May Commission Meeting: Opening Remarks of Commissioner Allison Clements

I want to touch on the two upcoming forums next month on New England winter energy adequacy and on the PJM capacity market.  My hope is that we use these gatherings to push beyond generic concerns about the pace of change on the electric system and instead examine, define, and quantify the specific challenges that each region faces and solutions that are tailored to those challenges.

In the New England context, I, along with lots of others, have been outspoken about the need to better quantify the scope of the region’s winter reliability risk.  To its credit, ISO New England heard these requests, and the preliminary results of its recent analysis are encouraging.  The new analysis shows that in the event the Everett LNG facility retires, the winter risk is more limited than originally supposed, largely due to greater than expected deployment of energy efficiency and new behind-the-meter solar generation.

In PJM, the RTO issued a white paper addressing resource retirement risk.  This paper has done a good thing in focusing stakeholders on assessing whether and how market rules may need to evolve.  But I think it is important that we avoid jumping to conclusions before we collectively kick the tires on the assumptions in this report.  As I read it, I have several questions and I hope we'll explore them at the forum:

• Does the report assume that every unit facing compliance costs from EPA rules will retire, and if so, why?  
• How will retirements affect PJM market dynamics?  
• Will price signals sent by tightening margins help retain needed capacity and if not, why not?  
• And given resource performance issues seen during recent storms, what can the Commission do to better ensure that capacity customers pay for will actually perform as expected?

My point here isn’t to suggest that we should stop worrying about winters in New England or retirements in PJM.  It is a reminder that reliability discussions will lead to more cost-effective solutions if they start with the data-driven analytical work required to understand and quantify the problem we are aiming to solve.  

One thing that I hope we can avoid in the context of both forums is assuming that all else on the grid remain static outside of the retiring units. 

First and foremost, new resources interconnecting to the system can bolster reliability.  And as PJM identifies, the faster they are connected, the more reliable the system will be.  While new solar and wind are not one-for-one replacements for retiring fossil plants, they’re not intended to create a reliable grid in isolation.  Properly accrediting the ability of all resource types to provide energy during shortages is critical to reliability.  We can do more now by unlocking barriers to more dynamic demand-side resources, which have proven critical in recent extreme weather events, and which offer flexibility outside of them.  We can also move forward on rules that require the use of grid-enhancing technologies.

And finally, we must keep our eyes on the prize of scenario-based, long-term regional and interregional transmission system planning, which will—together with interconnection reform—be leading players in the reliability solutions portfolio going forward.

In short, retirements are one important piece of a larger reliability puzzle, and solving that puzzle starts with an analysis of all the pieces.

E-1

I’ll speak to one agenda item, E-1.  We are approving, as the Chairman noted, NERC’s work plan on registering inverter-based resources.  I hope that NERC’s substantive filing on its registration approach, which is still to come, ensures an effective registration framework but does not compromise IBRs’ ability to provide the reliability services they are capable of providing, including at least reactive power, black start, and fast frequency response.  I look forward to engaging in this docket.

A-3

Thanks for the good work on this report.  It’s really informative and helpful, and people should read it.  I do think it’s trending in the right direction, and it is good news.  

One bright spot that came out concurrently with these reports this week is CAISO’s release of its summer outlook on Tuesday.  It showed considerable improvement in resource availability for the coming summer, driven in part by the better hydro conditions that you described, and also by the push for resource development that is resulting in the addition of over 4000 megawatts of new storage in one year.  Appreciating supply chain constraints, that’s a pretty impressive amount.