By David Giambusso
06/16/2016 10:35 AM EDT
It is an age-old dilemma for grid operators: how to balance policy priorities with free markets.
In a panel discussion as part of New York Energy Week, New York Independent System Operator CEO Brad Jones joined several of his contemporaries to address the inherent conflict of a free, wholesale energy market with the ever-increasing desire to produce power with little to no greenhouse gas emissions.
Hosted by EnerKnol and RTO Insider, the panel brought together Jones, ISO New England president and CEO Gordon van Welie, National Grid board of directors members Nora Mead Brownell, and RTO Insider editor Rich Heider Jr.
“As the traditional one-way grid evolves into this dynamic two-way platform the markets also have to evolve … The challenges and opportunities come in integrating these policies into wholesale markets,” said Erin Carson, EnerKnol’s chief policy strategist, kicking off the debate. “What happens when regulators impose conditions on the market that cannot be priced?”
The most glaring example of this divide is nuclear power. In New York, New Jersey and throughout the country, nuclear power, which is essentially carbon-free, is stuck between incredibly cheap natural gas, and policymakers’ desire to promote more renewable energy.
POLITICO New Jersey recently reported on PSEG’s push to value nuclear power’s carbon free attributes with zero emission credit, an “adder” to the wholesale price of nuclear.
PSEG CEO Ralph Izzo pointed to New York and other states where nuclear operators are all but begging for government subsidies to stay afloat.
“We value what nuclear brings to the table [but] our markets don’t value carbon so it’s put nuclear at a disadvantage,” Jones said. “I think there probably is an opportunity for this zero emission credit-type structure but we’d like to see that be a temporary structure.”
The real answer Jones and many others said would be to attach a price to carbon. By pricing carbon, a market is created that both generates revenue and incentivizes reductions in carbon output. While regional carbon pricing has been successful, as in the case of the Regional Greenhouse Gas Initiative, in order for carbon pricing to have real impact, it has to be instituted nationally and globally, the panelists said.
“If we don’t have leadership at the federal level to change these things then we need better regional models,” Brownell said, adding, “I think there’s more consensus on a carbon tax than would be apparent from all the hysterics you see in Washington … at this point we can’t govern.”
While most agree RGGI has been a success, Jones said it did not go far enough.
“Since we have RGGI why isn’t that already the price for carbon?” he said. “The RGGI goals aren’t as aggressive as the goals our governor has.”
Gov. Andrew Cuomo has set a goal of powering New York with 50 percent renewable power by 2030. Beyond policy-making to attract that much energy to the market, Jones said New York will have to dramatically accelerate transmission – the physical infrastructure that moves power. Jones said the typical timeframe for siting and building some transmission was 12 years.
“It’s 50 percent renewables by 2030 which is just a short 14 years away,” he said. “We have to take that green power from the North Country or from the western part of the state and move it all the way across the state. To do that we need to build transmission.”
While the state is designing policies to promote distributed generation like rooftop solar arrays, large-scale renewable energy will also have to be part of the mix, Jones said.
“The debate about the big or the small grid is not a debate I buy into,” he said. “You really have to have both.”
The geography and infrastructure of New York City, the state’s hungriest power market, make a large solar farm nearly impossible. So in order for the city to get the renewable power it needs, Jones said it will have to travel over greater distances.
“We have to improve our process for siting and approving transmission,” he said.
To view online:
http://www.politico.com/states/new-york/city-hall/story/2016/06/grid-operators-grapple-with-policy-versus-markets-102941
