Caroline Reiser
Senior Staff Attorney, Climate & Clean Energy Program
March 28, 2023
The Federal Energy Regulatory Commission's (FERC) rejection
of Southwest Power Pool's (SPP) proposal gives SPP a new opportunity to create
an accreditation process that does not discriminate against renewable
resources.
A year-long dispute that could determine how quickly
renewable energy advances across a broad swath of the central U.S. is back to
square one.
Earlier this month, the Federal Energy Regulatory Commission
(FERC) reversed its decision approving the Southwest Power Pool’s (SPP) plan
for determining how much capacity a particular energy resource can be expected
to deliver. Environmental groups including the Natural Resources Defense
Council had challenged SPP’s plan on the grounds that it discriminated against
wind, solar, and battery storage resources. FERC has now kicked the issue back
to SPP, which oversees the electric grid and wholesale power market for
utilities and transmission companies in 17 states.
At stake is accreditation – the value placed on energy
resources – a key factor used by grid operators to determine how to integrate
renewables into the system, and by utilities as they plan for future resource
additions. Accreditation and capacity payments go hand-in-hand: generators only
receive money up to the value at which they are accredited. A biased
accreditation scheme, like the one developed by SPP, rewards coal and gas while
penalizing renewables, potentially undermining grid reliability and resulting
in higher consumer costs.
Recent bouts of extreme weather have exposed the flawed
assumption that coal and gas resources are more dependable than renewables when
the electric system needs power the most. Over the past decade during crippling
weather events, including the 2011 cold weather outages in the Southwest, the
2014 polar vortex, and Winter Storm Uri
– which struck Texas and states in the SPP region in 2021 – fossil fuel
plant outages exceeded expectations while renewable resources outperformed.
That pattern held in December during Winter Storm Elliott,
another extreme weather event likely driven by climate change that plunged much
of the U.S. into freezing temperatures and pushed power grids to the brink of
crisis just ahead of the Christmas holiday. As bone-chilling temperatures
settled in, outages at fossil fuel plants began stacking up. Some couldn’t get
fuel. Some just stopped working. And others failed to start when called upon.
By Christmas Eve, an astonishing 46 GW of power plants
(enough to power California) were out of service in PJM, the grid manager for
65 million people in the Mid-Atlantic and Midwest. In SPP, coal and gas
performed well below expectations, with over 25% of that capacity unavailable
due to forced or emergency outages. Meanwhile wind significantly overperformed,
providing more than triple its accredited capacity near the height of the
storm.
“In the case of SPP, there is a consistent pattern of taking
a very conservative approach to the accreditation of inverter-based resources
while ignoring the significant limitations of other resources,” the coalition
of environmental groups said in a complaint before FERC. Inverter-based
resources include wind, solar, and battery storage.
The coalition argues that SPP’s proposal would undervalue
renewables relative to coal or gas generators through the accreditation
process. At the heart of the complaint is an allegation that SPP is ignoring
weather-related outages at coal and gas plants while fully accounting for
weather-related outages of wind and solar. Such disparate treatment increases
the cost of renewables and creates an “unfair playing field” as SPP and the
U.S. shift away from gas and coal to cleaner, more sustainable energy sources,
according to the complaint.
After initially approving SPP’s discriminatory plan, FERC
reversed itself earlier this month citing a procedural flaw, and did not weigh
the merits of the challenge.
“SPP’s proposal was unjust and unreasonable because it
penalizes wind and solar resources for outages, while simultaneously declining
to adjust the credit of other resources when they experience outages,’’ FERC
Commissioner Allison Clements said in a Tweet. “As SPP goes back to the drawing
board, I strongly urge it to develop a fair capacity accreditation methodology
that is consistent across all resource types.”
While the particulars of this case are unique to SPP, grid
and wholesale power market managers across the U.S. face a common challenge –
how to enhance grid reliability and lower costs while transitioning the
electric system to renewable energy. At this moment when renewable project
developers are eager to take advantage of incentives available through the
recently passed Inflation Reduction Act to build wind, solar, and storage, an unnecessarily
burdensome regulatory framework has stood in the way.
Some, including Rob Gramlich, president of Grid Strategies
LLC, are calling for a technical conference on capacity accreditation “because
multiple very divergent methods across RTOs can’t all be just and
reasonable.” This is especially true
when RTOs are being required to assist their neighbors by sharing capacity
during extreme whether events.
At a minimum, regulators at the federal and regional level
must stop overestimating the capabilities of gas and coal and redouble their
efforts to approve renewable resources and update transmission planning
policies that will pave the way for a clean, reliable, and resilient electrical
system.
SPP has an opportunity to bring fairness to the accreditation
process by finally accounting for weather-related outages at all power
resources. Returning to FERC with a proposal that fails to ensure equal
treatment will unjustly penalize renewable energy and fail to guarantee that
SPP member utilities have enough generation to meet demand during extreme
winter events.
Source: https://on.nrdc.org/3JSICcC
( www.nrdc.org )
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