Federal Energy Regulators Finalize Rules to Bolster Reliability Against Extreme Weather Threats
June 15, 2023
by Paul Ciampoli
APPA News Director
June 15, 2023
The Federal Energy Regulatory Commission on June 15 finalized two rules intended to help improve reliability of the bulk power system against threats of extreme weather.
One rule directs the North American Electric Reliability Corporation to develop a new or modified reliability standard to require transmission system planning for extreme heat and cold weather conditions over wide geographical areas, including studying the impact of concurrent failures of bulk power system generation and transmission equipment and implementing corrective actions as needed.
In a presentation at FERC’s open meeting, Commission staff noted that NERC must develop a new reliability standard or modifications to the current transmission planning Reliability Standard, TPL-001-5.1, no later than 18 months from the date of publication of the final rule in the Federal Register.
Specifically, the final rule directs NERC to develop a new or modified reliability standard that addresses three major concerns.
First, the draft final rule requires the proposed standard to define benchmark events based on prior extreme heat and cold weather events and/or future meteorological projections.
Second, the proposed standard must require planning entities to develop planning cases for extreme heat and cold weather events using steady state and transient stability analyses that cover a range of extreme weather scenarios, including the expected resource mix’s availability during extreme weather conditions and the wide-area impacts of extreme weather.
Third, to the extent these planning studies discover specified instances when performance requirements during extreme heat and cold weather events are not met, the proposed standard must require planners to develop corrective action plans to allow the performance requirements to be met.
The second rule directs transmission providers to submit one-time reports describing their policies and processes for conducting extreme weather vulnerability assessments and identifying mitigation strategies (Docket Nos. RM22-16, AD21-13).
FERC staff noted that an extreme weather vulnerability assessment — as defined in the final rule — is any analysis that identifies where and under what conditions jurisdictional transmission assets and operations are at risk from the impacts of extreme weather events, how those risks will manifest themselves, and what the consequences will be for system operations.
The final rule directs FERC-jurisdictional transmission providers to file one-time informational reports describing how they conduct extreme weather vulnerability assessments, if at all.
Specifically, transmission providers will need to report how they: 1) establish a scope; 2) develop inputs; 3) identify vulnerabilities and exposure to extreme weather hazards; 4) estimate the costs of impacts; and 5) use the results of vulnerability assessments to develop risk mitigation measures.
FERC staff said the reports would provide the Commission with a fuller record as to whether and how transmission providers assess and mitigate vulnerabilities to extreme weather and will enable coordination among transmission providers as well as information sharing on best practices.
The final rule reflects certain changes from a related Notice of Proposed Rulemaking, FERC staff said. The changes include requiring reporting on how transmission providers define extreme weather and requiring reporting on how Regional Transmission Organizations and Independent System Operators account for differences between transmission owner members’ assumptions and results.
The new rules stem from the Commission’s June 2021 technical conference on Climate Change, Extreme Weather and Electric System Reliability.
Both rules take effect 90 days after publication in the Federal Register.
FERC Approves Final Rule Aimed at Improving Credit Risk Management in Wholesale Power Markets
June 15, 2023
by Paul Ciampoli
APPA News Director
June 15, 2023
The Federal Energy Regulatory Commission on June 15 approved a final rule designed to improve credit risk management in the organized wholesale electric power markets operated by regional transmission organizations and independent system operators.
The Commission’s final rule will allow RTOs and ISOs to share credit-related information among themselves so they can better assess market participants’ credit risks.
The final rule explains that permitting the sharing of credit-related information among RTOs and ISOs could improve their ability to assess market participants’ credit exposure across multiple electric power markets.
It also could enable market operators to respond to credit events more quickly and effectively, thereby minimizing the overall risks of unexpected defaults by market participants.
The market operators’ tariffs currently contain confidentiality provisions that act as barriers to such information sharing.
The final rule and a July 2022 Notice of Proposed Rulemaking “demonstrate the Commission’s commitment to ensuring that market rules minimize the overall risks of unexpected defaults by market participants and respond to concerns raised” at a February 2021, FERC staff technical conference on principles and best practices for credit risk management in organized wholesale electric markets, FERC said.
The final rule takes effect 60 days after publication in the Federal Register.
APPA Welcomes Release of Elective Payment of Energy Tax Credit Guidance
June 14, 2023
by Paul Ciampoli
APPA News Director
June 14, 2023
The American Public Power Association on June 14 said that it is glad to see the release of the notice of proposed rulemaking for elective payments made possible by the Inflation Reduction Act.
The guidance was released by the Internal Revenue Service and the Treasury Department.
“We are still reviewing the proposed rules and expect to file comments but appreciate greatly the work that has been done to date to reach this point,” APPA said in a statement.
Prior to the IRA, utilities serving nearly 30 percent of the nation’s customers were excluded from receiving energy incentives delivered through the tax code, meaning the vast majority of wind, solar, and other non-hydropower renewable generation is owned by merchant generators with roughly 60 percent of the value of associated tax credits going to banks, insurance companies, and other financial “owners.”
“Elective payment of tax credits has the potential to be revolutionary for such investments, unlocking the ability for public power communities to own and control such projects, rather than going hat in hand to Wall Street hoping to find a willing investor. That means local decision-making driving local generation and jobs,” APPA said.
APPA noted that one caveat is that to claim energy tax credits through elective payment, the qualifying project must meet domestic content requirements.
Draft proposed domestic content regulations released by Treasury last month, though, appear quite challenging to meet from a substantive and logistical standpoint, APPA said. That means many entities wishing to claim direct payment may have to rely on waivers from the domestic content requirement for elective payments.
As a result, APPA “eagerly awaits guidance on these waivers, which if drafted correctly could mean elective payment spurring local clean energy resource development.”
The proposed rules that will be formally published in the Federal Register on June 21, 2023, include:
- Pre-Filing Registration Requirements for Certain Tax Credit Elections
- Section 6417 Elective Payment of Applicable Credits;
- Section 6418 Transfer of Certain Credits
House Committee Passes Bill That Retains Direct Payment of Certain Energy Tax Credits
June 14, 2023
by Paul Ciampoli
APPA News Director
June 14, 2023
The House Committee on Ways and Means on June 13 passed legislation that retains direct payment of certain energy tax credits but repeals some aspects of the energy tax provisions of the Inflation Reduction Act.
H.R. 3938, the Build It in America Act, would repeal the Clean Energy Production Credit, the Clean Energy Investment Credit, the Previously-Owned Clean Vehicle Credit and the Commercial Clean Energy Vehicle Credit.
At this point, it is not clear when the measure might be considered by the House and Senate Finance Committee Chairman Ron Wyden (D-OR) has said the repeal of the energy tax provisions will not be considered in his committee.
Under the bill, in general, there would be no production tax credit for wind, solar, closed-loop biomass, open-loop biomass, geothermal energy, municipal solid waste, qualified hydropower production, and marine and hydrokinetic renewable energy facilities construction of which begins after December 31, 202; and
Also, there would be no investment tax credit for solar energy property, fuel cell property, geothermal power property, fiber optic solar and electrochromic glass property, small wind property, waste energy recovery property, energy storage technology property, biogas property, microgrid controller property, combined heat and power system property placed in service after December 31, 2024.
The American Public Power Association strongly supports the use of refundable direct payment tax credits as a way of ensuring access to energy tax credits for projects owned by public power.
As a result, it is glad to see the decision to retain access to refundable direct payment tax credits for other tax credits, including the production tax credit, investment tax credit, carbon capture credit, the storage credit, and the advance nuclear tax credits.
At the same time, the Association said that by repealing the new “tech-neutral” production and investment tax credits created under IRA and allowing the current ITC and PTC to expire after 2024, the bill would inject needless uncertainty into ongoing federal incentives for these investments, putting in jeopardy public power’s ability to reliably and affordably make the investments needed to transition to a cleaner generation resource mix.
Researchers Envision Making Backup Energy Storage Available by Rail
June 13, 2023
by Peter Maloney
APPA News
June 13, 2023
A new paper from researchers at Lawrence Berkeley National Laboratory details how railways could provide an energy storage network that offers a flexible option for backup power for the grid.
In the paper, Leveraging rail-based mobile energy storage to increase grid reliability in the face of climate uncertainty, published in Nature Energy, the researchers compared the cost of deploying batteries on rail cars for low-frequency events, such as weather related power outages, with the investment costs of stationary energy storage and transmission lines.
The study looked at historical freight rail flows, costs, and scheduling constraints to see whether railroads could be summoned to transport batteries for high-impact events, given that grid operators typically have at least a few days’ notice, and sometimes up to a week, when extreme weather is coming. The paper’s authors found that mobile energy storage could travel between major power markets along existing rail lines within a week without disrupting freight schedules.
In cases where the trains need to cover distances of about 250 miles or less, rail-based energy storage could make more sense from a cost perspective than building stationary battery banks to fill supply gaps that happen during less than 1 percent of the year’s total hours, the researchers found. At that range, transmission lines are more cost effective than rail lines, if the batteries are used more frequently, the researchers added.
When distances grow to more than 930 miles, rail transport of energy storage becomes cheaper than transmission lines for low-frequency events, the paper found. Bringing energy storage to weather-affected areas by rail could save the power sector upwards of 60 percent of the total cost of a new transmission line or 30 percent of the total cost of stationary battery storage, the authors concluded.
While both new transmission lines and banks of batteries to store energy will be needed to meet demand and provide backup power for a grid that is increasing powered by intermittent renewable resources, “we wanted to explore additional, complementary technologies,” Natalie Popovich, a Berkeley Lab research scientist and co-author of the study, said in a statement. “We have trains that can carry a gigawatt-hour of battery storage, but no one has thought in a cohesive way about how we can couple this resource with the electric grid.”
The paper cited New York State with its robust freight capacity and current transmission constraints between upstate clean energy generation and downstate load centers, as an example of where rail-based mobile energy storage could work well. In other cases, the authors said, it may make sense for multiple states to share the additional capacity from a rail-based battery bank.
“This is not necessarily a resource that needs to be in one region,” Jill Moraski, a graduate student at the University of California Berkeley, researcher at Berkeley Lab, and the paper’s lead author, said in a statement. “It can operate similar to an insurance policy, where you spread the coverage across risks for a wide geographic region.”
The authors acknowledged that regulatory and infrastructure hurdles exist. For instance, there are not adequate interconnections to take power off a train and plug it into the grid, nor are there approval processes, pricing regimes nor regulatory frameworks in place.
They also acknowledged that extending energy storage across the rail network is not a replacement for expansion of the existing transmission infrastructure, but it could be an important complement.
“Our paper gives a top-level overview of how rail-based mobile energy storage could benefit today’s grid, in today’s climate,” Moraski said.
House Bill Would Retain Direct Payment of Certain Energy Tax Credits
June 12, 2023
by Paul Ciampoli
APPA News Director
June 12, 2023
A plan released on June 9 by House Committee on Ways and Means Republicans to repeal some aspects of the energy tax provisions of the Inflation Reduction Act would retain direct payment of certain energy tax credits.
The American Public Power Association strongly supports the use of refundable direct payment tax credits as a way of ensuring access to energy tax credits for projects owned by public power.
The bill, H.R. 3938, the Build It in America Act, is scheduled to be considered by the committee on June 13.
The bill would repeal the Clean Energy Production Credit, the Clean Energy Investment Credit, the Previously-Owned Clean Vehicle Credit and the Commercial Clean Energy Vehicle Credit. It would also modify the Clean Vehicle Credit.
The bill retains access to refundable direct payment tax credits for other tax credits, including the production tax credit, investment tax credit, carbon capture credit, the storage credit, and the advance nuclear tax credits.
Treasury, IRS Release Additional Details on Applying for Energy Credit Program
June 5, 2023
by Paul Ciampoli
APPA News Director
June 5, 2023
The U.S. Department of the Treasury and the Internal Revenue Service on May 31 released guidance that provides additional information about the application process and technical guidance for the expanded Qualifying Advanced Energy Project Credit program under the Internal Revenue Code.
Treasury and IRS established the expanded program under section 48C of the Internal Revenue Code on February 13, 2023.
The guidance is available on the IRS website.
The Qualifying Advanced Energy Project Credit renews and expands a tax credit created in 2009 through the American Recovery and Reinvestment Act.
It provides incentives for clean energy manufacturing and recycling, industrial decarbonization, and critical materials processing, refining, and recycling.
A broad variety of projects are eligible to apply for an investment tax credit of up to 30 percent, ranging from manufacturing of fuel cells and components for geothermal electricity and hydropower, to producing carbon capture equipment or installing it at an industrial facility, to critical minerals processing.
The Inflation Reduction Act provided $10 billion in new funding for the Qualifying Advanced Energy Project Credit program. Congress required that at least $4 billion be reserved for projects in communities with closed coal mines or retired coal-fired power plants. The initial funding round will include $4 billion, with about $1.6 billion reserved for projects in these designated coal communities.
To apply, taxpayers will submit concept papers describing the proposed project. Taxpayers whose concept papers receive a favorable review will be encouraged to submit a full application.
Concept paper submissions will be accepted starting June 30, 2023, and the deadline for concept papers will be July 31, 2023. Starting on May 31, taxpayers can access information and materials for preparing their concept papers.
More information for potential applicants, including a 48C mapping tool and an upcoming informational webinar, is available on the Department of Energy’s 48C webpage.
Treasury and IRS also released a Notice of Proposed Rulemaking for the Low-Income Communities Bonus Credit program under Section 48(e) of the Internal Revenue Code, which was established earlier this year.
The NPRM proposes rules for the application process and technical guidance for this program, which provides up to a 20-percentage point boost to the Investment Tax Credit for up to 1.8 gigawatts annually of solar and wind energy projects (with maximum output of less than 5 megawatts) located in low-income communities or otherwise serving low-income populations.
The NPRM reflects recommendations from a broad array of industry and environmental justice stakeholders to evaluate applications on an expedited basis and provide applicants clarity as quickly as possible.
Treasury and IRS intend to release final guidance related to the 2023 program prior to applications opening later this year.
Treasury, IRS Release Additional Details on Applying for Energy Credit Program
June 5, 2023
by Paul Ciampoli
APPA News Director
June 5, 2023
The U.S. Department of the Treasury and the Internal Revenue Service on May 31 released guidance that provides additional information about the application process and technical guidance for the expanded Qualifying Advanced Energy Project Credit program under the Internal Revenue Code.
Treasury and IRS established the expanded program under section 48C of the Internal Revenue Code on February 13, 2023.
The guidance is available on the IRS website.
The Qualifying Advanced Energy Project Credit renews and expands a tax credit created in 2009 through the American Recovery and Reinvestment Act.
It provides incentives for clean energy manufacturing and recycling, industrial decarbonization, and critical materials processing, refining, and recycling.
A broad variety of projects are eligible to apply for an investment tax credit of up to 30 percent, ranging from manufacturing of fuel cells and components for geothermal electricity and hydropower, to producing carbon capture equipment or installing it at an industrial facility, to critical minerals processing.
The Inflation Reduction Act provided $10 billion in new funding for the Qualifying Advanced Energy Project Credit program. Congress required that at least $4 billion be reserved for projects in communities with closed coal mines or retired coal-fired power plants. The initial funding round will include $4 billion, with about $1.6 billion reserved for projects in these designated coal communities.
To apply, taxpayers will submit concept papers describing the proposed project. Taxpayers whose concept papers receive a favorable review will be encouraged to submit a full application.
Concept paper submissions will be accepted starting June 30, 2023, and the deadline for concept papers will be July 31, 2023. Starting on May 31, taxpayers can access information and materials for preparing their concept papers.
More information for potential applicants, including a 48C mapping tool and an upcoming informational webinar, is available on the Department of Energy’s 48C webpage.
Treasury and IRS also released a Notice of Proposed Rulemaking for the Low-Income Communities Bonus Credit program under Section 48(e) of the Internal Revenue Code, which was established earlier this year.
The NPRM proposes rules for the application process and technical guidance for this program, which provides up to a 20-percentage point boost to the Investment Tax Credit for up to 1.8 gigawatts annually of solar and wind energy projects (with maximum output of less than 5 megawatts) located in low-income communities or otherwise serving low-income populations.
The NPRM reflects recommendations from a broad array of industry and environmental justice stakeholders to evaluate applications on an expedited basis and provide applicants clarity as quickly as possible.
Treasury and IRS intend to release final guidance related to the 2023 program prior to applications opening later this year.
Federal Energy Regulatory Commission, NERC to hold Physical Security Conference in August
June 1, 2023
by Paul Ciampoli
APPA News Director
June 1, 2023
The Federal Energy Regulatory Commission and the North American Electric Reliability Corporation will convene a joint technical conference on August 10 to discuss physical security of the bulk power system, including the adequacy of existing physical security controls, challenges, and solutions.
The technical conference, which will be held at NERC’s headquarters in Atlanta, Ga., is being convened in response to a recommendation in NERC’s recent report to FERC addressing the effectiveness of the existing NERC reliability standard on physical security – Critical Infrastructure Protection (CIP) reliability standard CIP-014.
The American Public Power Association and several other trade groups recently voiced support for recommendations included in the NERC physical security reliability standards study.
Additional details related to the conference’s agenda and organization will be issued by FERC.
MMWEC, Public Power Entities Ask FERC to Force Disclosure on Charges
June 1, 2023
by Paul Ciampoli
APPA News Director
June 1, 2023
Massachusetts Municipal Wholesale Electric Company, leading a group of public power entities throughout New England, recently filed a motion at the Federal Energy Regulatory Commission asking that it force the disclosure of information “concerning the exorbitant charges being imposed on New England ratepayers under a fuel security cost-of-service agreement,” MMWEC said on May 22.
Joining MMWEC in the request are the Connecticut Municipal Electric Energy Cooperative, New Hampshire Electric Cooperative, Vermont Public Power Supply Authority, Energy New England, and a group of Massachusetts public power systems known collectively as the Eastern New England Consumer-Owned Systems.
In 2018, the region’s grid operator, ISO New England, executed a two-year agreement, which began June 1, 2022 and ends May 31, 2024, requiring the continued operation of Mystic Units 8 & 9, which are owned by Constellation Mystic Power, LLC.
ISO-NE says that the units are needed to ensure regional “fuel security.” Mystic is paid under the agreement both its full cost of service and nearly all of the costs of Mystic’s affiliated liquefied natural gas fuel supplier, the Everett Marine Terminal.
MMWEC said the agreement protects customers against unreasonable fuel charges by requiring that ISO-NE audit Mystic’s fuel procurement practices. The audits are conducted to ensure that service under the agreement is being provided at the lowest possible cost.
Over the first ten months of the two-year term of the Mystic agreement, consumers have been charged more than $436 million in fuel costs, most of which resulted from Constellation’s LNG purchases, and then selling at a loss, burning uneconomically, or otherwise disposing of fuel that it turns out Mystic did not need, MMWEC said in a news release.
“In the ten months since the Mystic agreement went into effect, the only document concerning the audits that ISO-NE has released is an uninformative, three-page summary of the conclusions of a consultant retained by the grid operator,” MMWEC said.
The consultant concludes that the charges are appropriate under the agreement, “but provides no insight into what MMWEC and the other public systems say is a key driver of the fuel-related charges: Mystic’s fuel purchasing decisions and the terms of its liquefied natural gas supply contracts.”
The motion asks that FERC direct ISO-NE to release additional information concerning the variable charges passed through the agreement, including redacted copies of any reports, studies or other analyses produced by or for ISO-NE in connection with the audit.
In support of this request, the motion states that because of the paucity of data made public, neither FERC, the New England states, nor consumers have had the opportunity to assess what contributed to these charges and to determine if they are justified and reasonable.
MMWEC and its supporters asked that FERC direct Mystic and ISO-NE to release data related to the excessive charges and continue to do so on a quarterly basis.
The motion states that this information will help MMWEC and the public systems determine whether certain charges are warranted, whether there should be enhanced auditing, or if the agreement should be amended.
MMWEC, joined by the New Hampshire Electric Cooperative, called FERC’s attention to the issue in a joint filing last December, in which they stated the charges had become much larger and more volatile than anticipated.
Since that time, the charges have grown even larger, MMWEC said. In January and February 2023 alone, ISO-NE has passed on more than $220 million in charges under the agreement. The $120 million supplemental capacity payment to Mystic for January 2023 was more than a quarter of the value of the entire New England wholesale energy market for that month.
The motion concludes by requesting that FERC direct Mystic and ISO-NE to release more robust and useful information about the basis “for the extraordinary charges and ISO-NE’s audit of them, as was promised during the 2018 proceeding in which Mystic and ISO persuaded FERC to approve the agreement.”
MMWEC is a not-for-profit, public corporation and political subdivision of the Commonwealth of Massachusetts created by an Act of the General Court in 1975 and authorized to issue tax-exempt debt to finance a wide range of energy facilities.
MMWEC provides a variety of power supply, financial, risk management and other services to the state’s consumer-owned, municipal utilities.