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Commodities 2021: FERC seen as major player in clean energy transition going into 2021

Highlights

Biden climate agenda to give FERC impetus to act

Transmission, power markets flagged for reforms

Possibility of continued GOP majority presents challenges

New York — Industry observers see the Federal Energy Regulatory Commission as a major player in the clean energy transition and believe new leadership that will take the helm at the agency in 2021 could aid with effectuating the climate goals of the president-elect and certain states.

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Once considered an obscure, sleepy agency, clashes over natural gas infrastructure projects, coal plant retirements and state clean energy policies thrust the agency into the center of climate debates. With authority over power sector operations and planning, its decisions are helping to shape the evolution of the sector and influence the energy transition.

But "presidents don't control the FERC," Travis Kavulla, vice president of regulatory affairs at NRG Energy and a former Montana utility regulator, said in a blog post.

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As an independent agency, FERC is not beholden to the president and is designed as a multi-member, bipartisan commission. The president does select the chairman of the agency, "who decides when and how matters are called up for a vote and controls other important agency processes," Kavulla explained. "As they say on Facebook, 'it's complicated'."

Energy transition underway

However, "the move toward carbon-free electricity definitely is afoot," and was able to continue even under the Trump administration, "which is not a cheerleader for this effort," Ken Irvin, a partner with the law firm Sidley Austin, said in an interview.

More than 41.5 GW of coal-fired generation has been retired during the Trump administration, while nearly 46 GW of wind and solar projects have come online in that same timeframe from 2017 to mid-2020, according to data compiled by S&P Global Platts Analytics.

Platts Analytics' North American Electricity Short-Term Forecast expects 15.8 GW of wind and solar capacity to be added to the grid in 2021 as another 3.7 GW of coal is retired.

"When you have the occupant of the White House using the bully pulpit of the White House to advocate this, there could really be some pretty big wind at the sails and give a lot of impetus for FERC to take action," Irvin said, noting the growing public and corporate interest in carbon-free, greenhouse gas-neutral energy.

While FERC's mandate requires it to be fuel- and technology-neutral, Irvin said the commission is still "going to have to adapt to a changing resource mix that's going to have a lot more distributed generation, more distributed energy resources, and a different load pattern."

Direction from Congress

He pointed to Orders 841 and 2222, which seek to open the wholesale power markets to greater participation by energy storage resources and distributed energy resource aggregations, as "recognition by the commission that we have to go in that direction."

He added: "It would be nice if Congress would give direction through energy policy legislation" that firms up FERC's statutory authority in this area "because I worry that without that, we're going to have trouble – litigation – over things."

Ari Peskoe, director of Harvard Law School's Electricity Law Initiative, said that "regardless of whether Congress passes clean energy legislation, the Democratic-led FERC should choose to wield its authority to support a clean energy agenda." He asserted that FERC had broad discretion to do so given that it operates under flexible legal standards and already has transmission oversight and market regulation authorities.

In a paper, he specifically advocated for FERC to ensure that transmission networks support clean energy deployment and that power market rules align with the clean energy transition.

As such, Peskoe said FERC would "be an indispensable player in the Biden administration's clean energy agenda" as its decisions would affect the pace and cost of clean energy deployment.

'Seesaw problem'

Irvin suggested that a Democratic chairman, expected to be named after President-elect Joe Biden's inauguration, could prioritize proceedings that facilitate greater deployment of renewable energy.

Commissioner Richard Glick, who had been the sole Democrat on the panel since September 2019 until Allison Clements was sworn in Dec. 8, has a plethora of dissents under his belt, opposing FERC orders on gas infrastructure projects that he believed did not properly consider climate impacts and capacity market reforms that frustrated state clean energy policies.

"Imagine Glick as chair and being able to effectuate his objections to the [minimum offer price rule] and the other things that have been happening over his dissent," Irvin said. "He might be able to reverse all that."

Of course, that comes with its own set of challenges to industry players. "One of the concerns that we've been talking with clients about is a little bit of a seesaw problem," Irvin said. "With the Biden administration, especially in the energy and environmental areas, it's like we were going in one direction, now we're going to reverse course and go the exact opposite direction."

Republican majority

Whether a Democratic chairman could garner enough votes to make such changes is also a question. Unless the current chairman, James Danly, resigns, FERC will be led by a Democrat who lacks the majority vote at least through June when Commissioner Neil Chatterjee's term expires.

The commission of late has seen a batch of orders decided on party lines, namely on the issues with climate ties on which Glick dissented. But its decisions in many other areas often crossed party lines, including a recent move encouraging grid operators to incorporate a price on carbon into FERC-jurisdictional, competitive markets.

"Neil Chatterjee has made himself into the purple commissioner and he's the fulcrum for it all," Irvin said. "It seems like Chatterjee is trying to audition to be that tie breaking vote for the Dems and for the people who want to move us in that direction, with his work on carbon and his comments about distributed generation, distributed resources, as well as electric vehicles."

Irvin added that a 3-2 Republican majority at FERC "would be an obstacle to President-elect Biden's goals for sure," and with Danly in particular, "it would be hard to see 5-0 decisions out of FERC on a lot of" the clean energy agenda items.