FERC ends DOE resilience rulemaking, opens new proceeding

U.S. energy regulators have terminated a fast-tracked proceeding opened last fall to consider rules proposed by the Department of Energy that would have compensated certain electric generating plants for reliability and resilience values; instead, the Federal Energy Regulatory Commission has opened a broader case to examine the resilience of the bulk power system.

On September 29, 2017, Secretary of Energy Rick Perry directed the Commission to consider a proposed rulemaking to ensure that "traditional baseload resources, such as coal and nuclear" are rewarded for their reliability and resilience attributes. As proposed, the rule would have required grid operators to set rates for compensation paid to certain "grid reliability and resiliency resources" with a 90-day fuel supply on site and capable of providing "essential energy and ancillary reliability services, including but not limited to voltage support, frequency services, operating reserves, and reactive power."

The request under Section 403 of the Department of Energy Organization Act bore an expedited timeline. The Commission solicited public comments on the proposed rulemaking, and Commission staff issued a series of questions to frame the discussion. Many comments expressed concerns that rapid changes to wholesale markets could have harmful or perverse effects, and prior to yesterday's most seated Commissioners had publicly expressed reservations.

On January 8, 2018, the Commission issued its Order Terminating Rulemaking Proceeding, Initiating New Proceeding, and Establishing Additional Procedures.  In doing so, it recognized "that we must remain vigilant with respect to resilience challenges, because affordable and reliable electricity is vital to the country’s economic and national security." The order recites a history of the evolution of the electric power industry and the Commission's efforts to help ensure bulk power system resilience, including the adoption of NERC reliability standards, reforms to capacity markets and gas-electric coordination.

But the Commission found that neither the Department of Energy's proposed rulemaking nor the record in the case satisfied a key legal standard for Commission action under Section 206 of the Federal Power Act. Specifically, it concluded that the existing tariffs had not been demonstrated to be unjust, unreasonable, unduly discriminatory or preferential.

The Commission also noted potential problems with the proposed rule. For example, it said that allowing all eligible resources to receive a cost-of -service rate regardless of need or cost to the system had not been demonstrated to be just and reasonable, and that the proposed rule's on-site 90-day fuel supply requirement hadn't been shown not to be unduly discriminatory or preferential -- but that it would exclude some resources with resilience attributes.

At the same time, the order states, "The resilience of the bulk power system will remain a priority of this Commission." It continued, "Although the Proposed Rule failed to satisfy the fundamental legal requirements of section 206 of the FPA, the Proposed Rule and the record developed to date have shed additional light on resilience more generally and on the need for further examination by the Commission and market participants of the risks that the bulk power system faces and possible ways to address those risks in the changing electric markets." Noting "a variety of economic, environmental, and policy drivers that are changing the way electricity is procured and used," the Commission said these changes "present new opportunities and challenges regarding the reliability, affordability, and environmental profile of each region’s electric system."

To address these changes, the Commission initiated a new proceeding, Docket No. AD18- 7-000, to take additional steps to explore resilience issues in organized wholesale electricity markets. According to the order, the goal of this proceeding is: "(1) to develop a common understanding among the Commission, industry, and others of what resilience of the bulk power system means and requires; (2) to understand how each RTO and ISO assesses resilience in its geographic footprint; and (3) to use this information to evaluate whether additional Commission action regarding resilience is appropriate at this time."

The Commission directed six regional transmission organizations and independent system operators to respond within 60 days with comments on the definition of resilience, plus how they assess and mitigate threats to resilience. The Commission also solicited public comment within 30 days of the grid operators' due date.

Carbon capture and sequestration for enhanced oil recovery

A project to capture carbon dioxide emissions from a coal-fired power plant in Texas has captured more than 1 million tons of carbon dioxide for use in enhanced oil recovery, according to the U.S. Department of Energy.

Historically, carbon dioxide resulting from the combustion of coal and other fossil fuels has been emitted directly into the atmosphere, but global concern over climate change has led to efforts to limit carbon emissions to the atmosphere.  While many of these programs focus on reducing reliance on combustible fuels, carbon capture and sequestration technologies offer the potential to remove carbon dioxide from thermal plants' flue gas before it is emitted from their smokestacks.  The U.S. Department of Energy runs programs designed to support the development and commercial deployment of these technologies.

The Petra Nova project uses an amine solvent-based CO2-capture technology to remove carbon dioxide from the flue gas of NRG's coal-fired W.A. Parish power plant.  It is a 50/50 joint venture between NRG and JX Nippon Oil & Gas Exploration.  NRG describes Petra Nova as "the world's largest post-combustion carbon capture facility installed on an existing coal-fueled power plant."  The Department of Energy selected Petra Nova to receive $190 million as part of the Clean Coal Power Initiative Program.

The project uses a carbon capture process which was jointly developed by Mitsubishi Heavy Industries, Ltd. and the Kansai Electric Power Co.  It was designed to capture about 90 percent of the CO2 from a 240 MW slipstream of flue gas, compressing and transporting approximately 1.4 million metric tons of CO2 per year through an 80 mile pipeline to Hilcorp's operating West Ranch oil field where it is utilized for enhanced oil recovery (EOR) -- injecting the CO2 underground to help additional oil flow to a production wellbore.  According to the Department of Energy, the use of this CO2 for enhanced oil recovery has boosted the West Ranch Oil Field's oil production from 300 barrels per day to about 4,000 barrels per day.

Petra Nova began commercial operations on January 10, 2017. According to an October 23 press release, Petra Nova has now captured more than 1 million tons of CO2 for use in enhanced oil recovery. Secretary of Energy Rick Perry has said that Petra Nova's success "could become the model for future coal-fired power generation facilities," which could support CO2 pipeline infrastructure development and drive domestic enhanced oil recovery opportunities.

FERC grid reliability and resilience pricing questions

U.S. energy regulators have asked for public comment on a rule proposed by the Secretary of Energy that would require organized grid operators to pay certain electric generators for their grid reliability and resilience benefits.

On September 28, 2017, Secretary of Energy Rick Perry directed the Federal Energy Regulatory Commission to consider a proposed rule on an expedited basis.  The proposed rule defines an "eligible grid reliability and resiliency resource" based on criteria including the ability to provide essential energy and ancillary reliability services and to have a 90-day fuel supply on site enabling it to operate during an emergency, extreme weather conditions, or a natural or man-made disaster.  It would requires independent system operators and regional transmission organizations to establish a tariff that provides a " just and reasonable rate" for the purchase of electric energy from such resources including recovery of costs and a return on equity

On October 2, the Commission issued a Notice Inviting Comments, asking interested persons to submit comments regarding the proposal on or before October 23, 2017.  Two days later, Commission staff followed up with a series of questions for public comment.  Questions in that document cover topics including the need for reform, eligibility, implementation, and rates, as well as impacts on consumers.

Some questions posed by the Commission staff in its October 4, 2017 document are general, such as, "What is resilience, how is it measured, and how is it different from reliability? What levels of resilience and reliability are appropriate?"  Others ask for whether commenters agree with references in the proposed rule to the 2014 "Polar Vortex" and "other extreme weather events, specifically hurricanes Irma, Harvey, Maria, and superstorm Sandy," as well as "the retirement of coal and nuclear resources and a concern from Congress about the potential further loss of valuable generation resources" as justifying the need for action.

As previously noticed by the Commission, initial comments on the proposed Grid Reliability and Resilience Pricing Rule in Docket No. RM18-1-000 are due on or before October 23, 2017 and reply comments due on or before November 7, 2017.