Utilities

NERC's Polite Review of the Clean Power Plan: A "Challenge"

April 30, 2015 07:11
by J. Wylie Donald
When the draft of EPA's Clean Power Plan was promulgated in the Federal Register last June, one of the critical questions raised by those in the electricity space was: what about reliability? If you shut down all those coal plants, will you have enough generation from other sources to keep the lights on? Even if you have enough generation, will you have enough natural gas at the times and places when you need it? Is there enough time to get the needed generation and resources in place under EPA's schedule?

Carbon Emissions | Legislation | Regulation | Utilities

In re Murray Energy - the First Clean Power Plan Donnybrook

April 16, 2015 20:51
by J. Wylie Donald
This morning found us at the E. Barrett Prettyman Courthouse in Washington, hoping to take in the oral argument before the DC Circuit in the first (of what is certain to be many) challenge to the Clean Power Plan: In re Murray Energy Corp. Murray Energy is the largest privately owned coal company in the country and was joined by another coal company, twelve States and numerous amici. It sued last June and claimed, under the All Writs Act, that it would be irreparably harmed by the immense dislocation to be precipitated by EPA's planned move from coal to natural gas, nuclear power, renewable energy and efficiency (i.e., the Clean Power Plan) and, therefore, the Court should stop EPA's plan in its tracks.

Carbon Dioxide | Climate Change Litigation | Legislation | Utilities

Florida’s Solar Conundrum

March 31, 2015 09:40
by Marshall McLean
Despite ranking third in the nation for rooftop solar potential, the "Sunshine State" is 13th in cumulative solar capacity installed (dreary New Jersey is 3rd). This is the result of a state without a renewable energy portfolio standard (RPS) that does not permit power purchase agreements (PPAs) (Florida is one of only five states that explicitly prohibits anyone other than the big utilities from selling power). Depending on whom you ask, Florida's lack of solar infrastructure is either caused by the "monopoly" held by the State's big power companies, or the simple viewpoint that solar is a silly alternative when you compare cost to the comparatively cheap prices from more conventional generation sources. Well, the debate is scheduled to be settled soon... Environmentalists in Florida are pushing for a constitutional amendment initiative to place solar choice on the November 2016 ballot. The purpose of the ballot proposal is to expand solar choice by removing barriers that limit solar ownership models. If approved, the ballot measure would allow homes and businesses to install solar and sell excess energy they generate back into the grid. Curiously enough, much of the focus on this particular ballot proposal has been on the unlikely alliances that are now supporting the measure. Tea Party conservatives and aggressive libertarians (who advocate for free-market principles through energy choice) find themselves aligned with fundamental environmentalists and progressive liberals (who advocate for cleaner energy solutions). Opponents of course oppose taxpayer subsidies and consumer mandates. Regardless of one's viewpoint, an amendment permitting third-party sales in Florida will immediately result in a tremendous boom to the Sunshine State's solar industry. If that road is opened, expect a sea of solar developers to begin canvasing I-95 for opportunities from the Panhandle to the Keys.

Climate Change Effects | Renewable Energy | Solar Energy | Utilities | Florida | renewable portfolio standard | solar finance

The Clean Power Plan: A View from FERC, Part IV - Economic v. Environmental Dispatch, Please

March 16, 2015 09:31
by J. Wylie Donald
It’s been a long winter in my neck of the woods and not because Punxsutawney Phil saw his shadow.  Pipes froze.  Twice.  Furnace was out overnight.  Broke three shovels.  So I had a particular interest this past Wednesday, March 11, in FERC’s Eastern Regional Technical Conference on EPA’s Clean Power Plan (CPP) and FERC’s and EPA’s takes on reliability issues.   After the introductions EPA Assistant Administrator Janet McCabe led off with the same position she had delivered at the Opening Conference, which is something of a mantra for EPA:  EPA has enforced the Clean Air Act for over forty years and has not impacted reliability.  Commissioner Tony Clark,  however and politely, was not buying it.  To be sure, EPA’s Clean Air Act initiatives had not brought the Grid crashing down.  But he enumerated half-a-dozen facilities where EPA regulations had impacted reliability, including the Presque Isle Power Plant, the Potomac River Generating Station, and the E.D. Edwards Power Station.  Commissioner Clark laid it out plain and simple:  any time there is a “must run” requirement imposed on a plant, that is a reliability issue.  Where operators have made decisions to close because plants are no longer profitable as a result of the cost of environmental compliance, but reliability concerns have compelled the plants to keep operating, that is a case of environmental regulations impacting reliability. Commissioner Moeller asked Ms. McCabe for EPA guidance on how reliability could be ensured under the CPP, the so-called “reliability safety valve” (RSV).  She responded without specifics, saying merely that EPA is prepared to work with everyone.  To that Commissioner Moeller was very plain:  a reliability safety valve needs to be in the final rule. Period. What were the details driving Commissioners Moeller and Clark?  They are set out in great detail in the written comments of the affected generators. A few were stated at the technical conference: New England - RGGI, the Regional Greenhouse Gas Initiative, has put New England in excellent position to meet the CPP goals.  But even with the early mover advantage, New England has substantial concerns. As Commissioner Paul Roberti  of the Rhode Island Public Utilities Commission reported, the independent system operator, ISO-NE, forecasts 8300 MW are to be retired by 2020, to be replaced by 6300 MW, with an additional 1000 MW in efficiency improvements. Even assuming all of that can be built in time and the forecast efficiency is real, New England has gas transmission challenges (as demonstrated by skyrocketing prices and unavailability during the 2013 polar vortex) and electrical transmission challenges (the substantial wind resources identified in northern Maine are 100 miles from the nearest transmission).  As Steve Rourke, a VP of ISO-NE, commented:  even as New England's fuel mix starts to change, those current coal plants are needed on the coldest and hottest days. Duke Energy - Paul Newton, the State President for North Carolina for Duke, stated flatly that EPA's interim compliance deadlines leave no room to ensure compliance can be achieved without compromising reliability.  In February, North Carolina set records for demand at 7 a.m.  Why did he select 7 a.m. to report?  Because that is a time when non-dispatchable generation assets cannot provide power. The Southern Company - Jeff Burleson, System Planning Vice President for Southern, explained how Southern plans for the future.  It looks at each plant (as it must because regional capacity can only be based on individual plant capacity).  EPA predicts that Southern will need to retire 9 GW as a result of the CPP, in addition to 3 GW as a result of MATS (Mercury and Air Toxics Standards).  In response, Southern anticipates needing 5 GW of new gas-fired plants.  There is one small impediment:  current gas pipelines in the region are fully subscribed.  Mr. Burleson also commented that demand response is estimated to be able to shave peak demand by about 10% and that that is already included in Southern's planning. The environmental perspective is that reliability issues are manageable.  As John Wilson, the Director of Research for the Southern Alliance for Clean Energy, commented, "the sky is not falling" and there is plenty of solar and wind energy available.  Energy efficiency will help too.  In sum, the Alliance's studies show that "ensuring reliability can be business as usual."  Johnny Casana of EDP was a little more equivocal, if the suite of low carbon strategies can ensure reliability, then the RSV may not be needed.  Jonathan Peress with the Environmental Defense Fund advised that their studies showed that there is ample pipeline capacity in New England if it is used efficiently.  Some may remain unconvinced.  The solar and wind resources don't meet Mr. Newton's 7 a.m. need.  One might legitimately be skeptical that "business as usual" can possibly apply to something that (to paraphrase Commisioner Moeller) is the most comprehensive and profound rule ever to come out of the Clean Air Act.  EPA's own estimate of over 50 GWs in plant retirements belies that.  As for efficient use of gas pipelines, all are for that.  But theoretical efficiency worked out in an office is not much salve as the temperatures drop and the pipes burst because the gas has not gotten to where it efficiently should.  Mary Walker, representing the Georgia Environmental Protection Division, best summed it all up.  What is needed is “economic dispatch v. environmental dispatch.”  When a state's environmental regulator is talking the language of FERC, it is worth listening to.  As Ms. Walker noted, the environmental regulator in Georgia is being asked to implement energy policy, which it hasn't done before.   A bit of jocularity between Administrator McCabe and Chairman LaFleur puts the issue, we think, in perspective.  Ms. McCabe owned up to her lack of knowledge regarding the sources of unreliability – squirrels, she had been informed by her staff, affect reliability.  The Chairman referred to an apocryphal "throw-down squirrel" that linemen carry on their trucks.  But linemen don't need a throw-down squirrel, squirrel outages are very real.  So what do we have?  One regulator, “learning something new every day;” the other regulator dispensing the wisdom of the ages, so to speak.   As we move forward with what both regulator and regulatee have referred to as the most significant regulation of the Grid ever, we suspect that many will want the people that really know, rather than the people who are picking it up as they go, in charge of keeping the lights on.

Carbon Dioxide | Regulation | Renewable Energy | Utilities

A View from the FERC - Part III - Time to Keep the Lights On

March 16, 2015 06:40
by Tricia Caliguire
Last week, FERC held the eastern regional technical conference on “Environmental Regulations and Electric Reliability, Wholesale Electricity Markets, and Energy Infrastructure.”  The purpose was for the commissioners to hear the specific issues created by EPA’s Clean Power Plan (CPP) relevant to the states, utilities, generators, consumers and transmission operators covered by ISO-New England, Inc., PJM Interconnection LLC, New York Independent System Operator, the Southeastern Regional Transmission Planning, South Carolina Regional Transmission Planning, Florida Reliability Coordinating Council, and the Northern Maine Independent System Administrator.  The overwhelming theme of the morning was that, to effectively comply with the CPP, the states, and state commissions, need more time. Most of the speakers recommended that EPA do away with the interim (2020-2029) compliance goals, complaining that there isn’t time between the likely date of the final rule (mid-summer 2015) and 2020 to plan for retirement of existing resources, and to permit, finance, and construct new natural gas combined cycle plants and the natural gas infrastructure on which these new plants will depend.  James Frauen from Seminole Electric Cooperative noted that the draft rule would require Florida to rely “almost completely” on natural gas, all of which must be imported. According to Frauen, the one new gas pipeline currently proposed to be built in Florida is already 91% subscribed.  (Not to mention that, in regulated markets, the premature retirement of coal plants means stranded assets which must be paid for by the same ratepayers who must finance the new sources.) Mike Kormos, VP of Operations for PJM, frankly stated, “[PJM] needs time and transparency.”  He explained that he couldn’t predict the impact of the CPP on reliability because of the unknowns.  “We don’t know what the final rule is,” he continued, “we don’t know what will be in the state implementation plans, and we don’t know how the market will respond.”  (Note that PJM modeled regional implementation of the CPP using the draft rules though at least one state complained that such modeling was premature.) Which begs the question: what is the rush?  Why not give the states more than one year to propose their SIPs and more than just two years for regional SIPs?  Keep in mind that the Regional Greenhouse Gas Initiative (RGGI) – a voluntary agreement – took close to five years to develop.  The answer may be found in the collision of politics and policy.  That President Obama has made the reversal of climate change, and particularly reduction of greenhouse gas emissions, a cornerstone of his second term should come as no surprise.  Between his 2008 statement that “under my plan. . . electricity rates necessarily would skyrocket,”  and his 2009 pledge in Copenhagen to reduce emissions “17% below 2005 levels by 2020,”  he made his intentions clear.  After failing to get climate change legislation through Congress in 2010, he turned to EPA.  Despite rumors that the rules had to wait until after the 2012 election, it now seems unlikely that they would have been ready before then.  What does seem likely is that the Administration wants to have the rules – and the SIPs – firmly in place before Obama leaves office, in January 2017.  Hence, the rush. When the final rule is issued this summer, as EPA continues to promise it will be, the states will have one year to file their SIPs, unless this requirement is stayed pending litigation.  After EPA reviews the SIPs, the states will have roughly two to three years to begin implementation.  The states will be in the same Catch-22 that they found themselves in with the Affordable Care Act:  Cash-strapped states may waste time and resources planning for a law that could be thrown out or substantially altered by the courts, but otherwise, they risk that the law will survive legal challenge and, by not having a SIP in place, will be subject to a less-flexible federal program.  Senate Majority Leader Mitch McConnell (R-KY) weighed in on the side of delay, warning states that submission of SIPs could subject them to “federal enforcement and expose [states with SIPs] to lawsuits.”  If the states don’t cooperate, McConnell reasons, it will “give the courts time to figure out if [the CPP ] is even legal, and it would give Congress more time to fight back.”  Supporters of the CPP responded that states who fail to design their own compliance plans will be at a “huge disadvantage.”  Meanwhile, the clock is ticking.  As FERC Commissioner Philip Moeller pointed out, “we don’t have a whole lot of time … because summer’s coming.”  

Carbon Dioxide | Carbon Emissions | Climate Change | Regulation | Utilities

Community Solar - A New Path in Illinois

March 5, 2015 11:55
by Tricia Caliguire
This week, the Chicago Tribune reports that the Citizens Utility Board (CUB) and the Environmental Defense Fund (EDF) filed a petition with the Illinois Commerce Commission (ICC) to require Commonwealth Edison Company (ComEd) to offer its customers the opportunity to participate in a three-year "community solar" pilot program. Just to get the players straight: ComEd is a regulated electric utility which services close to four million customers in northern Illinois. The CUB is the statutory representative of Illinois utility customers in all proceedings before the commission and federal agencies regulating the utility industry. (These organizations are more often called consumer or ratepayer advocates). On its website, EDF describes itself as a non-profit environmental advocacy and research organization whose mission is to "preserve the natural systems on which all life depends." The ICC is the state agency directed by statute to balance the interests of consumers and service providers "to ensure the provision of adequate, efficient, reliable, safe and least-cost public utility services." Community solar is also known as "shared renewables," "solar gardens" or, sometimes, "virtual net metering." Essentially, in a community solar program, multiple electric utility customers invest in a solar project and share in the financial proceeds, whether that is from the sale of excess power to the grid and/or renewable energy credits, based on their level of investment. Most, if not all, of the customers will not actually be physically connected to the solar facility. The benefits of community solar include reducing the level of investment required of the host residence or business and providing a means for all electric customers to experience the economic (and intrinsic) benefits of solar, even those who would otherwise be unable to install solar on their own residences or businesses (e.g., rented properties; shaded or otherwise unsuitable roofs). On the other hand, the soft costs of marketing and administering a program to multiple small investors can be significant, reducing those economic benefits. Community solar has also met resistance with regulators; while working in government, I heard concerns about soliciting of consumers, particularly seniors, to "go green" without hosting a solar system. (An Arizona solar company was recently fined for deceptive sales tactics, including targeting of senior citizens and making false claims about potential savings, though not related to a community solar product.) Electricity pricing can be confusing for consumers, even when dealing with their local utilities. Regulators are still sorting through the complaints and litigation resulting from the large numbers of electric and gas customers who switched to third-party suppliers over the past couple years, enticed by low natural gas prices and what they thought were fixed-price contracts, but who then faced bills two and three times higher than "normal" as a result of price hikes during the polar vortex events of 2013-14. The other major challenge for community solar has been to bring the utilities on board. Solar, like any form of distributed generation, will reduce the utilities' revenues. Here is where the Illinois proceeding may pave the way for community solar programs nationwide. In any such proceeding, the utility will be able to argue for recovery of administrative costs and fixed distribution costs, as well as for a return on the company's investment. In a twist on traditional community solar, California utility PG&E will begin later this year to offer its customers a stake in solar energy purchased from facilities within the PG&E service territory. Customers will see the extra costs of the solar energy they consume, plus related program costs, with a credit for standard generation that is avoided, on their monthly bills. And, avoiding a frequent criticism of subsidized clean energy programs, the rate structure ensures that customers who don't participate in the program will not share in the costs.

Regulation | Solar Energy | Utilities

The Keystone XL Pipeline Veto: Much Ado ...

February 27, 2015 18:39
by J. Wylie Donald
When one talks of pipelines in recent days one hears nearly an incessant buzz about Keystone XL, as if that is where the real action is. But it isn't, notwithstanding the histrionics over President Obama's veto of S.1, the Keystone XL Pipeline Approval Act. The real action lies not with an 850,000 barrel per day oil pipeline, but instead with the natural gas pipelines that are needed to supply the natural gas electricity generating plants that will be required to replace, in part, 103 gigawatts of coal powered generation. What are we talking about? Building Block 2 of EPA's Clean Power Plan posits the replacement of coal-fired generation with cleaner natural gas-fired plants. Natural gas plants are also part of the solution to compliance with the strict Mercury and Air Toxics Standards, which are also driving coal plants off the grid. But to get and keep those natural gas plants on-line, the natural gas needs to get there and to do that it needs a means of transportation, which for natural gas, means pipelines. How many miles of pipelines are needed? EPA concluded: "the power industry in aggregate can support higher gas consumption without the need for any major investments in pipeline infrastructure." But the Nation's reliability watchdog, the North American Reliability Corporation, politely disagrees. In its November 2014 review, Potential Reliability Impacts of EPA's Clean Power Plan, NERC noted EPA's position, but then commented: "there are a few critical areas that likely will need additional capital investments. As an example, current and planned pipeline infrastructures in Arizona and Nevada are inadequate for handling increased natural gas demand due to the CPP. Pipeline capacity in New England is currently constrained, and more pipeline capacity additions will be needed as more baseload coal units retire." And that was not the end of it. NERC concluded that more pipeline capacity was needed independent of Clean Power Plan retirements. Further, as should be obvious, pipeline construction will not occur in an instant. NERC points out that "it takes three to five years to plan, permit, sign contract capacity, finance, and build additional pipeline capacity." In other words, planning and permitting of new pipelines is required now if the EPA's initial 2020 compliance date is to be met. But as we reported in a recent post, States aren't even drafting their implementation plans, much less making determinations about what plants to shut down and where pipelines need to be built.Which suggests that we should ask the miles-of-pipeline-needed question again. We have not seen that number but NERC reports that, based on EPA's own estimates for plant retirements due to the Clean Power Plan and other regulatory requirements (primarily the Mercury and Air Toxics Standard), "the power industry will need to replace a total of 103 GW of retired coal resources by 2020, largely anticipated to be natural-gas-fired NGCC and CTs. We tried to compare 103 gigawatts to Keystone XL's 850,000 barrels of oil per day. We came up with a rather stunning number: the energy needed to replace the to-be-retired coal plants is almost 2000 times more than Keystone XL can deliver.* Which leads us back to the beginning of this post: the real action in pipeline permitting is going to be in natural gas. *A barrel of oil contains about 1700 kW-h of energy. So Keystone XL will deliver 850,000 bbl x 1700 kW-h or 1.445 x 10e9 W-h in one day. 103 GW of coal plants operating for 24 hours yields 2472 x 10e9 W-h.

Carbon Dioxide | Legislation | Regulation | Utilities

The Clean Power Plan: A View from FERC, Part II - Infrastructure

February 26, 2015 12:54
by Tricia Caliguire
Because I had a seat inside the meeting room at FERC's Clean Power Plan Overview last Thursday, I got a close-up view of the protesters.  Most were older (as opposed to the college-student variety), they carried signs, wore matching red t-shirts and, after the first panel concluded, began to chant, “gas is dirty.”  Though none of them explained what they meant, and the speakers so far had not focused on Building Block 2 (shifting dispatch from coal to natural gas combined-cycle generators), most of the rest of the crowd understood that they were protesting the Clean Power Plan (CPP) reliance on natural gas-fired power plants to reduce greenhouse gas emissions.  Given that the temperature outside was in the single digits, I wanted to ask the group if they knew how the building was heated sufficient for them to wear only t-shirts, but that would have meant risking my seat, so I demurred. The red shirts would have been pleased to hear, later in the day, that the US Department of Energy (DOE) recently completed a study titled “Natural Gas Infrastructure Implications of Increased Demand from the Electric Power Sector,” which found that compliance with the CPP would not require much additional spending for natural gas pipelines.  Commissioner LaFleur “questioned [the study’s] conclusions,” including that increased demand for gas can be satisfied by better or more strategic utilization of existing pipeline capacity.  Commissioner Clark was more blunt, pointing out that DOE gives the “false impression” that siting of pipelines will be easier than experience – particularly in the northeast – has proven it to be. As if to prove him prescient, last night, FERC staff held a scoping meeting for the PennEast pipeline project, proposed to traverse six, mainly suburban and rural, counties over a 114-mile route in northeast Pennsylvania and west-central New Jersey.  Hundreds turned out at the Ewing, New Jersey hearing (the first in New Jersey); most strongly opposed the pipeline; and many spoke in favor of the “no build” alternative.  The director of the New Jersey chapter of the Sierra Club, compared the natural gas companies to the British and Hessian invaders who tried “to take our land” in the 1700s (though some might argue that the land more precisely belonged to the British at that point).  “This pipeline turns 50 years of public policy and change on its head,” he continued. Supporters of the pipeline included union members (who need jobs) and the gas companies.  Though they spoke of the increased reliability of supply for their customers, some of which are power plants, they did not discuss the significant CPP compliance obligations of Pennsylvania and New Jersey and the role that natural gas-fired generation will likely play in meeting those obligations. Which brings us back to the meeting room at FERC.  Toward the end of the afternoon, an Environmental Council of the States (ECOS) representative conceded that not all environmental policies align.  Nuclear is carbon free, but it is nuclear.  Wind and solar are expensive, intermittent, take up lots of space, and interfere with (even kill) birds and bats.  The best wind resources are far from load and transmission lines are unsightly and may traverse protected areas.  Natural gas plants are cleaner than coal and oil, but the gas has to be brought to the surface and transported, whether by pipeline or tanker truck or train. And, as the red shirts made clear, some think gas too is dirty.  To meet the CPP goals in 2030, some policies will have to give.

Carbon Emissions | Regulation | Utilities

The Clean Power Plan: A View from FERC

February 19, 2015 19:30
by J. Wylie Donald
It is innocuous enough: Conference on Environmental Regulations; but the plainness of title belies what is going on at the Federal Energy Regulatory Commission today. Today is the first public forum at FERC on EPA's Clean Power Plan. It is playing to overflow crowds. Notwithstanding arriving an hour early, I didn't even get to see the Commission, except remotely. One of the panelists characterized the implications of the Clean Power Plan as the most significant transformation of the bulk power system ever. While some might not agree, none would disagree that EPA's involvement in the electricity grid is unprecedented. This tension was evidenced repeatedly. Reliability and affordability are paramount - where are they referenced in EPA's plan? States and FERC regulate power supply and distribution - how is EPA directing States to prefer one source over another? Citizen suits regularly seek to compel compliance with Clean Air Act requirements - who will be the target when a State plan incorporates voluntary initiatives like fluorescent light bulbs or efficiency planning?So that all have the basics: EPA issued its proposed rule last summer. Comments were due in the fall. A final rule is predicted in early summer. EPA has proposed a broad and flexible plan (EPA's terms) to allow the United States to reduce its carbon dioxide emissions 30% below its 2005 emissions. Each State has been given targets with wide flexibility on how it will get there. EPA has identified four building blocks: improvements in fossil fuel plant efficiency, expansion of renewable energy and nuclear power sources, replacement of coal plants with natural gas, and improvements in system efficiencies. State plans are required by 2016, which can be extended to 2017 and even 2018. Requirements kick in by 2020 with the plans fully implemented by 2030. The Commission is holding fora on the subject over the next 45 days. Besides today's National Overview conference, upcoming regional meetings are scheduled for Denver (2/25), DC (3/11) and St. Louis (3/31).The conference opened with FERC Chairman Cheryl LaFleur explaining the Commission's goals. FERC wants to move beyond rhetoric and ideology. There will be three panels focusing on reliability (which is all we will address in this blog), infrastructure and markets. The goal is to identify concrete facts and suggestions to move things forward. The other commissioners lent their views as well. Commissioner Moeller pointed out that the role of wholesale markets has expanded over the last several decades. In so doing, the grid has provided unprecedented reliable and affordable power to consumers. The Clean Power Plan cannot upset those markets. Commissioner Clark stated that the "rubber meets the road" issue is reliability, and responsibility for that falls squarely on State regulators and FERC. There needs to be a granular and technical analysis to make this happen, which will require the permitting of a lot of infrastructure. The analysis will be two-fold: what does the reliability analysis need to look like (things like voltage support, market impact, SIP integration) and how can FERC leverage its expertise to assist EPA. Commissioner Bay echoed the concerns about challenges and FERC assistance; he also emphasized the importance of addressing infrastructure and market operation. Commissioner Honorable likewise saw the exercise as a job of constructively and thoughtfully solving the problem, and in so doing providing assistance to EPA. Acting EPA Assistant Administrator Janet McCabe spoke for EPA. She acknowledged that reliability is absolutely critical and offered that in the last forty years of Clean Air Act activity, at no time have EPA actions affected reliability. Anticipating a topic raised by other speakers, Ms. McCabe was confident that the EPA proposal could be implemented by 2030, but she seemed to be offering flexibility on the interim deadlines; EPA is listening to the States' and industry's concerns about the short term planning horizons. Another anticipated topic was the reliability safety valve (RSV), although EPA did not call it by that name. Ms. McCabe offered that experience with the Mercury, Air Toxics Standards (MATS) demonstrated that compliance could be melded with reliability. Chairman LaFleur commented that her review of the written comments identified five different RSVs that people were considering: 1) a fixed process identified in the rule, 2) a dynamic process that can take account of changing conditions, 3) a rule that takes into consideration the mutual achievability of all state plans, 4) exceptions for particular plants, 5) exceptions for particular evolving circumstances (i.e., a hotline). There was no consensus on what should be written into the rule. The panelists did not see it exactly like EPA did. Focusing on just these two topics (timeline and RSV) one heard the following:TIMING States are not working on their implementation plans because the proposed rule is too uncertain (Environmental Council of the States - Alexandra Dunn, Edison Electric Institute member companies - Gerard Anderson) The timing to build plants, pipelines, and infrastructure is all five years or more - the interim deadline of 2020 is simply not achievable; a longer "glide path" to 2030 is needed (EEI) A longer timeline is necessary (American Public Power Association - Sue Kelly) The deadlines are not realistic - we are facing a short-term "cliff" (National Rural Electric Cooperative Association - Jay Morrison) There is no short-term cliff; PJM has demonstrated this (Sustainable FERC Project - John Moore)Pushing out the interim deadline and easing the "glide path" would make achieving EPA's goals a lot easier (EEI, Environmental Council of the States) RELIABILITY SAFETY VALVE All the contingencies cannot be seen now so there has to be an RSV "baked into the rule" (National Electricity Reliability Corporation (NERC) - Gerry Cauley)No one has defined what a reliability safety valve is so the ISO/RTO Council did and provided specifics in its written comments. Key is that the process for invoking the RSV needs to be written into the rule (Independent System Operator/Regional Transmission Organizations Council - Craig Glazer) The RSV needs to be dynamic - able to adjust based on changing resources over the 15 year implementation period and beyond (NRECA)The need for the RSV is overstated, but if it is available it needs to be tightly written (Sustainable FERC Project)The RSV needs to be available for entities that have approved operations but then find that things go awry (APPA) The EEI companies have not reached agreement on what the scope of the RSV should be (EEI). Other topics that bear paying attention to included: EPA involvement may interfere with the exclusive jurisdiction of the state utility commissioners (National Association of Regulatory Utility Commissioners (NARUC) - Lisa Edgar) Intermittent sources may compromise reliability (NARUC, NERC)The patchwork of state plans may not work together effectively (NERC) Need better coordination of electricity and gas sectors (APPA)EPA did not consider the value of fuel diversity (NRECA)States will be reluctant to bring their voluntary programs into a federally mandated implementation plan (Environmental Council of the States) As can be seen, there are a lot of topics for discussion. We expect the dialog will be intense over the next several months. On one thing there was unanimity, however; all of the panelists wanted FERC to be more than a potted plant. As Sue Kelly of APPA put it, EPA has swept FERC into the maelstrom, FERC cannot be chopped liver.

Carbon Emissions | Regulation | Utilities

Executory Forward SREC Contracts - What Exactly Does This Mean?

March 3, 2014 20:25
by J. Wylie Donald
What happens to the payment for a solar renewable energy credit (SREC) when the payor closes its doors?  Maryland citizens are finding out the hard way.  The promises made to some of them are turning up empty. Here are the details.  Greenspring Energy was a promising solar installation company.  As it describes itself:  "Greenspring Energy offers a unique combination of high-quality solar energy systems and the best energy saving products and services in the marketplace today. Created to help people effectively and permanently reduce their utility bills, Greenspring Energy’s products and services will allow you to: Reduce your utility bills with innovative energy saving products, Produce your own energy with solar systems, Take advantage of federal, state, and local incentives to go solar, Increase the value of your property, Reduce your carbon footprint.”  It was a good business model. Following its founding in 2007, Inc. reports it had revenues of $10.5 million in 2010 and 40 employees the next year. Its website boasts 2011 Inc. 500.  Then something happened.   Jamie Smith Hopkins of the Baltimore Sun reports that Greenspring Energy closed its doors at the end of January this year.  Its employees received rubber checks.  And its customers, promised recurring payments for the SRECs associated with the electricity generated from their solar equipment, were likewise burned.  This is not a particularly unexpected outcome.  Entities regularly enter bankruptcy and their creditors take a beating.  The solar industry is no different.  In fact, one website compiled a list of dozens of “Deceased Solar Companies” through early 2013.   But what is not getting a lot of play (or even any) is the effect of a bankruptcy of the SREC provider.  It is probably safe to say that most SREC transfers are the subject of executory contracts, long-term contracts where the provider agrees to transfer the SRECs accompanying its future electricity generation for some future consideration.  In bankruptcy, such contracts may be assumed, or not, at the discretion of the bankruptcy trustee.  11 U.S.C. § 365.   Except, however, where such contracts are forward contracts.  E.g., Master Solar REC Agreement  (NJ BPU 2014) (“Buyer and Seller each acknowledge that it is a “forward contract merchant” and that all transactions pursuant to this Master Agreement constitute “forward contracts” within the meaning of the United States Bankruptcy Code.”).  In that case, the trustee’s right to reject or assume the executory contract does not exist.  11 U.S.C. § 556.  So there is some complexity here.  And it gets worse.  The SREC does not exist but for the generation of 1 MWh of electricity, even if the SREC is sold separately from that electricity.  It is not difficult to conceive of a situation where the value of the contract for the sale of electricity is going in the opposite direction of the value of the SREC contract.  Suppose the bankruptcy trustee has the right to suspend electricity generation, even if it does not have the right to walk away from the SREC contract.  Does an SREC contract have any value if there is no generation? To our knowledge, SRECs (and RECs as well) have not been tested in the furnace of bankruptcy.  We will be interested in seeing how that turns out. 

Renewable Energy | Solar Energy | Utilities

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