What to watch in the wake of the DOE grid study
Devin Hartman, electricity policy manager and senior fellow with the R Street Institute, said overall he was impressed with the study. “In the big picture the study was quite consistent with the empirical support in the field .. there are certainly areas where I had my nitpicks — I think everyone does — but I’m trying to encourage folks that had a predetermined stance that this would be a ‘nonsense study,’ to kind of take a refreshed look.”
“Frankly, a lot of the stuff on the FERC side, are things you would have seen had this study been done under last administration,” Hartman added. “Improving price formation was initiated by FERC under last administration, and it has huge industry buy-in. It’s not controversial at all.”
Asked to expand on the report’s fuel-neutral recommendation, DOE’s Fisher said it “really has to do with identifying essential reliability services, and guaranteeing either through market means or by standards, that those are adequate … abstracting away from a given fuel type and talking about grid characteristics that you need for reliable and resilient grid, that’s what is important.”
This could come to FERC in a number of ways, Peskoe said.
An RTO could file a proposal, or the commission could issue a proposed rule directing grid operators to create new products. FERC could also require RTOs to submit data on the issue, for further study, or DOE itself could initiative a rulemaking.
Finally, “market participants could file a complaint claiming that RTO tariffs are unjust and unreasonable because they fail to reflect baseload’s values,” he said.
The study “gives mild support to baseload resources,” said Peskoe. “It says baseload resources can add value, but they aren’t the only mechanism. …I don’t read the report saying baseload resources are necessary.”
Hartman said he believes the industry will see a “refreshed take on price formation.” FERC has issued a pair of final rules, but two pending Notice of Proposed Rulemaking (NOPR) have been “very controversial” within the industry, he said. For instance, there is broad agreement that it is proper to to allocate uplift costs by cost causation, but not everyone agrees with how to do it. There is also controversy on fast-start pricing, which has divided experts.
“It’s possible we’ll see a shift in some of those pending NOPRs,” Hartman said. Issues around scarcity values are also something FERC could dive into.
“The scarcity constructs of every RTO, except for ERCOT, which of course is not FERC jurisdictional, do not even come close to accurately representing the scarcity value of resources, so I think that’s an area where you may see a renewed sense of FERC interest,” Hartman added.