Report Released on Economic and Jobs Impact of the U.S. Electric Industry

The American Public Power Association (APPA), National Rural Electric Cooperative (NRECA), and the Edison Electric Institute (EEI) have jointly commissioned a report, published last month, entitled Powering America: The Economic and Workforce Contributions in the U.S. Electric Power Industry.

The report reviews the impacts of the nation’s electric industry on jobs and the economy, highlights of which include:

  • The electric power industry supports close to 2.7 million direct jobs (including utility employees, and contractor, supply chain, and investment jobs), and more than 7 million total jobs (direct and induced).
  • Capital investment by the industry in 2016 exceeded $135 billion.
  • In 2014, the industry contributed $274 billion directly to the U.S. Gross Domestic Product.
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Fifth Circuit Grants EPA’s Request for Power Plant Effluent Rule to Remain in Abeyance

On August 22, the Fifth Circuit issued an order granting EPA’s motion to sever and hold in abeyance all judicial proceedings in Southwestern Electric Power Co. v. EPA relating to certain provisions of the Effluent Limitations Guidelines and Standards for the Steam Electric Power Generating Point Source Category Rule (Effluent Rule).  While the Fifth Circuit held all proceedings related to the Effluent Rule in abeyance for 120 days this April, its August 22 order severs and holds in abeyance issues concerning the Best Available Technology Economically Available (BAT) effluent limitations and Pretreatment Standards for Existing Sources (PSES).

Published in November 2015, the Effluent Rule sought to update standards and limitations on various combustion waste discharges at steam-electric power plants, and has been subject to several challenges consolidated in Southwestern Electric Power Co.  EPA announced that it would reconsider the rule in April 2017, and, in an order issued April 24, the Fifth Circuit granted EPA’s request to hold the rule in abeyance until August 12, 2017.  The court also ordered EPA to file a motion to govern further proceedings at the conclusion of the initial abeyance period.

In a letter dated August 11, EPA Administrator Scott Pruitt announced that the agency will conduct a rulemaking proceeding to revise the rule’s BAT effluent limitations and PSES as they apply to bottom ash transport water and flue gas desulfurization wastewater.  A few days later, EPA submitted its Motion to Govern Further Proceedings, requesting that the court sever and hold in abeyance “all judicial proceedings as to all issues relating to the portions of the 2015 Rule concerning the new, more stringent BAT limitations and PSES applicable to (1) bottom ash transport water, (2) FGD wastewater, and (3) gasification wastewater.”  EPA also proposed to file status reports every 90 days and promptly upon the completion of further rulemaking.

With respect to issues in the Effluent Rule that will not be revised by the rulemaking, EPA proposed that litigation should continue, and that the court should direct the parties to file a revised briefing schedule.  The court’s August 22 order grants EPA’s requests, and directs the parties to propose a briefing schedule for the remaining issues within 21 days.

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NYISO, PJM Release Papers on Carbon Pricing in Wholesale Electricity Markets

In August, two regional grid operators for the mid-Atlantic region—the New York Independent System Operator (NYISO) and PJM Interconnection, L.L.C. (PJM)—released papers analyzing the feasibility of pricing carbon emissions in the wholesale electricity markets they administer.

NYISO’s paper, Pricing Carbon into NYISO’s Wholesale Energy Market to Support New York’s Decarbonization Goals, prepared by the economic consulting firm The Brattle Group, analyzes how New York State’s aggressive clean energy policies could be pursued through pricing carbon emissions in NYISO’s wholesale electricity markets.  After considering market design options, the report analyzes the customer cost impact of adding a $40/ton carbon charge. The Brattle Group’s analysis suggests that imposing a $40/ton carbon charge would result in very small cost impacts to customers within the -$1.50/megawatt-hour to +$4.60/megawatt-hour range, translating to a total of -1% to +2% change in total customer electric bills.  The report explains that the customer cost impact is limited because, under the scenario it modeled, “although average wholesale energy prices would increase, about 50% of the cost could be offset by returning carbon revenues to customers[,] another 18% would be offset by reduced prices for [Renewable Energy Credits] and [Zero-Emissions Credits] in the presence of higher wholesale energy prices,” among other things.

The PJM paper, Advancing Zero Emissions Objectives through PJM’s Energy Markets: A Review of Carbon-Pricing Frameworks, suggests that development of a carbon-pricing framework that complements PJM’s markets would enhance the policy goals of states seeking to reduce carbon emissions, minimize the impact of those policies on states not pursuing emissions reduction policies, and more directly address concerns over emissions leakage.  To that end, PJM’s paper examines two potential carbon-pricing models:  a regional and a subregional carbon-pricing framework.

According to PJM’s analysis, a regional carbon-pricing framework would apply a uniform carbon price across the PJM footprint to create a carbon cost for each resource, equal to the carbon price multiplied by the number of tons of carbon a resource emits per megawatt-hour, which would be considered part of each resource’s energy supply offer during system dispatch. PJM explains that this model would:

  • Utilize PJM’s current market design (which PJM notes already permits pricing of emission costs in cost-based energy offers),
  • Treat all resources equitably,
  • Align with PJM’s current resource dispatch model, and
  • Eliminate emissions leakage concerns within the PJM footprint (these challenges would still need to be addressed to a lesser extent for energy transfers to and from regions outside of PJM.

PJM’s analysis shows that pricing carbon in this way would decrease total emissions by shifting dispatch away from higher-emitting generation resources. PJM notes that the regional framework is the preferred option because it maximizes market efficiency, but notes that it also requires all of the states in PJM to agree on a carbon-pricing policy—an inherently difficult goal.  In recognition of this challenge, PJM also analyzes a subregional carbon-pricing framework, which PJM believes will adequately accommodate states that have not chosen to price carbon.  Under this framework, the PJM footprint would be split into subregions which either price or do not price carbon into energy offers.  A resource in a carbon-pricing subregion would incorporate its carbon-compliance costs into its energy offer, while a resource in the non-carbon-pricing subregion would submit its normal energy supply offer, as well as what its carbon-compliance costs would be if it were located in the carbon-pricing subregion (used to address the situation where a resource in a non-pricing subregion exports its production to the carbon-pricing subregion and minimize leakage).  PJM notes that this model, while more accommodating of state policy differences, would not prevent regional pricing impacts due to incorporating carbon-compliance costs.

PJM notes that further study is needed to analyze the potential effects of pricing carbon into the energy markets on capacity markets, ancillary services, and transmission congestion, among other things.

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NREL Reports on Demand Charges and Battery Storage Technology

The Department of Energy’s National Renewable Energy Laboratory (NREL) has issued a white paper on potential markets for behind-the-meter battery storage.  The paper focuses on demand charges, which are charges based on a customer’s peak level of demand.  Demand charges are designed to compensate utilities for the cost of providing sufficient electricity generation and distribution capability to their customers and typically make up 30% to 70% of a customer’s electric bill.

The paper explains that higher demand charges provide a greater opportunity for customers to use battery storage technology as a cost saving strategy.  Storage technology can consistently be deployed to reduce peak demand, in contrast with solar technology, which depends on the weather.

NREL’s analysis is based on an examination of more than 10,000 utility tariffs, covering about 70% of commercial buildings in the continental United States.  The paper notes that the demand charges in these tariffs vary widely.  For example, in New York, the greatest maximum demand charge is more than $50/kW, yet the median of all utility maximum demand charges in New York is just $4.30/kW.  According to NREL, five million commercial customers are currently eligible for tariffs with a demand charge of at least $15/kW, which Greentech Media Research found was a notable threshold for when demand charge management begins to make economic sense.  The state with the greatest number of such customers is California.  However, a geographically diverse range of states (including Georgia, New York, Michigan, and New Mexico) are among the top states in terms of customers with access to demand charges of at least $15/kW.

While this white paper provides a snapshot of market opportunities for battery storage systems, NREL projects that declining costs of solar and battery storage technologies will reduce demand charges in the future.  This could decrease the number of customers financially motivated to adopt these technologies.  NREL adds that increasing the use of demand charges in utility tariffs may unlock additional battery storage markets and strengthen existing ones.

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EPA Schedules Stakeholder Meetings on Defining Waters of the United States

EPA has scheduled ten teleconferences to solicit recommendations on how to revise the definition of “Waters of the United States.”  A February 2017 executive order directed the Administrator of the EPA and the Assistant Secretary of the Army for Civil Works to review this definition, which determines which bodies of water are subject to protections under the Clean Water Act.

EPA will hold nine issue-specific teleconferences and one that is open to the general public.  The dates and topics of the teleconferences are:

  • Tuesday, September 26, 2017—environment and public advocacy;
  • Tuesday, October 3, 2017—conservation, e.g., hunters and anglers;
  • Tuesday, October 10, 2017—construction and transportation;
  • Tuesday, October 17, 2017—agriculture;
  • Tuesday, October 24, 2017—industry;
  • Tuesday, October 31, 2017—mining;
  • Tuesday, November 7, 2017—scientific organizations and academia;
  • Tuesday, November 14, 2017—stormwater, wastewater management and drinking water agencies; and
  • Tuesday, November 21, 2017—open to general public.

Each meeting will take place from 1:00-3:00 P.M. ET.  Registration will close a week before the date of the teleconference, and EPA will select participants to provide verbal recommendations on a first-come, first-serve basis.

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