Policy outlook for US renewable energy
Law firms are fielding constant questions about the outlook for the "Build Back Better" bill, whether certain provisions risk being left behind and what is likely to happen with Customs seizures of some Chinese solar panels. The Federal Energy Regulatory Commission is moving to tackle bloated interconnection queues and grid congestion that are making it hard to connect needed projects in some parts of the country to the electricity grid.
Three long-time Washington observers talked about these and other policy issues currently in play in Washington at the annual renewable energy law conference hosted by the University of Texas in Austin. The panelists are Richard Glick, chairman of the Federal Energy Regulatory Commission, Abigail Hopper, CEO of the Solar Energy Industries Association, and JC Sandberg, chief advocacy officer for the American Clean Power Association. The moderator is Keith Martin with Norton Rose Fulbright in Washington.
Build Back Better
MR. MARTIN: Abby Hopper, what is likely to happen with the "Build Back Better" bill, and on what timetable?
MS. HOPPER: Gosh, if I knew the answer to that question, I would probably be playing Powerball to capitalize on my fortune-telling and future-prediction skills.
Here is what I know. We have been continuing to talk to members of Congress since that reset moment at the end of December when Senator Machin went on Fox News to say he will not vote for the bill. What we hear consistently from the Democratic caucus is that they believe they will get something done.
The energy provisions in the bill have a lot of support. We are focused on reminding everyone about the huge impact those provisions would have on solar and other domestic manufacturing for the global energy transition.
The clean energy provisions would serve as a catalyst for major transmission investments, major storage investments and workforce development. They are groundbreaking. They will change the way that our economy is fueled for decades to come, so I remain optimistic.
MR. MARTIN: Are you giving odds?
MS. HOPPER: I am not giving odds. I am optimistic. I think the politics tell us that something needs to happen. One of the things we talk about a lot, which really has resonance in Washington, is that if this bill passes, it would add $234 billion to our economy and 450,000 more people working in solar and storage over the next few years. Those numbers have resonance regardless of your party affiliation.
MR. MARTIN: JC Sandberg, are you giving odds?
MR. SANDBERG: No, and the inertia right now is frustrating, but this game has more innings to play. A lot will have to happen to get it going again.
I believe the clean energy provisions enjoy support not just from Democrats. While they will never vote for it, there are Republicans that would support it because, as Abby said, it really is transformative to the industry. It means maintaining and sustaining US jobs and building the supply chain here. There is political expediency to it. There is also a real economic expediency to acting now.
MR. MARTIN: This is an election year, and the conventional wisdom is things don't get done once the elections come into clearer view. By when do you think this must pass to have any chance?
MR. SANDBERG: I have stopped giving guesses on time, but I think you have some runway through the spring and maybe early into the summer. The election calendar may also be a benefit because this needs to have passed with enough time for the benefits from some of the social programs in the bill to be felt before the election.
MR. MARTIN: Abby Hopper, one of the big mysteries is why Biden has not engaged with Manchin. It has been more than a month since Senator Manchin said on Fox News that he will not vote for the bill. There do not seem to have been any negotiations since then. Why not? When will they restart?
MS. HOPPER: I feel like President Biden might be in a better position to answer that question.
What I do know is that we have reminded members from key states, including West Virginia and Arizona, about the investments that will be made in those states if the bill passes. It feels to me like some of the opposition is for reasons that have nothing to do with the clean energy provisions.
MR. MARTIN: Many of the questions coming into law firms are whether there is a danger of X or Y falling out of the final package. Let me ask you two some of those questions. You are both in Washington.
Abby Hopper, starting with you: what about restoration of the wind and solar credits to the full rates for an extended period? Is there any danger that will fall out of any bill that passes?
MS. HOPPER: We are hearing consistently, across the board, that there will be long-term extensions of the clean energy tax credits. Whether that means seven years, eight years, nine years, 10 years, I would not opine about the exact number. I think that may be up for negotiation.
I think there is also consensus and a general understanding about the importance of the direct-pay provisions. I think that the standalone storage credit, the transmission credit and the manufacturing pieces all seem to be areas of consensus. While there may be some massaging around the edges, I am less concerned about those falling out.
MR. MARTIN: JC Sandberg, you have the Energy Storage Association now under your umbrella. What about the standalone storage credit? Is there any danger that it will be left on the cutting-room floor?
MR. SANDBERG: No. Never say never, but I think, as Abby said, most of these things are probably seen as part of a whole package. These items have not been controversial. The controversy has been more on the social side. There are certain things that are still kind of percolating. There is still some uncertainty around what direct pay will look like. We continue to work with interested parties on it.
There are certain issues around the tax credit for standalone storage that could still imperil it.
MR. MARTIN: What is such an issue?
MR. SANDBERG: Normalization.
MR. MARTIN: The regulated utilities do not want to have to prove, in order to claim the tax credit, that it will not be shared more rapidly with ratepayers than permitted.
MR. SANDBERG: Normalization has had a long history and may or may not have been the reason the storage credit failed to make it before now, but I think that everybody wants to see such a tax credit in the final package. I am confident that the parties will find a resolution.
MR. MARTIN: Are utilities focused solely on normalization of the storage credit or of investment tax credits more broadly?
MR. SANDBERG: I think their interest is broader, but that happens to be the one issue that is still unresolved with the storage credit.
MR. MARTIN: Is there an issue that potentially could hold up direct pay?
MR. SANDBERG: I don't think so, but it remains on lists of things that need to be resolved. There are other constituencies that need direct pay that are helping to keep it in the mix. The carbon capture people want it.
There is an education effort underway about what direct pay is, who benefits and why it is important. I think the message is resonating. It is just that we are not at a point yet where the final deals are being cut in Congress.
MR. MARTIN: Abby Hopper, what about production tax credits for solar? Is there a risk that proposal will be left on the cutting-room floor?
MS. HOPPER: As JC said, the final deal has not been cut yet. That is not something about which we have heard a lot of concerns expressed on Capitol Hill.
Going back to direct pay, the version that passed the House has been extended to both utility-scale and distributed energy projects. I think that brings a constituency with it and some political capital that is important for ensuring the provision stays in the bill.
MR. MARTIN: What about the tax credit for new transmission lines that are 275 KV or higher and have at least 500 megawatts in capacity. Is there any danger of it falling away?
MS. HOPPER: That one is critical for many of our members. If there is a hierarchy of things folks can agree on, high-voltage transmission as a critical element of the infrastructure buildout would be high on the consensus list. I think that is less likely than other things to fall out.
MR. MARTIN: JC, it seems like the Democrats are locked into the wage, apprentice and domestic content requirements in the bill because of campaign promises that the energy transition will bring good-paying jobs. Is there any possibility those will not be in any final bill?
MR. SANDBERG: If they fall out, it would be because of procedural issues. Any final bill will have to go through a "Byrd bath" in the Senate where extraneous items that are not strictly tax or spending provisions are cut from the bill. The parliamentarian decides what is extraneous.
We have worked hard with labor and the tax committee staffs to get those provisions to a place where they can be workable in the market and not slow down project deployment. I think we are in a reasonably good spot.
MR. MARTIN: Abby Hopper, nothing seems to pass in Congress without a forcing date. Christmas was a forcing date; that didn't work. What is the forcing date this year for action?
MS. HOPPER: I wish I knew. I concur with JC that there is definitely a political need to pass something and then campaign on it. Smart minds could differ on whether that means March 1, April 1 or May 1. Late winter or early spring is a critical marker to receive any political benefit that might come from passing it.
MR. SANDBERG: It was really pencils down into early December, thinking this was going to be done. There are some things on the margins that remain in play. It is not the top-line content, but really down-in-the-weeds kinds of things that will help the law firms write opinions. That is where we are focused in a handful of instances.
MS. HOPPER: We glossed over the issues around the wage and apprentice requirements. I am not suggesting that those details remain to be worked out — I think they are pretty set — but that is going to be a pretty transformational aspect of this bill. We remain focused on the details of how to implement them.
MR. MARTIN: I have always thought Washington is like a dinner party with a tablecloth that is too small to fit the entire table, and everyone is tugging it in his direction. People finally sat down to dinner in early December, and then found that dinner is not ready. So they are tugging again on the tablecloth.
Tariffs and Customs Seizures
MR. MARTIN: Let's move to tariffs. Biden has seemed more protectionist than project developers had hoped. He has to make a decision by Sunday about whether to extend the current US safeguard tariff on imported solar panels.
Trump exempted bi-facial solar panels from the tariff and then tried unsuccessfully ever since to impose the tariff on them. He was blocked by the courts. Biden has been defending the Trump effort to collect duties on bi-facial panels.
Is it your understanding Biden could extend the tariff, but do an about face by exempting bi-facial solar panels?
MS. HOPPER: We have been advocating for the tariff to go away in its entirety for a variety of reasons, but we are also of the opinion that if he chooses to extend the tariff, he can do so while exempting bi-facial panels.
We have argued that the issue whether to revoke the current bi-facial exemption is before the courts and outside of Biden's jurisdiction, but that he has the ability to restore the exemption since that would be consistent with the court decisions to date.
MR. MARTIN: Are there other trade issues besides the safeguard tariff and the bi-facial exemption that are at the top of the SEIA agenda?
MS. HOPPER: One that comes to mind quickly is the enforcement and unpredictability of the withhold-release order that the Customs and Border Patrol issued in June. We could have a very long conversation around that.
That has had a pretty significant impact on the availability of solar modules. Both we and ACP have been deeply engaged in trying to make Customs actions in this area more predictable because that is important to being able to finance projects.
As you know, we advocated successfully against the initiation of an anti-circumvention tariff on Chinese-branded panels coming to the US from southeast Asia. That was a very good outcome.
There is obviously a longer list of trade issues that affect project development and domestic manufacturing. Those are the next level down of trade conversations to have.
MR. MARTIN: How widespread are solar panel seizures by US Customs on account of forced labor concerns?
MS. HOPPER: We are aware of some.
The more chilling effect is the uncertainty is making some panel manufacturers decide either not to ship to the United States or even, in some cases, to shut down factories overseas and not manufacture at all until there is more clarity here. That makes it hard to get modules. That makes it hard to plan for projects in 2022 and 2023.
We have carried that message to the administration to say, "You have these incredible climate goals that enjoy wide support and, yet, you have this trade policy that is pushing in the opposite direction." It is not the concerns around forced labor that are the problem. It is the uncertainty around the enforcement and around what kind of information companies have to provide to prove that their products are not made with forced labor. The forced labor requirement is an important step. It is the execution that has caused havoc in the marketplace.
MR. MARTIN: SEIA issued a protocol for companies to follow to determine whether forced labor was used to manufacture products. Is there any further work being done on that protocol?
MS. HOPPER: Yes, absolutely! Two things. One of the ways in which Customs and Border Patrol can be confident that there is no forced labor in a supply chain is through a third-party independent audit and using the traceability protocols. We are in the process of transforming the protocols into an accepted standard. That kind of outside validation is what an enforcement agency like Customs needs.
We are also working with Customs and Border Patrol directly. A notice went around for comment after Congress enacted a forced labor bill late last year. We are working on that as well.
MR. MARTIN: JC Sandberg, the House Energy and Commerce Committee held a hearing in January about large electricity usage by cryptocurrency miners. Senator Warren and seven other Democrats sent letters last week to six cryptocurrency mining companies. What, if anything, do you see coming out of this effort?
MR. SANDBERG: It is true that mining cryptocurrency is an incredibly energy-intensive exercise. The process of creating bitcoin consumes 91 terawatt hours of electricity annually. That is more energy than is used by Finland, which has five million people.
Senator Warren has expressed concern about the amount of fossil fuel generation being used to power these operations. Some of the crypto miners have been moving to clean energy for their sources of power. We are committed to helping that.
MR. MARTIN: Rich Glick, is cryptocurrency energy usage on the Federal Energy Regulatory Commission's radar screen?
MR. GLICK: It is an interesting topic. Many of the issues associated with cryptocurrency mining involve use of electricity supplied at the retail level, which is not subject to our jurisdiction. However, we are talking about a significant amount of increased demand on the grid, so it affects how we make decisions about transmission, how we keep the grid reliable and how we organize and design markets. We are definitely following this issue very closely.
MR. MARTIN: Is any proceeding planned or is this just the staff taking growing electricity usage for cryptocurrency mining into account while it does transmission planning?
MR. GLICK: More of the latter.
MR. MARTIN: Abby Hopper, what other Washington-type issues are getting the most attention currently from your members?
MS. HOPPER: Another area that we are really focused on is workforce. We talked a lot about solar panels and other types of assets, but this really is a human capital transition as well. It is important that the transition happen justly, not just for the end users but also for the people who work in our industry.
We are focused on ensuring that people from all parts of the country and every community have an opportunity not only to work in solar and storage, but also to have careers in solar and storage and to be business owners and entrepreneurs in solar and storage. It is one of the most exciting parts of what we are doing. The infrastructure bill has lots of workforce development money in it. Congress identified this as a critical need.
MR. MARTIN: JC Sandberg, is there another issue that ACP is following?
MR. SANDBERG: The implementation of the parts of the infrastructure bill around transmission. We are getting heavily involved with the US Department of Energy and the other federal agencies that will have a hand in implementation of the infrastructure bill.
MR. MARTIN: Rich Glick, this is a good bridge to you.
I shared with you, before this call, some interesting data that came out of an Iowa State University study in November about the amount of high-voltage interregional transmission capacity built since 2014 in various countries. China has built, or is close to having built, 260 gigawatts since 2014, the EU 44 gigawatts, Latin America 22 gigawatts, Canada four gigawatts and the US just three gigawatts.
The bipartisan infrastructure bill that President Biden signed in November gives FERC stronger backstop authority to push through transmission lines, but it can only do so in national interest corridors. So far, the Department of Energy has only designated two such corridors. Do you see any more national interest corridors being designated and, if so, on what timetable?
MR. GLICK: The answer is yes. The Department of Energy recently announced plans for implementing a number of authorities that it was given by the bipartisan infrastructure bill that passed last year. It announced that it will designate more corridors and ask for comments.
In the past, the focus was on broad corridors. It is looking more now at project-by-project functional corridors that will be driven by applications from utilities and transmission developers.
DOE has also indicated that it will give special attention to corridors that take advantage of existing rights of way, such as utility or railroad rights of way.
With regard to the authority that Congress gave us for backstop transmission siting, it remains to be seen how often it will be used. Utilities have been reluctant to go around their state commissions. I do not foresee many of them asking FERC to override their state commissions.
We are working with the Department of Energy on guidance for designating corridors.
MR. MARTIN: If someone asks for help siting a specific transmission line, how long a process do you think that will be first to get the national interest corridor designation and then to get FERC to help override any state rejection of the proposed line?
MR. GLICK: It will take time because, if I recall the law correctly, parties cannot come to us for backstop siting until the state has said yes or no. They have to wait another year after the state acts. It will probably be a couple years before we start seeing applications.
MR. MARTIN: FERC asked for comments last July on how to improve a number of things: regional transmission planning, cost allocation and generator interconnection processes. You held a technical conference in November. Did you hear any good new ideas?
MR. GLICK: We got 10,000 pages of comments, so I suspect there were a lot of good ideas.
There were two items on which we saw near consensus. One is that the transmission planning process should be substantially updated, taking into account what type of generation is likely to be built in the future, state policies and everything else that drives generation decisions. We saw a lot of support for a major revamping of the way we plan for transmission.
Second, and Abby mentioned this, almost everyone agrees the generator interconnection process takes too long. There are too many projects in the queue. Needed projects cannot be built because they cannot get connected to the transmission grid.
There was less agreement on what to do about cost allocation. However, it is an important issue that we are going to have to address along with regional transmission planning.
MR. MARTIN: One of your predecessors, Jon Wellinghoff, said about cost allocation that the current approach is like making the last car entering a congested interstate highway pay the full cost of a new lane. Do you have a guess where cost allocation is headed?
MR. GLICK: I have only one vote and can only speak for myself and not my colleagues, but I think the analogy you just used is a perfect one. When a generator applies to interconnect to the grid, sometimes significant network upgrades have to be built that benefit everyone using the grid.
The way our policy has worked in the past, the first generator in line has to pay what can be a staggering amount of money for grid improvements. The amounts can make needed projects uneconomic to build.
We need to look at who benefits. The courts have told us we can only allocate costs on that basis. If a network upgrade reduces congestion, increases reliability and hence resilience, then the cost needs to be shared by all of the beneficiaries.
MR. MARTIN: The principle to date has been he who causes the upgrade pays. You are saying it should be he who benefits pays.
MR. GLICK: There is a conflict between the two theories. We need to rethink our approach, and that is one of the issues we will be debating at FERC.
MR. MARTIN: Transmission reform is a massive area. Some people have suggested you should issue a series of proposed rules on subtopics rather than wait for everything to gel. Is that likely? If so, which topic is first, and what is the timetable for getting the proposed rules out?
MR. GLICK: We are still discussing that internally. There may be some merit in breaking it into subtopics, but we do not want to take one topic, deal with that, and then wait until it is finished before moving to the second topic. This is too urgent a subject.
If we end up breaking it into subtopics, my hope is that we would issue a proposed rule in one area, and then maybe two months later address the next area, and another two months later address the third area.
MR. MARTIN: When do you think the first will be out, and what is the likely topic?
MR. GLICK: I am going to refrain from guessing because, as I said, I have only one vote. My hope is that we will have something within a couple months.
MR. MARTIN: Grid reliability is back on the FERC agenda. It was an important issue for the Trump crowd, particularly for Rick Perry for whom grid reliability meant dispatching fossil fuels ahead of renewables. For you, grid reliability means a need to focus on more frequent extreme weather events, and both of you have been concerned about potential cyberattacks. What should FERC do?
MR. GLICK: You have it exactly right. There are two major threats to grid reliability: cybersecurity, which we can talk about if you like, and the growing threat of extreme weather. We had a technical conference recently on the subject. Just in the last year, hurricanes, wildfires and extreme heat and cold have had major consequences for the grid.
What should be done is to use some combination of reliability standards developed by NERC and incentives to cause utilities to invest in making the grid more resilient.
MR. MARTIN: Is one answer to bury transmission lines like we sometimes do with distribution lines?
MR. GLICK: People are looking at that, but it costs a lot of money. It also costs a lot of money every time transmission lines are blown down by a hurricane or other big storms and then have to be rebuilt. We are seeing a growing number of transmission developers come to us with plans for undergrounding certain parts of their facilities. That seems to me to make sense, but they have to weigh the high cost against the benefits.
MR. MARTIN: How do you characterize current cybersecurity threats to the grid?
MR. GLICK: They are constant. All you need to do is look at comments by our government officials about the increasing number of attacks against our utilities or other energy companies. We saw it recently with the shutdown of the Colonial gasoline pipeline after an attack by ransomware companies. We take this very seriously.
I believe we need to spend a significant amount of time on the supply chain. Utilities use many different kinds of equipment. It is very difficult for them to figure out whether all of the components going into the equipment they use came from reputable companies. The government is taking a more serious look at that. There is a process underway now to figure out what to do about the supply chain.
One thing I have suggested, but that not everyone is on board with, is for the government to have either a blacklist or whitelist to help utilities identify potentially harmful equipment. It seems to me that providing this information would help everybody.
MR. MARTIN: Trump issued a bulk power system order that caught many people by surprise because it instantly made it illegal to buy equipment from foreign adversary suppliers that might be used to harm the grid, but there was not enough detail to tell what exactly was proscribed. Biden set aside the Trump order. The issue the order tried to address is real. Is there work on a replacement order and, if so, when are we likely to see it?
MR. GLICK: You have it exactly right. It was set aside in large part because it was unworkable. There were questions about how power companies can figure out whether an adversary made any components or larger pieces of equipment, so the current administration asked for suggestions. I know they are going through the comments received and should be out with something relatively soon. The threat the order attempted to address remains real.
We used to have categories of high-risk, medium-risk and low-risk facilities, but now we know that bad actors can get into a low-risk facility through some supply-chain mechanism and then end up infecting a high-risk facility. We need to take a fresh look at this. I don't know exactly when the administration will issue something, but I think it will be relatively soon.
MR. MARTIN: Relatively soon meaning by the summer?
MR. GLICK: I can't speak for the administration on this. We are an independent agency. I just know that we have been having some discussions with other departments, and I know they are working hard on it.
MR. MARTIN: Going back to reliability, how important are capacity markets for reliability? A number of RTOs — PJM, MISO, New York, New England — hold periodic capacity auctions. Some other big states, like Texas and California, do not.
MR. GLICK: There has been an enormous amount of debate about capacity markets during the entire four years I have been at FERC. Are they good? Are they bad? Different regions have different approaches. From my perspective, they have been very complicated and have been administered in a way that unnecessarily raised costs and unnecessarily subsidized older, less efficient, generating units. Admittedly, a lot of that was FERC's fault.
There are some people who believe that capacity markets are very important to ensure that older baseload facilities remain available when they are needed.
The winter storm last year in Texas raises questions about that approach. Texas does not have a capacity market. Texas had a lot of capacity last winter when the storm hit. The problem was a lot of that generation failed, either because the equipment froze or because generators were not able to access fuel like natural gas. The problem was not lack of capacity. Texas had more than enough capacity to meet demand for electricity. It just didn't have capacity that worked.
I think we need to take a new look at the way our markets operate. We know we need generating facilities that are more flexible, that are able to ramp up and down quickly, depending on whether the wind is blowing or sun shining or whatever other changes there might be on an almost instantaneous basis. We need to figure out a way to compensate properly for the value to the grid and not just compensate facilities for sitting around and doing nothing. If I could design the markets, that is where I would focus.
MR. MARTIN: That sounds like more storage.
MR. GLICK: Storage absolutely will play an important role in addressing the flexibility and ancillary service needs in the various markets. There are also other technologies. There are certain storage types and natural gas facilities that are able to ramp up and down quickly and provide that flexibility.
MR. MARTIN: You mentioned the four-day Texas cold snap last February. Is there a way for FERC to provide ERCOT access to emergency electricity without subjecting ERCOT to interstate commerce and FERC jurisdiction?
MR. GLICK: I will answer that question in two parts. The first part is Texas definitely needs, in my opinion, to be better connected to the rest of the grid. Winter Storm Uri is the perfect example. We saw the massive blackouts in Texas. The same weather occurred in neighboring states like Louisiana, Oklahoma and Arkansas, but without similar disruptions.
There were about 30,000 megawatts of power plants that were not working in Texas and a similar number in neighboring states. The difference was Texas had massive, long-term blackouts because it was not able to import power. The other states were able to bring in power from PJM. The problem is Texas is not well-enough connected to the grid.
Texas spent a lot of time organizing ERCOT in a way to avoid being subject to FERC regulation and federal oversight. I understand the point, but something needs to change. I don't think FERC has the authority on its own to address that. I think that needs to come from two sources.
One is Texas, which needs to be more willing to interconnect to the grid. The other is Congress. The exemptions for ERCOT in the Federal Power Act should be closed. I understand the point about Texas being Texas and not wanting to be subject to regulation from Washington, but sometimes you can end up cutting off your nose to spite your face, and that is what happened last winter.
MR. MARTIN: So Texas should subject itself to more regulation because it will be better off?
MR. GLICK: It may be possible to fix the problem in a way that does not make Texas subject to full FERC regulation. That is for Congress to decide. My only point is let's not argue about who has jurisdiction. Let's try to figure out a way that people don't freeze to death next time.
MR. MARTIN: You have been concerned that some FERC policies, like access for storage and distributed energy to wholesale energy markets, apply only to parts of the country that are covered by RTOs. Something like 15 states are not. You said in October that you hope the commission will be able to even this out. What did you have in mind?
MR. GLICK: We have much broader regulatory authority over RTO regions than we do over the non-RTO states. My concern is that a lot of our rulemakings are focused exclusively on RTOs. This creates an incentive for utilities not to join RTOs because joining will subject them to more regulation.
We are looking at different regulatory approaches in an effort to broaden the appeal of joining organized markets. The most recent example is we issued a ruling requiring transmission facility ratings to be more flexible over time, and we subjected all transmission providers around the country, not just in RTOs, to that regulation.
MR. MARTIN: The Biden administration has made environmental justice a priority. It seems like a paradigm shift is underway at FERC in how it will consider siting of fossil-fuel infrastructure in communities of color and low-income areas. What does it mean for siting of renewables and electric transmission lines?
MR. GLICK: When we site any energy project, whether it is a hydroelectric facility, transmission line, natural gas pipeline or LNG facility, we are required to follow the requirements of the National Environmental Policy Act. One of the issues we are supposed to consider under NEPA is the potential impact of any proposed project on environmental justice communities.
In my opinion, FERC has not done a very good job of that. The DC circuit court of appeals sent a case back to us recently because it said we did not do the environmental justice analysis as carefully as we have should have.
We are trying to provide more legally durable opinions by taking a hard look at the environmental justice impacts of proposed projects and mitigating them if we can before approving a project.
MR. MARTIN: I have heard some critics complain that this ends up in some cases reopening some projects that have already been financed. What do you say to that?
MR. GLICK: That really makes me mad. I can't get into too much detail, but there is a compressor station in Massachusetts that has become controversial because it was sited in two different environmental justice communities. We have never reopened the commission decision to grant the project a certificate of public convenience and necessity. For instance, with pipelines, you have three different decisions to be made at FERC. First, we have to approve the certificate. Second, when the project is ready to begin construction, FERC has to say it can begin construction. Third, after construction is complete, the developer has to come back to FERC for permission to place it in service.
The particular project was at a stage of asking the commission for permission to start operating. We said, "Let's take a look at the impact on environmental justice communities before we do that." We have not second guessed the previous commission's decision to approve the certificate.
MR. MARTIN: Different subject. FERC said in a policy statement at the tail end of the Trump administration that it is open to having RTOs incorporate carbon pricing into their markets. When should carbon price adders be considered a legitimate cost of service?
MR. GLICK: That policy statement said basically that if a state or group of states has developed its own carbon pricing mechanism, we would consider including that mechanism in pricing for the RTO involved. Those are market-based approaches. It is not cost-of-service regulation. It would not require a finding that a particular generating plant has a higher cost of service. The cost of carbon would be priced into how the entire market operates. The adder would apply to all fossil generation across the particular region.
MR. MARTIN: So if the market is 43% fossil, what do you do? Do you have an adder to reflect the average fossil generation?
MR. GLICK: You could require fossil generation to bid a higher price or you could discount cleaner generation during bidding to be dispatched by that market. There are variety of ways to do it.
I will say that since we issued the policy statement, no state is closer to adopting a carbon pricing mechanism for its electricity generation. In fact, New York has been talking about it for years, but has not made much progress. What FERC put out was a nice policy statement, but I am not sure it will have much meaning for the way our markets operate.
MR. MARTIN: Two more questions, and then we will wrap it up.
There is growing interest among dairy and hog farmers in the Midwest in renewable natural gas, or converting animal manure into a gas substitute that can be fed into natural gas pipelines. Some pipelines have proposed their own standards for what is responsibly sourced gas. There has been a push for a national standard. Is a national standard likely?
MR. GLICK: I don't think FERC will wade into that particular area. Whether gas is responsibly sourced or renewable is an issue to be addressed at the local level.
The question made me chuckle a bit because Congress has been talking about having some sort of national standard for what is renewable electricity for a number of years now, and it has proven impossible to reach agreement. These issues are more easily addressed on a state or regional level.
MR. MARTIN: The Office of Public Participation is now up and running at FERC with a new director as of October. People have worried that it will be a mechanism to require companies applying for FERC orders to fund interventions by non-profit public interest groups. Has the fear been disproven?
MR. GLICK: Congress ordered FERC in 1978 to establish this office. For whatever reason, it was not established and we just established it last year pursuant to further Congressional direction.
Many FERC proceedings are so technical that it is hard for people who are affected to understand the issues and how to intervene. Take a natural gas pipeline siting case, for instance. Many people are affected by it. They don't know how to participate. The main goal of the office is to facilitate their participation.
There is a provision in the statute that says FERC can create an intervenor funding mechanism. We are pursuing a proposed rule that will lay out the associated issues in detail and ask for public comment.
The statute says the intervenor has to be successful in order to be reimbursed for its costs.
For that reason, I don't think this will lead to a flood of intervenors because there is no guarantee costs will be covered.