The Environmental Protection Agency's new proposed rules to significantly crack down on carbon emissions from fossil fuel-fired power plants, as published, promises to aggravate growing power grid reliability concerns, EPSA president and CEO Todd Snitchler suggests. "I think we need to be thinking a little more holistically and not siloed in the rules in order for us to make sure that we can achieve the outcomes that policymakers want us to achieve, while still ensuring system reliability. That has to be first and foremost," Snitchler says.
More broadly on grid-reliability concerns, Snitchler rejects assertions by some that competitive markets and RTOs are particularly vulnerable to outages and reliability issues. "I know that there are a number of views about what the right model is," he says, but he notes there are increasing reliability concerns in monopoly-regulated states as well as the clean-energy transition ratchets up. "I don't think there's a one-size-fits-all and we should just copy a different market because it allows vertically integrated utilities to carry the day because, even in that example, they're not able to get done, I think, some of the things that maybe some advocates would say that they can."
While there's little expectation the industry concerns will benefit anytime soon from a historically fractured Congress, Snitchler suggests lawmakers missed a key opportunity for bipartisan agreement during a recent debate over whether to include energy project permitting reforms in the Inflation Reduction Act.
"There was a time when energy wasn't quite so partisan. I think we would do well to try to think about constituents first," the former Ohio lawmaker and utility regulator says. "If you need to have transmission, and we all agree that we're going to need to have natural gas pipelines in order to power the system, those should go together. And that's where I think room for compromise would exist. That would be a best-case scenario in Washington because both sides would have something to gain. And they would be able to take that home and say, look, I won. And it would, in the end, result in a more reliable, more efficient power system."
The Environmental Protection Agency's new proposed rules to significantly crack down on carbon emissions from fossil fuel-fired power plants, as published, promises to aggravate growing power grid reliability concerns, EPSA president and CEO Todd Snitchler suggests. "I think we need to be thinking a little more holistically and not siloed in the rules in order for us to make sure that we can achieve the outcomes that policymakers want us to achieve, while still ensuring system reliability. That has to be first and foremost," Snitchler says.
More broadly on grid-reliability concerns, Snitchler rejects assertions by some that competitive markets and RTOs are particularly vulnerable to outages and reliability issues. "I know that there are a number of views about what the right model is," he says, but he notes there are increasing reliability concerns in monopoly-regulated states as well as the clean-energy transition ratchets up. "I don't think there's a one-size-fits-all and we should just copy a different market because it allows vertically integrated utilities to carry the day because, even in that example, they're not able to get done, I think, some of the things that maybe some advocates would say that they can."
While there's little expectation the industry concerns will benefit anytime soon from a historically fractured Congress, Snitchler suggests lawmakers missed a key opportunity for bipartisan agreement during a recent debate over whether to include energy project permitting reforms in the Inflation Reduction Act.
"There was a time when energy wasn't quite so partisan. I think we would do well to try to think about constituents first," the former Ohio lawmaker and utility regulator says. "If you need to have transmission, and we all agree that we're going to need to have natural gas pipelines in order to power the system, those should go together. And that's where I think room for compromise would exist. That would be a best-case scenario in Washington because both sides would have something to gain. And they would be able to take that home and say, look, I won. And it would, in the end, result in a more reliable, more efficient power system."
EMP S3E17: Todd Snitchler, president and CEO, the Electric Power Supply Association
(transcript lightly edited for clarity)
EMP: Welcome to the Energy Markets Podcast. I'm Bryan Lee, and our guest today is Todd Snitchler, president and CEO of the Electric Power Supply Association. EPSA is a trade group representing merchant power producers. Todd, welcome back to the podcast.
TS: Thanks, Bryan. Glad to be back.
EMP: Well, I expect we'll talk a lot about the Federal Energy Regulatory Commission today, as we normally do on this podcast, but first, I'd like us to discuss EPA’s new proposed rule establishing carbon pollution standards for fossil fuel-fired power plants. It's generated a lot of controversy within the industry and it has generated opposition pretty much throughout the industry, whether it's you folks in the independent power providers universe, whether it's EEI, APPA, NRECA – I think the only ones who don't have a concern about this are the ones who don't have carbon emissions. Why don't we get into this? The Clean Air Act has six criteria pollutants: ozone, sulfur dioxide, nitrogen dioxide, carbon dioxide, particulates and lead. Carbon pollution, per se, is not one of them. Is the regulatory hook carbon dioxide? How are they going to avoid the legal pitfalls going down the road here?
TS: Yeah, I'm probably not best positioned to give you the legal minutiae around where the hooks may be and where the issues are. As you'll note the comments that we filed in response to the proposed rule really didn't tackle the legal vagaries. We didn't go where some other associations and organizations did with regard to major questions doctrine and what have you. Our focus was really on a couple of things, primarily reliability, and the importance of ensuring reliability as well as the viability and the commercial readiness of the technologies that are being relied upon in order to achieve the objectives. So our members are invested in supporting all kinds of technologies that are lower-emitting, that are trying to drive for cleaner outcomes and lower-emitting outcomes in the future, including hydrogen-ready facilities, including demonstration projects on carbon capture and sequestration. The challenge is, are we going to be able to achieve the outcome that's proposed by the rule in the timeline that's afforded? And given that there is possibly one current actively working carbon capture project in the United States, it seems that expecting the fleet – and not a coal fleet but a gas fleet, which has not been tested and utilized in carbon capture – to be able to achieve that outcome in the basically a decade – and not also countenancing all the other infrastructure that will be needed, like carbon pipelines to move the carbon from where it's captured to where it may ultimately be stored. What are the requirements with regard to legal liability? Is there the workforce in order to be able to construct the infrastructure that will be needed to install the technology that presumably is available and functional and then can ultimately be retrofitted on what I think the count I heard was around a thousand gas plants around the country that would be required to have it. There are a lot of real technical challenges that could present timeline concerns, as well as cost concerns that are not adequately addressed by the proposed rule, and there are also not sufficient reliability offramps that are included there. Like what if there is a technological problem where you can't get things sited and there's no offramp that allows you to be able to say, well, we would be able to do this, but we can't build any pipelines or we can't get them cited and approved? And if you force the units that would use capture technology, and but can't, to have to go offline, well, then how are we going to power the system? So I think there's a number of issues that are at play here. And I think one of the other issues that's not been contemplated – and some have mentioned this – is what is the effect of multiple rules from EPA going to have on industry. So we've got the tailpipe emissions rule which is looking to drive greater EV penetration which would drive an increase in demand. And then you have the 111 rule, which would suggest that we're going to take units offline and not have as much resource available, which – I'm not an economist, I'm a lawyer – but if your supply and demand curves move in the wrong directions, you end up with a shortfall and in the electricity world that's a reliability problem. And nobody wants that to be the case. And so I think we need to be thinking a little more holistically and not siloed in the rules in order for us to make sure that we can achieve the outcomes that policymakers want us to achieve, while still ensuring system reliability. That has to be first and foremost, because I know there are a few outliers that say they're comfortable with their power being interrupted. But the vast majority of Americans – 95% or 96% – say that reliability is their number one concern.
EMP: Well I expect we're going to talk a lot about reliability today. But do you suppose that these standards were designed specifically to shut down power plants? The Biden administration wants us to have a rollover in power plants by, what was it 2035?
TS: Right.
EMP: And this seems to be designed to carry out that Biden administration objective.
TS: It's always hard to try to project what other people are thinking. So we try to take a look at what the rule actually says and what the outcomes for that proposed rule would be. It's our concern, and it is our estimation, that certainly this would have a significant impact on the existing coal fleet. I mean, there are those plants that could run without making modifications for I think, seven years or so. And then they would have to go offline completely. And then you have others that would be in the position of having to make decisions about very expensive retrofits or go offline by a future date certain on the coal side. And then on the gas side, you end up with plants that are going to have to look at different performance characteristics, both size and their capacity, the amount of time that they actually run. And I think you're putting us in a position where the units that some say are the highest emitters are the ones least subject to the rule – the peaking units – as opposed to the plants that are the combined-cycle, higher-efficiency units that are the ones that would be subject to this 300 megawatt and less than 50% capacity factor before you have to make some of your significant investment decisions. It's turned the desired outcome on its head. So it does cause us some consternation about, if you are crafting a rule to try to attack emissions and ensure reliability, there's a better way to go about it. And I don't think that the – especially the gas piece of this rule, proposed rule is in as good a place as it could have been.
EMP: Let's talk about the politics of it because the minutiae of this rulemaking are mind numbing, but, um . . .
TS: I agree.
EMP: As we discussed, pretty much anybody who's got a fossil fuel-fired power plant is not happy with this. And on Capitol Hill, it's lined up pretty much as you would expect. Senator Tom Carper of Delaware has led a letter signed by 29 other lawmakers urging EPA to swiftly follow through on the rule. And then you got Sherry Moore Capito and Joe Manchin of West Virginia who are ginning up the opposition. What about the other groups that are going to be lobbying Congress around this and intervening in the lawsuit? Are there outliers that we hadn't really expected involved in this?
TS: I don't know if I’d call them outliers, but I think some of the other groups that have weighed in, certainly the environmental community, has made it clear that many of them don't think that the rule goes nearly far enough and would like to see EPA turn the screws even quicker to reduce emissions because of the potential for the environmental catastrophe that they view emissions as creating. And then I think you've also got a number of the business organizations, the Chamber, NAM (National Association of Manufacturers) and others that are saying this proposed rule has reliability effects, it has cost impacts, many of which are unaccounted for by EPA, and that they want EPA to have to take a harder look at some of those potential outcomes. So you've kind of got those of us here in the middle that own the assets and are responsible for generating power and ensuring that people's lights stay on – and as you note, we're not alone in that. You've got EEI, NRECA, APPA, all the generator communities across all four business models, who are the ones who would have to implement this and customers that have to pay for it. Businesses that are obligated to buy power in order to operate and then the environmental community that has a varying range of how strongly they feel about how quickly some of these rules should be implemented and at what level. You know, there's at least one proposal that I've heard about but I haven't seen that suggests the 300 megawatt and 49% capacity factor actually should be 150 megawatts. So it would come down to a single turbine or less. So it would really encompass even more plants. Because as I testified in the House subcommittee, along with a number of other folks, and that was one of the issues that was brought up is, you know, is this rule broad enough to capture some of the other units that people would like to see? And folks on one side of the aisle seemed to suggest that we needed to have a broader application to really tackle more emissions. And, in a surprise to no one, folks on the other side of the aisle thought that, as it was introduced, it was too restrictive and was going to create reliability problems and cost implications. And in their view, not necessarily those of EPSA or our members, was that it ran afoul of the West Virginia versus EPA decision. So there's a broad range of opinion and it's really not only left or right or one side or the other. I think there's probably three or four views that are all coming together to create a real mess is the technical term, I think, with regard to the status of the rule.
EMP: Well, I don't think we have to define that technical term.
TS: Thank goodness.
EMP: So what about the large buyers? Where do they fall on us?
TS: Yeah, I think it varies. You've got the Clean Energy Buyers Association, which I think is very heavily leaning towards zero-emission resources. I think that's ultimately where they would like to see the generation stack go. And then you have other folks who are, you know, kind of what the traditional industrial customers always were, which is I want the lowest price possible. And they have commitments, of course, to emissions reductions. But in the end, if they're going to keep business and manufacturing onshore in the United States, they need to make sure that they have affordable power. And their concern is that if this creates more expensive power, what's that going to do to the price of goods? Are they going to find themselves in a situation where they can't compete globally? etc. So I think you have a new kind of separation. I wouldn't say that it's new, but it's perhaps more pronounced now, between some of the higher tech, large energy buyers – data centers consume a ton of electricity, and they have a different mindset than perhaps your traditional manufacturing base. You know, if you're an auto manufacturer, or a steel plant, what have you, the big energy users of, you know, the last 50 years. So I think you've got some separation amongst them that are also creating some competing interests as well.
EMP: Yeah, that's an interesting dynamic. When you come down to the bottom line here, it does seem as though EPA has, you know, in my opinion has drafted this without a large-scope vision, particularly of the reliability impacts. Even before EPA proposed this rule, there has been growing concerns about the rate at which existing fossil fuel units are being retired versus the rate at which we're bringing in newer, cleaner resources. You know, we had a discussion with Commissioner Mark Christie who feels very strongly about this issue. And again, we talked with you last season – and that was over a year and a half ago – that was a concern. So where does this fit into the whole mix? Was there any consultation with FERC on this rule?
TS: Yeah, that's a question better posed to EPA, I don't know if they interacted with FERC on this. Certainly, I saw that FERC has announced that they're going to do a technical conference where they're going to discuss some of the implications of the rule. And I think that is particularly relevant. You know, to your original point in your question, you know, we have been raising this issue for some time. Again, back to the testimony that I provided to the congressional subcommittee, you know, one of the comments offered by a critic was that, you know, industry always says that there's a reliability concern. They always somehow managed to achieve it. So it's a bit of a red herring. And our response to that would be, look, it's not just the generators that are raising the concern. It is NERC, who is the national reliability organization, it's the New York ISO, which just issued a report that said that New York City could be almost 500 megawatts short of power in the near future. PJM issued their four Rs report. You listened to all the presenters from MISO and SPP when they attend various conferences and events, including the NARUC events, and most recently at an EPRI event, where they are saying we have resources exiting the system too quickly and we are not replacing them with any resources or sufficient resources, in many cases, to ensure the reliability of the system. And I think it's a more challenging problem than maybe, at first blush, it would appear because you don't replace one megawatt of natural gas or coal or nuclear with one megawatt of wind or solar or battery storage. They operate differently. And so an analysis has been done that shows you really need something closer to 9-1 to 10-1. So if you retire 1000 megawatt fossil plant, whether it's coal or natural gas, you need something between nine and 10,000 megawatts of wind or solar or battery storage, or any combination of them, in order to replace them and have roughly equivalent performance characteristics. That creates a timing issue. It creates an expense issue, it creates a land use issue. Can you be interconnected? I mean, all sorts of systemic issues devolve from having to make that change. It's not saying we shouldn't it's saying that when you do you have to consider the whole system implications and the timelines involved in order for us to ensure reliability while we're getting from here to there. So there's, as I said before, there's a couple of ways to get there from here. There's the way you can do it fast and you can jeopardize reliability. Or you can do it the smart way and ensure reliability while driving down your emissions over time. And I think the power sector has demonstrated more than any other sector that we have been able to do that. If you look at power system emissions, I think they are the lowest they have been. They've dropped from 50-plus percent down into the 35%-36% range of all emissions in the country. And that's been as a result of a change in the fuel mix. That's been a result of investment by our members and others in lower-emitting technologies, which is all pushing us in the right direction. So I think we shouldn't lose sight of the progress that we've made and have people say that, well, industry is not doing anything in response. I think that's, in fact, that's exactly the opposite of what has happened.
EMP: Let's take a more FERC-centric view of this issue. So we've got – in PJM it just seems like the whole capacity market has been in limbo for well over a year if not more. You've also got the issue in MISO and now, you know, in ERCOT, they've come up with this weird semi-capacity market proposal. Let's break that down. So you've got this bottom up approach within the RTOs. What is FERC doing top down on this?
TS: Well, I think you've got an interesting dynamic at FERC with a chairman who is wholly committed to reliability. I don't think he's alone. I think all the commissioners have that on their radar, but Chairman Phillips has made it very clear that he views reliability as issue number one. I think we have seen, and we have tried to make the point to FERC and to others, that a number of decisions historically that have come out of FERC under a prior chairman have resulted in challenges to generators in the marketplace that have caused, you know, investment decisions to be adjusted that have resulted in the need for market reform initiatives to be undertaken in virtually every market. I know PJM is in the middle of one – well they’re in the tail end now of their critical-issue, fast-track process in order to look at market reforms in PJM as a result of the MOPR and their interconnection queue and then most recently, Winter Storm Elliott I think was the final impetus to push them into the fast track process to move forward on reforms. But I assume New England is doing the same. And then again, I point to the Midwestern ISOs and RTOs and SPP and MISO that have a similar set of issues and are trying to figure out how to address them to ensure that reliability is maintained. And I think it's important to note that, you know, we are more predominantly represented in the competitive RTOs like PJM and New England and New York and California and Texas. But even the vertically integrated RTOs like MISO and SPP are having a similar set of issues. So vertically integrated utilities who do an integrated resource plan, or an IRP, in theory ought to be able to replace resources with new resources that are lower emitting and get the approval in order to put them into the queue and then have them be constructed in a timely basis. They earn their money based on the amount of investment that they make there, it’s a different model than we have, and even in those vertically integrated portions of the country, we're running into a same set of issues around reliability and resource adequacy. So that suggests to me it's not just a restructured markets problem, but it is a broader issue that is impacting virtually all of the country. And that's where FERC, I think, has a role in making sure that we are addressing it in a more fulsome way, and not a series of one-off decisions, which I think some basic principles which certainly the chairman, I think, has made his views very clear. I think Commissioner Christie and Commissioner Danly have been very clear as Commissioner Clements presumably will have a fifth Commissioner before too long. And I anticipate that he or she will have a similar focus on reliability. But there needs to be less of a gap between talking about reliability and the outcome of decisions that have an impact on reliability. I think we need to marry those two a little more closely together. And I think the chairman is also focused on gas-electric harmonization, which has been a very significant issue since Winter Storm Elliott. The NAESB process has been underway now and just the voting wrapped up last month, I think. So it's been a seven-month process where they have been trying to address some of these issues around reliability and FERC and NERC have a very central role to that. And so I think that's where you're going to see resource adequacy addressed, not just in restructured markets, but in the broader context because of the importance in virtually all sections of the country.
EMP: Well, thanks for mentioning our friends at ISO-New England. I didn't mean to leave them out. They've been up in the weeds on this as well. So, in talking with Commissioner Christie, he doesn't like capacity markets. He’d like to see them to go away. So can we do that? Can we have a market without capacity markets? We did in Texas and ERCOT seems to be doing pretty well this summer, despite the extreme stress they've been operating under for months now.
TS: It's our view that the three-part market – energy, capacity and ancillary services – has been a very effective bedrock in order to ensure that the markets operate well. In fact, a number of studies have been done by outside third parties that substantiate the fact that capacity markets are a functional and important part of a well-functioning restructured market. And we think that they do have a place and they do serve a place. At the PJM capacity forum where all the commissioners were represented, you know, Commissioner Christie raised some of his concerns and to a person across a very broad spectrum of analysts, everyone said that they thought that the capacity market served a useful purpose and was an important part of the market as it was functioning, and so none wanted to see it go away. Now, Commissioner Christie and Commissioner Danly, in particular, have raised issues about are the markets operating in a way that's just and reasonable? And that's what I think some of these market reform efforts are intended to address. Some of those concerns, and certainly we have made clear that we have some concerns around those issues. That's why we have, of course, appeals at FERC. And then we are at least two matters that are pending in federal court in an effort to try and make sure that markets are just and reasonable and that they deliver sufficient revenue to generators in order to ensure reliability, and so that consumers are still getting the best, most-reliable power at the most affordable cost. And so we're in the process of trying to work through some challenges because I think the system, as you know, has been undergoing change and continues to undergo some pretty profound changes as you look at resource mix, as you look at ownership, as you look at what state policies are and how state and federal interplay has really changed over the last 20 years. When I was a commissioner (Ohio Public Utility Commission, 2011 to 2014)) many moons ago, you know, the whole objective was I want least-cost power and that was all that mattered. And RTOs were phenomenal at delivering least-cost power. Consumers benefit tremendously from that. Some states have changed what it is they're asking the market to deliver. And that change has resulted in some bumps along the way. But it's a feature, not a bug, that RTOs are transparent. It looks messy from the outside to be sure. And it is not always a straight line from here to a resolution. But I think that transparency in that process ensures that there are fulsome discussions around what the issues are, as well as what the proposed solutions could be. It means that, you know, there's very little of the, well, we'll just go ahead and do this because we think this is the appropriate approach. It has to go through that entire process. So we are as frustrated as a lot of other stakeholders are because of that nature of the stakeholder process, but it actually is arriving at better outcomes generally than you would just with some unilateral decision being made. It's a little like, you know, Congress: it's complicated and it's difficult to pass a bill for a reason. The founders didn't want it to be too easy to make significant changes. And so I think, in an odd sort of way, the stakeholder process in restructured markets is designed to achieve a similar outcome. A consensus-building exercise might take a little time and be a little messy, but it generally leads to better outcomes.
EMP: We've got movement in the West in terms of at least a real-time market being in place across the footprint, which is a huge, huge change from where they were 20 years ago – or even just 10 years ago. So they're not going to have a day-ahead market. They're not going to have a capacity market. Maybe they'll get there over time, but do we need the day-ahead market? Do we need the capacity market? Are they going to show us that we can get by with this disaggregated approach? We don't need necessarily the RTO and all these complicated markets?
TS: Yeah, that's, I think a to-be-determined outcome. There's a number of avenues that I think are being considered that are driven by a California-centric approach or an SPP-centric approach, or a we'll-go-with-our-own approach. And I'm not sure which one is going to be the ultimate winner in that discussion. What I am encouraged by is that this is an organic bottom-up, not a top-down. The states are determining that this is a wise approach that they want to take. They want to understand what the implications are and they want to get it as right as possible. But anything that moves us towards a more competitive, organized market that allows for consumers to benefit, for generators to compete in order for an opportunity to provide supply, certainly from the EPSA perspective is a positive development. And we are not as engaged in the West as we are in some of the Eastern markets but certainly some of our affiliates, our state and regional partners, you know, Scott Miller at the Western Power Trading Forum, among others are deeply engaged in that process and we are encouraged to see that that is on the docket for discussion, because I do think at this stage, it seems clear that some market-based outcome is in their future. We're interested to see exactly what it looks like when they finally arrive at that destination.
EMP: One of the things Commissioner Christie and I talked about was the fact that these markets were pretty much fleshed out the way they are maybe some 20 years ago. It's time to revisit the market design. Do you think we have the market design that works right now – this three-part market design that you talked about? Or do you think there's room for change?
TS: I think the three-part market as a broad construct works. Now, I also think and there has been over the last 20 years they have not been static markets. There have been revisions and changes that have been made throughout the market process. So to suggest that we, you know, have had one market and now we need to, you know, fundamentally alter it because there hasn't been change in 20 years doesn't quite capture it well. I know that there are a number of views about what the right model is. But there was an awful lot of discussion around SPP being the preferred model that maybe we ought to be looking at as a way for us to remedy some of the infirmities of the Eastern markets. But if you have listened to SPP talk, they are a, as I was mentioning before, they're a vertically integrated series of states where the utilities are all vertically integrated with an integrated resource plan, and they are struggling to ensure resource adequacy, that their model isn't the be-all-and-end-all that can solve all the issues as well. In fact, I just heard one of their senior executives mentioned again that they are very concerned about reliability going forward as they go through the resource transformation. So they've got a substantial amount of wind, but they also have a significant amount of fossil resources that are left and they are afraid of having resources retired too quickly because even they in vertically integrated states with integrated resource plans are unable to ensure that resources can come on the system at an adequate pace to replace those resources. So if that's really what we're concerned about, and that's what we're trying to achieve, I think SPP would tell you that, you know, we've got real concerns as well about ensuring resource adequacy. So I don't think there's a one-size-fits-all and we should just copy a different market because it allows vertically integrated utilities to carry the day because, even in that example, they're not able to get done, I think, some of the things that maybe some advocates would say that they can.
EMP: I want to pick up on that, but the question I was leading up to is, couldn't we have a market design where you have one market for baseload, one market for mid-merit and another market for peaking and the prices are derived for each of those three buckets independent of one another.
TS: I think that probably has some real issues, not least of which is, how do I know what I want to quantify as my baseload versus my mid-merit versus peaking? How much supply do I actually need for that? How am I going to procure it on a going-forward basis? Does it not create some pricing challenges where if I'm unit X, and I'm only going to be able to operate as a baseload plant, and I'm going to get less revenue, do I then change my operating parameters to operate as a mid-merit because I might make more revenue? If I'm a peaking plant, and I have every incentive to hang around to get paid for those five days a year but I'm not more efficient and not as lower emitting as I could be, are we incentivizing the wrong kinds of behavior? So I think what we have with the existing free-market structure actually helps us to ensure that the right incentives are in place. Because in the event that you are lower cost lower, certainly at the moment, lower-emitting you’re the resources that are winning when it comes to being able to be procured and then run as part of the energy supply. And so I don't know that trying to – I'm not smart enough, I'll say it that way. I know I'm not smart enough to know, what's the right amount of baseload? What's the right amount of mid-merit? And how do I get my peakers and then be able to figure it out? Are there folks who are thinking about that? There probably are. But I think the existing model functions and there are tweaks that can be made to the existing model. That's what these market reform processes are intended to highlight and bring forward are ways for us to improve its operation given the changing environment that we're in.
EMP: Getting back to the broader reliability issue.
TS: Yeah.
EMP: You mentioned Winter Storm Elliott. That primarily affected an area with the traditional monopoly-regulated price model. And we had the infamous Winter Storm Uri in Texas, which was in the market model. Is there one or the other that's better in terms of reliability? Because, obviously, Commissioner Christie pointed to Winter Storm Uri as a failure of the market design. We had a little bit of a discussion about that. But on the other hand, Winter Storm Elliott he didn't see as an indictment of the monopoly-regulated model. Where should we be going here? I mean, should we be falling back on this century-old monopoly regulatory model as some seem to suggest – integrated resource planning where we're trying to guess what we're going to need? Or do we need to double down on the market?
TS: I think that we very much support that the market solution can help deliver the results that people say that they want at lower cost. I don't view it as an opportunity to poke the eye of vertically integrated utilities or others who had challenges during Winter Storm Elliott where despite some of the challenges that PJM had the light stayed on. There were no outages. When you talk about outages and winter conditions, you're talking about people's lives and property. And we don't make light of that. I mean, no one is cheering for there to be an outage anywhere. But I do think that the two separate incidents expose the fact that this is a challenge in all types of markets. So simply suggesting that well, if we just abandon this restructured thing because it doesn't work. And, you know, look at Texas. I mean, that was clearly the case. When in Uri, you had large parts of the country that are vertically integrated and had a problem and were taking power that was being wheeled from restructured markets suggest that this is more of a systemic issue. And I would view it not as an opportunity to try to make my argument that markets should win and vertically integrated should lose. It should be how do we best address some of the issues that were identified like gas-electric harmonization, like resource adequacy and ensuring that there are sufficient resources available when they need to be called to run. Because in the end, this is human life and safety that we're talking about. And I think that we should be very careful about making, my markets are better, or vertically integrateds are better, when people's lives and property at stake. I think there is room for us to have a debate, but it shouldn't simply be using cherry picked examples that help support my argument or undermine someone who has a different view.
EMP: Do you agree with the statement that increasingly adverse climate effects are increasingly impacting grid operations?
TS: I think it's safe to say that the environment has a significant impact on operations of the system. As you look at some of the facilities that have had to operate in conditions that they've not faced before, whether it is extreme heat for long periods of time like this summer in Texas. I mean, Arizona had – what was it – 31 days in a row north of 100 degrees? And fortunately, as a result of hopefully good planning and proper maintenance, the system worked and the lights and air conditioning stayed on. But I do think that it requires us to think about planning a little differently. And by that I mean, in the old days, whenever that was, you know, we worried about the one large plant that tripped off or the one transmission line that would drop and what would the impact be on the system? That's our N minus 1 planning, right? If we lose that one thing, what do we need to make sure that we have enough power or a way to power the – move the power around in order to keep the lights on? The world is changing based on the resource mix changing. Now we have large solar fields that are providing certain amounts of megawatts. Or wind that is providing significant amounts of energy when the wind blows. Well, what do we do when there's marine cloud cover and we don't get the output from the solar facilities that we think we do but we've gotten rid of the other resources that could run because we don't like their emissions profile? Or what if you have a wind drought, and as a result of the wind drought, you’ve got four or five days with no wind. Well, what are you going to do when you've been counting on that to power the system? We've had droughts in the West and you don't have the hydro resources they thought you would have. Or at the other end of that we've had a significant amount of precipitation so accurate was really well. I think we have to think about how we're planning for those situations based on how the weather and the environment is changing. And doing so means we have to change our planning parameters. It's not as simple as, you know, 100,000 megawatts is our peak, let's add 15% and call it a day. That's not necessarily going to carry the day anymore because what the resources are and what the outages may look like. And so I think we've got to go back to some, you know, first principles about how we want to plan for the grid and what our system needs to look like and what we're accounting for. And I think people are starting to have some conversations around that. Jim Robb has been very clear at NERC about the importance of planning parameters and how that should look. We have been mentioning the need to look at planning parameters now for some time. And I think that's resonating with folks as they see what the energy transformation on the ground looks like with the resources, to how do we make sure that we've got all the tools in the toolbox – not be so reliant on one or another that we find ourselves in reliability crisis. Because as we saw in some of the winter storms that you mentioned, in the event that you've got a significant enough demand in your area and you don't have power to wheel, we can't always count on our neighbors to be able to power us up. We've got to make sure that we're balancing and doing a much more fulsome analysis of what those load requirements and resource adequacy obligations should be.
EMP: Well, to use a tired cliche, it seems we have a perfect storm. We're trying to rush pell-mell into a clean-energy transition at breakneck speed, which in itself is creating a reliability problem. And yet, we're responding to a climate crisis which is exacerbating the reliability issue. And there's no there's no compass point, there’s no lodestar for us to follow here. There's little to no chance of bipartisan action in this area in Congress. We have varying electricity market models from state-to-state. What are we going to do here?
TS: I think it would be helpful if we took a step back – and I know I'm probably aspirational at the moment and I always caution people not to be aspirational, but to focus on the practical – but there was a time when energy wasn't quite so partisan. I think we would do well to try to think about constituents first. I mean, if you're an elected official, which I formerly was, you think about your constituents. If you are a regulator, you're trying to think about the people who you are serving in that role. I formerly held that role (Ohio State House, 2009-2011). If you're a utility or a generator, who is trying to provide service to customers, you want to make sure that that service is available for two reasons. One, it's the right thing to do, it protects human health and safety, and selfishly, that's how you actually get paid. If you don't run, you don't get paid in our world. And so I think if we take a less partisan view about energy and a more thoughtful approach about how we can get there from here, it would help move the ball forward. And I have a pretty good example. I hope you'd agree. The current discussions that have happened around permitting and siting reform, have really focused on one side of the ledger. And it seemed to me that there was a political compromise to be had, which is you're going to need additional infrastructure for transmission, for the renewable resources that are located in remote locations to move power to load centers. At the same time, you're going to need additional pipeline infrastructure for natural gas, for the plants that will be needed to ensure that the system can remain reliable going forward. And that's not EPSA’s view only. But all the credible studies show that, even in high-renewable-penetration scenarios, you're going to need more natural gas plants, not less. They're going to operate less frequently, but you're going to need to have access to them for the planning reasons that we mentioned a moment ago. If there's a wind drought or a solar situation where your IBRs (inverter-based resources) trip off and they're not available, you need to have something that can come on to power the system. Well, if you're going to have to have more pipelines, that means you're going to have to be able to have permitting and siting for pipelines. So the compromise seems to be if you need to have transmission and we all agree that we're going to need to have natural gas pipelines in order to power the system, those should go together. And that's where I think room for compromise would exist. That would be a best-case scenario in Washington because both sides would have something to gain. And they would be able to take that home and say, look, I won. And it would, in the end, result in a more reliable, more efficient power system. Regardless of where we are with load growth, which I think we're on an upward trajectory for load growth, but even if you assume not, you need to ensure reliability. And so those are the kinds of ways that I think political solutions can be reached. If we could turn the temperature down and the rational middle could come together and have a meaningful discussion. There are outcomes to be had. There are wins to be had for both sides.
EMP: Phil Moeller, when he was at FERC years ago, made this issue of gas and electricity coordination – he tried to bring it to the fore. He did a great job. But he left the commission and it seemed to languish after he left. It's come to the fore now particularly since the 2021 debacle in ERCOT. Are we making progress? Where are we in terms of actually, you know – particularly since we're so dependent on natural gas for electricity generation – where are we on this coordination issue?
TS: I wish I could say we had made huge strides. I feel like we've made some incremental progress. Uri and Elliott have really been the catalyst for some serious discussions around the issue. The NAESB report that came out a couple of weeks ago now, I think was an effort to try and work on some of those solutions. In the end, I think some of the difficulty around this issue is, you know, everyone would love to have a silver bullet. But there isn't a silver bullet. And I'm not sure there's even silver buckshot because every pipeline and every plant that's situated on that pipeline is a little bit of a different situation than its neighbor. And so simply saying, if you have firm transmission you're going to be good to go, is not necessarily true. You could have interruptible service and be on a redundant system where you have access from multiple pipes and you're going to be more reliable than someone who's got (firm transmission) that's interrupted. So it's more complicated, which is probably why it's taken so long to get somewhere. But I think fundamentally, the system has evolved to the point now where gas and electric are not just neighbors that occasionally talk over the fence, but we are significantly intertwined to the point where there has got to be better coordination, better information-sharing and a way to ensure that sufficient resources can be delivered reliably for plants to operate reliably. And I think that's where NAESB is trying to go. I know there are industry conversations that are ongoing in an effort to try and address some of this in order to ensure that the lights stay on because absolutely no one in the value chain wants to be the party that's responsible for the deaths of hundreds of people in Texas, or for the lights to go out in North Carolina or in the TVA service territory or wherever it might happen. We're all trying to get it right. And I think the parties now have come to the realization that we all have skin in the game. Natural gas can't afford to be called an intermittent, weather-dependent resource. None of us want that because it is the fuel that balances the intermittence in the renewables that are coming on the system. So it's got to perform. So we all have a vested interest in getting it right and improving its performance. And I think people will get there.
EMP: In terms of the larger discussion that we've had in terms of the issues we’ve got with markets and what have you, how much of these issues – the issues with markets, the reliability issues – how much of these problems would be solved if we simply had a carbon tax?
TS: That has been EPSA’s preferred policy position going all the way back to Waxman-Markey in 2009. Because if we're trying to address emissions, if that's really your objective, the price on carbon – an economywide price on carbon – is the most efficient approach to get there. We had a study that we commissioned from E3 that looked at the P3 service territory, and their analysis showed that a relatively modest carbon price would actually result in lower emissions and not jeopardize reliability at a far cheaper cost than the current state-by-state approach that's ongoing. The challenge of course is you'd have to get 13 states and the District of Columbia and PJM to all agree to that. And a regional approach is better than a single-state approach. But a national approach is better than a state-by-state or regional approach. So, you know, folks, I think, took their lesson from Waxman-Markey. A lot of people lost their next election as a result of being supportive of that position. And the IRA, I think, is a direct outcome of that. You see an awful lot of money being awarded, the winners are being chosen and the losers are not being chosen by government, and they're trying to get to a similar outcome using a different set of tools. I'm not persuaded that it's more cost effective or that it will actually get to the outcome they want to get to. The more direct approach and the more economic approach is an economywide price on carbon. That remains politically elusive.
EMP: Well, I know you have a plane to catch, I think we should wrap things up here. Todd Snitchler, President and CEO of the Electric Power Supply Association. Thank you very much and have a safe flight.
TS: Thanks, Bryan.
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