By Michael Kuser
HARTFORD, Conn. — With fewer than four months to go in this year’s session of the Connecticut General Assembly, state regulators made their cases short and sharp Tuesday when briefing legislators on the Energy and Technology Committee.
“One of the big challenges that we face is that our wholesale electricity market is governed by FERC, and at the federal level, there has been no recognition of the need to address climate change and reduce carbon emissions through the design of the wholesale electricity market,” said Katie Dykes, commissioner-designate of the Department of Energy and Environmental Protection and chair of the Public Utilities Regulatory Authority.
Dykes, nominated to be DEEP commissioner by new Gov. Ned Lamont last month, made her remarks in a presentation to committee members and the public at an informational forum held in the Legislative Office Building.
She said that the state has had to work by itself over the past several years to ensure that an increasing volume of power is being sourced from zero-carbon and renewable resources, mainly through utility-backed contracts and state procurements.
“The challenge, though, is that in our wholesale market, we are not always getting credit for what we are procuring in these contracts and in these different mechanisms that the state has had to establish in order to correct for the failure of the wholesale markets to ensure investment in those types of resources,” Dykes said.
The urgency of climate change requires a speedy transition to a zero-carbon electric grid, while at the same time retaining units such as Dominion Energy’s Millstone nuclear plant in Waterford, which supplies a “significant share” of the region’s carbon-free generation, she said.
In December, the 2,111-MW plant was one of the winning bidders in a state solicitation for nearly 12 million MWh of zero-carbon energy, securing purchase of about half its output for 10 years. (See Conn. Zero-Carbon Awards Include Nukes, OSW, Solar.) The PURA deemed Millstone at risk for retirement without ratepayer support, which allowed its bids to be considered in terms of environmental and grid reliability benefits, as well as price.
Dykes pointed to another challenge for New England: fuel security. The region sits at the end of the U.S. natural gas pipeline system, and while the wholesale market has driven investment into natural gas-fired power plants, it has not provided the infrastructure needed to supply those plants, she said.
“So this challenge of fuel security, a very gas-dependent wholesale electricity market that is not achieving carbon reductions, has also reached a tipping point where the ISO New England is not confident … that they can maintain the reliability of that electric grid in the near term if certain units that do not run on natural gas were to retire,” Dykes said.
“Just to be explicit,” she said, ISO-NE concluded it can’t run the grid without the Millstone units, the largest power plant in the region.
The RTO’s fuel security analysis released last year actually showed the New England grid would become extremely stressed if the Millstone units were lost under a scenario of maximum retirements of coal- and oil-fired generators.
Dykes also cited a state report from a year ago that projected regional CO2 emissions would increase by 25% if Millstone retired.
Unfortunately, Dykes said, the wholesale market is not designed to value carbon reduction and fuel security benefits, which leaves the responsibility to the state.
While Connecticut has been able to procure power at good prices, “the challenges now are in respect to ISO New England, whether its leadership is acknowledging where this future is heading us … and whether they have the ability to adapt their market design to accept and help to achieve the carbon emission goals of the states and to address in a proactive manner the fuel security needs of our grid, or whether they’re going to continue to adopt a reactive posture to the states’ leadership role,” Dykes said.
CPES Hears from Legislative Leaders
Later that day, the Connecticut Power and Energy Society (CPES) partnered with the state’s bar association to host a panel discussion with the leaders of the Energy and Technology Committee at the University of Connecticut.
Day Pitney attorney Sebastian Lombardi, who represents the New England Power Pool, moderated the panel of Rep. Charles Ferraro and Sen. Paul Formica, the ranking Republican members, and Rep. David Arconti and Sen. Norm Needleman, the Democratic co-chairs.
“We need to make sure that our public utilities are accountable,” Needleman said. “We are trying to move to renewables and at the same time trying to manage rates, which seem to be pretty high in Connecticut. I have some pretty well-known issues with management decisions that Eversource [Energy] has made, but I’m going to put those on the shelf, to some extent.”
Needleman last month criticized the utility for asking the state to allow it to charge ratepayers an extra $150 million to recover storm-repair costs incurred over the past two years.
A local news source, CT News Junkie, quoted him saying: “If Eversource had invested in effective weather responses in the past, instead of reducing staff and equipment to save money, they wouldn’t need to ask for $150 million in repairs.”
“My priority is to not allow one bill or issue suck up all the oxygen in the room,” Arconti said, adding that technology could be a big part of the committee’s agenda given the IT background of Gov. Lamont, who has yet to announce his legislative program.
Ferraro said it was important “to keep ratepayer rates as low as possible, but still keep opportunities open for procurement of renewable energy sources and letting them come to bear by also limiting the effect of subsidies that we add on the ratepayer, because if you subsidize renewable energy, eventually somebody’s going to pay for it.”
Lombardi said it seemed legislators were striving to find a balance between protecting ratepayers and increasing investments in procurements like offshore wind, fuel cells and grid-scale solar.
Dan Dolan, president of the New England Power Generators Association, said one of the challenges is balancing how the market is structured.
“Over the years, my organization has raised a lot of concerns about carving out more and more of the market to individual resource types,” Dolan said. “How do you folks think about trying to integrate some of these different attributes within the market and be able to move away from a long-term contracting structure?” He added that NEPGA is specifically “looking at putting a more meaningful price on carbon emissions” beyond the Regional Greenhouse Gas Initiative.
“I think working with our colleagues at PURA and with DEEP … is going to be a big focus point for me,” Arconti said. “They just have way more institutional knowledge at this point when it comes to striking those balances.”
Needleman said he thought the idea of a carbon tax was more of a national issue and that he wouldn’t know how to implement it in Connecticut without making the state less competitive, “but I would certainly support it in a broad way.”
Needleman also expanded on Arconti’s point of consulting with state agencies.
“Meeting Commissioner Dykes today and listening to her blew my socks off,” he said. “She’s very knowledgeable, and I think [Arconti] is right that we have to follow the institutional knowledge. In some of the presentations we’re hearing about offshore wind, they’re comparing it to other forms of generation and emphasizing that we are a coastline state and that we have the perfect area to launch a lot of work and reap the benefits.”
Offshore Wind Base
Asked what single issue he would focus on more than any other, Formica replied that he would try to make the Port of New London part of the supply chain for the growing offshore wind industry in the Northeast.
“With no overhead obstructions, it puts itself in good position to be a base of operations for offshore wind,” Formica said. He recounted how years ago he had served “on a regional rail committee that created a freight line from that pier moving north” through the state and all the way to Montreal.
“There’s going to be $30 million to $50 million invested in the New London pier specifically to accommodate wind,” and if the state can establish some assembly or manufacturing plants for turbine components up north it could take advantage of the economic opportunities in renewables, he said.
Ferraro said people talk about New London, but “we also have offshore wind capability in Bridgeport. … Once those industries are up and running, it’s going to make sense to have the large components — the wind turbines — made right here in Connecticut in the ports, instead of shipping them from a place like Denmark, which would bring jobs and economic development to our state.”