) Icahn purchased 3.3% of the company’s shares in September 2021.
Nor would the purge affect a third new member expected to join the board this spring representing Blackstone Infrastructure Partners, which purchased $1 billion in FirstEnergy common stock in December. A Blackstone observer currently attends board meetings. (See FirstEnergy Announces $3.4 Billion in New Equity Financing.)
The company’s board announced the measures last week, just minutes before releasing full-year 2021 and fourth-quarter earnings, eclipsing the positive results that had been set as the focus of an analyst call Friday.
The shakeup is part of a package of changes the board accepted in order to resolve multiple shareholder derivative lawsuits filed by pension funds, unions and others in federal and state courts in Ohio.
The suits alleged that the bribery scheme — to which the company pleaded guilty in a deferred prosecution agreement with the U.S. Department of Justice — was not in the best interest of shareholders.
The company fired its former CEO, Charles Jones, and a handful of other top executives in October 2020. Current CEO Steven Strah was appointed in March 2021. The federal bribery probe is ongoing.
In addition to subjecting the company’s current executive team to a “review process” by a new board committee comprising “at least three recently appointed independent directors” and preventing six veteran board members from seeking re-election this May, the settlement would require:
the board to oversee the company’s future lobbying and political activities, including periodically reviewing and approving lobbying plans;
the board to “form a committee of recently appointed independent directors to oversee the implementation and third-party audits of board-approved action plans;
the company to issue “enhanced disclosure” to shareholders about political and lobbying efforts; and
the company to “further align” executive bonuses with “proactive compliance with legal and ethical obligations.”
Once approved by the courts, the settlement would also include a payment of $180 million to the company by insurance, minus any court-ordered attorney’s fees awarded to the multiple plaintiffs.
The settlement announcement came just days after FERC released an audit report of the company’s accounting practices. The report noted that its examiners were concerned about “significant shortcomings in FirstEnergy and its subsidiary companies’ controls over financial reporting, including controls over accounting for the costs of civic, political and related activities, such as lobbying activities, performed by and on behalf of FirstEnergy and its subsidiaries.” (See related story, FERC Auditors Find FirstEnergy Accounting Irregularities.)
In remarks to analysts during the earnings conference on Friday, Strah called the settlement one of the “important milestones” the company has achieved in the last year but stressed that “most of our significant work done over the past year involves the cultural changes at our company.”
The company said it earned $1.3 billion ($2.35/share) on revenues of $11.1 billion in 2021. That compares to earnings of $1.1 billion ($1.99/share) on revenue of $10.8 billion in 2020.
For the fourth quarter, the company reported earnings of $427 million ($0.77 cents/share) on revenue of $2.7 billion. That compares to earnings of $242 million ($0.45 cents/share) on revenue of $2.5 billion in the fourth quarter of 2020.
Edison Electric Institute laid out its 2022 legislative priorities in its annual Wall Street briefing last week, saying the investor-owned utilities it represents are key to building clean energy infrastructure but need enhanced federal tax credits to meet the nation’s climate goals.
Brian Wolff, EEI | EEI
“It’s really about a robust clean energy tax package,” Brian Wolff, executive vice president for public policy and external affairs, said Wednesday from the Nasdaq MarketSite at Times Square in New York. “Whatever package that the Congress comes up with next, that’s something that we hope will take place in the next quarter of this year.”
The production tax credit (PTC) and investment tax credit (ITC) for renewable energy development need to be extended and expanded, Wolff said. The PTC expired at the end of 2021. The ITC, a solar-only credit, is phasing out, with reduced benefits over time. The benefit rate, previously 30%, is 26% in 2022, 22% in 2023 and 10% thereafter.
Ten-year extensions of the credits are part of the Build Back Better Act (BBB), the $1.75 trillion economic and climate package stalled in the Senate because of opposition from Sen. Joe Manchin (D-W.Va.), chair of the Senate Energy and Natural Resources Committee. (See Build Back Better and Beyond: Insights for the Year Ahead.)
EEI’s main lobbying efforts include passage of the credits, possibly in a reworked BBB or in a separate bill. The trade group is seeking “optionality in choosing between the PTC and the ITC for solar” so that “everyone is going to be out there deploying solar on a level playing field,” Wolff said.
It wants a 100% direct-pay option to recoup benefits in a cash tax refund versus tax credits.
EEI also is pursuing new credits for transmission, storage and hydrogen and a nuclear PTC for existing facilities.
“I can’t emphasize the importance it means for our industry … not to take these zero-carbon facilities offline,” Wolff said, referring to the nuclear credit. “That’s only going to take us backwards.”
Natural gas also needs to remain a part of the resource mix for the foreseeable future, he said.
Emily Sanford Fisher, EEI | EEI
EEI General Counsel Emily Sanford Fisher said the industry is lobbying to deploy “advanced dispatchable renewables including advanced wind and solar technologies and advanced power electronics that will allow us to better integrate these into the grid [and] zero-carbon fuels, such as hydrogen and ammonia, that could be produced from a variety of sources.”
“As Brian mentioned, nuclear is incredibly important to our industry and to maintaining our zero-emissions goals, and we are also focused on advancing technologies: carbon capture, utilization and storage — particularly for our natural gas generation — and advanced demand-efficiency and long duration storage.”
In its prepared remarks EEI said, “establishing alternative cost-sharing formulas and providing financial incentives for investing in deployment of these technologies, including technology-neutral production or investment tax credits, loan guarantees, grants, secure loans and other innovative means, can help to expedite commercialization of the next generation of 24/7 carbon-free technologies.”
After the briefing Wednesday, EEI President Thomas Kuhn met with President Joe Biden, Energy Secretary Jennifer Granholm and top energy advisers at the White House as part of a roundtable discussion with utility CEOs, who lobbied the president to make sure the tax credits are extended.
“They’re back there talking about what this really means for our companies, but more importantly, what those tax credits will mean for our customers,” Wolff said.
In a letter sent Wednesday to House Speaker Nancy Pelosi and Senate Majority Leader Chuck Schumer, utilities and other companies urged Congress to pass the tax credits along with other provisions of the Build Back Better Act.
“The climate and clean energy provisions in Build Back Better, including tax credits for innovation as well as grants and other funding to support communities in transition, would harness market forces and help spur private sector investment at the scale needed to meet our long-term climate goals,” the companies wrote.
New Jersey is putting up $5 million to fund the launch of a project that will put 100 self-driving electric vehicles to work in a shuttle service in the state’s capital, Trenton.
Gov. Phil Murphy, who announced the local transportation grant Wednesday, has put out a request for expression of interest (RFEI) seeking input from companies willing to “design, build out and [operate] a safe, equitable, affordable, sustainable and efficient on-demand automated vehicle shuttle system.”
The RFEI envisions a project that uses low-capacity shuttles, each carrying four to eight passengers, to create a “ride-hailing service.” Passengers would call the shuttle via a phone application and board and disembark at one of 60 “kiosks,” or bus stops, spaced out across the city. The vehicles, when idle, would be “repositioned to the nearest/high-demand kiosk locations,” the RFEI stated.
The shuttles would be battery-powered, zero-emission vehicles, the RFEI said, and it encouraged “innovative ways to cleanly and sustainably recharge vehicles.”
Murphy and Trenton officials see the project as a way to provide transportation to the 90,000-resident city, where 70% of households have either a single car or no car at all.
The governor called the project, known as Trenton Moves for Mobility & Opportunity: Vehicles Equity System project, an “innovative solution to a longstanding transit deficit.”
“Using autonomous vehicle technology to combat inequities and to provide improved transportation in urban areas is a laudable and much needed effort,” he said.
Harnessing Technology
No autonomous vehicles, known as Level 5 vehicles, are currently for sale to drive on U.S. roads, mainly because they have not met safety standards, according to the National Highway Traffic Safety Administration (NHTSA). However, some states permit a limited number of “self-driving” vehicles to conduct testing, research and pilot programs on public streets, which the agency monitors, it said.
Despite extensive investment, autonomous technology has not managed to reduce accidents: There are 9.1 self-driving car accidents per million miles driven, compared to 4.1 crashes per million miles for regular vehicles, according to an article in the National Law Review. California prosecutors last month filed two counts of vehicular manslaughter against the driver of a Tesla on Autopilot — the company’s autonomous system that can control steering, speed and braking — that ran a red light, slammed into another car and killed two people in 2019.
Yet analysts expect self-driving vehicles, when improved, to be safer than vehicles driven by humans because they remove the factor of human errors, and A.I. can detect or anticipate problems earlier than humans.
Murphy has set a goal for New Jersey to cut carbon emissions to half of 2006 levels by 2030. He has pushed for greater use of EVs, including buses and shuttles, by offering incentives and grants to EV buyers, and he is pushing to increase the number of charging points around the state. The governor’s 2019 Energy Masterplan: Pathway To 2050 cast autonomous vehicles as a tool to help cut emissions.
“The state can also explore and pilot shared, connected and autonomous vehicle deployment in select communities and settings (e.g., dense downtowns, as shuttle operations) in a manner that enhances existing public transportation and promotes ridesharing, thereby reducing the need for personal vehicles,” the plan reads. “In addition to increasing shared vehicle usage, encouraging connections between mass transit, EVs, and connected and autonomous vehicles can foster more multimodal travel and overall emissions reduction.”
Overcoming Public Trepidation
Alain Kornhauser, a professor of operations research and financial engineering at Princeton University, where he is also faculty adviser for the Princeton Autonomous Vehicle Engineering program, said Trenton is an “ideal” market to launch the program because of the low level of car ownership.
Kornhauser sat on the 10-member New Jersey Advanced Autonomous Vehicle Task Force convened by the state legislature to study the possibility of using autonomous vehicles in the state. The task force’s final report concluded that “highly autonomous vehicles (HAVs) have the potential to provide a range of benefits, including safety, mobility, efficiency, convenience, economic and other societal benefits.”
The report acknowledged that there is a “great deal of uncertainty surrounding AV technology development and adoption,” including whether HAVs should be privately owned or used mainly for shared use, or a combination of both.
But “to realize the many potential positive benefits of AVs and to achieve high-quality affordable mobility that is within the reach of most New Jerseyans, the state should encourage driverless ridesharing,” the report added. It said that any test programs should be conducted with a “safety driver present.”
Kornhauser said the only project close to fruition in the U.S. that is similar to the proposed Trenton Moves project is in Phoenix, Ariz., where a fully automated ride-hailing service is operated by Waymo, a company that was started by Google and later split off.
Kornhauser said he is confident that the technology to enable self-driving vehicles will be available by the time the Trenton project has gone through a solicitation process and is ready to be launched. The task should be made easier by the fact that the project covers only 8 square miles and can be designed to take place in the “easiest streets, the easiest intersections to operate on,” he said.
“My expectation is that when we put out the request for proposals for a private company to join, to make a private-public partnership to make this actually happen, that the technology that’s brought in by the private folks works,” he said.
Kornhauser said that the low level of car ownership in Trenton will likely mean that the population is more open to using autonomous vehicles, but there will still be a learning curve.
“The main motivation to have an attendant is to make sure that it is safe, of course, without a doubt, but to acclimate the people,” he said. “They don’t know anything about this. They have never gotten into one. They don’t know if it works. There’s a whole acclimation period on the customer side.”
Dominion Energy expects to invest $73 billion in clean energy by 2035, “nearly all of which will qualify for regulated cost of service recovery,” CEO Robert Blue said during the utility’s fourth-quarter 2021 earnings call Friday. “It is, as far as we can tell, the largest regulated decarbonization investment opportunity in the industry.”
Green investments made within regulated markets, ensuring a 9% return on equity and stable profits for shareholders, were among the top-line takeaways from the call. The company reported fourth-quarter net income of $1.3 billion ($1.63/share) — nearly double that of the same quarter in 2020 — off revenues just short of $3.9 billion. It also reported a $3.3 billion profit for 2021, compared to a $401 million loss in 2020.
The call’s other major bullet point was the announcement that Dominion was expanding its net-zero goals, going beyond its own emissions to push reductions by its suppliers and customers.
The company has previously committed to net-zero emissions by 2050, but “we now aim to achieve net zero by 2050 for all Scope 2 and for Scope 3 emissions associated with three major sources,” Blue said. Scope 2 emissions come from the electricity Dominion uses for its own operations but does not generate itself. For Scope 3 emissions, Dominion will target its local natural gas distribution companies (LDCs), Blue said, as well as fuel and other power suppliers.
The utility has LDCs in South Carolina, Ohio and Utah, and a pipeline company, Dominion Energy Questar Pipeline. According to Dominion’s website, it has a total of 22,770 miles of pipeline in North and South Carolina and 2,500 miles serving Utah, Wyoming and Colorado.
In another Friday press release, Dominion announced it has signed an agreement to sell its West Virginia LDC, Dominion Energy West Virginia (also called Hope Gas), to Ullico Inc., a labor-owned insurance and investment company.
Dominion has already cut its emissions 42% over 2005 levels and is targeting a 70 to 80% reduction by 2035, Blue said.
“In 2005, more than half of our company’s power was from coal-fired generation; by 2035, we project that to be less than 1%,” he said. By 2030, the utility’s generation in South Carolina will be coal-free, while it will “have only two remaining facilities in Virginia,” Blue said.
As part of its efforts to tackle Scope 2 and 3 emissions, Blue said, Dominion supports federal regulation of methane emissions. “We’re working towards procurement practices that encourage and enhance disclosures by upstream counterparties on their emissions and methane-reduction programs,” he said. “Further, we encourage suppliers to adopt a net-zero commitment, and we have started to receive quotes for responsibly sourced gas.”
Blue did not provide further details on the company’s plans, but spokesperson Aaron Ruby said Friday’s “announcement provided the vision and goals we need to advance toward net zero. In the coming months, we’ll continue gathering information, refining our goals and analyzing potential pathways to achieve them.”
Further details will be provided in Dominion’s 2022 Climate Report, Ruby said.
Recoverable Investments
Under the Virginia Clean Economy Act, Dominion is required to generate 100% of its power from carbon-free sources by 2045. According to its earnings presentation, the company projects that by 2035, 76% of its power will be carbon free.
Currently solar accounts for 2% of Dominion’s generation mix, with nuclear, hydropower and biomass adding another 31% of low- or no-carbon power, according to company figures.
Blue touted the company’s aggressive solar and wind investments and Virginia’s “common sense approach to energy policy and regulation” as the main drivers for grid decarbonization in the state. Under state law, the State Corporation Commission reviews Dominion’s base rates every three years, while ongoing capital investments for new construction and other generation are recovered through rate adjustment clauses, often referred to as riders.
About 75% of Dominion’s $37 billion in planned investments over the next five years will be recoverable through riders, with an average 9% return on investment, according to company figures. The utility’s capital investments will increase to $73 billion by 2035.
By 2035, Dominion projects that 76% of its generation will be carbon-free, with a corresponding cut in emissions over 2005 levels of 70% to 80%. | Dominion Energy
For example, Blue reported that the utility had submitted its application for a rider for its 2.6-GW Coastal Virginia Offshore Wind project in November and expects a decision from the SCC by August. During Dominion’s third-quarter earnings call, Blue had said the cost for the project had increased from about $8 billion to close to $10 billion.
During Friday’s call, he said the project is on schedule to be completed by late 2026. In response to analysts’ questions about potential supply chain delays or price increases, he said the company had already contracted for materials with “experienced” suppliers.
Similarly, Dominion has about 400 MW of solar currently online and another 980 MW under contract. CFO James Chapman reported that all 2022 projects “remain on track.”
Dominion is also putting serious money into renewable natural gas (RNG), about $2 billion, COO Diane Leopold said. “We now have 10 projects under construction and one in service,” she said, with two that total coming online “in the coming days and weeks.”
Dominion is partnering with Smithfield Foods to produce RNG from hog farm waste and with Vanguard Renewables for RNG projects on dairy farms.
The company is also testing combining hydrogen with natural gas on its distribution system, with one pilot using 5% hydrogen successfully completed, three more under way and one in development, according to the earnings presentation.
Analysts also queried Blue on Dominion’s relationship with Virginia’s new governor, Glenn Youngkin (R), and the General Assembly, with a Republican majority in the House of Delegates.
Youngkin has been pushing to take Virginia out of the Regional Greenhouse Gas Initiative, but Blue said that energy has not been a major focus in the legislative session so far. (See Youngkin Takes 1st Steps Toward Va. RGGI Withdrawal.)
“The [2021] campaign was focused on education and taxes, and that’s what the General Assembly has been focused on,” he said, noting that the utility continues to work with both Democrats and Republicans.
