The Federal Energy Regulatory Commission has released an updated version of its "resource manual", Energy Primer: A Handbook of Energy Market Basics.
The FERC is an independent federal agency that regulates a variety of aspects of the U.S. energy industry, including the interstate transmission of electricity, natural gas, and oil, proposals to build liquefied natural gas (LNG) terminals
and interstate natural gas pipelines, and hydropower
projects, as well as engaging in strategic planning.
FERC's Office of Enforcement is charged with encouraging compliance with the Commission’s statutes, rules, and orders. Within the enforcement office, the Division of Energy Market Oversight is responsible for monitoring and overseeing the nation’s wholesale natural gas and electric power markets.
In 2012, the Division of Energy Market Oversight (or DEMO) issued the first edition of its Energy Primer. This week, DEMO issued an updated 2015 version of the Energy Primer. As with the previous edition, the 2015 Energy Primer gives the public a
broad overview of the physical wholesale markets for natural gas and
electricity and energy-related financial markets. As FERC has noted, the revised edition reflects some of the changes that have occurred in the
industry since 2012, including the growth in natural gas supplies and the
expansion of organized electric markets under Independent System
Operators (ISO) and Regional Transmission Organizations (RTO).
The 2015 FERC Energy Primer offers a useful introduction to the U.S. energy industry as it is regulated by FERC. As with the 2012 version, FERC staff states that the 2015 edition is
intended to be used as either a text or a reference guide. FERC's
website also notes that the Energy Primer is a product of FERC staff and does not reflect the views of the Commission or any individual Commissioner. Nevertheless it may offer careful readers insight into how Commission staff view the markets' continuing evolution.
Energy powers society; society's choices shape energy policy. A blog about our energy resources and the choices they present for society.
U.S. renewable energy share highest since 1930s
Tuesday, July 21, 2015
In 2014, about 9.8% of the total energy consumed in the U.S. came from renewable energy sources, according to the U.S. Energy Information Administration. This represents the highest share of total domestic energy supply coming from renewable resources since the 1930s.
Prior to the growth of production and distribution networks for petroleum and other fossil fuels in the early 20th century, many homes used wood for heating as did industry. This reliance on renewable biomass historically satisfied a significant portion of the total domestic energy demand. But technological advances and the birth of the electric power industry led to greater use of other fuels. As a result, the EIA reports that renewable resources' share of total domestic energy supply peaked in the 1930s, then declined.
But recent growth in U.S. renewable energy use has brought the country's energy mix back to nearly 10% renewable. Indeed, from 2001 to 2014, renewable energy use grew an average of 5% per year, largely through increased use of wind, solar, and biofuels:
Prior to the growth of production and distribution networks for petroleum and other fossil fuels in the early 20th century, many homes used wood for heating as did industry. This reliance on renewable biomass historically satisfied a significant portion of the total domestic energy demand. But technological advances and the birth of the electric power industry led to greater use of other fuels. As a result, the EIA reports that renewable resources' share of total domestic energy supply peaked in the 1930s, then declined.
But recent growth in U.S. renewable energy use has brought the country's energy mix back to nearly 10% renewable. Indeed, from 2001 to 2014, renewable energy use grew an average of 5% per year, largely through increased use of wind, solar, and biofuels:
- Wind energy grew from 70 trillion Btu in 2001 to more than 1,700 trillion Btu in 2014.
- Solar energy (solar thermal and photovoltaic) grew from 64 trillion Btu to 427 trillion Btu.
- The use of biomass for the production of biofuels grew from 253 trillion Btu to 2,068 trillion Btu.
Maine explores non-transmission alternatives coordinator
Thursday, July 2, 2015
Should Maine designate an entity to coordinate the development of lower-cost alternatives to new electric transmission lines? The Maine Public Utilities Commission has opened an inquiry to obtain comments on the role of a non-transmission alternative (NTA) coordinator and the parameters for procuring the services of an NTA coordinator.
Modern society counts on electric utilities and power plants to supply consumers with electricity. As consumer needs and plant economics change over time, utilities have traditionally looked to new infrastructure like transmission lines to meet new needs. But in some cases, transmission development may not be the cheapest or best way to meet consumer needs; rather, "non-transmission alternatives" such as distributed generation, energy efficiency or microgrids may be able to achieve the same ends for a lower total cost.
Grid modernization -- and the tools needed to manage the process efficiently -- can be controversial. By order dated May 11, 2015, the Maine Public Utilities Commission declined to designate a "Smart Grid Coordinator" to provide a broad array of services to the state, on the grounds that that the record before it did not support a finding that designate a coordinator to provide all these services was in the public interest.
But the Commission indicated interest in designating someone to provide the services of marketing, implementing, and possibly operating non-transmission alternatives. To that end, the Commission found "there is the potential for benefits from an entity that has the relevant expertise and a commercial interest in the successful development and implementation of NTAs" -- provided that the entity can deliver its services in a way that provides value to ratepayers.
By a June 30 Notice of Inquiry, the Commission initiated the next phase of its exploration of designating an NTA coordinator. The Commission requested comment on issues it had previously identified in its May 11 order as requiring further factual development to enable the Commission to determine whether it is in the public interest to designate an NTA coordinator:
Modern society counts on electric utilities and power plants to supply consumers with electricity. As consumer needs and plant economics change over time, utilities have traditionally looked to new infrastructure like transmission lines to meet new needs. But in some cases, transmission development may not be the cheapest or best way to meet consumer needs; rather, "non-transmission alternatives" such as distributed generation, energy efficiency or microgrids may be able to achieve the same ends for a lower total cost.
Grid modernization -- and the tools needed to manage the process efficiently -- can be controversial. By order dated May 11, 2015, the Maine Public Utilities Commission declined to designate a "Smart Grid Coordinator" to provide a broad array of services to the state, on the grounds that that the record before it did not support a finding that designate a coordinator to provide all these services was in the public interest.
But the Commission indicated interest in designating someone to provide the services of marketing, implementing, and possibly operating non-transmission alternatives. To that end, the Commission found "there is the potential for benefits from an entity that has the relevant expertise and a commercial interest in the successful development and implementation of NTAs" -- provided that the entity can deliver its services in a way that provides value to ratepayers.
By a June 30 Notice of Inquiry, the Commission initiated the next phase of its exploration of designating an NTA coordinator. The Commission requested comment on issues it had previously identified in its May 11 order as requiring further factual development to enable the Commission to determine whether it is in the public interest to designate an NTA coordinator:
- What duties should be included in the scope of services offered by an NTA coordinator?
- Should T&D utilities be allowed to bid on an NTA RFP and if so should such services be provided through an affiliate?
- If an RFP were seeking proposals for having a non-utility entity operate an NTA in a manner consistent with reliability and cyber security standards, how would the incremental costs to operate the NTA be determined?
- What type of pricing structures should be considered in developing the RFP?
- What factors should be considered in bid evaluation?
- What should be the term of the NTA coordinator contract?
- What entities should be the counterparties to the contract?
- What enforcement mechanisms should be included in the contract?
- What type/amount of financial security should be required?
Supreme Court rules on EPA power plant regulations
Wednesday, July 1, 2015
The Supreme Court of the United States has ruled that the U.S. Environmental Protection Agency acted unreasonably in developing new regulations on hazardous air emissions from power plants without considering the cost impact of those regulations. This ruling reinjects uncertainty into EPA's "Mercury and Air Toxics Standards" and other efforts to regulate power plant emissions under the Clean Air Act.
The federal Clean Air Act was designed to improve environmental quality and human health, among other goals. It broadly allows federal regulation of air emissions of pollutants of various types and from various sources.
Because certain specific provisions in the Clean Air Act applied specifically to power plants, Congress placed a special restriction on EPA's regulation of power plant emissions under Section 7412(n)(1)(A) of the Clean Air Act. That provision allows EPA to regulate emissions of hazardous air pollutants from power plants under Section 7412 only if it “finds such regulation is appropriate and necessary.” In 2000, after a study, EPA concluded that regulating power plants under Section 7412 was "appropriate and necessary." EPA reaffirmed this finding in 2012, and promulgated standards for emissions from power plants.
Along with those standards, EPA issued a “Regulatory Impact Analysis” estimating that the regulation would force power plants to bear costs of $9.6 billion per year. That analysis also found that while benefits were hard to fully quantify, estimated benefits were worth $4 to $6 million per year. Based on this analysis, compliance costs to power plants were thus between 1,600 and 2,400 times as great as the quantifiable benefits from reduced emissions of hazardous air pollutants. At the same time, EPA argued that it did not have to consider costs in establishing its standards.
Following the issuance of these standards, 23 states sought review of EPA’s rule in the D. C. Circuit Court of Appeals in a series of cases which were later consolidated. The D.C. Circuit upheld EPA's refusal to consider costs in its decision to regulate, at which point petitioners appealed to the Supreme Court. As my partner Jeff Talbert explains, in a 5-4 decision issued June 29, the Supreme Court held that EPA interpreted §7412(n)(1)(A) unreasonably when it deemed cost irrelevant to the decision to regulate power plants.
So what does the Supreme Court's ruling mean for U.S. power plants? Uncertainty -- but not necessarily freedom from regulation. The Supreme Court remanded the case back to the D.C. Circuit for further consideration. The D.C. Circuit could uphold the rule again (on new grounds, compliant with the Supreme Court's decision) -- or it could invalidate the rule based on the Supreme Court ruling. If that happens, EPA will likely have to resume the process of developing new regulations for hazardous air emissions from power plants under Section 7412.
The federal Clean Air Act was designed to improve environmental quality and human health, among other goals. It broadly allows federal regulation of air emissions of pollutants of various types and from various sources.
Because certain specific provisions in the Clean Air Act applied specifically to power plants, Congress placed a special restriction on EPA's regulation of power plant emissions under Section 7412(n)(1)(A) of the Clean Air Act. That provision allows EPA to regulate emissions of hazardous air pollutants from power plants under Section 7412 only if it “finds such regulation is appropriate and necessary.” In 2000, after a study, EPA concluded that regulating power plants under Section 7412 was "appropriate and necessary." EPA reaffirmed this finding in 2012, and promulgated standards for emissions from power plants.
Along with those standards, EPA issued a “Regulatory Impact Analysis” estimating that the regulation would force power plants to bear costs of $9.6 billion per year. That analysis also found that while benefits were hard to fully quantify, estimated benefits were worth $4 to $6 million per year. Based on this analysis, compliance costs to power plants were thus between 1,600 and 2,400 times as great as the quantifiable benefits from reduced emissions of hazardous air pollutants. At the same time, EPA argued that it did not have to consider costs in establishing its standards.
Following the issuance of these standards, 23 states sought review of EPA’s rule in the D. C. Circuit Court of Appeals in a series of cases which were later consolidated. The D.C. Circuit upheld EPA's refusal to consider costs in its decision to regulate, at which point petitioners appealed to the Supreme Court. As my partner Jeff Talbert explains, in a 5-4 decision issued June 29, the Supreme Court held that EPA interpreted §7412(n)(1)(A) unreasonably when it deemed cost irrelevant to the decision to regulate power plants.
So what does the Supreme Court's ruling mean for U.S. power plants? Uncertainty -- but not necessarily freedom from regulation. The Supreme Court remanded the case back to the D.C. Circuit for further consideration. The D.C. Circuit could uphold the rule again (on new grounds, compliant with the Supreme Court's decision) -- or it could invalidate the rule based on the Supreme Court ruling. If that happens, EPA will likely have to resume the process of developing new regulations for hazardous air emissions from power plants under Section 7412.
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