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APPA, Other Groups Urge Lawmakers to Appropriate $1 Billion for Distribution Transformers

November 21, 2022

by Paul Ciampoli
APPA News Director
November 21, 2022

Lawmakers should appropriate $1 billion this year for implementation of the Defense Production Act (DPA) to specifically address the supply chain crisis for electric distribution transformers, the American Public Power Association (APPA), the National Rural Electric Cooperative Association (NRECA), Edison Electric Institute (EEI), National Association of Home Builders (NAHB), Leading Builders of America (LBA), and Associated General Contractors of America (AGC), said in a Nov. 18 letter.

The letter was sent to Sen. Patrick Leahy, D-Vt., Chairman of the Senate Committee on Appropriations, Sen. Richard Shelby, R-Ala., Vice-Chairman of the Senate Committee on Appropriations, Rep. Rosa DeLauro, D-Conn., Chairwoman of the House Committee on Appropriations, and Rep. Kay Granger, R-Texas, Ranking Member, House Committee on Appropriations.

In June 2022, President Biden announced that he was invoking the DPA to accelerate the domestic production of certain clean energy technologies, which included grid components and distribution transformers. Under DPA authorities, DOE could rapidly support domestic manufacturing capacity through purchases of equipment or materials, financial assistance in capital to expand production lines, or making subsidy payments for the supply of high-cost materials. For DOE to utilize DPA authorities, it must receive a direct appropriation from Congress.

“Throughout 2022, the electric sector and representatives from residential and commercial building sectors have been calling attention to the unprecedented supply chain challenges both industries have been facing in procuring equipment used to maintain and grow the electric grid,” wrote APPA President and CEO Joy Ditto and leaders of the other groups.

“Specifically, electric utilities continue to have significant problems in procuring basic equipment – particularly distribution transformers – needed to operate the grid, provide reliable electric service, and restore power following severe storms and natural disasters. In housing construction, this is further exacerbating their ability to address the housing affordability crisis facing our nation.”

Due to the threats to reliability, the Electricity Subsector Coordinating Council (ESCC) established an industry “Tiger Team” to examine the supply chain crisis, the letter noted.

“Through this process, the electric industry has been able to report and confirm what individual utilities and the housing industry have been saying since late last year: that construction and electrification projects are now being deferred or canceled and that they are concerned about their ability to adequately respond to major storms due to depleted stockpiles,” the groups said.

The Tiger Team ultimately found that current transformer production is not meeting demand and that demand is expected to continue to increase in the coming years. Between 2020 and 2022, average lead times to procure distribution transformers across all segments of the electric industry and voltage classes rose 443 percent. The same orders that previously took two to four months to fill are now taking on average over a year. “This is a serious threat to reliability,” the groups said.

Among initial considerations for the federal government to address are labor shortages and material availability, which were identified as the most immediate short-term barrier to more manufacturing output. Additional long-term recommendations include building manufacturing capacity to support long-term demand and investing in domestic production of grain-oriented electrical steel (GOES), a key transformer component, the letter noted.

Usage of DPA authorities to address labor and material shortages, focused specifically on the production of distribution transformers, “is the most immediate way we can address this growing crisis. The upcoming work period is a critical opportunity to appropriate funds needed to help address these problems before the end of this year,” the letter said.

APPA is asking its members to reach out to their congressional delegation to support this appropriation request.

APPA Survey of Members Shows Distribution Transformer Production Not Meeting Demand and Shortages Pose an Urgent Threat

An APPA survey of its members shows that production of distribution transformers is not meeting current demand, “as evident in the significantly growing lead times, lack of stock in yards and the high number of project deferrals,” APPA said. Utilities are reporting low or near zero emergency stock, often used to recover post-disaster or do infrastructure maintenance. Electric reliability is under severe threat with demand increasing, lead times growing, and stockyards emptying.

APPA’s Joy Ditto Voices Concerns About Potential Railroad Strike in Letter to President Biden

November 21, 2022

by Paul Ciampoli
APPA News Director
November 21, 2022

In a Nov. 18 letter to President Biden, Joy Ditto, President and CEO of the American Public Power Association (APPA), voiced concerns about the potential for a strike by railroad workers, saying that a work stoppage would “seriously threaten” the reliability of electric grids in public power communities.

“I write to add the American Public Power Association’s (APPA) voice to the chorus of great concern being expressed regarding the ongoing railroad labor negotiations and the potential for a strike,” wrote Ditto.

“Public power utilities rely on railroads to receive fuel, chemicals, and other equipment necessary to provide their communities with essential electric service. A work stoppage would seriously threaten the reliability of the electric grids in their communities, as well as further pressure already strained supply chains and increase prices at a time of already high inflation,” she said.

For months, APPA has been calling attention to the enormous challenges our members are facing in procuring basic equipment to provide electric service and to restore service following storms and natural disasters.

“Distribution transformers pose a particularly acute problem; our members are now facing lead times of more than a year for delivery and, in many cases, are being limited in the number they are allowed to purchase,” wrote Ditto.

Transformers are also necessary to extend electric service to new homes, businesses, and communities, she noted. “Prices have also gone up precipitously. As not-for-profit electric utilities, increased equipment costs are shouldered directly by our customers. A rail work stoppage on top of these already formidable supply chain challenges would be calamitous.”

Ditto said APPA appreciates the hard work the Biden Administration put into averting a strike in September “and we urge all parties to redouble efforts to avoid a strike now.”

Comment Period Opens on Proposal to Add Reliability Mechanism to Texas Market

November 17, 2022

by Peter Maloney
APPA News
November 17, 2022

The Public Utility Commission of Texas (PUCT) is seeking comment on a report on reforms aimed at bolstering the reliability of the state’s wholesale electric market.

The report, Assessment of Market Reform Options to Enhance Reliability of the ERCOT System, includes “novel hybrid designs that maintain the unique” energy-only wholesale power market of the Electric Reliability Council of Texas (ERCOT). The study was done by Energy+Environmental Economics (E3).

The PUCT developed a Blueprint for Wholesale Market Design in response to legislation passed by Texas’ 87th Legislature, SB 3, calling for electric market reforms in the wake of the widespread outages and hundreds of deaths caused by Winter Storm Uri in February 2021.

The objective of the law, as regards generation reliability during extreme weather, is to set a reliability standard of a 1-in-10 loss of load expectation (LOLE) in order to establish sufficient reserves at all times and to provide a means of providing incentives for building new dispatchable generation.

Pursuant to the law, the PUCT agreed to develop tools to meet reliability needs not met by ERCOT’s real-time and ancillary services market. Phase II of the Market Design Blueprint adopted by the PUCT last December called for the commission to study hybrid designs that would maintain ERCOT’s energy-only energy market while providing incentives to ensure sufficient generation resources to meet reliability needs.

The recently released E3 report analyzed six proposed market design modifications and incorporated the results of over 35 hours of testimony and more than 300 written submissions received during the PUCT’s public comment period.

The PUCT was not, however, able to open for comment one design, the Performance Credit Mechanism (PCM), that emerged from the review and analysis process. The PUCT, therefore, opened a public comment period on the PCM option (Project 54335). The public comment period closes at noon on Dec. 15.

In addition to a status quo option, the reviewed market modification options included a Load Serving Entity Reliability Obligation (LSERO) that would require load serving entities to acquire reliability credits bilaterally from generators based on forward forecasts, a Forward Reliability Market (FRM) that would create a mandated, centrally cleared reliability market administered by ERCOT, a Backstop Reliability Service (BRS) that would authorize ERCOT to procure resources sufficient to meet reliability needs, and a Dispatchable Energy Credit (DEC) that would require load serving entities to procure credits equal to 2 percent of their annual load. The PCM would establish a process in which credits are awarded based on historic generation during periods of high stress on the grid.

The energy-only status quo scenario would result in a 2026 loss of load expectation of 1.25 days per year, far above the common industry standard of 0.1 days per year, and the exit of 11,260 megawatts (MW) of coal- and gas-fired generation capacity at a customer cost of $22.3 billion per year, according the E3’s analysis in the report.

The LSERO, FRM and PCM designs would result in the addition of 5,630 MW of incremental gas-fired capacity with a LOLE of 0.1 days per year and an annual cost of $460 million per year.

The BRS design would result in the addition of 5,620 MW and a LOLE of 0.1 days per year at an annual cost of $360 million. The DEC design would lead to an aggregate reduction in natural gas-fired generation, resulting in an LOLE of 2.03 days per year at an annual cost of $490 million, according to E3’s analysis.

The PCM design is similar to the LSERO and FRM designs but is less complex and avoids the need for forward looking accreditation, but generator revenues would be less stable under PCM and the design would be less able to less able to reflect infrequent extreme weather conditions, E3 said.

Multiple market designs in the report appear capable of improving market signals to ensure reliability, E3 said, but in the end the report’s authors recommended the FRM design as a “more suitable fit” for the ERCOT market that would “provide more natural year-to-year stability over market outcomes.” The PCM design, E3 said, would “entail significant risk because of its novelty.”

The PCM design has elements similar to the LSERO but “introduces features that may be more consistent with ERCOT market principles such as earned accreditation rather than an upfront administrative process,” PUCT staff said in the filing releasing the report and recommending the opening of the comment period on the PCM design.

Department of Energy Makes Nearly $350 Million Available for Long-Duration Energy Storage

November 17, 2022

by Paul Ciampoli
APPA News Director
November 17, 2022

The U.S. Department of Energy (DOE) recently announced nearly $350 million for emerging Long-Duration Energy Storage (LDES) demonstration projects.

The LDES Demonstrations Program will be managed by DOE’s Office of Clean Energy Demonstrations (OCED) and will fund nearly $350 million for up to 11 demonstration projects — projects that will contribute to the Department-wide goal of reducing the cost of grid-scale energy storage by 90% within the decade. DOE will fund up to 50% of the cost of each project.

The program aims to fund projects that will overcome the technical and institutional barriers that exist for full-scale deployment of LDES systems by focusing on a range of different technology types for a diverse set of regions.  

Letters of Intent are due by December 15, 2022, and full applications are due by March 3, 2023. Additional funding opportunities may follow this announcement to validate and accelerate commercialization of LDES technologies.  

In October, DOE issued a $30 million Lab Call Announcement for Long-Duration Energy Storage Demonstrations. Remaining funding for LDES programs will be covered at a later date. 

For more information on DOE’s Long-Duration Storage Shot initiative, click here. 

APPA Responds to FERC Proposals on Cybersecurity Rate Incentives

November 17, 2022

by Paul Ciampoli
APPA News Director
November 17, 2022

The Federal Energy Regulatory Commission (FERC) should reconsider several aspects of a Notice of Proposed Rulemaking (NOPR) on cybersecurity rate incentives including a proposal that would allow a 200-basis point return on equity (ROE) adder on eligible investments, the American Public Power Association (APPA) said in recent comments filed at FERC.

If the Commission allows an enhanced ROE on eligible investments, it should limit the incentive to 50 basis points, as the proposed 200-basis point adder is more than necessary to promote cybersecurity investment and could impose excessive costs on consumers, APPA said in its comments filed this month.

The comments responded to the FERC NOPR issued in September.

At the outset of its comments, APPA noted that it supports prudent utility investment to address the growing cybersecurity threats faced by the nation’s electric grid.  APPA also recognizes that, in adding section 219A to the Federal Power Act (FPA) Congress has directed the Commission to adopt incentive rate treatments (or performance-based rates) to promote certain cybersecurity-related investments. 

“While many features of the NOPR strike an appropriate balance between encouraging cybersecurity investment and protecting customers from unreasonable costs, APPA respectfully submits that certain aspects of the NOPR do not fully comply with the FPA’s requirements for incentive rate mechanisms, which remain fully applicable to any rule promulgated under section 219A.”

APPA urged the Commission to modify certain of the NOPR’s proposals while preserving the features of the NOPR designed to protect customers and ensure transparency.

NOPR Details

Under the NOPR, cybersecurity expenditures would be eligible for an incentive including both expenses and capital investments associated with advanced cybersecurity technology and participation in a cybersecurity threat information sharing program. 

Also, eligible cybersecurity expenditures would be voluntary and have to materially improve the utility’s cybersecurity posture. FERC proposes to establish a pre-qualified list of cybersecurity expenditures that are eligible for incentives that would be publicly maintained on FERC’s website.

The proposed incentives would take two forms: a return on equity adder of 200 basis points, or deferred cost recovery that would enable the utility to defer expenses and include the unamortized portion in its rate base, on which the utility could earn a return (the Regulatory Asset Incentive).

Approved incentives, with certain exceptions, would remain in effect for up to five years from the date on which the investments enter service or expenses are incurred.

Incentives Should Be Narrowly Tailored to Satisfy the Requirements of FPA Section 219A

Along with its concerns about the ROE adder proposal, APPA also said that FERC must ensure that there is a nexus between the incentives and project investment decision.

Such a requirement conforms the Commission’s regulations to precedent requiring the Commission, in awarding rate incentives under the just and reasonable standard, to see to it that the increase is in fact needed, and is no more than is needed, for the purpose, it said.

“Evaluating applications for incentives to ensure that there is a nexus between the incentive and the applicant’s investment decision is also necessary to verify that incentives are not awarded for actions that a utility has already taken or is already required to take,” APPA said.

While Congress has required FERC to adopt a rule providing incentives, the Commission, in designing such incentives, must conform to longstanding requirements for just and reasonable rate incentives, it said.

In considering the design of incentives under FPA section 219A, the Commission should also take into account evidence that lucrative incentives are generally unnecessary to promote cybersecurity investment, APPA argued.

The Commission Should Limit the Regulatory Asset Incentive to 50 Percent of Project Investment

APPA noted that in connection with the Regulatory Asset Incentive, the NOPR asks whether it would be preferable to permit only 50% of incentive-eligible expenses to be treated as regulatory assets.

“APPA encourages the Commission to adopt this change from the NOPR’s proposal to allow the entire qualifying expenditure to be accorded regulatory asset treatment.”

APPA also said that incentives should not be available for investments that utilities are required to make or that have already been made.

Southeast Energy Exchange Market Begins Operations

November 16, 2022

by Paul Ciampoli
APPA News Director
November 16, 2022

The Southeast Energy Exchange Market (SEEM) on Nov. 9 announced that it has initiated operations.

The new SEEM platform will facilitate automated, sub-hourly trading, allowing participants to buy and sell power close to the time the energy is consumed, utilizing available unreserved transmission. Participation in SEEM is open to any entity that meet qualifying requirements. 

Founding members of SEEM include Associated Electric Cooperative, Dalton Utilities, Dominion Energy South Carolina, Duke Energy Carolinas, Duke Energy Progress, Georgia System Operations Corporation, Georgia Transmission Corporation, LG&E and KU Energy, MEAG Power, N.C. Municipal Power Agency No. 1, NCEMC, Oglethorpe Power Corp., PowerSouth, Santee Cooper, Southern Company, and TVA. 

Four Florida energy companies – Duke Energy Florida, JEA, Seminole Electric Cooperative and Tampa Electric Company – have signed agreements to join as members of SEEM effective Jan. 1, 2023 and expect to initiate active energy trading in mid-2023. 

With their addition, the SEEM footprint would include 23 entities in parts of 12 states with more than 180,000 MW (summer capacity; winter capacity is nearly 200,000 MW) across two time zones.

TVA Pilot Program to Examine Installing Solar Projects at Closed Coal Ash Sites

November 16, 2022

by Paul Ciampoli
APPA News Director
November 16, 2022

The Tennessee Valley Authority (TVA) Board of Directors recently approved a pilot program to determine if closed coal ash sites are suitable for utility-scale solar projects.

Pending environmental reviews and regulatory approval, the $216 million pilot project would explore an innovative approach to repurpose a closed coal ash site at the Shawnee Fossil Plant to advance TVA’s clean energy efforts, TVA said.

TVA previously issued a request for proposals for conducting a Valley Decarbonization Study in calendar year 2023. The study is intended to model pathways to further reductions in emissions throughout the economy.

The Board recognized TVA’s fiscal year 2022 decarbonization initiatives guided by the agency’s strategic priorities and guiding principles:

Columbus, Ohio, Unveils First Solar-Powered Microgrid

November 16, 2022

by Paul Ciampoli
APPA News Director
November 16, 2022

The City of Columbus, Ohio’s Department of Public Utilities recently put into operation its first-ever solar-powered microgrid.

The purpose of the microgrid, which is located at the Tussing Water Booster Station, is to serve as a backup power source to the main power grid.

If grid power is lost or disrupted, the microgrid will enter “island mode” and utilize the onsite solar and battery energy storage system to operate one of the three booster pumps at the station, ensuring residents continue to receive safe and clean drinking water, the city noted in a Nov. 3 news release.

The microgrid consists of two main components — a 100-kilowatt solar panel system and the battery energy storage system. The solar energy can be stored in the batteries or converted for use in island mode to power the pump station. The battery system has a power rating of 442 kW.

The water towers can supply drinking water for 1-2 days without electricity, but the microgrid is designed to extend its ability to supply water during an outage for a minimum of six hours with the potential to extend it for many days using energy supplied by the solar panels.

“This microgrid will support residents continuing to receive safe, clean drinking water during times of climate crisis and emergency situations,” said Kristen Atha, director of the Department of Public Utilities.

In an interview with Public Power Current, Phil Schmidt, project manager for the Division of Water Tussing Water Booster Station Solar Microgrid, detailed why the water booster station was chosen for the project’s location.

He noted that available space on the site was a key driver for the microgrid’s site selection. “About a decade ago we built a second water tower and as part of that process we acquired some additional land,” Schmidt said. “We had some green space available, and I think that was just the big driver for this project…we needed the footprint to be able to put these solar panels on the property, so this site was a good candidate.”

The city’s climate action plan commits Columbus to achieve carbon neutrality by 2050. One of the actions under the plan aims to evaluate microgrids and storage projects, with targets to complete a prioritization study by 2025 and implement five microgrid pilot projects by 2030. 

Erin Beck, Assistant Director in the city’s Sustainable Columbus office, told Public Power Current that the climate action plan “is really meant to be our roadmap” for how the city will achieve carbon neutrality by 2050 “and how we’re imparting equity and environmental justice to our residents here in Columbus.”

Beck noted that “another key goal in our climate action plan is we’re looking for at least a 45 percent reduction in emissions by 2030.” The plan includes five sections, 13 strategies and 32 distinct actions.

The microgrid project has been in development since 2019 and was supported through a funding initiative and partnership with investor-owned AEP Ohio.

When asked about where things stand with planning for the other microgrid pilot projects, Beck said, “From the wider community perspective, the goal is to do five by 2030 and that is across our entire community, so that could be either with” the city’s Division of Power or working again with AEP Ohio “to identify some potential other sites.”

She noted that “one other thing we’re really looking to do throughout the community is establish a network of resiliency hubs and so we’re really trying to tie some of the microgrid work into that resiliency hub work as well.”

The climate action plan notes that “every neighborhood is unique, and as such the needs of its members vary. The development of localized resilience hubs can respond to its community depending on the situation. Whether it is natural disasters or utility outages, a trusted community member will know how to reach and assist its most vulnerable citizens.”

Department of Energy Announces Nearly $9 Billion for Home Energy Rebate Programs

November 15, 2022

by Paul Ciampoli
APPA News Director
November 15, 2022

The U.S. Department of Energy (DOE) recently announced nearly $9 billion will be available to states and Tribes from the Inflation Reduction Act for consumer home energy rebate programs.

DOE estimates that the home energy efficiency and electrification consumer rebates authorized will save households up to $1 billion annually.

From November through January, DOE will hold a series of listening sessions to engage a wide array of stakeholders, including direct engagement with states and Tribes, labor, industry, and others, on these consumer rebate programs.

Following the listening sessions, DOE will issue a Request for Information for public input in early 2023.

DOE anticipates that the funding to states and Tribes will be available by Spring 2023, and the rebates will be available to the public later in the year.

The Inflation Reduction Act includes multiple tax incentives and investments to bolster consumer home energy rebate programs.

Programs that states will implement include:

The home energy performance-based, whole house rebates (HOME Rebates) for:

The high-efficiency electric home rebate program to:

To learn more about home energy efficiency and electrification rebates available through Inflation Reduction Act, visit https://cleanenergy.gov/.

NYPA’s Sylvia Louie Receives DOE Clean Energy Education and Empowerment Award

November 15, 2022

by Paul Ciampoli
APPA News Director
November 15, 2022

Sylvia Louie, a director of business development at the New York Power Authority (NYPA), is the recipient of a Department of Energy (DOE) 2022 Clean Energy Education and Empowerment (C3E) award.

The C3E Initiative aims to close the gender gap and increase the participation, leadership, and success of women in a diverse array of clean energy fields.

As part of the NYPA development team, Louie focuses on development of large-scale renewables, energy storage, and transmission projects. Along with a variety of projects, she supports opportunities for public–private collaborations to help achieve state energy goals. 

Louie joined NYPA in 2009 as a mechanical engineer, providing engineering design skills to the Energy Services & Technology group and supporting implementation of energy-saving initiatives for NYPA customers. In 2012, she joined the Clean Energy Technology group, focusing on development of clean energy technology projects.

In 2014, she entered the executive office as a Special Project Manager, helping NYPA leadership set strategic initiatives for a clean energy future. Prior to joining NYPA, she spent four years as a design engineer of HVAC systems for a small consulting engineering firm.

Each awardee receives a cash gift of $8,000 and national recognition of their efforts. 

Now in its 11th year, the C3E Initiative is led by DOE in collaboration with the MIT Energy Initiative, Stanford University’s Precourt Institute for Energy, and the Texas A&M Energy Institute.

Additional information about the awards including other winners is available here.