- New FERC Commissioner David Rosner flags the “huge problem” of energy permitting delays. While a Senate committee has reported out Sen. Manchin’s bill to address the issue, will it come to the floor for a vote?
- Maryland takes steps to attract more data centers, but, as a major electricity importer, will the state be able to increase its transmission infrastructure to meet surging demand?
- The U.S. Dept. of Energy has a plan: build new reactors on current and former power-plant sites.
- NERC signs a memorandum of understanding with the National Electrical Manufacturers Association to work to improve the reliability, resilience and security of an electric grid at risk.
- The changing state of electricity needs and energy reality seems to have affected investment firms, as they reduce support for environmentally oriented shareholder proposals and exit a group trying to pressure corporations on their climate policies.
- By a unanimous vote, California’s Assembly passes legislation to enhance transmission through technology as the state faces the reality of trying to reach zero emissions while maintaining a reliable grid and keeping costs down.
A New FERC Commissioner Speaks Out on the ‘Huge Problem’ of Permitting Delays as a Bipartisan Solution Awaits a Senate Floor Vote
In an interview earlier this month at Gastech 2024, the world’s largest integrated energy conference, David Rosner, a new commissioner of the Federal Energy Regulatory Commission (FERC), raised serious concerns about continuing delays in approving permits for U.S. energy infrastructure projects. Those delays are harming reliability and affordability across the country.
“Yeah, it’s a huge problem,” he said in an interview at the event in Houston, “but we know how to do this, we’ve done it before. Permits, the time involved, it’s a problem.”
A Democrat, Rosner was confirmed in June as a commissioner by a vote of 68-26 in the Senate. His term runs through June 30, 2027. Rosner worked at FERC as an energy analyst and spent two years on detail to the Senate Energy and Natural Resources Committee’s staff. The chairman of that committee, Sen. Joe Manchin (I-WV), was a strong supporter of Rosner’s nomination to FERC.
“When I look at these questions,” said Rosner, “I think, what do we need to do to make these things a reality, while balancing all the things that the statute asks us to balance, while also making sure that consumers have access to electricity? Affordable electricity, cleaner electricity?” A great deal of the answer lies in moving infrastructure projects along without unnecessary delays.
As we reported in Newsletter No. 39, the Senate Energy and Natural Resources Committee reported out the permitting reform bill sponsored by Sen. Manchin and Sen. John Barrasso (R-WY), the panel’s ranking member, on a bipartisan vote of 15-4.
Eight Republicans – all those on the committee except Sen. Josh Hawley (MO) – voted to report the bill to the floor. Only two of eight Democrats, Sens. Ron Wyden (OR) and Mazie Hirono (HI), as well as Independent Sen. Bernie Sanders (VT), voted against advancing the bill out of the committee. Of course, Independent Manchin, who, like Sanders, caucuses with the Democrats, voted in favor.
The bill was backed by supporters of both conventional and alternative energy sources. Manchin and Barrasso called the outcome “tremendous,” “unheard-of” and “encouraging” to reporters after the markup.
Last month’s newsletter quoted Quill Robinson of the Center for Strategic and International Affairs (CSIS) as writing that “the federal permitting process has proven to be a chokepoint, slowing the deployment of the clean energy infrastructure necessary to meet the United States’ climate goals.” Robinson added:
According to one study, 80 percent of the IRA’s 2030 emissions reduction potential could be lost if transmission expansion remains at the current rate of 1 percent per year. The need to streamline the permitting process has brought Democratic climate hawks on Capitol Hill into the permitting reform conversation.
“We just did this for a year and a half in the most bipartisan way it can possibly be done,” Manchin said of the fashioning of the bill. “And we did it in the most toxic atmosphere. I think it’s pretty surprising to a lot of people we can get this far.”
The bill streamlines judicial review of energy infrastructure projects with the aim of ending the years of delay caused by repeated lawsuits. It also enshrines a strategy of using a broad array of U.S. energy resources, strengthening leasing of both renewable and traditional resources on federal land and opening millions of acres to production.
The bill also improves FERC’s authority to permit interregional transmission projects in order to maintain the electric grid’s reliability, security and affordability, particularly as energy demand increases in the 21st century.
The bill may not be perfect, but it is an example of progress through bipartisan cooperation and the first step toward improving the permitting process. John Podesta, the White House climate advisor, endorsed a previous version of the Manchin bill, saying that President Joe Biden “frankly doesn’t love everything in the bill. But that’s the spirit of a compromise.” When Manchin first proposed the legislation in 2021, President Biden recognized it would “speed up what we know are needed infrastructure projects around this country.”
The comments of Rosner in Houston echo remarks by FERC Chair Willie Phillips, also a Democrat. FERC does not endorse legislation, but Phillips expressed what Politico called “cautious optimism” about the bill. He told reporters that he is hopeful the transmission policies within the new permitting package will be “a step in the right direction.”
The bill, however, is still awaiting a decision by Majority Leader Chuck Schumer (D-NY) on when – if at all – to bring the measure to vote of the full Senate in the waning days of the session. It would seem that there is overwhelming support at a time when the challenges to reliability and affordability are mounting.
It would be sadly ironic if the Senate delayed a vote on legislation that itself is designed to end delays.
Maryland Tries to ‘Supercharge the Data Center Industry,’ But the State Needs a Vast Expansion of Its Power Transmission Grid
The chief legislative officer to Maryland Gov. Wes Moore told a Frederick data center summit on Aug. 29 that Maryland’s clean energy agenda will require a vast expansion of the state’s power transmission grid.
The officer, Eric Luedtke, told the conference that “even in the absence of any new data centers in the state of Maryland, we would have to approximately double Maryland’s electrical grid to meet our clean energy goals.” He cited increased demand from electric vehicles (EVs) and appliances.
In May, Gov. Moore signed the Critical Infrastructure Streamlining Act of 2024, which aims to make Maryland competitive with Virginia as a home for data centers. The law makes it easier for data centers to install backup power generators and was passed quickly after the state’s Public Services Commission denied the request to install 168 backup generators as part of a proposed project by Texas-based Aligned Data Centers.
“This bill is going to supercharge the data center industry in our state so we can unleash more economic potential to create more good-paying union jobs,” Moore said during the bill signing.
The push for more data centers at the same time as meeting other clean energy goals means rising electricity prices from a combination of increased demand and constricted supply.
A Goldman Sachs study, released in May, projects that electricity use by data centers will rise 160% by 2030. The centers currently consume 1% to 2% of all U.S. power, but that proportion will increase to 3% to 4% in just the next six years.
“On average,” said the research, “a ChatGPT query needs nearly 10 times as much electricity to process as a Google search. In that difference lies a coming sea change in how the US, Europe, and the world at large will consume power — and how much that will cost.”
While Maryland is trying to encourage more data centers, legislators in other states – including Connecticut, South Carolina, and Virginia — are becoming more hesitant, worried about the strain that these “electricity hogs” are putting on the grid, according to a report by Maryland Matters.
In Maryland, policymakers are pushing to retire power plants that use less expensive fossil fuel sources for generation, and they are also opposing transmission projects. These are policies that inevitably will lead to higher energy prices for consumers and businesses. Currently, Maryland consumes 61.8 terrawatt hours (TWh) of electricity a year but only generates 37.8 TWh within the state.
In an opinion piece in the Baltimore Sun on Sept. 3, Todd Snitchler, CEO of the Electric Power Supply Association (EPSA), wrote that lawmakers themselves are to blame for the policy decisions that are leading to higher electricity costs. Snitchler points out that “the latest capacity auction for PJM, the electric grid that includes Maryland and the rest of the mid-Atlantic, resulted in wholesale prices more than nine times higher than in previous years. That could translate into rate hikes as high as 24% for households.” (We reported on the PJM auction in Newsletter No. 39.)
Snitchler, whose organization represents competitive suppliers of power, wrote that state legislators have blocked construction of new energy supply sources – including solar projects — because they didn’t comply with aggressive environmental policies. Instead, Maryland policymakers, including those at the federal level, are disingenuously blaming PJM, the grid operator for the region, for rising rates.
In his remarks in Frederick, Eric Luedtke seems to understand the real cause of the crisis. “The challenge and the key in Maryland right now is the distribution infrastructure,” he said. “That is going to remain a challenge that we are going to have to work through.”
Maryland, like many other states, is suffering as electricity demand rises, the grid is stretched to the breaking point, and politicians impose limitations on energy sources and the construction of new infrastructure.
Gov. Moore is clearly aware of the realities, and he and other policymakers need to focus on upgrading the grid. Net-zero emissions goals, extreme environmental policies, and growth of data centers are threatening reliability across the country. Gov. Moore, who may have ambitions beyond Maryland, could become a national leader in the adoption of sensible, balanced energy policies.
The Energy Dept. Says the U.S. Could Add Lots More Nuclear Capacity – But Makes the Mistake of Citing the Vogtle Plant in Georgia
On Sept. 9, the Department of Energy (DOE) released a report declaring that the U.S. could add 60 gigawatts (GW) of nuclear capacity – almost double the current level — by adding reactors to existing or recently retired power plants, including coal plants.
The report claimed that this “additional nuclear capacity could increase access to clean, firm, reliable, and resilient energy while putting our nation on a path to achieve the Biden-Harris Administration’s goal of a net-zero economy by 2050.”
Existing and retired sites could deliver the extra capacity by “utilizing large light-water reactor technology — such as the AP1000 reactors recently built at Vogtle in Georgia — or 95 GW of electric power using smaller 600-megawatt electric advanced reactors.”
Citing the Vogtle plant is hardly a good advertisement for the policy advocated in the report. After a seven-year delay, Plant Vogtle Unit 4 finally opened in April to a headline by the Associated Press that read, “A second new nuclear reactor is completed in Georgia. The carbon-free power comes at a high price.” The piece stated:
“Unit 3 began commercial operation last summer…. They’re the first two nuclear reactors built in the United States in decades.” The total cost: $35 billion. “Electric customers in Georgia already have paid billions for what may be the most expensive power plant ever. The reactors were originally projected to cost $14 billion and be completed by 2017.”
This newsletter has chronicled the Vogtle disaster since 2021. In Newsletter No. 3, we reported:
Vertically integrated monopoly utilities, often benefiting from a tight relationship with elected regulators, can not only force rate-paying consumers and businesses to shoulder the cost of the utilities’ own mistakes – but can also profit from those mistakes. Take the case of the expansion of the Vogtle nuclear plant by Georgia Power, whose parent is utility giant Southern Co.
We cited an Atlanta Journal Constitution article by Matt Kempner in July 2021 that pointed out that Vogtle cost overruns, which were then estimated at a mere $5 billion, “could represent a huge financial windfall” for Georgia Power. “That’s because the electric utility’s profit from the sprawling project is tied largely to how much it spends, not whether it stays within budget.”
Originally, wrote Kempner, the utility expected to earn $7.4 billion on the project. “But because costs have soared by billions of dollars, those profits could rise to $12.6 billion over the decades-long life of the two new reactors under construction,” according to testimony by state independent monitors and Public Service Commission staff.
Wrote Kempner:
The company’s customers are already paying a fee in monthly bills for a portion of Vogtle financing costs and company profits on the project. It’s estimated that [the] average residential Georgia Power customer will have paid over $850 in such fees before the project is completed. Then their bills are expected to rise higher to cover all “prudent” and “reasonable” construction costs and company profits that rise with those costs.
The AP reported that, “like other utilities,” the company now “plans to build more fossil fuel generation in coming years, saying demand is rising sharply.”
No wonder. Despite earlier expectations, “Vogtle’s electricity will never be cheaper than other sources the owners could have chosen, even after the federal government reduced borrowing costs by guaranteeing repayment of $12 billion in loans,” said the AP.
As is the typical case with monopoly utilities, customers are the losers when management makes mistakes. Georgia regulators in December approved an additional 6% rate increase “to pay for $7.56 billion in remaining costs at Vogtle, with the company absorbing $2.6 billion in costs. That’s expected to cost the typical residential customer an additional $8.97 a month in May, on top of the $5.42 increase that took effect when Unit 3 began operating,” the AP reported.
The DOE report makes the reasonable point that “locating new NPPs [nuclear power plants] or technologies at a current NPP site is advantageous because communities surrounding these plants already support nuclear energy, know the safety culture, and are aware of continuous strict environmental monitoring of areas surrounding the plants.”
Regulator Signs Agreement of Cooperation With Electrical Manufacturer Group to Improve the Reliability and Security of the Grid
As the bulk power system in America works to provide electricity faced with the challenges of rising demand and constraints to supply, two key organizations have signed a memorandum of understanding (MOU), pledging to coordinate to improve the reliability, resilience and security of the electric grid.
The organizations that signed the MOU on Aug. 28 are the North American Electric Reliability Corporation (NERC), the not-for-profit regulatory authority whose goal is to “assure the effective and efficient reduction of risks to the reliability and security of the grid,” and the National Electrical Manufacturers Association (NEMA), a 98-year-old trade association.
“We look forward to enhancing our coordination with electrical manufacturers through our partnership with NEMA,” said Jim Robb, NERC’s CEO. “As the grid transforms, new and different demands are being placed on the equipment that supports grid operations. This MOU provides a framework for early collaboration that will prove to be essential for bulk power system reliability.”
Said Debra Phillips, NEMA’s CEO: “I am thrilled to partner with NERC on this important collaboration that represents the electrical industry’s growing focus on grid reliability and resiliency. As we scale production and capacity to meet Americans’ increasing demand for energy, electrical manufacturers need consistency and predictability to deliver key technologies and products that will modernize grid infrastructure and accelerate the energy transition.”
The MOU is a recognition by NERC that the grid is under serious strain:
- Last December, the organization’s Long-Term Reliability Assessment “found that most areas face power generation resource adequacy challenges, with many regions projected to have reserve shortages or emerging energy risks, and the incremental mix of resources increases fuel supply concerns as the reliance on just-in-time delivery of natural gas to fuel power generation grows,” according to an S&P Global summary.
- In January, NERC released a white paper warning that there are “significant gaps in both the electric utility and EV charging community’s technical understanding, planning, and modeling of EV charging characteristics…. Cross-sector collaboration is essential.”
- In May, NERC’s Summer Reliability Assessment warned of elevated grid risks, sparked by high temperatures, in many states, from New England to Texas to California (see below).
In meeting the goals of the MOU, the two organizations will be placing emphasis on natural gas. On Sept. 6, NERC issued a statement affirming that “natural gas is essential to the reliability of the grid during the electricity industry’s unprecedented transformation” and calling for efforts “to meet the gas/electric challenge with the sense of urgency that it deserves.”
Currently, according to the Energy Information Administration, 43% of the energy that generates electricity in the U.S. comes from natural gas, compared with 16% from coal, 10% from wind, and 4% from solar.
NEMA has stated that closing existing power plants too soon and relying too much on geothermal or hydroelectric power will burden customers with higher energy costs. “In general, existing fossil plants have years of useful life left, so closing them involves economic loss to the current owners and potentially increased costs for customers,” said a NEMA brief on baseload generation.
Keeping a balance among energy sources and capabilities is an important principle of the MOU. The industry and regulators have a difficult job keeping costs low and reliability high with the grid under pressure.
Big Investment Firms Reduce Their Support for Environmentally Oriented Shareholder Proposals
Large institutional investors – even those with widely publicized affinity for environmental and social policies, like BlackRock – have been reducing their support for shareholder proposals on these issues in recent years.
Bloomberg reported on Sept. 19, “The three biggest US money managers slashed their support of environmental and social shareholder proposals, marking a stark turnaround from 2021, when they voted in favor of a record number of such resolutions.” The article by Saijel Kishan added:
State Street Corp.’s investing unit said . . . that it supported 6% of environmental shareholder proposals in the first half of the year and 7% of social ones, less than what it did in the same year-ago period. Vanguard Group said last month that it didn’t back any of those resolutions, while BlackRock Inc. said it voted for 4% of the proposals in the 12 months ending June, down from 7% a year earlier.
As recently as 2021, BlackRock and State Street were each voting for about 40% of environmental and social proposals and Vanguard, 30%.
The Big Three aren’t the only firms that are retreating. “Total shareholder support for environmental and social resolutions fell to about 19% during the latest proxy season from roughly 22% in the year-earlier period, according to Morningstar,” wrote Kishan.
This trend follows financial firms’ departures from the group Climate Action 100+ (CA100+), as we reported in Newsletter No. 33. On Feb. 15, JP Morgan Asset Management and State Street Global Advisors announced they were leaving CA100+, too.
The organization “is an investor-led initiative to ensure the world’s largest corporate greenhouse gas emitters take necessary action on climate change in order to mitigate financial risk and to maximize the long-term value of assets,” according to its website. It advocates “curbing the carbon footprint of the world’s largest corporate greenhouse gas emitters and focuses on engaging companies to improve their climate change governance, slash emissions and strengthen climate-related financial disclosures to create long-term shareholder value.”
The decisions by the firms, said Reuters, “remove nearly $14 trillion of total assets from efforts to coordinate Wall Street action on tackling climate change.” The actions came after CA100+ “asked signatories to take stronger action over laggards.”
Invesco and Pacific Investment Management Company (PIMCO) also left, and in August Goldman Sachs became the latest to exit. Companies cited CA100+’s “Phase 2 requirements,” which, said ESG Dive, “asked signatories to enhance their corporate disclosure and implement climate transition plans — an add-on to its original push for companies to make climate-related disclosures.”
The exit by Goldman Sachs came “just a few days after the House Judiciary Committee sent letters to over 130 U.S.-based companies, retirement systems and government pension funds that are members of CA100+, inquiring about their involvement in the group.
Institutional investors own 80% of the value of the assets on the New York Stock Exchange, so their votes on proxy questions – which can sometimes involve ESG matters – carry enormous weight.
While these heavyweights are backing away from environmental shareholder proposals, proxy advisors ISS and Glass Lewis continue to press for approval. The House Financial Services Committee on Sept. 10 held a hearing titled, “The Fall of ESG: Scrutinizing the Failed Use of Environmental, Social, & Governance Standards and the Influence of Proxy Advisors.”
One reason that environmental proposals may be falling out of favor is the huge capital needs of data centers with the rise of Artificial Intelligence. The Washington Post reported on Sept. 20:
Pennsylvania’s dormant Three Mile Island nuclear plant would be brought back to life to feed the voracious energy needs of Microsoft under an unprecedented deal announced Friday in which the tech giant would buy 100 percent of its power for 20 years.
The decline in support for environmental and social shareholder proposals is a natural outgrowth of the reevaluation of energy needs as data centers are built, manufacturing jobs return to the U.S., and electric vehicle sales rise. Government and the private sector are thinking about energy pragmatically rather than ideologically.
California Assembly Unanimously Passes a Bill to Modernize the Electric Grid to Keep Up With Renewable Energy Deployment
Bipartisanship was also evident in California when, on Aug. 29, the state’s Assembly passed SB 1006 by a vote of 58-0. The legislation, introduced by State Sen. Steve Padilla in February, aims to increase the efficiency of the electric grid, speeding the deployment of energy resources to a state that is facing major challenges from increased demand and limits on supply.
If passed, the bill “will require utilities to study the feasibility of grid-enhancing technologies (GETs) and advanced conductors and then file a report with the California Independent System Operator (CAISO),” wrote Kelsey Misbrener in Solar Power World. As Environment California put it, the new law will be “charting a quicker transition to 100% clean energy by upgrading our electric grid.”
We reported previously that “GETs can handle more power flow than traditional cables” through such means “as dynamic ratings and power-flow control devices.” U.S. Energy Secretary Jennifer Granholm calls GETs the lowest-hanging fruit for adding capacity to the grid at the least cost. “So there’s no reason not to love grid-enhancing technologies,” she said May 28 at a White House summit on grid modernization.
Misbrener reported, “GETs are easily-installed hardware and software tools that can double the amount of renewable energy that can be integrated into the grid from existing power lines. Advanced conductors replace older, inefficient power lines with lines made of improved conductive material that increase their capacity, efficiency and strength.”
The California bill follows a memorandum of understanding (MOU) signed by 10 Northeastern states pledging to establish a framework for developing a “robust interregional transmission infrastructure.” As a key part of the MOU, the states agreed to examine using grid-enhancing technologies.
“California is in a race against time to meet the energy demands of the future. As we set important climate goals, it is vital we have the infrastructure in place to support them,” said State Sen. Padilla in a statement when he introduced the bill. He recognized that “California has enacted some of the world’s most aggressive climate goals.”
Those goals require the electric grid to be emissions-free by 2045. The difficulty of meeting that goal without major infrastructure changes has forced the legislature to face up to the realities of a severely strained grid.
In a 2022 article, Politico quoted Gov. Gavin Newsom as saying that a heat wave “went right up to the edge of breaking our grid, but it didn’t…. This transition worked.” But, reported Camille von Kaenel, “The reality…is a lot messier.”
She wrote, “California’s recent decisions to postpone the closure of its last nuclear plant and to extend the life of some natural gas-fired facilities highlight what officials and experts say is the fact that the state with the most ambitious energy goals is far from achieving them.” The Politico report added:
Growing demand for electricity and the fickle nature, for now, of greener technologies such as wind and solar are making it hard to progress toward the state-mandated goal of a grid that’s 100 percent emissions-free by 2045. Renewables provided 36 percent of the state’s power supply on average so far this year.
At Newsom’s urging, the state legislature voted to extend the life of the Diablo Canyon nuclear plant until 2030 and to continue to buy power from fossil fuel plants.
Hot weather, combined with increased needs for electricity to power electric vehicles and data centers, is straining the grid. CASIO issued a “heat bulletin” in July, stating “that the sustained heat raises the risk that power plants — natural gas-fired ones in particular — will fail due to the strain on their operations,” reported E&E News.
CAISO’s chief operating officer, Mark Rothleder estimated that the state has to add 7,000 megawatts of renewable energy to the grid every year for a decade in order to meet the zero-emissions goal.
In 2023, the state added “5,660 megawatts of new power onto the grid” and in the first six to eight months of 2024, “a little more than 1,100 additional megawatts are scheduled to go into commercial operation,” reported the Los Angeles Times in January in an article that carried the headline, “How hard is it to develop California’s electric grid of the future? Like repairing a car while driving.”
The passage of the GETs bill, SB 1006, is a positive move toward allowing California’s current grid to accommodate more electricity, but ending the state’s energy crisis will require more. An efficient and secure transition requires an understanding of the continuing role of lower-cost energy sources. Lofty goals have to face reality.