FERC 2020 staff report on advanced metering and demand response

Advanced meters for electric service are now the most prevalent type of metering deployed throughout the United States, according to a recent federal report, and 2018 was the first year when estimated nationwide advanced meter penetration rates were greater than or equal to 50% of each of the residential, commercial, and industrial customer classes.

Since the enactment of the federal Energy Policy Act of 2005, each year the Federal Energy Regulatory Commission's staff has published a report as required by Section 1252(e)(3) of that act, addressing the following:

• saturation and penetration rate of advanced meters and communications technologies, devices and systems;
• existing demand response programs and time-based rate programs;
• the annual resource contribution of demand resources;
• the potential for demand response as a quantifiable, reliable resource for regional planning purposes;
• steps taken to ensure that, in regional transmission planning and operations, demand resources are provided equitable treatment as a quantifiable, reliable resource relative to the resource obligations of any load-serving entity, transmission provider, or transmitting party; and
• regulatory barriers to improved customer participation in demand response, peak reduction and critical period pricing programs.

The Commission staff's 2020 Assessment of Demand Response and Advanced Metering presents information based on the latest publicly available data -- 2018 for retail data and 2019 for wholesale data -- as well as "findings of Commission staff using non-public data to evaluate demand response performance in California during summer 2020 events."

The U.S. Energy Information Administration defines advanced metering infrastructure (AMI) meters or “advanced meters” as “[m]eters that measure and record usage data[,] at a minimum, in hourly intervals and provide usage data at least daily to energy companies and may also provide data to consumers. Data are used for billing and other purposes. Advanced meters include basic hourly interval meters and extend to real-time meters with built-in two-way communication capable of recording and transmitting instantaneous data.”

2018 represents the first year when the Commission staff report found 50% or greater advanced meter penetration for each of residential, commercial, and industrial customer classes. According to staff's most recent prior report, "In 2017, the estimated advanced meter penetration rates for residential and commercial customer classes were greater than or equal to 50 percent for the first time, while the penetration rate for the industrial customer class increased to 44.5 percent." 

By contrast, now, "While the advanced meter penetration rate varies by customer class, in 2018 the estimated nationwide advanced meter penetration rates for each of the residential, commercial, and industrial customer classes were greater than or equal to 50% for the first time." According to the report, "In 2018, according to EIA data, there were 86.8 million advanced meters installed and operational out of the 154.1 million meters installed and operational nationwide, representing a 56.4% penetration rate and a total increase of 7.9 million advanced meters from 2017 to 2018". The report highlights EIA data showing growth over time, from 6.7 million advanced meters in operation in 2007.

Department of Energy Prohibition Order for Bulk-Power System Security

The U.S. Department of Energy has issued a Prohibition Order prohibiting the acquisition, importation, transfer, or installation of certain bulk-power system electric equipment that directly serves Critical Defense Facilities. The order follows an Executive Order signed by President Trump earlier this year, authorizing the Department to take steps to secure the nation's bulk-power system.

On May 1, 2020, President Trump signed Executive Order 13920, "Securing the United States Bulk-Power System". As described in a press release, that Executive Order "prohibits Federal agencies and U.S. persons from acquiring, transferring, or installing BPS equipment in which any foreign country or foreign national has any interest and the transaction poses an unacceptable risk to national security or the security and safety of American citizens."

On December 17, U.S. Secretary of Energy Dan Brouillette signed a Prohibition Order implementing EO 13920. As described by the Department, "The order applies to a limited number of utilities and specific BPS electric equipment from the People’s Republic of China that poses an undue risk to the BPS, the security or resilience of critical infrastructure, the economy, national security, or safety and security of Americans."

The Department further described its “Prohibition Order Securing Critical Defense Facilities” generally as prohibiting covered utilities that supply Critical Defense Facilities ("CDFs") at a service voltage of 69kV or above from acquiring, importing, transferring, or installing certain BPS electric equipment manufactured or supplied by persons owned by, controlled by, or subject to the jurisdiction or direction of the People’s Republic of China. 

According to the Prohibition Order, "certain BPS electric equipment or programmable components subject to China’s ownership, control, or influence, constitute undue risk to the security of the BPS and to U.S. national security." The order applies from the point of electrical interconnection with the CDF up to and including the next “upstream” transmission substation. 

According to the order, utilities subject to its requirements will be notified no later than 5 days from the order's issuance.

US energy-related CO2 emissions declined in 2019, nearly all due to the electric sector

U.S. energy-related carbon dioxide emissions declined by 3% in 2019 relative to the prior year, almost entirely due to the changing mix of fuels used to generate electricity. Transportation now exceeds electric power as the energy-related sector contributing the most CO2 emissions, according to recently released federal data.

 

The U.S. Energy Information Administration tracks estimated domestic energy-related CO2 emissions, by multiplying energy consumption, measured in British thermal units, by a "carbon factor" representing the average carbon intensity of each source. According to EIA, total energy-related CO2 emissions in 2019 decreased by about 150 million metric tons (MMmt) relative to their 2018 level. This roughly reverses the 3% year-over-year increase experienced in 2018.

Through the twentieth century, the electric power sector was responsible for the largest share of domestic carbon emissions. U.S. total energy-related CO2 emissions peaked in 2007, and have since declined by about 15%.

U.S. total CO2 emissions from the electric power sector also peaked in 2007, but have since declined even more than than other energy-related sectors. According to EIA data, U.S. electric power sector emissions have fallen 33% below their 2007 peak "because less electricity has been generated from coal and more electricity has been generated from natural gas (which emits less CO2 when combusted) and non-carbon sources." 

This trend toward decarbonization of the electric power sector continued in 2019, leading EIA to attribute nearly all (96%) of the 2019 year-over-year decline to changes in the fuels and resources used to generate electricity. In particular, non-carbon-emitting generation such as nuclear and renewable sources generated a record 38% of total U.S. electric generation in 2019.  As a result of these changes and energy efficiency gains, EIA calculates the total carbon intensity of domestic electricity has fallen from 619 metric tons per megawatthour (mt/MWh) in 2005 to 408 mt/MWh in 2019.

Transportation has long been a significant contributor of CO2 emissions. While U.S. transportation-related CO2 emissions declined slightly in 2019, the transportation sector now emits more CO2 than any other energy-related sector tracked in EIA's carbon reporting. In some states, such as Maine, the transportation sector is responsible for more than half of all tracked carbon emissions.

Maine announces floating offshore wind research array plans

Maine Governor Janet Mills has announced the state's plan to develop a floating offshore wind research array in the Gulf of Maine.

Analysis by the National Renewable Energy Laboratory and others has demonstrated that Maine's ocean waters and the broader Gulf of Maine have significant potential as sites for wind turbines to generate renewable electricity. As described by one NREL study which quantified Maine's offshore wind technical resource potential at 94,468 megawatts, "the offshore wind resource potential is 36 times greater than the state’s electric energy demand, which is proportionally greater with respect to load than any other state in the country." 

On November 20, 2020, Governor Mills announced that Maine plans to designate "a small-scale research array in the Gulf of Maine" to "engage the fishing industry’s expertise to minimize potential harms and maximize the benefits to Maine people from offshore wind". The announcement describes a research array expected to contain up to 12 floating wind turbines, spread over up to about 16 square miles of ocean space. It lists research project partners including "the University of Maine, whose floating foundations will be utilized in the array, and New England Aqua Ventus -- a joint venture of Diamond Offshore Wind, a subsidiary of Mitsubishi Corporation, and RWE Renewables, one of the world’s largest offshore wind energy companies -- which will lead the array’s development."

Indicating that the site will be located in federal waters "some 20 to 40 miles offshore into the Gulf of Maine," the announcement states that Maine "intends to file an application for the research array with the Bureau of Ocean Energy Management" which manages offshore wind site leasing. The announcement describes the Governor's directive to the Governor's Energy Office to collaborate on project siting with the commercial fishing industry, the Maine Department of Marine Resources, and other interested parties.

In describing the planned research array, the announcement also Maine offshore wind "critical to meet the state’s climate goals of moving Maine to using 80 percent renewable energy by 2030, and 100 percent by 2050, in order to curb harmful greenhouse gas emissions." It notes that offshore wind development "represents a significant opportunity for Maine’s energy future and economic recovery from COVID-19, as outlined in Maine’s 10-year Economic Development Strategy and a recent Clean Energy Economy report from the Governor’s Energy Office."

The announcement ties the research array plans to Governor Mills's ongoing Maine Offshore Wind Initiative. In March 2020, Governor Mills announced the designation of the Port of Searsport for a study of port opportunities related to offshore wind, including transportation, assembly, and fabrication of offshore wind turbines. Maine is also participating in regional offshore wind discussions, including through a Gulf of Maine Task Force established by BOEM in 2019 at the request of New Hampshire Governor Christopher Sununu.

At present, the 30-megawatt Block Island Wind Farm off Rhode Island is the region's only operating offshore wind farm. Numerous developers have proposed much larger projects in federal waters offshore New England, in response to state laws which collectively call for the purchase of gigawatts of offshore wind by 2030.

Federal Reserve Bank cites climate risks in Financial Stability Report, for the first time

On November 9, 2020, the Federal Reserve Board issued its latest Financial Stability Report, which for the first time addresses the threat of climate change to the stability of financial systems. 

Twice per year, the Federal Reserve Board issues a Financial Stability Report summarizing the Board’s framework for assessing the resilience of the U.S. financial system and presenting the Board’s current assessment “to promote public understanding and increase transparency and accountability for the Federal Reserve’s views on this topic.” The 80-page report released in November includes a section, “The Implications of Climate Change for Financial Stability”, featuring discussion of how climate risks affect the stability of the U.S. financial system:

Opacity of exposures and heterogeneous beliefs of market participants about exposures to climate risks can lead to mispricing of assets and the risk of downward price shocks. Similarly, uncertainty about the timing and intensity of severe weather events and disasters, as well as the poorly under-stood relationships between these events and economic outcomes, could lead to abrupt repricing of assets. Climate risks thus create new vulnerabilities associated with non-financial and financial leverage. In regions affected by severe events, households and businesses could become overlevered if the value of their assets or income prospects become impaired. Levered financial institutions may be exposed to losses from disasters made more likely by climate change that are not accurately reflected in current financial models; for example, financial models may lack sufficient geographical granularity to accurately connect local physical damages to financial exposures. The financial system is also vulnerable to amplification effects of these damages if contracts are incomplete and do not capture all damages and if poorly understood financial exposures cause spillover effects or financial contagion. 

Within the financial system, increased transparency through improved measurement and disclosure could improve the pricing of climate risks, such as an increase in the frequency and severity of extreme weather events, thereby reducing the probability of sudden changes in asset prices. Continued research into the interconnections between the climate, the economy, and the financial sector could strengthen knowledge of transmission, clarify linkages and exposures, and facilitate more efficient pricing of risk. Outside the financial system, efforts to mitigate or adapt to the physical effects of climate change through technological advances and policy changes could also reduce climate risks in the long run.

The report also included illustrations of how climate risks can affect financial systems:

In a parallel statement, Federal Reserve System Governor Lael Brainard addressed the issue:

I welcome the introduction of climate into the FSR. Climate change poses important risks to financial stability. A lack of clarity about true exposures to specific climate risks for real and financial assets, coupled with differing assessments about the sizes and timing of these risks, can create vulnerabilities to abrupt repricing events. Acute hazards, such as storms, floods, or wildfires, may cause investors to update their perceptions of the value of real or financial assets suddenly. Chronic hazards, such as slow increases in mean temperatures or sea levels, or a gradual change in investor sentiment about those risks, introduce the possibility of abrupt tipping points or significant swings in sentiment. Supervisors expect banks to have systems in place that appropriately identify, measure, control, and monitor their material risks, which for many banks is likely to extend to climate risks. At present, financial markets face challenges in analyzing and pricing climate risks, and financial models may lack the necessary geographic granularity or appropriate horizons. Increased transparency through improved measurement and more standardized disclosures will be crucial. It is vitally important to move from the recognition that climate change poses significant financial stability risks to the stage where the quantitative implications of those risks are appropriately assessed and addressed.

Through the report, the Federal Reserve did not directly require banks to plan for climate-related shocks, but it did express an expectation that banks will “have systems in place that appropriately identify, measure, control, and monitor all of their material risks, which for many banks are likely to extend to climate risks." 

The Financial Stability Report follows the September 2020 report by a Commodity Futures Trading Commission subcommittee which identified climate change as a "major risk" to financial system stability.