Energy industry groups agree FERC’s ruling recognizes attributes of all key power providers
Federal action that flips off the switch on the U.S. Department of Energy’s (DOE) plan to essentially subsidize nuclear power plants and coal seeks a balanced, less-discriminatory pricing path forward, said several energy industry association representatives during a press conference in Washington, D.C., on Tuesday.
The Federal Energy Regulatory Commission (FERC) ruled late Jan. 8 to terminate consideration of the DOE’s Sept. 29, 2017 grid reliability and resiliency pricing proposal. In that so-called cost-of-service proposal, Energy Secretary Rick Perry asked FERC to consider giving coal and nuclear energy generators sizable subsidies for being able to have more than a 90-day supply of on-site fuel that could be used to retain electricity if the grid was threatened by widespread man-made or natural interruptions.
Secretary Perry had sought urgent out-of-market action from FERC by Jan. 10 in order to preserve coal and nuclear baseload generation and to make good on President Donald Trump’s campaign promise to renew the U.S. coal industry, which provided half the country’s electricity a decade ago but which now is much less efficient and much less in demand compared to natural gas and renewables.
FERC now has decided to start a new proceeding to “holistically” evaluate the resiliency of the bulk power system in the geographic areas of the regional transmission organizations (RTOs) and independent system operators (ISOs), which had opposed Perry’s plan.
Several energy industry groups representing wind, solar, natural gas, storage and others, agreed unanimously along with FERC commissioners, who voted 5-0 on Monday to end the DOE secretary’s proposal.
“The ruling by FERC sets up a more balanced playing field for looking at resiliency,” said Amy Farrell, senior vice president of government and public affairs at the American Wind Energy Association (AWEA).
The RTOs and ISOs now have 60 days to provide FERC with specific information and recommendations regarding any issues and concerns they may have related to resilience of the bulk power system, a topic that “will remain a priority” warranting the commission’s continued attention, according to FERC’s order.
“We expect to review the additional material and promptly decide whether additional Commission action is warranted to address grid resilience,” FERC commissioners wrote.
Dena Wiggins, president and CEO of the Natural Gas Supply Association (NGSA), agreed that FERC’s order values the attributes of all fuels and said during the press conference that the commission adopted “a thoughtful and measured approach to evaluating resilience in the organized electricity markets.”
“We all have positive attributes … and we were all looking for a review from the commission that looks at each, and that’s what FERC has done,” Wiggins said. “We’re confident this will lead to a good result.”
Distributed energy resources, renewables, natural gas, storage, etc., “all have a role to play in creating a robust market,” added Malcolm Woolf, senior vice president for policy at the Advanced Energy Economy (AEE). “They all bring something to the overall process.”
FERC’s ruling, said John E. Shelk, president and chief executive officer of EPSA, which represents independent power producers and marketers, begins the next phase of the commission’s “critical and urgently needed work to improve price formation for all bulk power resources, not just a select few.”
“As we learned from the recent cold snap, during which the bulk power system performed very well, fuel-neutral reforms” are the most effective, Shelk said in a Jan. 8 statement.
Among its goals, FERC intends to complete a comprehensive examination based on RTO and ISO responses that will help it develop industry-wide agreement on what resiliency of the bulk power system means and requires. The commission also wants to learn how each of the RTOs and ISOs assesses resilience in their respective areas.
“I think we see in its order a comprehensive list of well-thought out questions” that will enable all power producers to comment on what each of them brings to the table, AWEA’s Farrell said.
For instance, FERC’s order directs RTOs and ISOs to address several questions related to how they address threats to resilience, both naturally occurring and man-made, and to highlight any unique resilience challenges in their areas and how they identify and plan for “high-impact, low-frequency events,” such as cyberattacks, extreme weather or extended fuel supply disruptions.
“We firmly believe that natural gas is a reliability asset,” said NGSA’s Wiggins. “We’ve proven this repeatedly by continued, excellent performance during Hurricanes Harvey and Irma and during last week’s extremely cold weather event,” which she said set records for natural gas demand.
FERC also noted in its order that it has largely adopted a pro-market regulatory model in which it relies on competition in approving market rules and procedures that likewise determine the prices for energy, ancillary services and capacity products.
And the commission’s support of competitive wholesale electricity markets, which it contends “has been grounded in the substantial and well-documented economic benefits that these markets provide to consumers,” won’t prevent it from continuing to simultaneously focus on reliability.
“The Commission’s endorsement of markets does not conflict with its oversight of reliability, and the Commission has been able to focus on both without compromising its commitment to either,” according to its order.
Dan Whitten, vice president of communications at the Solar Energy Industries Association (SEIA), noted the significance of that distinction.
“We’re all in agreement here about supporting competitive markets,” Whitten said during the press conference. “We all want an opportunity to compete and this ruling presents that opportunity.”
AEE’s Woolf also commended FERC commissioners for rejecting what he called “an unwarranted bailout of uneconomic power plants in order to solve a problem that doesn’t exist.”
“We look forward to engaging in a holistic look at what it takes to keep the lights on, and to demonstrating the contribution of advanced energy technologies to an affordable, reliable, resilient grid,” Woolf said.
Todd Foley, senior vice president of policy and government affairs at the American Council on Renewable Energy (ACORE), hopes to see FERC’s evaluation “send signals that promote a flexible grid that responds to the wants and needs of consumers and businesses,” who want a mix of resources providing critical needs, bulk power and emissions reductions, among other benefits. “They should also have flexibility of choice,” he said.
“The nation’s electricity grid continues to evolve and get better and better,” Foley added, “and we need market-based rules to encourage that.”
The industry trade associations participating in today’s press conference — AEE, AWEA, NGSA, ACORE, SEIA and the Energy Storage Association — also joined with EPSA, the American Petroleum Institute (API) and the Interstate Natural Gas Association of America in issuing a joint statement in response to FERC’s action.
Encouraged, the groups said they “look forward to engaging with FERC, DOE, and grid operators in an examination of what resilience of the electric power system means and requires, and to demonstrating the contribution of our industries to ensuring reliable power for all.”
DOE Secretary Perry said in a Jan. 8 statement that he also looked forward to the federal regulator’s review into “the marketplace distortions that are putting the long-term resiliency of our electric grid at risk.”
