Advanced Energy Perspectives

Last August, thunderstorms in the United Kingdom triggered a loss of power generation that left 1.1 million consumers fumbling for a flashlight. As trains halted and traffic slowed, 475 MW of energy storage began discharging. A combination of batteries and other generators worked together to take 1 GW of demand off the system. In less than four minutes, grid frequency was returned to normal and power returned to customers. Blackouts are not particular to the UK. According to the U.S. Energy Information Administration, Americans lose approximately $150 billion to power outages each year. What’s less common is the use of advanced energy technologies like energy storage and distributed energy resources to increase reliability and keep the lights on. But that could change, if these technologies were allowed to compete in wholesale electricity markets on the basis of price and performance. Two new market briefs from AEE demonstrate why they should.

A decision handed down by the Federal Energy Regulatory Commission (FERC) on a seemingly obscure issue in one regional power market threatens to have far ranging impact on the cost of electricity, the future of state policy, and the ability for advanced energy to compete – and win, as it has been doing – in the marketplace. FERC’s policy change is purportedly intended to address the “price suppression” in competitive wholesale power markets allegedly caused by resources that are supported by state policies like renewable portfolio standards (RPS) and zero emission credit (ZEC) policies. But what FERC’s decision will actually do is limit the ability of advanced energy resources to participate in the nation’s largest electricity market, force customers from New Jersey to Ohio to pay twice for the generating capacity they need,  steer funds to existing coal and natural gas power plants that are otherwise redundant, and undermine state policies that are explicitly intended to promote advanced energy deployment. How it will do so is complicated, but potentially devastating to the advanced energy economy that has been steadily growing in the United States.

There are a couple of major issues currently before FERC and Congress that will impact advanced energy resources in wholesale markets. One of them is a decision expected from FERC soon after it regains a quorum of voting members that threatens to force operators of renewable energy facilities to artificially jack up their prices in a way that leaves them uncompetitive. The other, on which FERC has launched a proceeding but is also within congressional purview, involves building the transmission that is needed to get low-cost renewable energy to consumers. Here, and in two new wholesale market briefs, we explore the implications of these two issues for advanced energy resources, especially large-scale renewable energy development.

AEE's Jeff Dennis testifying before the House Committee on Energy and Commerce's Subcommittee on Energy

Since Democrats won a majority in the U.S. House of Representatives, the topic of deep decarbonization in the power sector has attracted more attention in our nation’s capital. While this topic has received the most attention through Members of Congress, most notably Rep. Alexandria Ocasio-Cortez, calling for a Green New Deal, many other policymakers across the political spectrum have put forward ideas on moving towards a decarbonized power sector. Most recently, Democrats on the House Energy and Commerce set a goal in July 2019 to reach net-zero carbon emissions by 2050 and have begun a series of hearings to gather feedback from stakeholders. In October, at a hearing entitled “Building a 100 Percent Clean Economy: Solutions for the U.S. Power Sector,” AEE was invited to testify on the role the advanced energy industry has played to date.

Two-thirds of the nation’s wholesale electricity sales occur in a competitive market managed by a Regional Transmission Organization (RTO) or Independent System Operator (ISO), with over 200 million customers in these areas and over $120 billion in annual energy transactions taking place. Under the Federal Power Act, these markets are overseen by the Federal Energy Regulatory Commission (FERC), which ultimately determines the rules for how wholesale electricity is bought and sold in the marketplace. RTOs/ISOs develop the market rules that dictate whether and how energy resources can participate and compete. Wholesale electricity markets should allow all resources to compete on price and performance, as the Federal Power Act requires that the rates, terms, and conditions of service governing wholesale competitive markets be “just and reasonable” and not grant any “undue preference or advantage.” Many market rules, however, are outdated, having been designed with older technologies in mind. Those rules can favor incumbent technologies and disadvantage newer and more innovative energy options – that is, advanced energy.