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Grid operators look to balance greening power supply with reliability

As the grid continues to decarbonize, regional transmission organizations and independent system operators are grappling with maintaining a diverse generation mix and adequate power resources, issues that dominated a panel discussion at the S&P Global Platts Nodal Trader Conference in New York on Oct. 24.

Fuel diversification can be protected as states conform to new renewable standards, said Noha Sidhom, CEO of trading firm TPC Energy Fund.

"I think the market is solving that problem," said Sidhom, nothing that PJM Interconnection, for example, "is very fuel diverse."

Panelists also engaged in the perennial debate over which form of power market, capacity or energy-only, is best equipped to accommodate a diverse generation mix.

"Capacity markets exist for resource adequacy," said Mason Emnett, vice president of competitive market policy at Exelon Corp., who said he has seen states evaluating their generation mix. "States, as they have been looking forward to [addressing] the impacts of climate change, have questioned whether the resources that are being used, being procured through the eastern capacity markets are in fact the ones they want to be using."

The Electric Reliability Council Of Texas met great demand for electricity for the third summer running, said Sidhom, asking "When are we going to call it a success?"

"I'm not here to say that ERCOT is this panacea, that it doesn't have any issues," Sidhom said. "I think it's kind of unfortunate that we've framed this debate into energy-only or capacity. Because ERCOT is different, we have retail competition."

The role of RTOs has changed in recent years, added Sidhom, pointing to renewable standards and battery storage as much bigger factors in 2019 than in 2012.

"All of the economists at the time said 'Let's focus on the energy markets, let's get the prices right in the energy markets.' Meanwhile, you had the states taking action [on renewables], you have a lot of battery storage," the CEO said, noting that RTOs are dealing with much more than they were originally designed to.

"We've always been against Standard Market Design, I feel like Standard Market Design left a bad taste in everyone's mouth," Sidhom said. But Standard Market Design could be beneficial in certain areas, such as the integration of new technologies.

Repairing a deteriorating relationship between states and the Federal Energy Regulatory Commission must also be a priority.

"There needs to be a lot more collaboration between the states and FERC," said Sidhom. "They used to have a much better relationship than they do now."

However, one area where FERC and states appear synchronized is keeping prices artificially low, according to some panelists.

"I think there's not an appetite by FERC or the states, frankly, to let prices go where they need to go," said moderator Catherine Krupka, a partner at Eversheds Sutherland, who agreed with David Maggio, senior manager of market analysis and validation at ERCOT, that Texas is more willing to let that happen than other parts of the country.

"The capacity markets have done a tremendously good job up until this point in transitioning the resource mix," said Arnie Quinn, senior director of FERC-jurisdictional markets at Vistra Energy Corp., citing natural gas-powered assets replacing coal-fired assets in PJM Interconnection.

S&P Global Platts and S&P Global Market Intelligence are owned by S&P Global Inc.