RTOs Weigh In on Decarbonization

On October 30, 2019, the House Committee on Energy & Commerce held a hearing in furtherance of its development of comprehensive climate legislation focused on reaching a 100 percent clean energy economy by 2050. John Bear, the Chief Executive Officer of the Midcontinent Independent System Operator, Inc. (“MISO”) testified at the hearing while Southwest Power Pool, Inc. (“SPP”) and PJM Interconnection, L.L.C. (“PJM”) provided input in response to an earlier request from the Committee. The three Regional Transmission Organizations (“RTOs”) generally reported increases in both renewable and distributed generation in their regions over the past several years, highlighting the operational and reliability challenges that can come along with the growing prevalence of both. The RTOs also recognized the widely divergent state decarbonization policies and the associated impacts to the regional wholesale markets.

The aim of the hearing, which was the fifth in the 100 percent by 2050 series, was to examine policies that have been effective in reducing power-sector emissions and identify ways to build upon those policies on a national scale. While there was substantial overlap in content and theme, each RTO offered a unique perspective to the Committee.

Mr. Bear’s testimony introduced three overarching trends observed by MISO in recent years: 1) de-marginalization; 2) decentralization; and 3) digitalization. Based on these trends, MISO has been studying the structural and operational impacts to its system as varying degrees of renewable penetration. The MISO studies indicate that, at 30 to 40 percent renewable penetration, MISO would face system stability issues that would need to be addressed through non-traditional transmission devices, like High Voltage Direct Current lines or other advanced technologies. MISO points to three key future needs to ensure continued reliability in the face of increasing renewable generation: improved availability, flexibility, and visibility.

SPP, which contains the highest concentration of wind in the nation, emphasized the growing technical challenge of mitigating against the variable and unpredictable nature of renewable generation on its system. For example, SPP explained that on March 15, 2019, it lost 13,300 MW of wind energy in only 22 hours, highlighting the importance of “fast-start” generation that can be used to balance against fluctuations in renewable generation. SPP encouraged the Committee to consider the growing need for “fast-start” resources, like battery storage, but cautioned that such solutions need to be large-scale investments driven by vertically integrated utilities or independent entities, not at the direction of an RTO.

Finally, PJM explained that RTO markets already incorporate public policy as inputs into the price formation process, and that some PJM generators are already subject to regional carbon costs imposed by state decarbonization policies. As such, a national price on carbon could be incorporated into regional markets efficiently and may be preferable to the state-by-state or sector-specific approaches currently in place. PJM also noted that new high voltage transmission lines will likely need to be expanded to incorporate more remote renewable generation. PJM encouraged the Committee to consider potential “leakage” issues, overlapping regulatory authority, and the need to harmonize FERC’s transmission planning and cost-allocation policies in its development of any future clean energy legislation.

A recording of the hearing and the testimony filed by MISO are available here.

A copy of SPP’s response is available here.

A copy of PJM’s response is available here.