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A new solar and wind group in Washington is working on new wholesale electric market rules for federal regulators to consider in an effort to “level the playing field” by increasing the amount of electricity that comes from renewables.
Grid specialists for the new Wind Solar Alliance plan to ask federal and state regulators, lawmakers and U.S. governors this fall to consider a plan that changes the way electricity is priced and generation resources are dispatched and compensated in the two largest organized wholesale electricity markets—PJM Interconnection, and the Midwest Independent System Operator.
Among the 10 North American centrally operated markets, PJM and MISO have the largest amount of generating capacity and miles of transmission.
Organized markets represent two-thirds of U.S. electric grid. They serve more than 60% of U.S. electric consumers and half of Canada’s population.
About 17 % of U.S. electricity comes from renewable resources, double what it was in 2008. About 10 percent of that is from wind and solar, according to the Energy Information Administration, the statistical arm of the U.S. Energy Department.
While the share of renewables across the country is growing, the Alliance says more wind and solar plants could be dispatched, especially in the most populated areas of the country covered by PJM and MISO, if the rules were different.
Washington insiders are behind the plan
The Alliance is brand new, launched this month, but the group has retained well known former staffers from the Federal Energy Regulatory Commission, PJM and other organized markets, some of whom worked on developing current market rules.
Rob Gramlich is one the architects behind the plan. Gramlich is the founder of Grid Strategies, a Washington-based consulting and advocacy firm that helps clients integrate clean energy onto the electric grid. He has been involved in historic change in the sector and has had the ear of regulators for decades.
He was a senior economist for PJM and economic advisor to former FERC Chairman Pat Wood III, who led the expansion of RTOs and electricity markets to much of the country in the early 2000s.
With Gramlich by his side, Wood presided over some of the most celebrated cases post Order 888, the landmark rule that established competitive wholesale markets and expanded transmission access across the country.
Gramlich says state mandates like renewable portfolio standards encourage renewables to bid into and generate power for the grid, but the market still favors coal, nuclear and natural gas. The market doesn’t capture the value of renewables and “in some cases, [renewables] face implicit barriers to entry that were entirely unintentional since no one imagined the current portfolio,” when the rules were written, he said.
He declined to comment on the details of the new plan, which are expected to be outlined in a white paper early next month.
Under current market rules, grid operators essentially select the lowest-cost option to generate power at a particular time.
Many of the current detailed grid operating protocols date back to the 1970s and beyond, when renewables were not on the grid. And the current blueprint for the wholesale electric market, circa 1998, was adopted when wind and solar resources were scarce and relatively expensive.
In the past decade, however, there have been incremental, yet arguably transformative shifts in the wholesale electric market to accommodate more renewables.
Although the Alliance is focused on wind and solar generation, Gramlich said, “We’re not designing wind and solar markets, we’re talking about general market design and how to make it more efficient and reliable overall by incorporating what wind and solar can provide.”
The architects examined electric markets in Australia, Ireland and the United Kingdom, where renewable penetration is high and the barriers to entry are low.
The Alliance is working with PJM and MISO but some industry sources have said the Southwest Power Pool could be next. Industry observers have said the ultimate goal would be to get all 10 organized markets in North America to adopt rules that open the door for more renewable energy.
It’s all about the timing
Over the years, several groups, including the American Physical Society, the Energy Department’s National Renewable Energy Laboratory, and the International Renewable Energy Agency have examined ways to increase renewable integration. They’ve even issued white papers.
But this is the first time wind and solar, otherwise unlikely bedfellows, have aligned and organized to one mission.
The timing is definitely right, Gramlich said.
The Alliance plan emerges as energy groups wrangle over two major policy movements some argue unfairly boosts coal and nuclear generation at the expense of renewables.
Earlier this year, the Energy Department advanced a grid resilience policy that would reward baseload coal and nuclear generators for being reliable sources of power with fuel onsite. The argument is that renewable generation is still intermittent; the sun doesn’t always shine, the wind doesn’t always blow and there is no large-scale storage solution to overcome that reality.
While the Trump administration works to finalize the grid resilience policy, federal regulators have pushed for changes to PJM’s capacity market, which essentially pays coal and nuclear plants for being available during emergencies.
The Alliance thinks the administration’s imminent policy paired with PJM’s capacity market is a double hit on renewables trying to compete in what many Washington insiders call an uncompetitive wholesale electric marketplace.
Steven Shparber, former in-house attorney at PJM, is one of the plan’s architects.
He is now an attorney with Nelson Mullins Riley & Scarborough where he co-founded the Solar RTO Coalition, a group of 10 utility-scale solar developers and capital providers that would benefit from these new market rules.
Shparber says timing of the Alliance plan is optimal, but not only because of the politicized policies.
The Investment Tax Credit, which largely benefits solar providers, and the Production Tax Credit which largely benefits wind generators, are being phased out in the coming years.
And the cost of solar and wind technology has come down, “so much so that renewable energy resources in some places in the country today will be the cheapest resources,” Shparber said.
Lazard’s Levelized Cost of Electricity (LCOE) study last year showed that natural gas fired generation, utility-scale solar and wind are cheaper on a lifetime basis than the marginal cost of running nuclear or coal plants. The LCOE shows utility-scale solar fell 86% from $359/MWh in 2009 to less than $50/MWh in 2017, and utility-scale wind fell 67% from 2009 to 2017.
The market reflects the shift. In 2017, the U.S. wind and solar industry saw $28 billion in total investment--$11 billion in wind, $17 billion in solar. Kevin O’Rourke, Wind Solar Alliance spokesman, says the resources are here. They just need fair compensation for the services they’re providing to the grid.
