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Climate Risk

Entergy's Hurricane Outages Shine Spotlight on U.S. Grid Challenges

With most of New Orleans suffering through a third day without power, Entergy Corp. faces questions about whether it was sufficiently prepared for another monster storm pummeling the city.

Such reckoning is becoming all-too-familiar for utilities nationwide that must contend with more weather catastrophes fueled by a rapidly warming climate and the need to strengthen their aging transmission systems. U.S. power companies face a $500 billion "resilience investment gap" that poses risks to their assets and long-term viability if unaddressed, a report by the ICF consulting firm warned earlier this year.

"We still don't have power or gas, I can't even access my email or information — we do wonder what's going on," Andrew Tuozzolo, the New Orleans City Council chief of staff, bristled in a brief phone interview Wednesday morning. As with any outage, he said an official inquiry will be launched into the loss of power.

By midday Sept. 1, nearly four days after Hurricane Ida struck the Louisiana coast with 150 miles-per-hour winds, Entergy was able to return power to 11,500 customers in isolated pockets of New Orleans as the city heat index crept toward 100 degrees. A 400-foot transmission tower by the Mississippi River that withstood Hurricane Katrina in 2005 collapsed from the wind on Sunday and contributed to the loss of power experienced by the entire city.

"While initial service can be provided to some customers, the full restoration will still take time given the significant damage across the region," Entergy cautioned in a statement.

Meanwhile, in California, thousands of residents in the Lake Tahoe region were fleeing the rapidly growing Caldor wildfire, one of 15 major blazes burning across the drought-stricken state. Under pressure to reduce fires sparked by overhead power lines, PG&E Corp. recently said it plans to invest up to $20 billion to bury 10,000 miles of high-risk distribution lines.

"I don't know of any utilities that are not preparing for more extreme weather today," said Larry Gasteiger, Executive Director of Wires, a trade group representing transmission owners and developers. "There are all kinds of extreme weather events that seem to be increasing and that we need to deal with in the transmission system. I think it's more a question of which ones are taking additional measures."

Mich. Regulators Launch Inquiry into Electric Utility Storm Response

The Michigan Public Service Commission directed DTE Electric Co., Consumers Energy Co. and other electric utilities to file a report on their response and distribution system performance during the Aug. 10-12 storms that left nearly 1 million residents and businesses without power.

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About 1.2 Million Customers Without Power in Hurricane Ida's 'Catastrophic' Wake

The extremely powerful Hurricane Ida cut off almost 1.2 million customers from electric service as of about 1 pm CT Aug. 30, and according to Entergy, the largest utility serving the area, "Those in the hardest-hit areas could experience power outages for weeks."

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Extreme Weather, Citizen Backlash Jeopardize California's Climate Plans

California has what most states do not: a legislature, governor and state agencies all working in tandem to make deep greenhouse reduction cuts and reach carbon neutrality, perhaps as early as 2035.

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Extreme Temperatures, Transmission Outages Bring Volatile Power Prices to New York

A heat wave that moved through the Northeast US coincided with transmission outages on Long Island to result in significant power price volatility, with real-time power prices bouncing from minus $3,800/MWh to over $1,500/MWh Aug. 11 and 12.

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Grid Instability & Resiliency

CAISO Extends Flex Alert, Restricted Maintenance Operations on Supply Concerns

The California Independent System Operator remains under a flex alert and restricted maintenance operations notice because of expected high loads and temperatures across the footprint with gas supply concerns in Southern California.

The alert and notice started Sept. 8 with the flex alert extended until 9 pm Sept. 9 and the restricted maintenance operations notice extended until 9 pm Sept. 10.

Peakload reached 43.591 GW Sept. 8, the highest in a year, according to CAISO data.

"The ISO is predicting an increase in electricity demand, primarily from air conditioning use," according to a Sept. 8 ISO statement. "The increase can stretch electricity supplies thin and cause strain on our power grid, especially in the late afternoon and evening, when solar production goes offline and wind generation is uncertain, however, temperatures and electricity demand remain high."

There is more natural gas being used than scheduled. SoCal Gas is showing estimated receipts of about 2.4 Bcf/d, with sendout above 2.8 Bcf/d, so storage draw is more than 400 MMcf/d, and it will probably need to pull gas from Aliso Canyon, which usually implies very high prices, said Morris Greenberg, senior manager of North American Power for S&P Global Platts Analytics.



ERCOT Generation and Transmission Winterization Rules Proposed for Publication

Generation and transmission entities in the Electric Reliability Council of Texas would have to complete by Dec. 1 "all actions necessary to prevent a reoccurrence of any cold weather critical component failure" that occurred in the winter of 2020-21 under weatherization rules proposed for publication and filed by Texas regulatory staff Aug. 25.

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New York City Calls on Households, Businesses to Cut Power Use Amid Heat Wave

New York City issued an emergency alert late June 30, urging electricity users to dial back consumption to avoid power failures as a heat wave, with temperatures above 95 degrees Fahrenheit, stressed the power grid.

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ERCOT Requires More Market-Design Reform to Promote Grid Resiliency: CPS CEO

For the Electric Reliability Council of Texas to avoid another energy emergency, such as what occurred during the deadly mid-February winter storm, it has "a whole lot more to do with market design," the head of San Antonio's CPS Energy said July 30.

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As Heat Wave Looms, ERCOT and Texas Regulators Emphasize Grid Readiness

Texas regulators and the Electric Reliability Council of Texas sought on July 22 to reassure Texas power consumers that they are doing what is necessary to ensure the power system remains reliable for the rest of the summer, as August is typically the hottest period of the Texas summer.

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Extreme Weather Challenges California Grid as Goal Remains Decarbonization

As extreme summer weather tests the California power grid, opportunities for reliability alongside deep decarbonization and achieving 100% renewable power remain, state regulators said June 16.

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Clean Energy

The Path To Net-Zero Emissions: Credit Perspectives On What This Means For Some U.S. Regulated Electric Utilities

There are many components on the path to net-zero that have to work well in order for some utilities to achieve their goals, beginning with articulating a clear resource strategy that is beneficial for ratepayers.

Closing down coal-fired generation is a logical next step toward net-zero for some vertically integrated utilities.

The growth in renewable power generation is likely to remain a key aspect of the net-zero strategy for these utilities.

Support for existing nuclear power generation is another possible step on the path toward net-zero, but we do not expect to see new big buildouts of this asset class any time soon.

Energy-efficiency investments can also support the transition to net-zero for affected utilities, as the New York case study shows.

Technological progress will likely dictate the pace of the net-zero transition for affected utilities.

In the end, credit quality may hinge on how well affected utilities manage the pace of transition to a net-zero carbon future, without compromising their financial policy decisions and attitudes toward credit quality.

For these utilities, the path to net-zero begins with articulating a clear resource strategy that is beneficial for ratepayers

S&P Global Ratings believes this to be a first step on the path toward net-zero carbon emissions. This aspect seems straight forward but belies several complexities. Vertically integrated utilities typically make long-range plans on what mix of electric generating resources will be required to meet the demand for future electricity consumption. This is generally done through a process known as an integrated resource plan (IRP) which is required in several states (see map).

On the Delmarva Peninsula — in the heart of Chesapeake's business — the local problem that needed attention was waste from poultry farms. Nearly 1,300 chicken growers raised 540 million chickens in 2020 on the peninsula, which comprises much of Delaware and parts of Maryland and Virginia.

California Unlikely to See Power Market Changes Despite Close Governor Recall Election: Experts

The outcome of the California governor recall election is unlikely to have immediate impacts on wholesale power markets or existing laws such as the one concerning state's goal of 100% clean energy by 2045, but the leading opponent would likely change the heads of the state's various utility commissions, industry experts say.

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Battery Storage Capacity Rapidly Rising Across California, Thermal Remains Strong

Battery storage is taking off in California with nearly 1.2 GW of capacity added in the last year and expected to double before the end of the year, despite COVID-19-related supply chain delays that have helped boost natural gas demand, along with lower hydro and imported generation.

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Wind Energy Sector Accounted for 42% of New Capacity in 2020, a Record High

Record growth in the wind energy sector is helping the U.S. make progress toward President Joe Biden's 2035 clean electricity goal even as the country remains "well behind" China, Denmark, Germany and other wind leaders in the percentage of power it gets from the energy source, the U.S. Energy Department said.

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NY Power Producers, Unions Seek Program for 1 GW of Nonrenewable Clean Energy

The Independent Power Producers of New York, along with two major labor unions, filed an Aug. 18 petition urging the New York State Public Service Commission to develop a program that would incentivize the development of a minimum of 1 GW of nonrenewable, zero-emission energy systems that are ready to enter commercial operation by 2030.

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U.S. Clean Power Installations Surpass 2020 to Reach a Q2 Record, Texas Leads States

U.S. project developers installed 5.62 GW of clean power capacity in second-quarter 2021, a record for Q2 installations and an increase of 13% year over year, the American Clean Power Association announced Aug. 24 in its quarterly report.

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As Xcel Energy CEO Departs, Utility Will Keep Fueling Growth with Clean Energy

Benjamin Fowke spent the past 10 years guiding Xcel Energy Inc. from a "middle of the road" Midwestern utility, as judged by investors, to an industry leader and trendsetter in the clean energy transition.

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Natural Gas in the Energy Transition

Chesapeake Utilities, a Small Utility Operator, has Big Renewable Gas Plans

When asked how big he wants his company to be in the renewable gas market, Chesapeake Utilities Corp. President and CEO Jeff Householder offered an observation: "You're the 95th person that's asked me that question in the last two days."

It makes sense that Householder fielded the inquiry during the American Gas Association's Financial Forum in May. The company began entering a string of renewable natural gas, or RNG, investments and tie-ups last year. In November 2020, executives outlined a strategy to integrate RNG into their businesses transporting gas in pipelines and tube trailers. In February, they announced plans for a hydrogen pilot project, and by early May, they were updating investors about additional RNG investment opportunities.

In a pair of interviews with S&P Global Market Intelligence, Chesapeake Utilities executives discussed the RNG opportunity — one of five key strategic initiatives through 2025 — and their plans to establish a foothold in the emerging hydrogen economy. They expect that the plans could help Chesapeake grow and decarbonize its business and see the company expand its geographic footprint. However, when evaluating RNG opportunities, the company will continue to think locally, Householder said.

SRP Proposes to Expand Coolidge Gas-Fired Power Capacity as Bridge to More Solar

Salt River Project wants to expand capacity at its quick-start, natural gas-fired Coolidge Generating Station plant to ensure a reliable backup for the Arizona utility's planned increase of solar-generated power, SRP said Aug. 25.

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SoCal Gas City-Gate's Winter Strip Hits New High as California Increases Reliance on Gas

SoCal Gas city-gate's winter strip climbed to a fresh year-to-date high in the week started Aug. 22 as an increasingly weak hydropower outlook deepens California's expected reliance on gas-fired generation even as pipeline constraints limit gas inflows into the region.

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Kinder Morgan Sees Growth Potential from Gas Storage Network Ties to Grid, Exports

Kinder Morgan wants to leverage its US midstream infrastructure network to serve what it sees as a likely rise in natural gas storage demand to support power grid reliability and growing LNG exports, CEO Steve Kean said Sept. 9.

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Calif. Power Grid Faces 'Precarious Transition Period' Amid Gas Outages

A series of punishing heat waves and a ferocious start to wildfire season are exacerbating concerns over power supplies in the severely drought-stricken western United States, especially in California, which has been hard-pressed at times over the past two months to keep the lights on in the world's fifth-largest economy.

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U.S. Markets

NYISO's Distributed Energy Compliance Plan Draws Fire at FERC

The New York ISO's attempt to integrate aggregations of distributed energy resources into its wholesale power markets has exposed a range of thorny issues surrounding a landmark Federal Energy Regulatory Commission rule.

Order 2222, issued in September 2020, requires FERC-jurisdictional grid operators to clear market barriers to aggregations of distributed energy resources, or DERs, such as small-scale solar arrays, residential batteries, and electric vehicles. FERC reasoned that combinations of those types of behind-the-meter resources can provide crucial reliability benefits and other services to the grid as the U.S. continues to shift to more variable renewable energy resources.

NYISO was already a leader in DER integration when Order 2222 was issued, having won FERC's approval in January 2020 for a separate program that established an aggregation DER participation model. The grid operator is projecting behind-the-meter solar installations and nonsolar distributed generation in the state will roughly double over the next three decades as the state strives to have 70% of its electricity generated by renewable resources by 2030 and achieve a 100% clean power grid by 2040.



In a July 19 compliance filing (ER21-2460), NYISO detailed its plan for revising its existing DER program to align with Order 2222's requirements. In doing so, the grid operator said it planned to deploy new software to implement its DER aggregation participation model in the fourth quarter of 2022. However, the filing was met with multiple protests by state agencies, clean energy groups, transmission owners and others.

Advanced Energy Economy, the Natural Resources Defense Council, and the City of New York filed a joint protest — endorsed by 48 additional organizations — to NYISO's bid to exclude energy efficiency resources from participating in its capacity market as part of DER aggregations.

NYISO already bars energy efficiency resources from supply-side capacity market participation because those resources cannot be dispatched when called upon. But energy efficiency resources in New York help customers reduce demand and, as a result, reduce the region's capacity needs.

Noting that Order 2222's definition of DER aggregations explicitly included energy efficiency resources, the clean energy advocates argued that the order, therefore, prohibits the uniform exclusion of energy efficiency resources on the supply side of NYISO's capacity market. They also noted that energy efficiency resources in the PJM Interconnection have been allowed to participate in the 13-state grid operator's capacity market on the supply side for over a decade.

The groups also noted that Order 2222 prohibits the double-counting of the same service provided at both the retail and wholesale level but allows resources within DER aggregations to provide one service at one level and a different service at another.

"While it is critical that specific [energy efficiency] savings are not double-counted ... it is common for some portion of the total amount of [energy efficiency] that supports resource adequacy to be reflected on the supply side and some on the demand side," the coalition said. "Indeed, under supply-side models, rigorous accounting guidelines are established to ensure that savings are reflected on only one side of the market and to ensure that the 'baseline' against which [energy efficiency] savings are measured is properly set."

Energy efficiency resources will be crucial in helping New York reach its 70%-renewables-by-2030 goal because that target is based on the level of end-use energy, the groups added. NYISO is projecting energy efficiency-related peak demand reductions in the summer to jump by a factor of 12 by 2030 and a factor of 21 by midcentury compared to current levels.

Cryptocurrency Offers Opportunities, Challenges for Power Market Participants

Power demand from cryptocurrency mining data operations offers opportunities and challenges around decarbonization of the U.S. economy, panelists said Sept. 15 at the fall conference of the Independent Power Producers of New York.

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Details Emerge on House Clean Electricity Performance Program

The House Energy and Commerce Committee is considering a proposal that would establish a new U.S. Department of Energy program to provide grants for power companies that increase their percentage of clean energy by certain margins each year and impose fees on those that do not.

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Critics: PJM's Minimum Offer Price Rule Overhaul Will 'Crater' Capacity Market

The PJM Interconnection is facing fierce pushback to its proposed replacement for a highly contentious minimum offer price rule, or MOPR, used to blunt the effect of member states' clean energy policies in the grid operator's multibillion-dollar capacity market.

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Berkshire Hathaway Gas and Power Unit Urges U.S. Incentives to Support Clean Energy

Warren Buffett's Berkshire Hathaway, a major investor in US energy infrastructure and operator of the Cove Point LNG export terminal in Maryland, is putting its weight behind an industry push for passage of new legislation that would provide additional tax incentives for clean energy projects.

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Opportunities in Dems' Clean Energy Plans to Dominate Q2 Utility Earnings Talks

Investment opportunities created by federal clean energy legislation will likely be a key topic of discussion for U.S. utility investors and executives during the second-quarter earnings season.

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Utilities Eye Grid-Enhancing Technology Incentives Amid U.S. Infrastructure Push

A growing number of electric transmission and distribution companies are experimenting with grid-enhancing technologies as the U.S. Congress advances legislation that would offer billions of dollars in matching grants for those types of investments.

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FERC Kicks Off Major Rulemaking Effort to Help Speed Electric Grid Build-Out

The Federal Energy Regulatory Commission on July 15 took the first step in developing a major proposed electric transmission planning rule that could eventually transform the nation's energy landscape.

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Major U.S. Power Consumers Call for Regulation to Increase Transmission Project Competition

A group of 73 major US power consumers called on Congress Aug. 3 to strengthen competitive transmission project bidding processes as part of the infrastructure legislation currently being debated, with the group citing a lack of competition as significantly increasing costs for electricity customers.

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Global Regulation

China's Net-Zero 2060 Plan Will Need Full Power Grid Overhaul

China will need to fundamentally revamp its power generation and distribution system by 2060, as part of its roadmap to decarbonize the power sector and accommodate a fuel mix that largely replaces fossil fuels with cleaner energy sources, according to experts at a recent conference in Nanjing.

EC Approves Belgium's Electricity Capacity Market Design

The European Commission has approved Belgium's electricity market capacity mechanism under state aid rules, it said in a statement Aug. 27.

Approval comes after months of EC scrutiny and offers relief to the Belgian government, which plans a first four year ahead capacity auction this October to compensate for the phase-out of nearly 6 GW of existing nuclear capacity by 2025.

"Capacity mechanisms can help to safeguard security of electricity supply to the extent that they are designed in a way that avoids distortions of competition in energy markets," said EC Executive Vice-President Margrethe Vestager.

Approval comes after Belgium decided to introduce certain sustainability requirements for new fossil fuel installations, the EC said.

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