Chairman Richard Glick Statement
June 7, 2021
Docket No. ER21-1637-000
I dissent in part from today’s order because I strongly believe that ISO New England Inc.’s (ISO-NE’s) proposed capital cost estimate for offshore wind is not just and reasonable. The majority’s adoption of ISO-NE’s proposal will, by definition, shunt every offshore wind resource into an administrative pricing construct that is particularly ill-suited to an emerging technology. The Commission should have instead adopted New England Power Pool’s (NEPOOL) estimates, which better reflect market activity as opposed to bureaucratic cost estimates that bear little relation to reality.
NEPOOL uses publicly available data from four recently executed power purchase agreements from large New England offshore wind projects,[1] giving it a clear and strong connection to the actual resources being developed in New England. By contrast, ISO-NE’s proposal is based on a mythical project that produces an absurdly high Offer Review Trigger Price (ORTP) of $17.947/kilowatt (kW)-month, which ISO-NE calculated by assuming $4.3 billion in capital costs for its hypothetical offshore wind facility.[2] ISO-NE’s capital cost assumptions are so high that ISO-NE does not even bother to propose an ORTP for offshore wind resources[3] because it is so far above the estimated starting price of $12.400/kW-month for the upcoming Forward Capacity Auction.[4] Accordingly, in accepting ISO-NE’s proposal, the Commission is forcing offshore wind developers to beg the market monitor for permission just to bid into upcoming capacity auction at a price that at least offers a chance to be selected for a capacity payment.[5]
In addition, ORTPs are supposed to capture only those offers “that plainly appear commercially implausible absent out-of-market revenues.”[6] Yet in adopting a capital cost estimate that is beyond the outer limits of anything even remotely reasonable, the Commission has done the exact opposite, effectively capturing all offshore wind resources by assuming that any contract for offshore wind is commercially unreasonable.
And as if that were not enough, ISO-NE uses stale data from hypothetical projects that do not represent the current state of the market while also slapping a confidential label on its data set, thereby precluding any serious discussion of those hypothetical numbers.[7] Relying on stale, secret data is a particularly misguided approach when it comes to an emerging technology like offshore wind, where costs are changing rapidly and relying on yesterday’s numbers only serves to overestimate the actual market results.[8] Unlike ISO-NE’s proposal, NEPOOL’s proposal is an open, reasonable, and well-substantiated estimate of the actual market-derived costs of developing a large-scale offshore wind project in New England. In contrast to ISO-NE, NEPOOL’s proposal is actually just and reasonable.
Today’s outcome will only further prop up prices, protect incumbent generators, and impede state energy policies. In so doing, it underscores the extent to which “we must move beyond the Minimum Offer Price Rule (MOPR).”[9] Moreover, the ORTP construct establishes a rebuttable presumption that offers below the ORTP may reflect the exercise of buyer-side market power. Buyer-side market power mitigation should be all about and only about buyers with market power. New offshore wind resources are not buyers and they do not have market power. The majority’s decision to apply buyer-side market power mitigation rules to entities that are not buyers or that lack market power is nonsensical.[10] I urge ISO-NE to move expeditiously to replace its ORTP and MOPR-related rules or the Commission will be left with little choice but to step in and establish new rules ourselves.[11]
For these reasons, I respectfully dissent in part.[1] NEPOOL Transmittal at 16-17.
[2] ISO-NE Transmittal at 28-29.
[3] Id. at 27.
[4] ISO New England Inc., 175 FERC ¶ 61,172, at P 59 (2021).
[5] See Calpine Corp. v. PJM Interconnection, L.L.C., 171 FERC ¶ 61,034 (2020) (Glick, Comm’r, dissenting at PP 85-89).
[6] ISO New England Inc., 142 FERC ¶ 61,107, at P 38 (2013).
[7] ISO-NE Transmittal at 26-35.
[8] Offshore wind costs fell 28% to 49% from 2014 to 2019, and experts anticipate further cost reductions of 17% to 35% by 2035 and 37% to 49% by 2050, driven in part by technology innovation (e.g., larger and more efficient turbines). Lawrence Berkeley National Laboratory, Expert elicitation survey predicts 37% to 49% declines in wind energy costs by 2050 (Apr. 2021), https://emp.lbl.gov/publications/expert-elicitation-survey-predicts-37.
[9] ISO New England Inc., 162 FERC ¶ 61,205 (2018), order on reh’g, 173 FERC ¶ 61,161 (2020) (Glick, Comm’r, dissenting at P 2), order denying reh’g, 174 FERC ¶ 61,120 (2021).
[10] See N.Y. State Pub. Serv. Comm’n v. N.Y. Indep. Sys. Operator, Inc., 170 FERC ¶ 61,119 (Glick, Comm’r, dissenting at PP 1-7), order on reh’g, 173 FERC ¶ 61,060 (2020) (Glick, Comm’r, dissenting at PP 1-19).
[11] See N.Y. Indep. Sys. Operator, Inc., 174 FERC ¶ 61,242 (2021) (Glick, Comm’r, concurring at P 3) (citing 16 U.S.C. § 824e; Technical Conference Regarding Resource Adequacy in the Evolving Electricity Sector, Docket No. AD21-10-000, Tr. at 9:10-20 (Mar. 23, 2021) (Comments of Chairman Richard Glick) (“I think we should to the extent we can, allow . . . the RTOs themselves, and the stakeholders to come up with their own proposals, to organically come up with an approach that’s different on the current MOPR rules around the country. . . . But to the extent they don’t come up with something, I think we have an obligation under the Federal Power Act to act where rates and terms of these markets are unjust and unreasonable.”)).