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Calif. Community Choice Aggregator Taps Green Bond to Lower Costs of Renewable Energy Procurement

March 13, 2023

by Paul Ciampoli
APPA News Director
March 13, 2023

California’s community choice aggregator Clean Power Alliance has arranged for the issuance of a municipal non-recourse Clean Energy Project Revenue Bond through the California Community Choice Financing Authority.

The nearly $1 billion bond issuance is expected to reduce CPA’s renewable energy costs by approximately $66.7 million over the initial eight-year period of the bonds, or an average of $8.3 million annually.

Energy prepayment bonds are long-term financial transactions available to municipal agencies like CPA to provide power procurement cost savings.

The savings from this prepay transaction are locked in until 2031, when the bond will be repriced. The bond received an investment-grade Baa1 rating by Moody’s and received a ‘Green Bonds’ designation by Kestrel Verifiers.

“This prepay structure has historically been utilized for natural gas procurements and as part of the clean energy transition it is exciting to see it now being used for renewable energy procurements,” said Susan Santangelo, Chair of CPA’s Finance Committee and Mayor of the City of Camarillo. “As a public agency, we utilize our tax-exempt status to reduce our power procurement costs and can pass these appreciable savings along to our many Southern California customers.”

A Clean Energy Project Revenue Bond is a form of wholesale electricity prepayment that requires three key parties: a tax-exempt public electricity retailer (CPA in this transaction), a taxable energy supplier (J Aron & Company, LLC in this transaction), and a municipal bond issuer (CCCFA in this transaction).

The three parties then enter into long-term power supply agreements for zero-emission clean electricity sources such as solar, wind, geothermal, and hydropower. The municipal bond issuer issues tax-exempt bonds (underwritten by Goldman Sachs in this transaction) to fund a prepayment of energy that will be delivered over 30 years.

The energy supplier utilizes the bond proceeds and provides a discount to the tax-exempt public electricity retailer in exchange for the prepayment on the respective power purchases. This discount is historically in the range of 8 to 12 percent.

CPA has assigned three power purchase agreements to this prepay transaction, two solar-plus-storage projects, and one geothermal project. The bond will be utilized to prepay the purchase of 503 megawatts of clean electricity.

The demand for the bond was more than one-and-half times the available supply, reflecting strong institutional investor interest in this issuance. The bond proceeds were $998,780,000 and the bonds yield an average of 4.60 percent.

Founded in 2017, Clean Power Alliance is the locally operated not-for-profit electricity provider for 30 cities across Los Angeles County and Ventura County, as well as the unincorporated areas of both counties.

Federal Budget Proposal Includes Excise Tax on Cryptocurrency Mining

March 13, 2023

by Paul Ciampoli
APPA News Director
March 13, 2023

President Biden is proposing a 30 percent excise tax on electricity used to mine for cryptocurrency as part of his Fiscal Year 2024 budget submission to Congress released on March 9.

“An excise tax on electricity usage by digital asset miners could reduce mining activity along with its associated environmental impacts and other harms,” the Treasury Department wrote in an explanation of the President’s revenue proposals.

Under the Digital Asset Mining Energy Excise Tax any firm using computing resources, whether owned by the firm or leased from others, to mine digital assets would be subject to an excise tax equal to 30 percent of the costs of electricity used in digital asset mining.

The proposal would be effective for taxable years beginning after December 31, 2023. The excise tax would be phased in over three years at a rate of 10 percent in the first year, 20 percent in the second, and 30 percent thereafter. The Treasury Department estimates it would raise approximately $3.5 billion over the next decade.

Firms engaged in digital asset mining would be required to report the amount and type of electricity used as well as the value of that electricity, if purchased externally. Firms that lease computational capacity would be required to report the value of the electricity used by the lessor firm attributable to the leased capacity, which would serve as the tax base. Firms that produce or acquire power off-grid, for example by using the output of a particular electricity generating plant, would be subject to an excise tax equal to 30 percent of estimated electricity costs.

The President is also proposing expanding the Low Income Home Energy Assistance Program to allow for the provision of water assistance. To help pay for the expanded scope of the program, the budget would increase regular annual funding by $111 million to $4.1 billion. The budget does not propose repeating emergency appropriations for the program.

Texas Grid Operator Expects Capacity Will be Sufficient to Meet Spring Forecasted Peak Demand

March 13, 2023

by Paul Ciampoli
APPA News Director
March 13, 2023

Assuming that the Electric Reliability Council of Texas region experiences typical spring grid conditions, ERCOT anticipates that there will be sufficient installed generating capacity available to serve the system-wide forecasted peak demand for the upcoming spring season, the grid operator said on March 8.

The forecasted April and May peak demands are 59,505 megawatts and 69,921 MW, respectively. These
forecasts are based on average weather conditions at the time of the spring peaks for years 2007
through 2021.

The Seasonal Assessment of Resource Adequacy report does not contain a weather forecast for the spring season. The forecasts also incorporate expected load increases during the peak demand hour due to interconnection of large loads (such as crypto-mining facilities) to transmission service provider networks.

Almost 99,800 MW of spring-rated resource capacity is expected to be available for the spring peak
demand. One thermal generation resource — a coal-fired unit with a 610 MW spring rating — is out of
service for the duration of the spring season. Also, a gas-fired unit with a spring capacity rating of
568 MW has changed its operating period to summer-only.

The total resource amount also includes 844 MW of battery storage capability assumed to be available for dispatch prior to the highest spring net load hours. 

This capacity estimate serves as a proxy for the amount expected during a tight reserve hour for the upcoming spring and is an interim availability assumption to be used until a formal capacity contribution method is adopted for future reports, ERCOT noted.

The report also identifies the aggregate amount of installed generation capacity where large loads,
such as crypto-mining facilities, are directly interconnected, and the expected peak reduction in
available generation capacity attributable to these loads during spring hours with the highest risk of
insufficient reserve capacity.

The spring SARA includes a typical thermal generating unit outage assumption of 19,536 MW for
the spring generator maintenance window (March-April) and 15,979 MW at the time of the
forecasted spring peak load in May. These outage assumptions are based on historical outage data
for the last three spring seasons excluding 2021 (2019, 2020, 2022).

Spring 2021 outages were excluded to avoid including Winter Storm Uri-related outages that extended into the spring season.

The spring SARA includes two risk scenarios — base and moderate risk scenarios, and extreme
risk scenarios. The most severe risk scenario assumes a forecasted May peak load with extreme
unplanned thermal plant outages based on historic observations, combined with extreme low wind
power production.

Department of Energy, Environmental Protection Agency Sign Reliability MOU

March 11, 2023

by Paul Ciampoli
APPA News Director
March 11, 2023

The U.S. Department of Energy and U.S. Environmental Protection Agency on March 9 signed a joint memorandum of understanding under which the two agencies will collaborate on efforts to boost electric grid reliability.

The new MOU on Interagency Communication and Consultation on Electric Reliability builds upon longstanding engagement from DOE and EPA with the power sector and further commits the agencies to routine and comprehensive communication about policies, programs, and activities regarding electric reliability. This includes sharing information and analysis, and ongoing monitoring and outreach to key stakeholders to proactively address reliability challenges. 

Both agencies have designated a team of experts on electric reliability to serve as points of contact for routine communications across the agencies. In addition, the agencies will meet on an at least semiannual basis to provide updates about policies, programs, and activities pertaining to electric reliability, share information and analysis, and discuss ongoing monitoring and outreach activities. 

The U.S. already has in place a multilayered system of institutions, policies, and practices to ensure that our infrastructure for generating, transmitting, and distributing electric power maintains the highest standards of reliability, the agencies said.

“The MOU ensures that, with the sound application of existing authorities and policy tools, DOE and EPA can continue to support the ability of the power sector to maintain electric reliability and seize new reliability opportunities presented by clean energy advancement.”

EPA and DOE anticipate continued consultation with the Federal Energy Regulatory Commission on electric reliability challenges.

EIA Reports Wind, Solar and Storage are Dominating U.S. Capacity Additions

March 11, 2023

by Peter Maloney
APPA News
March 11, 2023

So far in 2023, wind, solar, and battery storage account for 82 percent of the new, utility-scale generating capacity developers plan to bring online in the United States, according to preliminary data from the Energy Information Administration.

As of January 2023, 73.5 gigawatts of utility-scale solar capacity was operating in the United States, about 6 percent of the country’s total capacity, according to the EIA’s Preliminary Monthly Electric Generator Inventory.

The EIA now projects that just over half of the new U.S. generating capacity in 2023 will be solar power. If all of the planned capacity comes online as expected, it would be the most U.S. solar capacity added in a single year and the first year that more than half of U.S. capacity additions are solar, the EIA said.

Utility-scale solar capacity started ramping up in the United States in 2010 as the cost of solar panels dropped substantially and state and federal policies introduced tax incentives, the EIA noted.

Similar to solar power, tax incentives, lower turbine construction costs, and new renewable energy targets helped fuel the growth of U.S. wind capacity. Wind capacity was “negligible” prior to 2000, but as of January 2023, 141.3 GW of wind capacity was operating in the United States, about 12 percent of total U.S. capacity, the EIA said, adding that in 2023 developers plan to add another 7.1 GW of wind capacity.

The majority of U.S. wind capacity is located in the windy central part of the country, which has wide swaths of open land that can accommodate large wind farms, the EIA said. The agency also noted that offshore wind farms offer significant potential for future wind capacity growth.

To offset the intermittency of wind and solar power resources, developers are increasingly pairing them with battery energy storage systems. In 2023, developers plan to add 8.6 GW of battery storage capacity, which would double total U.S. battery power capacity, the EIA said.

Although significant renewable capacity has been added in the past decade, differences in the amount of electricity that different types of power plants can produce mean that wind and solar made up about 17 percent of the country’s utility-scale capacity in 2021 but produced only 12 percent of the country’s electricity, the EIA said.

Parties Execute Funding Agreements Tied to Development of SPP Market

March 11, 2023

by Peter Maloney
APPA News
March 11, 2023

Several parties, including two public power utilities, have executed funding agreements for the development of Markets+, Southwest Power Pool’s western energy market.

The parties signing funding agreements are Arizona Public Service, Bonneville Power Administration, Chelan County Public Utility District, NV Energy, Powerex Corp., Puget Sound Energy, Salt River Project, and Tucson Electric Power.

The next phase of Markets+ development will begin immediately, ahead of the planned April 1 start date, SPP said.

SPP also executed stakeholder agreements with participants that do not serve load or own generation but, while not contributing to funding Markets+ in phase one, will participate in the development of the Markets+ stakeholder process.

Together, the participating entities operate a diverse mix of generating resources and serve more than 250,000 gigawatt-hours per year in the Western Interconnection, representing more than 40 gigawatts of peak demand.

During the initial development phase, stakeholders and SPP staff will collaborate to develop the market protocols, tariff and governing documents for Markets+, as well as major components of Markets+ governance structure, including the Markets+ Participants Executive Committee, Market Design Working Group, Transmission Working Group, and Seams Working Group.

For more than a year, SPP has worked with western stakeholders to develop a proposed day-ahead and real-time market that meets the needs of western utilities to centralize unit commitment and dispatch, bring additional savings to customers, and pave the way for the reliable integration of a rapidly growing fleet of renewable generation.

“The Bonneville Power Administration’s contribution to phase one funding of SPP Markets+ is an investment that we expect to provide multiple benefits to BPA and its customers,” John Hairston, BPA Administrator and CEO, said in a statement. “Markets such as this are the future of operations in the West, and this ensures BPA and its customers will keep pace and help shape these important initiatives.”

BPA announced its commitment to funding phase one development of Markets+ Feb. 24.

SPP released the proposal for its western energy market Nov. 30, 2022. Additional parties interested in committing to funding further market development must sign a Markets+ Market Participant Phase One Funding Agreement by April 1, 2023.

EPA Proposes Stronger Limits on Water Pollution From Coal-Fired Power Plants

March 8, 2023

by Paul Ciampoli
APPA News Director
March 8, 2023

The Environmental Protection Agency on March 8 proposed to strengthen wastewater discharge standards that apply to coal-fired power plants.

EPA said its proposed rule would establish more stringent discharge standards for three types of wastewater generated at coal fired power plants: flue gas desulfurization wastewater, bottom ash transport water and combustion residual leachate.

The proposed rule also addresses wastewater produced by coal fired power plants that is stored in surface impoundments, for example, ash ponds. The proposal would define these “legacy” wastewaters and seeks comment on whether to develop more stringent discharge standards for these wastewaters.

EPA is also proposing changes to specific compliance paths for certain subcategories of power plants. The agency’s proposal would retain and refresh a compliance path for coal-fired power plants that commit to stop burning coal by 2028.

The agency is issuing a direct final rule and parallel proposal to allow power plants to opt into permanent cessation of coal compliance path.

Additionally, power plants that are in the process of complying with existing regulations and plan to stop burning coal by 2032 would be able to comply with the proposed rule.

EPA estimates its preferred options would cost $200 million dollars annually in social costs, equating to approximately a $0.63 increase in the cost of electricity and reduce pollutant discharges by approximately 584 million pounds per year.

Click here for additional details, including how to comment or participate in an online public hearing.

New Nuclear Unit in Georgia Reaches Key Milestone

March 8, 2023

by Paul Ciampoli
APPA News Director
March 8, 2023

A new nuclear unit at a site in Georgia has safely reached initial criticality, Georgia Power announced on March 6.

“Initial criticality is a key step during the startup testing sequence and demonstrates that — for the first time — operators have safely started the nuclear reaction inside the reactor. This means atoms are being split and nuclear heat is being made, which will be used to produce steam,” the investor-owned utility said.

Vogtle Unit 3 continues with startup testing, which demonstrates the integrated operation of the primary coolant system and steam supply system at design temperature and pressure with fuel inside the reactor.

Vogtle Unit 3 is adjacent to the operating Units 1 and 2, near Waynesboro, Georgia. Unit 3 and a second new unit are two 1,100-megawatt Westinghouse AP1000 nuclear reactors being constructed in Burke County, Ga.

A reactor achieves criticality when the nuclear fission reaction becomes self-sustaining. Achieving initial criticality is necessary to continue the startup of the unit in order to generate sufficient heat for the production of electricity.

Now that the Unit 3 reactor has reached criticality, operators will continue to raise power to support synchronizing the generator to the electric grid and begin producing electricity. Then, operators will continue increasing power through multiple steps, ultimately raising power to 100 percent. These tests are designed to ensure all systems are operating together and to validate operating procedures prior to declaration of commercial operation.

The in-service date for Unit 3 is projected during May or June 2023.

Southern Nuclear will operate the new units on behalf of the co-owners: Georgia Power, Oglethorpe Power, MEAG Power and Dalton Utilities.

PJM Begins Expedited Process for Reform of Capacity Auction

March 8, 2023

by Peter Maloney
APPA News
March 8, 2023

PJM Interconnection and its stakeholders have begun an expedited process to address capacity market design issues related to maintaining resource adequacy.

The PJM Board implemented the Critical Issue Fast Path process by letter on Feb. 24, citing a PJM report, Energy Transition in PJM: Resource Retirements, Replacements and Risks.

The letter noted that while PJM “currently has a healthy reserve margin, Winter Storm Elliott demonstrated that PJM is not immune to reliability challenges as the system was stressed, even with a reserve margin in excess of the target and a lower level of renewable penetration than other regions.”

Although PJM maintained grid reliability throughout Winter Storm Elliott, “we believe this event demonstrates a need to focus on PJM’s rules and processes to ensure reliability is maintained both now and throughout the transition,” the letter said.

PJM has “healthy reserve margins,” but that “cannot be taken for granted into the future,” PJM said in the letter, noting that up to 40 gigawatts of capacity in the regional transmission organization, whose territory includes a large swath of Mid-Atlantic and Midwestern states, is at risk of retirement by 2030.

The PJM report also highlighted “significant uncertainty around the pace of resource additions, which at current completion rates would be inadequate to maintain resource adequacy.” In addition, the potential also exists for “significant load growth in the future, driven by data center additions and electrification of transportation, heating and industry,” PJM said.

In initiating the Critical Issue Fast Path process for resource adequacy, PJM’s board of directors identified four areas for stakeholders to focus on in the CIFP process:

These areas are considered as “must haves,” Adam Keech, PJM vice president of market design and economics, said during a Feb. 28 meeting of PJM’s Resource Adequacy Senior Task Force. “These will be the centerpiece of the PJM proposal,” Keech said, adding, “the board is open to solutions across the spectrum that align with their objectives.”

This fast-track process will inform a decision by PJM’s board by late summer, and the organization aims to file its proposal with the Federal Energy Regulatory Commission on Oct. 1.

Capacity auctions normally occur three years before the capacity delivery date, but the reforms under way in PJM have caused delays for several capacity auctions. PJM hopes to have its capacity auction schedule back on track for the 2027/2028 auction, which is now scheduled for May 2024, but PJM’s board is seeking stakeholder feedback on whether prior year auctions that have not been run, the 2025/2026 and 2026/2027 auctions, should be adjusted or pushed back.

DOE Urged to Provide More Flexibility, Fund Eligible Hydro Projects Under Incentive Programs

March 7, 2023

by Paul Ciampoli
APPA News Director
March 7, 2023

The Department of Energy should provide for more flexibility for permits and authorizations and fund all eligible projects under hydroelectric incentive programs that will be implemented under the Infrastructure Investment and Jobs Act, the American Public Power Association and two other associations recently said in comments filed with DOE.

Section 40333 of the infrastructure law amended the Energy Policy Act of 2005 to establish section 247, which offers a new hydroelectric incentive payment to the owners and operators of qualified hydroelectric facilities for capital improvement projects directly related to supporting grid resiliency, improving dam safety, and environmental enhancements.

Incentive payments are limited to 30 percent of the cost of capital improvements, and only one incentive payment of no more than $5 million can be made to a single project per year. $553.6 million was appropriated for the provision.

In February, DOE issued draft guidance to inform its implementation of hydroelectric incentives in the Infrastructure Investment and Jobs Act.

APPA was joined by the National Hydropower Association and the Edison Electric Institute in Feb. 23 comments filed in response to the draft guidance.

The Associations asked that DOE provide funds to all eligible projects on an equitable basis. “Congress did not authorize DOE to create a prioritization structure between categories or within categories. It is impossible for DOE to create a system that could score the vast array of potential projects that could be eligible for Section 247 grants,” they said. “DOE should review each project to see if it is eligible for funding and, in the event of oversubscription, prorate such that eligible projects receive at least some funding.”

The groups noted that the draft guidance requires applicants to have received any and all permits and authorizations as a condition on eligibility. “This strict requirement significantly limits the population of potential investments to only those that are shovel ready. This was not Congress’ intent,” APPA and the other groups said. 

Projects that are still ongoing the permitting process should be eligible to apply for funding, they argued, noting that DOE has other programs that “obligate” funds pending the permitting process. “Actual outlay should remain conditioned on the project receiving all applicable permits.”

The groups also argued that the application period should be long enough to give applicants the opportunity to put together robust and complete applications, noting that the Section 247 program is new for both DOE and the industry. 

“The Associations have heard great interest in this program from member companies; however there are significant questions on what constitutes an eligible project and uncertainty as to what is required in the application package.”

APPA, EEI and NHA said that potential applicants will require varying degrees of resources to put together a complete application. “The Associations recommend at least a 90-day open window which gives potential applicants enough time to put together comprehensive applications.“

The Associations said they agree that projects where capital was spent (i.e., placed in service) after the IIJA was signed by President Biden, but before guidance was finalized are eligible.

However, due to the timing of the development of these projects, they were planned and undertaken without guidance from DOE, they pointed out.

“Therefore, they had no way to know what was required to apply for Section 247 funds. DOE should create a process such that these projects have a path to apply for these funds and cure any deficiencies so they can meet the spirit and intent of the guidance.” 

The Associations recommended that that DOE require only expenditures made after the final guidance is issued need to adhere to the Community Benefits Plan requirements in Section VIII and relevant requirements in Section XIII.  Alternatively, DOE could grant waivers in these cases.