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Are renewables killing it? Quite possibly — literally.

image credit: www.pjm.com
Rory Sweeney's picture
President Power Prose, Inc.

A policy analyst, media contributor and PR consultant to the power industry with more than a decade of experience in journalism. I'm bringing media savvy to energy sector and awareness about...

  • Member since 2020
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  • Dec 2, 2021
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I have in my possession a couple of copies of PJM’s book from 2017 celebrating its 90th anniversary, which places its humble beginnings in 1927 when three regional utilities realized they had differing daily peak-power demands that could allow them to split the costs of generation facilities and interconnecting transmission lines and still serving all of their various customers while minimizing the time the generators weren’t being used.

All beneficial for everybody, and so the first power pool — known as PNJ at the time — was formed.

94 years later, PJM now boasts a footprint that stretches into 13 states and the District of Columbia, manages the electricity flow for 65 million people across the Mid-Atlantic and Midwest, oversees more than 180 GWs of generation, and manages something on the order of $40 billion in billing each year.

The Midcontinent Independent System Operator has also enjoyed similar halcyon days (if you overlook some poaching and border disputes with other grid operators) since it formed nearly 20 years ago, now stretching fully down the center of the country from Canada to the Gulf Coast.

And they both may be at the peak of their success.

As the current worldwide obsession with environmental politics and related virtue-signaling continues to spur ever-growing demand for emissions-free and renewable energy, highlighting the work of RTO/ISOs and influencing their goings-on are where it’s at for the hippest of hand-waving academics, holier-than-thou activists of various stripes and media members who identify as hifalutin “journalists” with personal opinions that matter rather than humble news-reporters (apparently the allure of life as an “ink-stained wretch” has lost favor in the Digital Age).

Part of their interest is in top-down promulgation of their preferences by shoehorning all states into FERC-jurisdictional RTO/ISO structures and then leveraging the current left-leaning FERC to force desired changes (often enough at the objection of state-level officials and regulators). That’s the strategy activists fear they’ve lost since the non-FERC-jurisdictional Southeast Energy Exchange Market was approved by operation of law in October when a deadlocked FERC was unable to make a determination one way or the other.

And it’s just that increased scrutiny and pressure from the “cool” classes that might be regional grid-operators’ eventual undoing.

How and why, you ask? Well, as Yeats so eloquently acquiesced, “things fall apart; the centre cannot hold.” If we’ve learned little else from the long, complicated history of cooperative federalism, it’s that states don’t like to be told what to do.

Among PJM’s 13 states are several aggressively pursuing environmental goals related to energy production: Regional Greenhouse Gas Initiative members New Jersey, Maryland, Delaware and Virginia for sure, and while not RGGI members, North Carolina remains a hotbed for solar development and Illinois just passed the Clean Energy Jobs Act to phase out fossil-fuel generation over the next 25 years.

Some of those states have grumbled about PJM's unwillingness to move as quickly as they prefer. More than three years ago now, I reported on New Jersey Board of Public Utilities President Joe Fiordaliso's threat to leave PJM. In a subsequent visit earlier this year to the GT Power Hour podcast I host, he backed away from the brinkmanship only slightly.

Other PJM member-states are happy with the status quo, and still others are aggressively opposing being saddled with the additional unspoken green that comes with “green” energy — that green being the money it costs to build it all. For example, one Kentucky-based power cooperative made it clear (Slide 5) in a recent PJM workshop on revising its generation-interconnection policy in light of the changing industry that, “state policies differ across the region (and between regions/RTOs); costs should not be imposed on states not sharing the policy objectives.” Depending on your perspective, it may not seem coincidental that those oppositional states like Kentucky and West Virginia also have longstanding and ongoing co-dependencies with various fossil fuels.

Given PJM’s founding ideal of sharing costs for mutual benefit, how can that model be sustained when there’s plenty of costs to go around but disagreement on what’s beneficial?

Equally, les bons temps may soon no longer be rolling in MISO, quite literally. Louisiana, it turns out, is hesitant to pay for the transmission lines to connect the explosion of wind turbines in the upper Midwest to MISO’s system, even though MISO assured the state it won’t. And why would they when the expert they tasked with looking into it couldn’t guarantee who would benefit or when? (It might also again be relevant that the Bayou State has a thriving oil and gas industry.) According to published reports, the motion regarding a notice to withdraw from MISO is up for consideration at the Louisiana Public Service Commission’s next regular meeting on Dec. 14, though the commission’s chairman appears strongly opposed to the idea.

This after orders out of the up-until-recently split FERC — such as the renewable-friendly/thermal-antagonistic revisions to PJM’s capacity-offer rules (MOPR and MSOC, for the arcane-acronym-lovers out there) — have further pushed the envelope on integrating renewables.

Interestingly, FERC recently demurred in a case involving utilities within the Tennessee Valley Authority region seeking to force an unwilling TVA to allow open-access use of its transmission lines to buy cheaper power elsewhere, shrugging that TVA isn’t within FERC’s jurisdiction though arguing it’s time that it should be.

So where does this undercurrent of "you're not the boss of me" bristling go, mirroring in many ways as it does the nationwide identity-politics war? As always, “follow the money” is surely valid advice. PJM and MISO never miss opportunities to note their value-add provides billions of dollars in benefits and savings each year. If or when those savings are eventually offset for individual states remains to be seen, but it’s sure to hinge at least in part on how much they’re asked to pay for other states’ more-aggressive actions.

Discussions
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Bob Meinetz's picture
Bob Meinetz on Dec 2, 2021

What a surprise, Rory. De-regulate electricity, and everyone wants a piece of the action. Whether it's good for the environment, ratepayers, states, reliability, or anything else doesn't matter - as long as it's profitable.

Re-regulation is the answer, of course, but that may be the biggest challenge of all. The genie is out of the bottle.

Rory Sweeney's picture
Rory Sweeney on Dec 3, 2021

Thanks for the comment, Bob. I come away with a different conclusion, though, and perhaps it's only a perspective thing -- which system do you trust more to get it right: leaving all decisions to a few politically connected individuals bombarded on all sides by powerful interests trying to influence those decisions (not to mention whichever way the wind's blowing), or pitting those interests against each other by exploiting their natural tendencies toward selfishness and antagonism?
Personally (and feel free to call me a cynic -- guilty as charged -- but don't forget to include "pragmatic"), I consider the second option to be more pure. As ironic as that might sound, I prefer to take human nature as it is and develop constructs around those realities rather than futilely (however nobly) attempt to reform how our subconscious works. The latter, in my estimation, is hubris.
So I just think we haven't gotten the market elements right yet, not that competition is fundamentally the wrong choice.

Bob Meinetz's picture
Bob Meinetz on Dec 3, 2021

Rory, thanks for your thoughtful response. I like to consider myself a "hardcore moderate", and I'm largely sympathetic to your argument.

Electricity is unique though, in that for end users it remains a monopoly. In a recent email exchange I was enlightened to that fact by a former career attorney at the Federal Energy Regulatory Commission (FERC). After suggesting various alternatives for making the electricity market more competitive, she responded, "What leads you to believe a market exists for electricity? Without freedom of choice on the part of the retail customer, without real alternatives, each with its own benefits and qualities, there is no free market for electricity. It's a natural monopoly, and always has been."

For a product that most believe is a fundamental right - like access to clean water, like waste / sewage disposal, like security (police) protection - there are no free market answers. And in general, public problems have never been solved by private interests.

Until the Great Depression, utility customers faced skyrocketing prices and disconnection by the companies bringing electricity to their homes - if they wanted electricity they had no other options. In response, FDR signed the Public Utility Holding Company Act (PUHCA) into law. It put all utilities under oversight of the federal Securities and Exchange Commission. And after PUHCA was repealed in 2005, we're right back where we started (in California, retail prices have risen by 40% since 2011).

Though competition is fine for groceries, cars, and airplane tickets, for electricity it doesn't exist. And I fear that's a hard lesson we'll eventually have to learn again, the hard way.

Andrew Blakers's picture
Andrew Blakers on Dec 6, 2021

Interstate transmission and electricity distribution is a natural monopoly (short of running redundant powerlines in parallel). However, electricity supply per se is not a monopoly in several important aspects, driven by the dramatic fall in the cost of solar and wind:

  • The rise and rise of rooftop solar, coupled with EVs (50 kWh batteries), thermal storage (hot water, ceramic heat stores etc), sophisticated demand management, and local power sharing, allows houses, businesses, suburbs and small towns to become substantially self-sufficient at low cost. Whether they will choose to do so depends on the quality and cost of grid supply.
  • Transmission, large-scale pumped hydro storage, large-scale aggregations of EV batteries, and large-scale demand management (packaging thousands of consumers) can be traded off against one another since they accomplish similar tasks to a substantial degree.
  • Rapidly falling cost of solarfarms & windfarms, below the operational cost of coal and nuclear, offers a major new choice in generation capacity
  • Offshore wind offers coastal states direct access to very large scale and competitive electricity that can be brought ashore directly in each state.

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