FERC Clean Energy Policy Roundup
The Federal Energy Regulatory Commission (FERC) has been extremely busy, taking action on a number of issues related to clean energy. Here is a brief run-down of some of these recent actions—with a focus on PJM Interconnection.
Energy Storage (RM16-23-000): On February 15, 2018, FERC issued Order 841 that aims to reduce barriers to energy storage participation in energy, capacity, and ancillary service markets in RTO/ISOs. Among other things, the order requires RTO/ISOs to develop a market participation model specific to energy storage resources, including market rules that consider the unique characteristics of storage resources. The rule also clarifies the locational marginal price (LMP) must be used when storage resources buy and sell power from the market.
Primary Frequency Response (RM16-6-000): On February 15, 2018, FERC issued Order 842 that requires all new generating facilities interconnecting to the grid to install, maintain, and operate equipment that enables these facilities to provide primary frequency response (PFR). This order acknowledges technology advances and anticipates an evolving power grid that incorporates an increasing amount of renewable energy generation. By requiring PFR capabilities, the order helps ensure the grid won’t lose important reliability resources as more advanced energy technologies interconnect. For more about the order, check out this blog post by Kleinman Center Research Fellow Thomas Lee.
Seasonal Capacity Performance Resources (Dockets EL17-32-000; EL17-36-000): FERC staff will be hosting a technical conference on April 24 exploring seasonally available capacity resources (e.g. wind, solar, demand response) and PJM Interconnection’s capacity performance rules. This tech conference was the result of a February 23 Order, responding to complaints by certain PJM stakeholders asserting PJM’s 100% capacity performance requirement will result in reduced participation of seasonal resources in PJM’s capacity market and unnecessarily increased costs to consumers. The tech conference order identifies specific questions raised by FERC staff for comment, mostly related to the benefits and drawbacks of a seasonal capacity construct on reliability requirements (e.g. 1-in-10 loss of load requirement). Comments are due by April 4 and a FERC decision on the matter is expected within 12 months of the tech conference. Details about the conference are available on FERC’s events calendar.
Distributed Energy Resources Technical Conference (Dockets RM18-9-00; AD18-10-000): On April 10 and 11, FERC will hold a technical conference exploring distributed energy resource (DER) participation in bulk power markets. In November 2016, FERC issued a NOPR on electric storage and DER participation in bulk power markets. FERC finalized the energy storage portion of the rule in February 2018 (see above), but maintained additional information was needed on DERs in order to move forward on the issue. FERC posted a series of questions about DERs in its tech conference notice, generally under the categories of DER aggregation reforms and the potential effects of DERs on the bulk power system. FERC also released a staff report on DER technical considerations for the bulk power system in February 2018, as part of the tech conference docket. Details on the tech conference can be found on FERC’s events calendar.
Energy Efficiency Opt-Out (ER18—870-000): Certain energy efficiency projects that achieve continuous reductions in end-use electricity consumption can qualify to participate in PJM’s capacity market. On June 6, 2017, the Kentucky Public Service Commission (KPSC) issued an order stating that retail electricity customers could not participate in PJM’s capacity markets, unless there was a special tariff or contract on file with the commission. After being petitioned by Advanced Energy Economy, FERC issued a declaratory order on December 1, 2017, stating that retail regulating authorities (like the KPSC) may not bar retail customer participation unless FERC provides them with such authority. However, the order also acknowledged that FERC provided such authority to the KPSC when certain Kentucky utilities integrated into PJM. On February 16, 2018, PJM filed with FERC proposed revisions to its tariff that would enable Kentucky to restrict retail energy efficiency resources from wholesale market participation. PJM requested the rules become effective as of April 17, 2018. Several parties have filed interventions on the docket.
Renewable portfolio standard (RPS) policy is an effective state-level subsidy program used to increase renewable electricity supply. FERC’s response to PJM’s upcoming filing on how to manage state subsidized policies—spurred by actions to keep economically struggling nuclear plants online—may be important to the future of RPS policy.
Capacity Construct and Public Policy: In response to state policies to subsidize existing generation resources, in early 2017, PJM and its stakeholders launched an effort to evaluate options for maintaining competitive market signals for capacity investments. In November 2017, the stakeholders almost reached supermajority on one policy option (MOPR-Ex) that would have prevented certain subsidized resources (excluding most renewables) from offering below minimum price bids into the capacity market. However, PJM notified stakeholders of intentions to recommend its preferred approach—the two-tiered repricing proposal—to the PJM board, after that proposal achieved only 26% support from stakeholders. After outreach from states and stakeholders, PJM’s board stated its intention to file both the MOPR-ex and the repricing proposal with FERC. PJM later indicated it would recommend filing an alternative to the MOPR-ex that would not discriminate in favor of renewable energy. At the time of his blog, PJM’s board has yet to file its proposal with FERC.