US policy outlook for renewable energy
Abby Hopper, CEO of the Solar Energy Industries Association, Tom Kiernan, CEO of the American Wind Energy Association, and Greg Wetstone, CEO of the American Council on Renewable Energy, talked at the annual renewable energy law conference on the University of Texas campus in Austin in late January about the policy outlook in the United States for renewable energy.
The discussion was soon after the US Congress gave wind developers another year to start construction of new wind farms to qualify for federal tax credits, but without extending the deadline to start construction of solar projects. The following is an edited transcript. The moderator is Keith Martin with Norton Rose Fulbright in Washington.
MR. MARTIN: Abby Hopper, how did wind end up with a tax credit extension at year end and solar did not when solar seemed to have done most of the leg work?
MS. HOPPER: It was a narrow tax extender that only extended things that had either already expired or were expiring. Solar did not fall into that bucket. Wind did. We are only half way through the current Congress. Bills have been introduced in both the House and Senate to extend the solar investment tax credit for five years at 30%. We do not usually give up fights in the middle of the battle.
MR. MARTIN: Is the story true that a tax credit extension for solar was in the bill until the Saturday or Sunday before the bill was enacted?
MS. HOPPER: We understand that we were in the bill even later than that.
MR. MARTIN: Tuesday? The bill passed the House without a tax credit extension for solar on Tuesday the week before Christmas.
MS. HOPPER: Correct.
MR. MARTIN: Can you talk about what time.
MS. HOPPER: Until Monday around 11 p.m.
MR. MARTIN: Tom Kiernan, you take issue with my characterization of how this happened. [Laughter]
MR. KIERNAN: Well, a couple of thoughts. Let me get a running start. [Laughter] As often is the case, I very much agree with Abby and her sense of how things unfold in Washington. This was a situation where a large deal was close to adoption — a solar tax credit extension, a wind extension, a tax credit for standalone storage, more time for offshore wind projects to start construction and tax credits for electric vehicles. A bunch of stuff was in the package until 11 p.m. on Monday night.
The deal then unraveled, and the fallback was not to do a big package, but only to do something small. The Ways and Means Committee had reported a bill earlier out of committee that only dealt with tax credits that had already expired, so they turned to it.
We had made a very strong, diligent and clear case for a wind tax credit extension during the course of 2019. Solar did do a lot of work, but we were up on the Hill as well. We had never said tax credits at 40% of the full rate did much for the market. Our message on the Hill was that to put wind and solar — and ideally other renewables — in some degree of parity, wind needed to be extended at a 60% of the full rate, and that is where things ended up.
MR. MARTIN: The Joint Tax Committee staff appears to have advised that a tax credit at 60% of the full rate for wind is equivalent to a 30% investment tax credit for solar. Is that true?
MR. KIERNAN: That is our rough sense. They are roughly equivalent.
MR. WETSTONE: Can I jump in here?
MR. MARTIN: Please.
MR. WETSTONE: The big picture is there was every reason to believe that the leverage was there to get the more ambitious deal. That’s why a lot of people were disappointed at the way things ended because this was an opportunity to make progress on tackling climate change. There was a large and diverse coalition behind the broader package. The package had bi-partisan support. There is momentum to find a way to get those issues taken care of at the next opportunity.
MR. MARTIN: Abby Hopper, you are still pushing to extend the 30% solar tax credit. How do you answer CEOs who ask what are the odds it will happen this year?
MS. HOPPER: I get that question a lot. My board is meeting this week to talk about our priorities for 2020. I can guess that our priority ultimately — I think we all share this — is a holistic approach to the extensions.
MR. MARTIN: A package covering all the things that Tom and Greg mentioned?
MS. HOPPER: Exactly. Rather than one-off technology-specific solutions, a holistic . . . .
MR. MARTIN: You are not going to leave Tom in the dust? [Laughter]
MS. HOPPER: No man. This is the future of how we are going to power our nation, right here in front of you. It is not my proposal versus your proposal. It is a holistic look at how we power our entire economy. It is probably unrealistic to think the full package will move by the end of the year, but it is a framework that we are all getting behind. Of course, we will be opportunistic and try to make progress wherever opportunities arise.
What I say to every CEO who asks me is that I am not in the business of giving odds, but I can tell you of all of the work that we are doing and the conversations that we are having.
Last year, you asked Tom and me whether we were asking Congress to extend the tax credits, and we said no. The conversation has changed so dramatically in Washington. It is not about tax credits. It is about how do we move more vigorously to address the climate crisis that we are facing, and what tools do we have at our disposal. Our conversations in 2019 were about climate change and here is a suite of solutions before you. Use of tax credits to accelerate adoption of renewables has already been established as a construct. We know how production tax credits work. We know how investment tax credits work. And so, while you work on figuring out a holistic approach, at least extend what is working.
Tom and I say all the time that we do not have to innovate our way out of this crisis. Let’s use the tools we already have.
MR. MARTIN: Let me come back to Tom and Greg because I want to try harder to get some odds — business people need odds — but, Abby, what were you asking for? Five more years of the solar investment tax credit at the full 30% rate?
MS. HOPPER: That is what is in the bills that were introduced in the House and Senate.
MR. MARTIN: It seems unrealistic that the whole package would clear this year during an election year. However, what if you have a shot at getting an extension of the 30% investment tax credit. Would it be retroactive to the start of 2020?
MS. HOPPER: The ask is still being refined given that we just started 2020, and the tax credit stepped down on January 1 to 26%. We are in deep conversations within our trade association.
MR. MARTIN: Tom Kiernan, if solar gets an extension, will wind be looking for the same 60%?
MR. KIERNAN: Let me back up half a step and I will get to your question. We are starting the year looking very much, as Abby said, for more of a holistic solution. We will be on Capitol Hill talking about Senator Wyden’s tech-neutral approach that offers tax credits of varying amounts based on the carbon emissions of the various clean-energy technologies. We will be pushing on that front.
While we are not particularly optimistic about the odds this year for the Wyden approach or other carbon legislation or even a standalone tax extenders bill, this year is really important. As one of my colleagues said, this year is a dress rehearsal. It is a running start. You are going to see a lot of proposals this year as Republicans and Democrats start jockeying for position on what is likely to move next year.
If a tech-neutral bill is not possible and if something on tax credits starts gaining momentum, then yes, we will be in there because we feel strongly about parity. We want a level playing field on the clean energy front going forward. That includes onshore and offshore wind and storage. Maybe we even end up putting wind under the investment tax credit. If not, it would have to be an extension of production tax credits.
MR. MARTIN: Greg Wetstone, do you seeing anything happening on this front in Congress before December? And what odds do you give an extension of these two tax credits?
MR. WETSTONE: The question is whether Congress will take any action on tax matters before year end. It is hard to tell. If a tax bill of any kind starts moving, then I think you will some engagement around clean energy issues. We are particularly focused on energy storage, which we believe, as Abby and Tom said, should have a tax credit even when it is free standing.
We want to get to very high levels of renewable penetration. We need advanced grid technologies like storage to get there.
MR. MARTIN: But is any of this realistic this year?
MR. WETSTONE: It might be.
MR. MARTIN: How do you see it unfolding?
MR. WETSTONE: For example, if there is an opportunity in May around some sort of healthcare extension, we will be looking at that. You said December. That would be the classic scenario for Congress to meet in a lame-duck session after the election to deal with tax extenders. The dynamics in a lame-duck Congress will depend on what happens in the election. If control of either house shifts to the other party, then the party that gained control will want to push everything into the next Congress rather than deal with anything in a lame-duck session.
I think the technology-neutral credit that Tom and Abby mentioned has tremendous advantages. It brings all the technologies together and makes us inherently more united in our advocacy. That’s a good thing.
MR. MARTIN: Let me change the topic. Last week was Davos, and it seemed like we reached a tipping point both for the business community and world leaders in terms of agreement about the necessity to act on climate change.
Will that translate into some action among Republicans this year? There seems to be a little panic among House Republicans that the party must move off its position of questioning the science behind climate change.
MR. WETSONE: I think we will see Republicans find something to be for this year to tackle climate change rather than continue to oppose any action.
MR. MARTIN: Let me rephrase the question. I saw a report this morning that Congressional Republicans and even President Trump are now scrambling to acknowledge climate change after years of denying the problem. The question is: has there been a noticeable change in willingness to act?
MS. HOPPER: We have 14 Republican co-sponsors on our House bill to extend the solar ITC by five years.
MR. MARTIN: How many Republicans have co-sponsored the Senate bill?
MS. HOPPER: None.
MR. MARTIN: Trick question.
MS. HOPPER: I knew you knew the answer to that, but in my opinion, it shows – and I think Tom has a similar story – that there are Republicans who understand that it matters in their districts. There are businesses and consumers in their districts who are anxious for more solar.
We have had lots of soft support from Republicans. People are not signing up to co-sponsor, but they were being incredibly helpful behind the scenes in December when we were pushing hard for an extension.
MR. MARTIN: Bob Inglis, who was a very conservative congressman from South Carolina, lost his re-election bid, but he switched on climate change in his last term. He had been denying the need to act. What caused him to switch was his kids said they would not vote for him. [Laughter] Are you sensing a sea-change among Republicans this year in Washington?
MR. KIERNAN: I think the answer is yes. That does not mean that action is imminent. But two years ago, you could not go into a Republican office – I am overstating this—and talk climate change. Now you can go in virtually every office and talk about it, but that does not mean we will have a climate bill this year. Pressure has to keep building. Our political leaders tend to be trailing indicators, not leading indicators, of public opinion. They will follow the public as momentum builds throughout the country.
MS. HOPPER: All of the polling is showing that young Republican voters care about this and are demanding answers. I think what we have heard from elected officials is they see the same polling numbers that we see. They see their constituencies changing over time.
MR. KIERNAN: Will it be a carbon tax? Maybe yes, maybe no. How about a clean energy standard, cap and trade or some other standard? There are many ways of approaching this, and Republicans and Democrats are trying to figure out which of these work for them in the best way. Republicans are putting out a lot of innovation bills. They want to innovate . . .
MR. MARTIN: And plant trees.
MR. KIERNAN: . . . both of which I applaud, but I don’t think they will get us where we need to go.
MR. MARTIN: There has been a ground swell of support from Republican business types for a carbon tax with the money returned to the public through a dividend. The suggestion has been made that if Congress were to act on this, it should pass the dividend first and keep fingers crossed that the tax will pass, perhaps by coming up with another word for tax.
Do you see this getting traction in Trump’s second term or a Democratic president’s first term?
MR. WETSTONE: The proposal has a long list of avid Republican supporters. Unfortunately, it is always the people who have announced they are leaving Congress or who are not currently in office. That has been the pattern. Carbon pricing, however it is implemented, could be really helpful, but in order to get where scientists say we need to be, we will need a mix of approaches. It will be hard to set a carbon price high enough to do by itself what is needed.
MR. MARTIN: Let’s switch gears and go back to Abby Hopper. The US International Trade Commission is studying the solar panel import tariffs. I don’t know whether the tariffs can be extended legally beyond the initial four years, but many people think that the rate of reduction will be slowed. Do you see any evidence to counter that fear?
MS. HOPPER: It is an interesting legal question. The tariff statute requires a mid-term review and says that, during the mid-term review, the president cannot make the tariff harsher. We have argued in our briefs that slowing the decline of the tariff is in fact making them harsher.
We have had lots of conversations with the administration about this and will continue to do so. Businesses need certainty. All of our companies have been planning for a four-year step-down. I think it would be fairly catastrophic if it was slowed.
MR. MARTIN: Do you sense there could be an extension of the four-year term?
MS. HOPPER: The way the statute works, two things could happen. The petitioners can ask for an extension, but they cannot do that until the last nine months before the tariff expires. Separately, the president could ask the International Trade Commission to evaluate whether the tariff should be extended.
MR. MARTIN: The argument that slowing down the rate of reduction would make the tariff harsher is an argument that must be made to an audience of one, right? Trump.
MS. HOPPER: Yes, or perhaps in an appellate court. [Laughter]
MR. MARTIN: Next topic. We saw a phase-one China trade deal. There was an interesting cartoon in the newspaper of a box. Somebody had opened the top, but the box was empty inside except for one insect flying around.
The one thing the phase-one deal did that affects solar potentially is the tariff on Chinese batteries was reduced from 15% to 7 ½%. Are you aware of any other benefits from the phase-one deal?
MR. KIERNAN: No. We need a phase-two deal to get at the significant tariffs that are on wind turbines, wind parts, towers, etcetera. The existing tariffs pose a significant challenge for our industry. Our initial analysis showed that the tariffs have cost tens of thousands of jobs in the wind industry. We are deeply concerned and want a phase two.
MR. WETSTONE: The big problem, as Abby said, is the lack of predictability. Talk about the government picking winners and losers: now you have companies coming forward seeking specific exemptions. And you have the government granting an exemption — for example, for bi-facial solar panels – and then yanking it away within months after companies have started making investments in new manufacturing capacity. This is a very unpredictable framework that makes it tough for long-term investment that is so critical for manufacturing. It is remarkable that we have been able to score the growth rate we have in the face of such uncertainty.
MR. MARTIN: A poll of CEOs in the US in the last couple of days showed most CEOs put cybersecurity as their number one issue and trade uncertainty as the number two issue.
Abby Hopper, you are seeking exemptions for imported solar panels I believe, from Canada and Singapore. On what basis?
MS. HOPPER: I have two ITCs in my life — the International Trade Commission and the investment tax credit. We are asking two things of the ITC. One is that exemption. We think that could have a meaningful impact on US solar adoption rates and the levels of production in the two countries are not so high as some of the other countries who are seeking to increase their tariff rate quotas for imported cells. The second thing we want is no change in the stepdown in the tariff rate.
MR. MARTIN: Meanwhile late in the day on Friday, Trump issued a proclamation slapping 25% import tariffs on products that use steel and 10% tariffs on products that use aluminum because the existing steel and aluminum tariffs are not having their desired effect on the US manufacturing employment base.
Have any of you heard complaints from members about these enhanced steel and aluminum tariffs?
MR. KIERNAN: Steel is a major component in wind towers. The existing steel tariff has affected our industry. We will be very interested in the scope of any new steel tariffs.
MS. HOPPER: The steel tariff has also affected the solar industry. There is steel in the trackers and other components. If you slap on section 201 tariffs and then add section 331 tariffs and then impose section 301 tariffs, it has a pancaking effect. Little changes in each can be important, but the cumulative effect has really been challenging.
MR. MARTIN: A Wood Mackenzie report out this month found 15,000 megawatts of new wind capacity is likely to be installed this year, but 9,000 megawatts are at risk of spilling over in 2021. What do your own numbers show?
MR. KIERNAN: We are going to be releasing our numbers next week. I will say there was significant spillover from 2019 to 2020 that contributes to the high number for 2020. We expect 15,000 megawatts, if not significantly higher deployment, this year. Yes, there will be some spillover into 2021, but we think we will see a record number of megawatts deployed in 2020, well above 15,000.
MR. MARTIN: I have put on the screen one of two slides that show wind and solar growth. The solar growth curve is as steep as the best wind forecast. However, there are two alternative wind forecasts that show new wind capacity additions slowing slightly after 2020. To what do you attribute that slowdown versus solar?
MR. KIERNAN: There are a couple factors that contribute on the positive side to growth, and then I will comment on the challenging side of your question. With the tax credit extension at year end, we are seeing more likelihood of the bold scenario. The spillover from 2019 to 2020 may even produce a higher number for 2020 than is shown.
We do have some challenges. The major one is transmission and the grid. We are seeing significant grid congestion. Developers can build projects, but not connect them to the grid because there is no room to move the additional electricity and, in other cases, the cost to interconnect is staggering. This has been a front-burner issue for years. We need progress. We are having challenges siting wind farms in different regions of the country. This is creating additional headwinds.
MR. MARTIN: The second chart is now on the screen and shows a drop off in new wind capacity additions after this year. To what do you attribute it?
MR. KIERNAN: The phase out of the wind tax credit. The last five years have been really strong, steady and unprecedented. The wind industry has deployed seven, eight or nine thousand megawatts in each of these last many years.
We have had a lot worse drop offs in the past as the tax credits ran off. The tax credits for newly installed projects will be declining each year after 2020. However, we are optimistic that we will still see significant annual capacity additions going forward.
MR. MARTIN: If there is a distinct tipping point on climate change and people then try to grab every tool they can to promote renewables, we could see these use cases change.
Let me also ask a few other wind questions quickly. One is that it seemed like, in the past year, the Federal Aviation Administration was having more problems with wind towers than ever before. Why?
MR. KIERNAN: I don’t want to overstate this, but the towers are getting taller and the blades are getting longer. A higher percentage of the projects are above that 500-foot level. That then causes a little bit more scrutiny from the FAA.
Obviously we are putting more turbines in the ground. The FAA and Department of Defense, which operates the radars used by military aircraft, are aware of that and we are having an effect on some of the radar, so we are working closely with the FAA and DoD and others to mitigate the effects.
MR. MARTIN: The other big story is that developers say municipalities are making it harder to get permits to move the big blades down the road.
MR. KIERNAN: Yes, the issue is not just permitting, but also finding experienced drivers for the specialized trucks. The blade manufacturers are looking at segmented blades that are in two parts. As with most industries in the clean energy space, we are innovating. We are going to figure out solutions to whatever new problems arise. We are still at an early point in the technology curve.
Offshore Wind Delay
MR. MARTIN: Do all of you share the view that we are not likely to see the hold on offshore wind projects off the Atlantic coast lifted until after the November election?
MR. KIERNAN: The offshore wind industry has extraordinary momentum with 26,000 megawatts of projects in the pipeline. We are looking at 46,000 jobs in the next decade and $70 billion supply chain. Yes, the president has not spoken positively about the wind industry, but the economic and political case is there.
We have had some productive discussions recently with the Department of Interior and the Bureau of Ocean Energy Management. BOEM has suggested to us that it could start moving some of the permits as early as this spring.
MR. MARTIN: Abby, you were head of BOEM. What do you think?
MS. HOPPER: I think elections have consequences. [Laughter]
MR. WETSTONE: It is worth mentioning that there was a big public outreach around the new effort by the Trump administration to streamline application of the National Environmental Policy Act. Here is a situation where the administration was under no legal requirement to halt offshore wind development while it does a cumulative impacts study under NEPA. If the administration is serious about streamlining NEPA, this would seem like a good place to start. It would free up tens of billions of dollars in investment.
The case is there. It may well be that it takes an election.
MR. MARTIN: How significant are the Trump NEPA proposals for renewable energy? Where do you see them going? Tom Kiernan?
MR. KIERNAN: There are areas for improvement on NEPA, but we also have strong concerns about how some of the administration’s proposals might negatively affect climate change. My understanding from our attorneys is that the administration probably has the legal authority to move forward with this.
MR. MARTIN: Abby Hopper, are the NEPA changes significant?
MS. HOPPER: I echo what Tom said. There is clearly an opportunity for improvement. I know when I led BOEM and was issuing NEPA documents for offshore wind farms, it was sometimes frustrating even inside the administration to work through all of the NEPA procedures to get to completion.
The biggest issue for developers is lack of predictability about the timeline. Improvements are needed there, particularly for companies that are building on public lands. I also agree with Tom that parts of NEPA are critically important for the environment and should not be undercut.
MR. MARTIN: Let’s switch gears. Joe Kelleher, who was chairman of the Federal Energy Regulatory Commissioner under President George W. Bush, was called away from our panel at the last moment, so we are going to tackle FERC issues without him. What difference do capacity auctions in places like PJM and ISO New England make for renewable energy producers?
MR. WETSTONE: They are huge. The idea is that you have to have capacity to back up variable generation. However, the auctions can become a vehicle that the regional grid operators can use to penalize states that have established policies that promote renewable energy or arguably internalize the cost of fossil fuel generation.
There is no capacity market here in ERCOT, and it works fine. The market pays when the market needs power. So there is room for argument about whether capacity auctions are absolutely necessary.
What FERC has done essentially is to say that renewables are too cost effective so it is going to require consumers to pay more so that consumers can have dirtier power.
That is pretty much the consequence of the minimum offer price rule or MOPR that FERC has proposed should apply to generators bidding to supply capacity in PJM. The FERC proposal was worse than I think any of us anticipated. There has been a huge response. The comments are overwhelmingly in opposition. We will see where this goes.
MR. MARTIN: Renewables are intermittent. How do they supply capacity?
MR. KIERNAN: That’s correct. We are now seeing large developers piece together wind, solar and storage projects and offer customers firm or semi-firm products. I am aware of one developer that is about to combine wind, solar and storage to offer a product that mimics the electricity from a natural-gas peaker plant. It will generate the wind and solar electricity and put the electricity into storage until the customer wants it.
MR. MARTIN: PJM holds capacity auctions each year, but it did not hold one in 2019, and it does not look like it will hold a 2020 auction. The auctions are auctions of the right to supply capacity three years in the future.
Where do you think this is headed, and when will it clear up?
MR. WETSTONE: It is a mess. It is worth highlighting the extent to which this is creating huge fissures. Several states are now seriously considering withdrawing from the market because the initial PJM policy has been made worse by what FERC has proposed. The current proposals undercut state authority, which is very clear in the Federal Power Act, to decide on the resource mix each state wants for electricity. Surely FERC won’t let this happen. It will have a rehearing and figure something new out.
MS. HOPPER: You are more optimistic than I am. This is a move by established business interests that feel threatened by the technologies that we represent. Today it is MOPR. Two years ago, it was ensuring a return for suppliers of electricity from coal and nuclear power plants.
These are different tools that incumbent generators are using to try to retain market share for themselves and not let us come in and compete. We can talk about the MOPR intricacies, but it is our job as folks that see a different energy future to try to ensure that there are fair market rules so that we can compete.
This is one of the areas where AWEA and SEIA are making a joint effort. These markets were designed for an electricity system that does not represent where we are today or where we are headed. We need to change them.
MR. MARTIN: Play it out. What happens if states like Maryland and New Jersey drop out? What happens to these organized markets?
MR. WETSTONE: I don’t think anyone knows, but what we are talking about here is the integrity of the competitive electricity markets. It is a major concern. Imagine if the shoe is on the other foot. We have putative free marketeers essentially asserting that, “Everybody has to pay more for power to keep out-of-market coal plants operating.”
MR. MARTIN: Let’s move to another topic.
FERC has made a number of proposals to modify how it implements the Public Utility Regulatory Policies Act that many people think will make it impossible to finance projects that have PURPA contracts. How important is PURPA at this point to wind and solar?MS. HOPPER: It is really important for solar. We look at it through the lens of competition. It is an incredibly important tool to gain access in markets where there are monopolies that frustrate competition. A lot of solar development has happened because of PURPA. We think the statute is important for continued access to markets.
MR. MARTIN: For those of you who are new to this industry, PURPA is a 1978 law that requires utilities to buy electricity from certain types of projects, including smaller renewable energy facilities. In 2005, Congress dialed it back. PURPA really only applies today in places where independent generators do not have other outlets for their electricity than to sell to the local utility.
Tom Kiernan, what about wind?
MR. KIERNAN: It is not as important, so we let solar take the lead on it.
MR. MARTIN: Is any further action likely on PURPA, or will FERC just roll forward with the proposals it already made?
MS. HOPPER: Will FERC have a quorum to transact business?
MR. MARTIN: That’s another question. Could FERC even take action?
MS. HOPPER: Another Friday, with more news.
MR. MARTIN: There was a lot of news on Friday. Let’s start there. FERC has five members in theory, but only three currently and one of those just announced he is leaving in June. He is a Republican, which leaves only two members since there are two empty seats. FERC cannot transact business without a quorum. It needs three to have a quorum.
Explain what is happening on Capitol Hill. We have a Democratic nominee who has been waiting for some time. We have a Republican. And then we have another Republican empty seat. Where do you see this going?
MS. HOPPER: I am hopeful that the Senate will follow protocol. Traditionally, a Republican and a Democratic nominee are paired together and approved at the same time. We can all wax on about how super political things have become. FERC really does need to regulate our wholesale markets.
On the PURPA matter itself, we are deeply concerned because I think there has been a fair amount of misinformation about the “evils” of PURPA – that we don’t need it anymore because solar and wind are competitive without it. As you said, we need PURPA in places where there is no competition. We filed strong comments at FERC. It wasn’t just, “We are opposed to any changes.” It was, “Here is a whole construct for how we can have a competitive process under the rubric of PURPA, but not give all authority to implement to the same folks who regulate the local utility.”
MR. MARTIN: Are we better off at this point as a renewables industry with FERC without a quorum or with quorum? [Laughter]
MS. HOPPER: I am not going to be quoted on that. [Laughter]
MR. WETSTONE: I hope we see a two-for-one that includes the nominee suggested by the Senate minority leader along with the one pending nomination for the Democratic seat and then someone to fill the seat of Bernard McNamee who has now indicated he is leaving the commission. It if happens that way, it will be the first time in a very long time where we have had five FERC commissioners.
MR. KIERNAN: It is important in the long term to have a functioning, working FERC because of transmission and other grid issues. We have to figure out ways to have a rational means for permitting transmission throughout the country. FERC has a docket inquiry on transmission incentives that has to move forward.
MR. WETSTONE: FERC used to be seen as a quiet corner for the electricity specialist that most of the world could ignore. It is now a front line for some really critical issues, as the MOPR discussion reflected. I think you will see a real battle to maintain the historic bi-partisan nature of the FERC deliberations. It is at risk today.
Other Policy Debates
MR. MARTIN: For people who were having trouble following the MOPR discussion, what is at issue is renewables and other subsidized forms of electricity have to bid a minimum price into the capacity market, and the fear is they will have a harder time winning in those auctions.
Let’s ask quickly about three other FERC issues. One is there is a long gestating policy to allow aggregated distributed energy sources, like solar rooftop panels and distributed batteries, to bid into wholesale electricity markets. What opportunity will this open up that is not available currently?
MS. HOPPER: Sunrun, I believe, put together a portfolio of distributed storage assets and bid them into the ISO New England wholesale market. It should create an additional opportunity to earn revenue that, in turn, will make such storage assets more economic to install. It is transformational in terms of how we think about these distributed assets. I am hopeful that more ISOs will allow the same thing to happen.
MR. MARTIN: Another issue is storage. There was a big FERC order — 841 — that was supposed to improve the ability of storage owners to participate in organized markets. Greg Wetstone, what is happening on it at FERC?
MR. WETSTONE: RTOs have had to put together plans to make that happen. Those plans have been largely submitted. It has been a constructive process. We see more progress in some RTOs than others, but I think it has been a good start. We need to do a lot better integrating storage into the grid, taking advantage of what it brings and creating a marketplace where what storage can compete.
MR. MARTIN: More for states to do or FERC to do or both?
MR. WETSTONE: FERC can be very helpful. The RTOs can be very helpful. Some states have been out there in a big way. California and New York in particular have made some efforts really to jump start such a market. The market does not fully recognize yet what storage brings to the grid. When that happens, I think we are going to see a lot of investment released and a lot of growth. That will enable much higher levels of renewable energy penetration.
MR. MARTIN: Another FERC question involving transmission. Obama tried very hard to encourage transmission, but then ultimately gave up. There was not very much that Congress was willing to do. It did not seem like FERC could make much progress, either. Did I get this wrong? FERC has reduced the returns that transmission owners can earn from building new transmission lines. Why does that make sense?
MR. KIERNAN: My recollection is yes, it did do that.
MR. WETSTONE: The debate about transmission has evolved. There is greater awareness that our transmission infrastructure was developed initially to reach hydro facilities and then later coal facilities. Most of that was paid for by the government. There has never really been an active effort to build interstate transmission to reach prime renewable resources. Eventually, we are going to have to get there if we are going to respond in any meaningful way to the climate imperative.
MR. KIERNAN: One proposal that we have been encouraging in Congress is to have the different RTOs do their planning at the same time so that they can arrive at some joint solutions. Right now, PJM will do long-range planning and then MISO and then SPP as opposed to all three doing it at the same time and saying, “If we do some interconnects here and here, we can meet both our needs.” Bills have been introduced in both the House and Senate to require FERC to have RTOs do simultaneous planning.
The point is there are some things that can be done that are not earth shattering and will improve the planning for transmission.
MR. MARTIN: There is an excellent book that came out last summer, Superpower by Russell Gold, a Wall Street Journal reporter about . . .
MR. KIERNAN: It is a quick read. It is well worth reading.
MR. MARTIN: It is an excellent book about the trials and tribulations of Michael Skelly and Clean Line Energy Partners as they tried to build a transmission line from Oklahoma to Tennessee and how one US Senator from Tennessee and one woman in Arkansas who was politically well connected and angry because the line was going to pass near her house could basically block the project. It shows the challenges of building transmission.