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Why the time is right for FERC to issue a NOPR on peaking power plants

Credit: Photo by roya ann miller on Unsplash

With the majority of the country’s workforce at home and most businesses and industries either operating at reduced capacity or temporarily shut down, COVID-19 has reduced electric demand across the board. This unprecedented drop in electricity consumption is reshaping the way the power system operates and forcing grid operators to revise forecasts and expectations for grid needs.

One of the most dramatic impacts may be the reduced need to fire up hundreds of power plants, known as peaker plants, this summer. Peakers usually sit in reserve, waiting for demand to spike as temperatures rise. This shift could provide an opportunity to begin transitioning the country’s fleet of expensive peaker plants to cleaner, cheaper, more efficient peaking resources, like battery storage.

COVID-19 impacts on electric grid

In New York State, critical grid workers are sleeping at work, while exhausted after 12-hour shifts, and the New York Independent System Operator (NYISO) is thinking of setting up a new third control room. From a process perspective, load forecasts are seeing dramatic shifts from normal expectations. Typical electric demand is simply not there; NYISO alone experienced a 4-5% drop in load. New York City and Long Island saw an almost 11% drop in demand during morning ramp periods when the workday would typically be beginning.

The current impacts on electric utilities and grid operators bring up a fundamental question, what happens to summer demand in 2020? Electric utilities typically take units out on maintenance during spring to be ready for summer. If summer demand is lower by 5-10%, will the need to turn on a peaker arise?

Background on peakers

Peakers are typically natural gas and diesel generators — in some cases fueled by oil or kerosene. Some older coal plants that are no longer economical to run all the time have even been repurposed as peakers. They are often only turned on during the peak hours of highest demand, usually less than 350-500 hours in a year, about 5% or less of their full operating capacity. When they do operate, peakers can be significant sources of local pollutants, including nitrogen dioxides and particulates that have been linked to higher COVID-19 mortality rates.

Unlike the disruptions occurring in energy consumption patterns, the virus does not impact the output of existing renewable generation. As a result, if the demand for electricity is lower than expected and renewable production continues to be part of the energy mix, where is this excess going to go? Energy storage provides a solution that is already on the ground to avoid massive renewable curtailments and could act as a viable, cost-effective alternative to fossil-fuel peaker plants.

FERC Order 841

FERC Order 841 treats Electric Storage Resources (ESR) as generation assets. FERC Order 841 compliance plans for ISO/RTOs indicate various levels of implementation. Midcontinent Independent System Operator (MISO) has asked for more time (until June 2022) to implement new market systems that include ESR.

Pennsylvania New Jersey Maryland (PJM) Interconnection has shifted its attention to treating energy storage as a transmission asset. New York ISO (NYISO) is farther along than most ISOs due to FERC’s acceptance of the dual participation model. This NYISO model allows both retail and wholesale market participation for resources, including energy storage. Energy storage is flexible and can participate not only in organized markets for energy, capacity and ancillary services, but can replace peakers if the Federal Energy Regulatory Commission (FERC) acts.

FERC is headed in the right direction with jump-start hybrid (storage plus another resource like solar or wind) interconnections by announcing a technical conference in July. This announcement is a direct result of the comments received in FERC Order 841 ISO/RTO compliance plans. It also helps with utility-scale storage development.

FERC has yet to release its order on Distributed Energy Resource Aggregation (DERA), but that order supports behind-the-meter storage. Some groups in Hawaii have petitioned Hawaii Public Utilities Commission (PUC) to reduce the distributed energy resource interconnection gridlock to bring faster economic recovery from COVID-19 impacts. FERC has sent back MISO’s Storage As a Transmission Only Asset (SATOA) filing, but that helps storage as a transmission asset. None of these orders or actions help advance an essential value stack of storage as a peaker.

FERC Notice of Proposed Rulemaking (NOPR) required on peakers

To advance energy storage’s value as a peaker, and help states meet their carbon goals, FERC must build the case around whether the current set of peakers are making wholesale energy rates unjust and unreasonable. But with demand projected to be lower due to COVID-19, it is unlikely that the current set of peakers will operate near normal levels during the summer of 2020. Hence, the time is ideal for initiating a Notice Of Proposed Rulemaking (NOPR), limiting the dispatch of peakers. FERC must be technology agnostic so, this NOPR won’t be specific for energy storage but for “peaking needs” at FERC jurisdictional ISO/RTOs.

The nonprofit Clean Energy Group (CEG) has identified and mapped the location of existing peaker plants across the country. The plants are predominately clustered around major population centers, usually situated in low-income communities and communities of color, which have faced higher COVID-19 infection and mortality rates. These stark social injustices were highlighted in a recent report released by a coalition of New York City environmental justice groups and CEG, Dirty Energy, Big Money, which argues that the $4.5 billion in ratepayer funds that have gone to support the city’s peaker plants could, and should, be better used as investments in local distributed clean energy and battery storage.

Conclusions

When demand comes back, we need to keep emissions front and center without falling into the past habits of turning on polluting peakers, and FERC has a vital role to play by releasing a NOPR on peaking needs. A FERC order alone can bring all the ISO/RTOs together on enabling carbon-free resources to participate as peakers when the demand is back up post-COVID-19.