Manchin’s permitting bill would not move the needle for renewables

Sen. Joe Manchin’s permitting bill may not solve the renewables industry problems. If we focus on expanding the Federal Energy Regulatory Commission (FERC) mandate to site transmission lines required for renewable development, I am not convinced that this permitting bill would do much for the renewable industry, because there are structural problems at grid operators that are under FERC’s jurisdiction that this bill does not and cannot address.

First, grid operators across the board are reducing the capacity credit for renewables. It is accepted in the renewable industry that as we add higher penetrations of renewables, the average calculation of capacity credit gradually reduces from its peak at 40-50% to 15-20%. Realizing that drop in capacity as we add more wind or solar, renewable developers started adding energy storage at the same location.

But now, grid operators are changing rules and moving to a “marginal” concept which drops the capacity credit to zero. There is no gradual drop. The MISO market monitor is endorsing this marginal concept, so renewable developers must take this seriously. Manchin’s permitting bill can fix transmission permitting, but what use would that be if the capacity credit of renewables is zero? If developers were building 10,000 MW of renewables assuming 50% credit, they were guaranteed 5,000 MW of renewable capacity delivered on the grid even though they paid for the full nameplate capacity. With these rules changing, even if we add 20,000 MW of solar to the grid – there is zero marginal value. How would that help the renewable industry?

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I propose to keep the current method of calculating capacity credit for renewables for at least three years of operations. This proposal would be fair to developers whose projects are stuck in interconnection queues waiting to be studied. If a developer enters the queue today, they will most likely see a reduced capacity value three years from now. Why not reduce their hardship? Otherwise, it is a double whammy for them, not only to wait for three years to be studied but once studied and allowed to operate- their capacity has zero value.

Second, the bill emboldens transmission utilities to build more transmission under the “reliability” excuse to interconnect renewables – the utility argument is that we need more transmission safely interconnect variable generation compared to what we have today.

High voltage transmission is needed to deliver energy to the load centers from remote renewable-rich areas. Planning for that transmission should run parallel with better, faster, and cheaper solutions such as aggregating solar rooftops with batteries because those batteries saved California from blackouts on September 6 when public alerts were sent. High Voltage Direct Current transmission is prone to litigation, as the recent complaint at FERC from Invenergy suggests because grid operators assert that they don’t have a tariff interconnecting new merchant HVDC projects. MISO and PJM treat merchant HVDC as an “external generator” compared to the renewable projects in their respective queues. Manchin bill cannot fix this.

The Manchin bill mentions “grid-enhancing technologies” such as advanced power flow controls and dynamic line ratings, but it should mandate the participation of distributed resources and other alternatives to transmission solutions in the wholesale energy markets. Illinois Congressman Sean Casten has proposed legislation to remove “opt-out” barriers in some Midwestern states. That proposed REDUCE legislation would do more for small-scale distributed renewables than Manchin’s bill for utility-scale renewables.

Third, a better bill would have made grid operator participation mandatory. Because Clean Energy Buyers Association (CEBA) points out on their website, “By leveraging the power of competition and balancing clean energy generation over large geographic regions, organized wholesale electricity markets produce billions of dollars in benefits annually. These markets expand purchasing options and support reliable clean energy integration, increasing the ability of large energy customers to drive the clean energy transition.”

Every utility would play by the same rules because challenges with interconnecting renewables are at least transparent in regions where grid operators exist in the current voluntary participation model. Renewable developers have a tough time following interconnection rules in states that don’t have grid operators. Bringing southeast into an established grid operator like PJM Interconnection would do the renewables industry a favor compared to the current Southeast Energy Exchange Market (SEEM), which is not a market per se because there is no independent market monitor, and there is no capacity and ancillary services market.

Keeping the current average method of calculating capacity credit for renewables for at least three years of operations, removing “opt-out” barriers in Midwest states, and mandating utilities across the board to join a grid operator would do more to the renewable industry than expanding the transmission siting authority of FERC.

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Author: Rao Konidena

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