Previous discussions focused on the implementation challenges that come after and flow from the Inflation Reduction Act (IRA). The murky picture of a few months ago has been changing with expanded analysis of just what the Act entails and how, and how long, raising as many questions as it has provided answers. Recent news suggests that the scope could be much larger. The Wall Street Journal reported that “a Goldman Sachs report projects its myriad green subsidies will cost $1.2 trillion—more than three times what the law’s supporters claimed.” The funnel...
Decarboning electricity requires major expansion in transmission. At the same time, transmission has been saving the day when tens of GWs of conventional plants keep failing in severe weather situations by enabling delivery of neighboring regions’ surplus power. To expand transmission at the scale needed, changes will be needed in transmission planning, investment, siting, and funding. Although incremental more traditional investments can move forward, the expectation is that renewable energy sources must expand in new locations far...
The goals for carbon emission reduction and the precipitating event of passage of the IRA lead to a focus on implementation. All elements of the electricity system and markets face new stress tests. Absent the unlikely unlimited expansion of the transmission grid, storage and demand participation, the power system will face continuing, and even growing, operational constraints. Rapid changes in system conditions will be increasingly the norm, with implied or real prices more volatile. These are early days, with system operators and market participants seeking better models and practices...
The immediate crisis in Ukraine and attendant turmoil created by all Russian connections in energy markets is compelling a rapid reassessment of the resource mix and impacts on electricity systems. While the case of Europe is the most dramatic, the crisis is not without potentially major implications for North America. Policy making is adjusting in real time. European search for a substitute for Russian gas...
The Inflation Reduction Act (IRA) is greatly about energy and climate related investments. The main political sausage compromise of the broad policy debate is now a done deal: no carbon tax but a methane fee! Attention must shift to implementation and consequences. Expanded subsidies will be here for the immediate future and the money will be spent. The implied Federal policy does not yet resolve many differences among the states, and the thorny issues related to transmission and grid reliability remain. The...
The power sector is being transformed by dramatic technological change. The demands for further innovation, emanating from the need for greater productivity internally and external public objectives, is increasing. How should the industry, policy makers, and regulators respond to this demand? How do we identify the most promising technologies? What are the costs and cost trends going forward and how do they compare with anticipated benefits? ...
A confluence of events presents major implications for the development of electricity system policy as part of the larger energy transition. The 26th UN Climate Change Conference of the Parties in Glasgow, Federal legislation for the economy and climate policy, increasing focus on upgrading the transmission grid to achieve national goals, and responses to extreme events such as in Texas (ERCOT) could set dramatically new paths for the evolution of the electricity system. There is general agreement that much is broken and needs to be fixed, but less of a common view of...
The level playing field metaphor has long been a mantra of electricity market reform and regulation. The goal was an efficient and reliable system that supported investment. The costly experience with failures of monopoly planning pointed to using markets to help achieve the benefits of competition. Although always a work in progress, the policy had a coherent framework of balancing costs and benefits. Has clean energy policy upset this coherent framework? Does the science of climate change dictate clean...
Tail events: Prediction, Planning, and Performance
Extreme weather and related fires and floods are much in the news. The electricity crisis in ERCOT in February 2021 illustrated the challenge of addressing high consequence but low probability events. The extraordinary heat wave on the Pacific Coast of US and Canada in June provided a stark example of a seemingly very low probability event that was not predicted and shocked us because of the magnitude of the temperature spike. How much of this is driven by climate change dynamics? If so, what reliability/resiliency policy implications should that have? And how much remains both surprising and unexplained? Everyone wants to protect against severe consequences. A report on the ERCOT crisis by former state regulators in Texas embraced the title “Never Again”. But we cannot protect ourselves from everything. When we get outside the envelope, emergency procedures are required. How have these cases changed the analysis, prediction, planning and procedures for low probability high consequence events? What promises should we make? What promises can we keep?
The Environmental Protection Agency recently “completed a reconsideration of the appropriate and necessary finding for the Mercury and Air Toxics Standards.” The main elements of the finding address the appropriate metrics for the underlying cost-benefit analysis. The focus was on whether to include co-benefits in determining what is required to meet the “appropriate and necessary” standard to be applied to its rules under the Clean Air Act. In doing so, EPA left the pre-existing mercury rule in place but removed its factual and analytical underpinning....
The basic model of bid-based, security-constrained, economic dispatch with locational prices is well understood and provides the foundation for efficient pricing. The most common analysis is for a single period with well-behaved bids and offers without uncertainty. With independent dispatches, serial application of this approach produces efficient prices. The real dispatch system requires some degree of look-ahead with intertemporal constraints. The expansion of intermittent resources increases the importance of efficient multi-period pricing. In principle, the same model applies for the...
