The New York Public Service Commission on Thursday approved rules designed to allow low- and moderate-income apartment dwellers to own renewable energy projects (15-E-0082).
“Shared Renewables places customers who do not own homes on an equal footing with traditional single-home customers and creates opportunities for low- and moderate-income families who don’t have access to electricity generated from renewable resources,” PSC Chair Audrey Zibelman said.
Customers can band together to form larger groups that share in the benefits of renewable energy projects, such as solar energy installations and wind farms.
The plan contemplates “community solar” projects, where solar panels are erected on a shared site, such as a vacant lot, with the economic benefits shared among its participants.
Under the first phase of the program, from Oct. 19 through April 30, 2016, projects will be limited to those that site distributed generation in areas where it can provide the greatest benefits to the power grid or support economically distressed communities (at least 20% participation by low- and moderate-income customers).
A second phase beginning May 1, 2016, will make shared renewable projects available throughout entire utility service territories.
The program was proposed in Gov. Andrew Cuomo’s 2015 State of Opportunity Agenda. “This program is about protecting the environment and ensuring that all New Yorkers, regardless of their zip code or income, have the opportunity to access clean and affordable power,” he said.
MISO has won approval to revise its Tariff to provide common treatment for network customers seeking to serve network load not physically interconnected with the RTO.
The tariff mechanism sought by MISO and approved by the Federal Energy Regulatory Commission last week is expected to eliminate the need for filing specific non-confirming network integration transmission service agreements on a case-by-case basis (ER15-1745).
South Mississippi Electric Power Association delivers wholesale power to its cooperatives in three transmission areas.
The change stems from two non-conforming NITS requests: a 2013 request to allow South Mississippi Electric Power Association to take network service to serve a network load pseudo-tied to SMEPA but not physically interconnected with a transmission owner or independent transmission company within MISO (ER13-2008), and a 2014 MISO request to allow Arkansas Electric Cooperative Corp. a similar right to serve pseudo-tied load (ER14-684).
A pseudo-tie is a mechanism for operationally transferring a resource from the balancing authority in which it is physically located to another BA, which becomes responsible for it for system reliability.
Some MISO transmission owners filed comments in those cases, raising concerns that the two utilities could be receiving special treatment. The transmission owners asked FERC to order MISO come up with a global solution to the issue through changes to its Tariff.
In response, FERC said it expected MISO to offer non-conforming service on a non-discriminatory basis to other transmission customers in similar situations.
After discussions with transmission operators, MISO proposed several changes to Section 31.3 of its Tariff, which required that network load be physically interconnected with a MISO transmission owner or independent transmission company.
The revised Tariff requires that the non-interconnected network load “be part of a pricing zone in MISO, so that the network customer is subject to a rate for network service.”
One way to meet such eligibility requirements is if a non-interconnected network load is pseudo-tied into the MISO balancing authority. MISO stated that provision is necessary because otherwise there wouldn’t be a mechanism to charge the network customer for network service, “meaning the network customer could receive this service for free.”
MISO noted that in its NITS agreements with SMEPA and AECC, it required them to pay a rate for network service based on the MISO zone in which the physically interconnected portion of their load is located.
The revised Tariff also requires network customers to have coordinating arrangements in place with the host transmission owner or independent transco for reporting network load.
Unable to reach consensus on a winter reliability program, ISO-NE and the New England Power Pool have asked federal regulators to choose between competing proposals in a “jump ball” proceeding that would cover the next three winters (ER15-2208).
ISO-NE has used a winter reliability program for the past two winters to create incentives for generators to secure fuel supplies during cold months until its Pay-for-Performance program, already approved by FERC, launches in late 2018 (ER14-1050).
Both ISO-NE and NEPOOL have proposed expansions of last winter’s program, but neither has received adequate support among stakeholders.
“Both proposals are intended to address the well-documented reliability challenges created by New England’s increased reliance on natural gas-fueled generation. Both are also intended to be stop-gap measures until revised incentives for capacity resources become fully effective in 2018,” the filing states.
The primary difference between the two proposals is what types of resources are eligible to receive compensation. NEPOOL’s proposal is based on the design of last winter’s program, which provided compensation for unused oil or liquefied natural gas remaining at the end of the winter and adds demand response.
ISO-NE’s proposal includes compensation for unused oil or LNG fuel and would also compensate nuclear, hydro, biomass and coal-fired resources but does not include DR.
FERC had ordered the RTO to develop a market-based approach for the 2015-2016 season in response to a complaint by the New England Power Generators Association. The commission in April reversed course when it determined the plan might not be finalized in time. (See FERC Backtracks from ISO-NE Winter Reliability Order.) It directed the RTO and its stakeholders to keep trying to develop a solution.
The petition asks FERC for an effective date for next winter’s program of Sept. 14.
The Federal Energy Regulatory Commission reaffirmed its authority Monday to regulate New York reliability support services agreements, rejecting a rehearing petition filed by the state Public Service Commission challenging its jurisdiction (ER15-1047).
The NYPSC had argued that it had sole jurisdiction over the rates and terms of an RSSA it had ordered between Exelon’s troubled R.E. Ginna nuclear plant and Rochester Gas & Electric. (See NYPSC Challenges FERC Jurisdiction over Ginna.) FERC in April rejected the proposed rate schedule in the agreement and ordered hearing and settlement proceedings.
FERC rejected the contention that it would be setting retail rates, asserting that it was properly exercising its authority under the Federal Power Act to regulate wholesale markets.
“Preventing the exercise of market power through [reliability-must-run] agreements is important to ensure that wholesale rates are just and reasonable,” FERC said. “Therefore, finding that the commission does not have authority to regulate such agreements — which keep RMR resources online, provide them out-of-market compensation and remedy a potential opportunity to exercise market power — would be inconsistent with the congressional intent behind the FPA.”
The agreement, set to be retroactive to April 1 once approved, would cost about $175 million a year and be effective through late 2018. Ginna says it lost more than $150 million between 2011 and 2013.
FERC did, however, reverse its stance from April when it said it would not consider the issue of Ginna “toggling” between the RSSA and NYISO. In its original order, the commission said it would only reconsider how much Ginna would have to repay in the event the plant returned to the market after the agreement’s expiration — saying that this provision was “a sufficient disincentive” to prevent toggling. (See FERC Rejects Ginna Rates, Orders Settlement Proceeding.)
“We find that the pleadings raise disputed issues of material fact concerning Ginna’s incentive to toggle between RSSA compensation and the NYISO markets,” FERC said. That issue has been added to the roster of items to be decided in the ongoing proceeding before a FERC administrative law judge.
In Monday’s order, FERC also rejected rehearing requests from several parties that challenged several aspects of the agreement. The commission
Again accepted the NYISO Ginna Reliability Study that justified the RSSA;
Upheld the September 2018 end date for the RSSA, saying early termination clauses in the contract are consistent with FERC policy to keep RMRs of limited duration; and
Reiterated its stance that consideration of the “price-suppressive” effects Ginna’s contract would have on the capacity market is beyond the scope of the proceeding.
Meanwhile …
In the concurrent proceeding before the administrative law judges of the NYPSC, RG&E last month requested a temporary rate surcharge to avoid rate compression over a shorter duration of the RSSA. Whatever rate increases it will eventually collect are being held in abeyance until the RSSA is approved by state and federal regulators.
RG&E estimates that its deferred collection will reach approximately $25 million from the effective date of the RSSA through July and will continue to grow, with interest. “By authorizing a temporary rate surcharge, the bill impacts resulting from the deferred collection amount would be mitigated,” it wrote.
In a brief filed Monday, RG&E said the commission “should find that the company’s proposed temporary rate surcharge tariffs are in the public interest and authorize the company to immediately implement the surcharges, subject to refund.”
PSC staff filed a brief Monday that supports the move, proposing Sept. 1 as the effective date.
“The RSSA is not in effect,” the state consumer advocate wrote. “Neither the commission nor FERC have reached a final conclusion to accept the RSSA, so RG&E has not, and might never, incur any financial obligations to Ginna under the RSSA.”
The administrative law judges said they will set a schedule to recommend a decision once reply briefs due July 20 are filed.
SPP will soon file a full report on the Integrated Marketplace’s first year of performance, but its most recent quarterly State of the Market report indicates the market expansion hasn’t affected the fundamental dynamics in the region.
Electric prices are continuing to track natural gas prices, and congestion patterns “have generally remained consistent” with those under the old Energy Imbalance Service, according to the spring market report by the RTO’s Market Monitoring Unit.
The Integrated Marketplace, which launched in March 2014, includes a day-ahead market with transmission congestion rights and a reliability unit commitment process and real-time balancing market. It also incorporated a price-based operating reserve market and combined the region’s balancing authorities into a single SPP balancing authority.
The Federal Energy Regulatory Commission told SPP and its MMU to file an information report 15 months after the implementation of the market. A draft of the report is expected to be presented to the Board of Directors during its July 28 meeting.
Here are some highlights from the MMU report:
Gas, Electric Prices
Average gas prices for March, April and May were about half those for last year’s spring, averaging $2.46/MMBtu, as compared to $4.66/MMBtu in 2014. That decline has led to a corresponding decline in the LMP. Day-ahead LMPs averaged $22.13 this spring, compared to $37.03 in 2014. Real-time LMPs were $20.95, compared to $34.72 last year.
DA/RT Divergence
At the same time, the SPP system’s day-ahead to real-time price divergence hit a high of -46.9% in March. Day-ahead prices were $22.06, compared to real-time average prices of $20.46. Divergence eased to -7.4% and -7.2% in April and May, respectively; it has only been in the positive once since the Integrated Marketplace’s implementation, coming in May 2014 at 3.8% ($35.58 for day-ahead compared to $35.97 for real time).
The report partially attributed the price divergence to significant price volatility in the real-time market. “Prices are expected to be more volatile in the real-time balancing market than the day-ahead market,” the report said.
Virtual Trading
The day-ahead market’s virtual trading is intended to promote convergence between day-ahead and real-time prices, improve day-ahead efficiency and moderate market power. The report said cleared demand bids — most placed by financial-only participants — steadily increased before leveling out this spring.
SPP said gross virtual profits for the Integrated Marketplace’s most recent 12 months totaled just over $92 million, with gross virtual losses totaled nearly $71 million. It noted every Integrated Marketplace month has had a net profit from virtual transactions save for May 2014, which had a net loss of just over $700,000.
Cleared virtual bids as a percentage of reported load is averaging about 3% since the Integrated Marketplace’s implementation; cleared virtual offers as a percentage of reported load is averaging just over 4%.
Cleared virtual transactions averaged 7% of load since March 2014. April 2015 saw the largest amount of virtual transactions, at 9.75% of reported load.
Gas-Electric Price Correlation Continues
SPP also pointed to a positive metric comparing gas prices from the Panhandle Eastern Pipeline with electricity prices. (SPP uses PEPL costs as a proxy for overall gas costs in its footprint).
SPP power costs continued to track natural gas costs in the first year of the Integrated Marketplace.
“Historically, gas prices and real-time prices have been highly correlated in SPP,” the report said, noting the trend has continued into the Integrated Marketplace. “Workably competitive markets should experience highly correlated gas costs and energy prices in general.”
Congestion Patterns
The report said congestion patterns have remained consistent with the Integrated Marketplace’s implementation. Newly energized transmission service has eased congestion in northwest Kansas and the Kansas City area, but congestion remains an issue in the Texas Panhandle and northwest Oklahoma, where four flowgates registered the highest shadow prices in SPP’s footprint this spring. (Shadow prices reflect congestion’s intensity on a flowgate’s path, indicating the marginal value of an additional megawatt of relief on a constraint in reducing the total production costs.)
The market report said low-cost generation north of the constraints and limited import capabilities were some of the driving factors.
Regulation Market
The report notes that SPP implemented its regulation-compensation market to comply with FERC Order 755 on March 1. The market includes payment to market participants based on changes in energy output for regulation deployment.
This March, SPP cleared more regulation mileage than necessary with a regulation mileage factor of 1.0 for both regulation up and down, according to the report. The 1.0 factor was adjusted to a more realistic value, averaging near 0.2, in April and May, resulting in fewer unused mileage make-whole payments.
Five 170-foot-tall concrete foundations that will support the nation’s first offshore wind farm have been completed in Houma, La., and are starting their barge journey to the Deepwater Wind construction site off Block Island, R.I.
The 1,500-ton foundations, which will support five 6-MW turbines manufactured by Alstom, are expected to arrive off Block Island in mid-July, according to Deepwater Wind CEO Jeffrey Grybowski. The turbines are scheduled to be installed in mid-2016, with the project expected to be operational by the end of that year. National Grid has agreed to buy the wind farm’s output under a 20-year contract.
Facebook Powering New Texas Data Center Entirely with Wind
Facebook announced that its new data center in Fort Worth, Texas, will run entirely on wind energy. The Fort Worth facility will be the third Facebook server center to be powered entirely on renewable energy. The other two are in Altoona, Pa., and Lulea, Sweden.
Facebook said it is working with Citi Energy, Alterra Power and Starwood Energy to tie 200 MW of wind energy to the Texas grid, and then to the data center. It said the wind facility will cover a 17,000-acre site about 100 miles from Fort Worth. Facebook says that it aims to produce 50% of its power needs from renewable energy by 2018.
Facebook’s news follows separate announcements from tech giants Google and Amazon.com that they plan to step up commitments to renewable energy.
Brattle Report Puts Nuclear Industry’s GDP Input at $60 Billion a Year
A report commissioned by a nuclear promotional group said U.S. atomic power contributes about $60 billion annually to the country’s gross domestic product.
The report by the Brattle Group, commissioned by the trade organization Nuclear Matters, said the industry accounts for 475,000 full time jobs and provides 19% of U.S. electricity. The report said the industry provides about $10 billion in federal taxes and $2.2 billion in state taxes.
More than Half of Large Businesses Generating Some of Own Power
A Deloitte survey shows that more than half of about 600 large businesses in the U.S. are able to generate some of their energy on-site. Two years ago, only about a third of the companies generated some of their power.
The study showed that the largest companies – those with $500 million in annual revenue or more – are investing more in energy management, ranging from on-site generation to energy efficiency. The majority of the on-site power is still provided by diesel generators, but it is increasingly likely to include renewables such as solar or wind.
Peabody Energy, in asking a federal judge in Wyoming to dismiss a lawsuit filed by protesters who were jailed after demonstrating at a shareholders meeting, also wants the judge to purge the lawsuit of the famous John Prine protest lyrics that mention the company’s name.
Thomas Asprey and Leslie Glustrom, who were jailed after demonstrating at a 2013 Peabody shareholders meeting, cited the lyrics from Prine’s 1971 song “Paradise” in the lawsuit. Peabody said the lyrics tarnish its name.
The lyrics include the refrain about the company’s mining practices in Muhlenberg County, Ky.:
And Daddy won’t you take me back to Muhlenberg County
Down by the Green River where paradise lay?
“Well, I’m sorry my son, but you’re too late in asking
Environmentalists Say Dominion’s Coal Ash Plans Inadequate
A coalition of environmental groups says Dominion Virginia Power’s plan to close its 11 coal ash ponds doesn’t do enough to prevent toxic materials from seeping into nearby rivers, and they’ve asked the state to step in.
The environmentalists have asked the Virginia Department of Environmental Quality to halt Dominion’s plans to remove the coal ash if it shows pollutants are escaping. “Dominion’s proposal to cap in place will not stop heavy metals and other toxic pollutants from leaking out of the sides and bottom of coal ash ponds right into water bodies used to kayak, fish and swim,” said Emily Russell of the Virginia Conservation Network.
Company officials say the procedure for closing the ponds and moving the material to prepared disposal sites meets all state and federal regulations, and tests show the method is safe.
Ameren Reaches Settlement on Missouri Coal Ash Plan
Ameren Missouri has settled a series of lawsuits dating back more than five years over its coal ash disposal plan, allowing the power generator to go forward with construction of a coal ash landfill at its Labadie power plant that it says is crucial to the plant’s continued operation.
The settlement with Franklin County and the Labadie Environmental Organization requires Ameren to construct 5-foot berms to keep any ash or ash residue out of the Missouri River floodplain. The company also agreed not to bring in ash from other sites, or to use coal ash in the construction of the berms.
Construction has started on Maine’s largest renewable energy project, a $420 million wind farm in Bingham that will have a capacity of 185 MW.
Developer SunEdison said it had secured $360 million in financing for the 56-turbine farm, which will increase the company’s total wind generation capacity in Maine to 552 MW. The Bingham project’s output will be sold to Eversource, National Grid and Unitil.
Pump Malfunction Forces Indian Point Unit Shutdown
A water pump malfunction forced the shutdown of Entergy’s Indian Point Unit 3 on Wednesday. Control room operators shut down the nuclear reactor after they found that one of the unit’s condensate pumps automatically stopped while the unit was operating at full power, causing the steam generator’s water levels to fluctuate, according to Entergy.
The condensate pumps, which are part of the system that feeds water into the plant’s steam generators, are located away from the nuclear side of the plant, Entergy said. Operators safely shut down the reactor, the company said. The shutdown did not affect Unit 2, which is still operating at full power.
Entergy did not say when it expects to resume operations.
Ameren is planning a 15-MW solar farm on a 70-acre site in eastern Missouri. The project would be twice the size of Ameren’s first utility-scale solar facility near St. Louis. Ameren’s application with the Missouri Public Service Commission did not detail costs.
The state’s renewable energy standard has stoked interest in renewable projects, as utilities are required to generate a portion of their electricity from non-carbon sources. Developers also are racing to build projects before a federal tax credit for renewable energy falls from 30% to 10% at the end of next year.
Indianapolis Power & Light has broken ground on the first utility-scale battery storage project in MISO’s 15-state territory.
The AdvancionTM Energy Storage Array will provide 20 MW of interconnected energy storage. The facility, which will provide additional stability to IPL’s system, is due to go online in the first half of 2016.
IPL’s parent, AES, pioneered the use of grid-connected lithium-ion batteries in 2008, in Indianapolis. AES has 86 MW of energy storage projects in operation worldwide and has announced an additional 260 MW of interconnected battery-based storage.
Talen Energy, the independent power producer formed by the spinoff of PPL’s generating assets and competitive producer Riverstone Holdings, is looking to grow. The Allentown, Pa., company holds about 15,000 MW of generation, primarily in the PJM region and some in Texas.
“We’re as open to buying coal as gas as nuclear,” CEO Paul Farr told Reuters. But he said its fuel mix is more likely to become more “gassy” while gas prices remain low. He did say, however, that Talen is looking at American Electric Power’s coal generation holdings in Ohio. AEP has been signaling a willingness to unload its coal assets there.
Minnesota Power Shutting Down 2 Coal Units at Taconite Harbor
Minnesota Power announced last week that it will retire two coal-fired units at its Taconite Harbor plant in Schroeder, part of a larger plan to shift the company’s generation portfolio from coal.
The company’s commitment will be included in its “integrated resource plan” due to be filed with the Public Utilities Commission in September. Minnesota Power’s fuel-mix currently has about 75% coal-fired generation and 25% renewables. That will change over the next 15 years to about a third coal, a third natural gas and a third renewables.
“It’s a balanced portfolio of energy sources,” said Al Rudeck, vice president of strategy and planning. “We think it’s the best plan, and the most affordable plan, for our customers.” Environmentalists applauded the announcement.
FirstEnergy would spin off the transmission assets of Jersey Central Power & Light, Metropolitan Edison and Pennsylvania Electric into a new subsidiary under a plan it has submitted to regulators, saying the move would allow it to more cheaply and efficiently upgrade its grid (EC15-157).
With the formation of the new company, Mid-Atlantic Interstate Transmission (MAIT), all 24,000 miles of the Akron, Ohio-based company’s system would be managed by transmission affiliates.
The plan must be approved by New Jersey and Pennsylvania regulators and the Federal Energy Regulatory Commission. The company made no formal announcement of the proposal except for a June 19 filing with the Securities and Exchange Commission.
“When you have a separate transmission-only company, typically it carries a more favorable credit rating, so it can borrow money for less, and that results in lower costs for customers,” FirstEnergy spokesman Doug Colafella said. “It’s an arrangement that really allows a company to make the significant investments in transmission that we’re looking at. It also allows our separate utilities to stay focused on the distribution system and respond quickly to customer needs.”
FirstEnergy already operates American Transmission Systems (ATSI) in Ohio and northwest Pennsylvania and Trans-Allegheny Interstate Line Co. (TrAILCo) in western Pennsylvania.
The spinoff falls in line with FirstEnergy’s “Energizing the Future” initiative, announced in 2012, to enhance its high-voltage transmission system.
FirstEnergy expects to invest $2.5 billion to $3 billion over the next five to 10 years on upgrades in the JCP&L, Met-Ed and Penelec zones, Colafella said.
The company estimates that streamlining the projects through one company with a higher credit rating will save $135 million in interest over the 30-year life of $1.5 billion in projects, according to FirstEnergy’s filing with the New Jersey Board of Public Utilities.
“Consolidating all of the operating companies’ transmission assets in a stand-alone transmission company can reduce investors’ perception of financial risk, strengthen the credit profile of the transmission function and, in that way, provide improved access to capital and reasonable rates,” it said.
Ron Morano, a spokesman for JCP&L, said that being relieved of the task of operating its transmission system will allow the company to better focus on customers’ needs.
“For Jersey Central, it enables a more timely investment on new transmission projects,” he said.
Under the plan, MAIT would own and operate all transmission assets of the three utilities, which would lease to the transmission subsidiary their real estate and real property rights.
Colafella said the spinoff would not affect transmission-related jobs at the utilities.
“It won’t have any impact on employees day-to-day,” he said. “It’s more of an accounting arrangement.”
It is, however, expected to lead to the creation of about 200 FirstEnergy jobs in New Jersey and Pennsylvania, he said, and the projects should provide work for roughly 600 engineering, project management and construction jobs in those states.
CARMEL, Ind. — MISO will propose closing the day-ahead market one hour earlier during Daylight Savings Time and reducing the clearing time by an hour in response to the Federal Energy Regulatory Commission’s final rule on gas and electric schedules.
MISO officials said their proposal — Alternative 3 — was an effort to balance reliability and market efficiency concerns with stakeholder preferences. Most stakeholders preferred no changes.
FERC Order 809 moved the timely nomination cycle deadline for scheduling gas transportation from 11:30 a.m. to 1 p.m. CT (from 12:30 p.m. to 2 p.m. ET) and added a third intraday nomination cycle. The commission ordered RTOs to adjust the posting of their day-ahead energy market and reliability unit commitment process results “sufficiently in advance” of the revised gas cycles or explain why it is not suitable for their markets.
Three Alternatives
The RTO rejected Alternative 2, which officials said was most in line with Order 809 but was opposed by most stakeholders. In addition to reducing the clearing time by one hour, it would have aligned the day-ahead market with the timely gas nomination cycle by closing the day-ahead two hours earlier during DST and one-hour earlier during standard time. Only 18% of stakeholders supported the change.
Alternative 3 won a bare majority with 53% support, making it the second choice to the status quo Alternative 1, which was backed by 78%.
Alternatives 2 and 3 got much of their support from gas-dependent members in Zones 8 and 9 (Louisiana, Arkansas and eastern Texas).
“I know not everybody is going to agree with [the choice] given the voting that took place. I hope that everybody can understand how we got there and [that] it makes sense,” Joseph Gardner, MISO’s vice president for forward markets and operations services, told the Market Subcommittee last week in announcing the decision.
Gardner told stakeholders MISO will have to make a partial show-cause filing to defend the choice to FERC. MISO also will ask FERC to delay the implementation of the new hours to November 2016 rather than next April as required by FERC.
More Units to Call On
Gardner said Alternative 3 had several benefits. Moving the market before the Intraday 2 gas nominations could free up about 5,000 MW more than under the current approach.
“From a reliability perspective, by moving our timeframe up by shortening our window, we bring more units into the mix. That basically allows more units to be considered as part of the normal day-to-day process, in terms of getting them online [and] in terms of committing them economically,” he said.
MISO estimates that natural gas-fired generation could rise to 50% of its generation pool in 2016/2017 as coal-fired plants are shuttered in response to the Environmental Protection Agency’s Mercury and Air Toxics Standards. EPA’s proposed Clean Power Plan is expected to spur gas use further.
From a market efficiency standpoint, Gardner pointed to the value of being able to trade during the “most liquid” time of the day “and then having that price discovery and know[ing] what price to put into the day-ahead market. So that’s a consideration, too, as to why we didn’t go with Alternative 2.”
Not Ideal for Some
The change may be hard for some stakeholders to swallow. Gardner acknowledged that many have indicated that they found ways to manage their gas supply risks and thus didn’t support moving up the day-ahead schedule.
Marc Nielsen of Alliant Energy said his company plans to add additional gas-fired generation and already conducted a great deal of modeling. “We supported Alternative No. 1. We’re able with our gas supply resources to handle things perfectly as they are now,” he said.
Gardner said he recognized Alliant’s concern. “I hope people can understand how we ended up here,” he said. “It’s been a long journey.”
But the tone among stakeholders at the Market Subcommittee was mostly supportive.
“I appreciate you guys looking at your processes and working toward also shortening the [market clearing] time. I think that was a big step, too, so thank you,” Ameren’s Jeff Moore told Gardner.
Moore asked whether Gardner thought FERC would be amenable to MISO’s choice.
“I think we have a much better chance of succeeding [than sticking with the status quo], but we still are going to have to make a good argument,” Gardner said.
NYISO and ISO-NE are not considering any schedule changes in response to the Federal Energy Regulatory Commission’s April order on gas-electric coordination.
FERC Order 809 moved the timely nomination cycle deadline for scheduling gas transportation from 11:30 a.m. to 1 p.m. CT (12:30 p.m. to 2 p.m. ET). It also added a third intraday nomination cycle (RM14-2).
“We are not contemplating market timing changes at this point in time and believe the additional 1.5 hours for generators to arrange day-ahead gas purchases will be helpful to reliability,” NYISO spokesman Ken Klapp said.
ISO-NE, which shifted its day-ahead market schedule two years ago to align with the natural gas trading day, said it is already in compliance with the FERC rule.
PJM confirmed last week that it will seek to move the deadline for submitting day-ahead offers up 90 minutes, from noon to 10:30 a.m. ET.
Adam Keech, director of wholesale market operations, told the Operating Committee that the RTO will post day-ahead results as soon as they are complete — but no sooner than 12:30 p.m. — up from the current 4 p.m. The reliability assessment and commitment (RAC) run rebid window will be open until 2:15 p.m., up from the current 6 p.m.
Keech said PJM will seek to complete the RAC run assignments before the 3 p.m. deadline for the second intraday gas nomination cycle.
“We’re going to commit as much as we can by 3 p.m., recognizing that if system conditions change we’re going to need to make supplemental commitments,” Keech said.
The RTO’s explanation last week clarified the changes it outlined to the Markets and Reliability Committee on June 25. PJM officials acknowledged the lack of consensus among stakeholders on the changes but said they were necessitated by the Federal Energy Regulatory Commission’s April order moving the timely nomination cycle deadline for gas to 2 p.m. ET from 12:30 p.m. and adding a third intraday nomination cycle. (See PJM Moving on Day-Ahead Schedule Changes.)
Keech said PJM officials are considering changes to their algorithms as well as faster computer servers as a way to meet their goal of reducing the market-clearing time to three hours from four. He said FERC’s requirement that the RTO allow hourly pricing updates means it will have to process more data during the clearing process. (See “PJM Won’t Be Ready for Flexible Generator Offers by November” in PJM Markets and Reliability Committee Briefs.)
PJM told FERC in a report last week that it will implement hourly offers by Nov. 1, following consultations with stakeholders (EL15-73).
Uncertainty over renewable tax credits and competition from low-priced natural gas may be discouraging some wind power investors — but not SunEdison’s TerraForm Power.
Established by SunEdison to own and operate its solar farms, TerraForm has since expanded its focus to wind and other clean-power assets, seeking long-term contracts that generate steady revenues for additional investments.
In the year since its July 2014 initial public offering, TerraForm has added 2 GW of wind assets to its portfolio. Last week, TerraForm made its biggest splash yet, joining with SunEdison to acquire a 930-MW energy portfolio for $2 billion from Invenergy Wind.
Just the week before, TerraForm and SunEdison announced they had finalized the acquisition of another 521-MW portfolio of operating wind farms in Idaho and Oklahoma from Atlantic Power. In January, the two companies closed a similar 521-MW package of wind and solar assets from First Wind Holdings.
The Deal
TerraForm said it intends to acquire net ownership of 460 MW of Invenergy’s wind plants, with the remaining 470 MW to be acquired by a “warehouse” facility, a financing mechanism that will be sponsored by SunEdison and third-party equity investors.
The initial acquisition includes the 187-MW Rattlesnake farm in Texas, the 196-MW California Ridge project in Illinois and the 78-MW Raleigh wind farm in Ontario. The warehouse facility includes the three Prairie Breeze wind farms totaling 279 MW in Nebraska and the 190-MW Bishop Hill, Ill., facility.
The deal is expected to close in the fourth quarter, subject to the approval of the Federal Energy Regulatory Commission and the Public Utility Commission of Texas.
Bucking a Trend
The companies are upping their stake in wind at a time in which other developers have scaled back.
Second-quarter investments in U.S. wind projects were $9.4 billion, down 4% from the first quarter and 21% from 2014’s second quarter, according to the American Wind Energy Association. Bloomberg New Energy Finance reported that global clean energy investment dropped 28% in the second quarter versus a year earlier. The U.S. entered 2015 with 65.9 GW of installed wind, AWEA says.
Yieldco Strategy
TerraForm is seeking value by “aggregat[ing] a highly fragmented industry,” CEO Carlos Domenech said.
The company’s strategy is based on the use of “yieldcos,” an increasingly popular method of holding renewable energy assets. Yieldcos allow developers to raise capital at lower costs by selling — or dropping — completed projects to the yieldco and using the proceeds to fund new projects.
“The thinking with warehouse assets is that as you drop or acquire assets into the warehouse, you’ll be tranching those assets,” SunEdison CFO Brian Wuebbels explained in a conference call last week. “Equity investors, debt investors, us … we all want to know the quality of the assets we’re putting into the warehouse. Getting an investor to put down $2 billion into an empty warehouse without having an idea of the particular asset’s performance would be creating [higher] costs. … By having definitive, high-quality assets, we can drive down the cost of capital.”
The assets being acquired from Invenergy have a weighted average remaining contract life of 19 years.
UBS Securities noted only 93 MW will be under construction upon the deal’s close, easing concerns about developmental risk. The deal also diversifies the portfolio of SunEdison, the world’s largest renewable energy development company.
Invenergy
For Invenergy, a privately held company, the sale will provide capital to invest in more projects, CEO Michael Polsky told Bloomberg. “It’s a new phenomenon. It’s helped to proliferate renewable energy.”
SunEdison’s TerraForm Power is acquiring 930 MW of wind capacity from Invenergy, including the Prairie Breeze (top) and under-construction Prairie Breeze II farms (bottom), both in Nebraska.
Domenech said he expects that TerraForm’s “ongoing partnership” with Invenergy will result in additional acquisitions in the future.
Invenergy bills itself as North America’s largest independent wind power generation company, with 51 wind farms in the U.S., Canada and Europe totaling more than 4.4 GW.
The company, which is selling 10% of its total contracted portfolio to TerraForm, will retain a 9.9% stake in the U.S. assets being sold, providing operation and maintenance services for the facilities.
Cash Flow
TerraForm and SunEdison say the assets they are purchasing should generate average unlevered cash available for distribution (CAFD) of $141 million annually over the next 10 years, a levered cash-on-cash return of about 8.4%.
Private equity investors have expressed “a lot of interest in the warehouse,” Wuebbels said.
In announcing the deal, TerraForm raised its 2016 dividend target 26% to $1.70/share from $1.53 and projected a 20% compound annual growth rate from its current first-quarter dividend “driven by the increased visibility and growth provided by this transaction.”
Market Reaction
Shares in both SunEdison and TerraForm stock rose following the sale announcement Monday, with TerraForm shares up 4.4% for the week.
Travis Hoium, a columnist for The Motley Fool, was less impressed, warning that yieldcos’ appeal could fade if they turn out to be based on overly aggressive assumptions.
“Adding $141 million in cash available for distribution may sound like a lot, but the $2 billion price tag is steep for that kind of return. Remember that the cash flow from projects has to cover the depreciating value of a wind turbine over time as well as pay for debt that will be used to acquire the assets, so the return for shareholders may not be as attractive as it seems. … Unless TerraForm Power can re-up contracts for equal or greater electricity prices well beyond the current contracts, the company may not even earn its cost of capital back.”
