BOSTON — FERC Commissioner Robert Powelson said last week that New England needs to overcome its aversion to new energy infrastructure to avoid natural gas shortages in the winter.
Powelson Rob at NE Roundtable 2018 03 16 RTO Insider FI
Powelson | © RTO Insider
“You all burned 2 million barrels of oil during this recent bomb cyclone,” Powelson said at Raab Associates’ 157th New England Electricity Restructuring Roundtable on Friday. “We didn’t do that in Pennsylvania; we burned a lot of natural gas, we ran economic nuclear plants and we integrated renewables with close to 1,400 MW of wind capacity.” (See Van Welie: ISO-NE in ‘Race’ to Replace Retirements.)
vanWelie Gordon at NE Roundtable 2018 03 16 RTO Insider FI
van Welie | © RTO Insider
Paired in a session with ISO-NE CEO Gordon van Welie, Powelson was the only FERC commissioner who voted against accepting the RTO’s Competitive Auctions with Sponsored Resources (CASPR), the grid operator’s two-stage capacity auction to accommodate state renewable energy procurements.
Powelson wrote a dissent calling the construct “a complicated, patchwork solution that will neither accommodate the desires of the states, nor send proper price signals to market participants.” (See Split FERC Approves ISO-NE CASPR Plan.)
“Here you are today, with 15 million customers in the New England market during these weather events paying some of the highest gas [and electricity] costs in the country,” Powelson said. “My good friend here [van Welie] will say, ‘Well that was the least-cost resource.’ Well so much for your [greenhouse gas] requirements that you’ve set forth as state regulators.”
Powelson did say he was “extremely impressed” with the RTO’s capacity auction results last month, where the clearing prices were the second-lowest in the history of the market. (See ISO-NE Capacity Prices Hit 5-Year Low.)
Despite his praise of some aspects of the New England wholesale electricity market, Powelson joked, “Gordon, I might have you come down to PJM, do a little 12-step program.”

Tectonic Baseload Shift

Kaslow Tom at NE Roundtable 2018 03 16 RTO Insider FI
Kaslow | © RTO Insider
Extreme weather events put regulators on a “tipping point” of addressing reliability, Powelson said.
“We’re seeing this tectonic shift in our baseload resources of accelerated retirements of coal and nuclear plants,” he said. “Last time I checked, we’re not building coal plants in New England — is that correct? By the way, I live in Pennsylvania, and we’re not building a lot of coal plants in Pennsylvania; in fact, I don’t think we’re building any.
“I looked at the last two capacity auctions; the clearing resource is a combined cycle gas plant with a 6,600 heat rate, sourced under the greatest blessing we have — and I don’t want any boos in this room, but Marcellus shale has had a profound impact on my state’s economy,” he said.
Powelson continued a theme he had taken up earlier in the week at the American Council on Renewable Energy’s (ACORE) Renewable Energy Policy Forum in D.C., where he said that ISO-NE’s Operational Fuel Security Analysis report issued in January was “like a horror story.” The study found the region will face energy shortfalls because of inadequate natural gas supplies in almost every fuel-mix scenario by winter 2024/2025. (See Report: Fuel Security Key Risk for New England Grid.)
“Siting is hard, but you gotta get there,” he told the ACORE conference Wednesday, citing the region’s inability to win approvals for new gas pipelines or transmission to import Canadian hydro.
“Fifteen million customers in [New England] paid the highest gas-basis costs in the country and they were less than 200 miles from the Leidy gas hub in Pennsylvania in a $2.34/MMBtu trading market,” he continued. “I recognize it’s probably going to be hard to get 30-inch pipe into New England, but in lieu of that, we’ve got to solve this problem. … This is all going to be a failed experiment if we have reliability issues in the New England states.”
Massachusetts Sierra Club Director and Newton City Councilor Emily Norton challenged Powelson at the Boston conference, saying she was “surprised and disturbed” at his “lack of attention to the full costs” inherent in choosing fracked gas, such as the water pollution in Pennsylvania.
“To that customer or to your constituent, I think they should have peace of mind that they’re going to have safe, affordable and sustainable energy to their homes,” Powelson said. “A lot of people in Pennsylvania are switching fuel from oil to natural gas. Not everybody can afford a rooftop solar installation on their house, or a battery storage behind that, or for that matter, a propane or natural gas-fueled Generac or Cummings generator.”
ISO-NE’s 2025 lookout has some alarming points for a regulator, he said. He added that he had read about the risk of rolling blackouts and other emergency measures becoming necessary in New England if the region didn’t act to secure the supply of natural gas for its generators.
“Look, what happens with Millstone?” Powelson said. “I don’t know, I’ll leave that to Connecticut, [PURA Vice Chairman Jack] Betkoski and others, and Gov. [Dannel] Malloy. What happens more recently in this post-bomb cyclone with lack of adequate gas supply where you’re dealing with storage issues here in the New England market? There’s a case where storage is meeting your demand right now, but we don’t have adequate pipelines into the market.
“The reality for this region is that state governors, both Democrat and Republican, are committed to incent investment and develop policies that support that investment, which is a good thing,” Powelson said. “In lieu of a national energy policy, the states have to drive that. … The states are getting ahead of the federal government. So be it. … But we’re also building a lot of things in the PJM footprint.”

Resilience of the Grid

Closing on the topic of resilience, Powelson said that he and his fellow FERC commissioners “are in a very good spot.”
“The feedback from the RTOs has been what we expected,” he said. “If a resource needs to close and exit the market, there should be orderly entry and exit, and I use my example of PJM, where roughly 13,000 MW have come offline. That’s the reality of the market.”
NE Roundtable Crowd 2018 03 16 RTO Insider Alt FI
The New England Electricity Restructuring Roundtable gathered on March 16 | © RTO Insider
Price suppression created by resources like cheap natural gas is displacing uneconomical resources, “so why should we go out there and pick winners and losers in a market?” Powelson said. “To do what? Hurt the other, more efficient units in the market or send bad market signals?”
Van Welie said the question is how much further the RTO can go with retirements before they must slow them down.
The National Oceanic and Atmospheric Administration last fall “forecast a return to ‘normal’ winter after two unseasonably warm ones, whatever ‘normal’ is in New England anymore,” van Welie said. “But no one was predicting a 100-year cold snap over the Christmas-New Year break.”
The RTO’s winter preparedness program created an incentive for the oil-burning generators to fill up going into the winter, but when it came to resupplying during the winter, they were buying on the spot market, van Welie said. (See ISO-NE Plans for Hybrid Grid, Flat Loads, More Gas.)
“And they were competing with home heating on the spot market,” van Welie said. “So then we hit all kinds of logistics problems, where truck drivers don’t have enough hours to move the fuel around, and the oil suppliers are going to supply homes before they’re going to supply generators.”
Raab Jonathan at NE Roundtable 2018 03 16 RTO Insider FI
Raab | © RTO Insider
The RTO’s job is “to procure the reliability services we need through the wholesale market construct,” he said. “In our resiliency filing with FERC, we are asking for a year to work things out, asking to wait until the second quarter of 2019.”
Moderator Jonathan Raab asked van Welie: “If CASPR is a transition mechanism, what might be a long-term solution to help states ‘achieve’ their climate reduction commitments without undermining the integrity of wholesale markets?”
“The obvious answer is carbon pricing, but we’re not going to do that as none of the states want to,” van Welie said. “It’s really going to have to be the states that take the lead on that.”

— Rich Heidorn Jr. reported from the ACORE conference in D.C.

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