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IBC - Editorial Board
Editorial Advisory Board December 2013 • Volume 26, Issue 10
I
n this issue . . .
Once the poster child of energy market liberalization, and the inspiration for similar projects in the U.S. and other countries, the United Kingdom is now grappling with the difficulties of balancing competitiveness, energy security, and ambitious decarbonization. But will the recent proposals for Electricity Market Reform be effective? That’s the question posed by Michael G. Pollitt and Aoife Brophy Haney in our lead article this month. Their take: The strategy as a whole does not seem consistent. The EMR is not a fundamental redesign of the market, as the government suggests, but an attempt to combine subsidies and the market to reach an intermediate solution between the market and a governmentdirected, low-carbon investment plan. Their sad conclusion: the consumer and macroeconomic impact is likely to be negative. Our next article takes a careful look at a darling of some alternativeenergy proponents: renewable portfolio standards, as they’re being enacted at the state level. Lynne Holt and Mary Galligan ask, Are they really serving the public interest? Given lower natural gas prices, declining prices for renewable technologies, and political pressure, many states are asking the same questions lately. But the authors point to several countervailing factors on the way to concluding: RPS remains
a viable tool for pursuing fuel diversity and reducing carbon emissions. Next, Jennifer Mersing, wanders deep into the weeds of Federal Energy Regulatory Commission policymaking, examining the inclusion of non-public utility revenue requirements into FERCjurisdictional RTO/ISO rates. We next head overseas to explore how they do things in Brazil and India. Erik Eduardo Rego discusses an innovative methodology employed in Brazil to contract capacity that employs an index designed to allow comparison among the expected generation costs of electricity from different types of fuel sources. His analysis, though, shows that the methodology presents several worrisome distortions. During a stay in India, Colin Gunnar Beckman had a chance to examine the country’s new cost allocation method for interstate transmission that shifted the approach from a regional postage stamp method to a flow-based cost allocation charging method. The author views this as a definite improvement: less congestion and losses will likely ensue as generators and distribution entities respond to prices that more precisely reflect their use of the system. Lesley Fleischman, Rachel Cleetus, Jeff Deyette, Steve Clemmer and Steve Frenkel update their analysis of members of the U.S. coal fleet that are ripe for retirement and conclude that, contrary to the dire predictions emanating from some quarters, these uneconomic plants can be replaced with
The Electricity Journal (ISSN 1040-6190) is published monthly, and bi-monthly in January/February and August/September by Elsevier Inc., 360 Park Avenue South, New York, NY 10010-1710.
Web site: www. elsevier.com/locate/tej
Editor Richard Cohen [email protected] Managing Editor Gerry Khermouch [email protected] Publisher Henri van Dorssen [email protected]
affordable alternatives in each region of the country. Lindsay Dubbs, Andrew G. Keeler and Theresa O’Meara explore the permitting processes surrounding an exciting alternative energy technology: hydrokinetic energy. The existing permitting process, they argue, places significant burdens on MHK testing and prototyping that are significant impediments to technological progress. With energy storage also coming on strong as a technology that is well suited to providing regulation service, Kiran Kumaraswamy and Jamie Cotrone evaluate the relevant ISO and RTO rules, which so far have not fully accommodate these technologies. The passage of FERC Order 755 in 2011 forced market operators to remove institutional barriers to storage resources. The authors’ assessment suggests that PJM has the most forwardthinking, inclusive market to date, while ERCOT, ISO-NE, and SPP are continuing to refine their processes in response to FERC regulations and market needs. We conclude with a thoughtful essay by Steven A. Mitnick that examines the principle of customers’ value in electric rate cases. There is relatively little said, he notes, about whether individual customers’ costs have been proportionate with the service that they have received, and with what they will receive if a requested rate increase is approved by regulators. ■
Richard Cohen Gerry Khermouch
Subscription rates: euro 114 for European countries and Iran; USD 123 for all countries except Europe, Japan and Iran (personal price). Euro 725 for European countries and Iran; USD 812 for all countries except Europe, Japan and Iran (institutional price). Editorial office: 954-659-0061 Fax: 954-659-0062
The members of The Electricity Journal’s Editorial Advisory Board listed below have graciously agreed to assist us in identifying appropriate topics and authors for each issue, and to review articles in advance of publication when asked We and our readers are continually enriched by their generosity, their ideas, and their critical comments. Responsibility for what appears on these pages is, however, entirely our own.
John A. Anderson, Executive Director Electricity Consumers Resource Council
Miles Bidwell, President Bidwell Associates, Inc.
Edward Kahn, Principal Analysis Group/Economics, San Francisco
Sue Kelly, Vice President of Policy Analysis and General Counsel American Public Power Assn.
Ashley C. Brown, Executive Director, Harvard Electricity Policy Group John F. Kennedy School of Government, Harvard University
Ralph Cavanagh, Senior Staff Attorney Natural Resources Defense Council, San Francisco
Frank A. Felder Bloustein School of Planning and Public Policy, Rutgers University, New Jersey
Scott Hempling, Attorney-at-Law, Executive Director National Regulatory Research Institute
Benjamin Hobbs, Professor, Department of Geography and Environmental Engineering, The Johns Hopkins University
J. Robert Malko, Professor of Finance Utah State University
Steven A. Mitnick, President, Build Energy America Senior Energy Advisor, Bates White Economic Consulting
David K. Owens, Executive Vice President, Business Operations Group, Edison Electric Institute
Joshua Z. Rokach Lexicon Strategy Group, Washington
Mohammad Shahidehpour, Bodine Distinguished Professor and Chairman, Electrical and Computer Engineering Department Illinois Institute of Technology Chicago
F.P. Sioshansi, President William W. Hogan, Raymond Plank Professor of Global Energy Policy John F. Kennedy School of Government, Harvard University
Paul L. Joskow, Elizabeth and James Killian Professor of Economics and Management Massachusetts Institute of Technology
Menlo Energy Economics, San Francisco
Irwin Stelzer, Director, Regulatory Policy Studies, Hudson Institute
Richard D. Tabors, Vice President Charles River Associates, Boston
I
n this issue . . .
Once the poster child of energy market liberalization, and the inspiration for similar projects in the U.S. and other countries, the United Kingdom is now grappling with the difficulties of balancing competitiveness, energy security, and ambitious decarbonization. But will the recent proposals for Electricity Market Reform be effective? That’s the question posed by Michael G. Pollitt and Aoife Brophy Haney in our lead article this month. Their take: The strategy as a whole does not seem consistent. The EMR is not a fundamental redesign of the market, as the government suggests, but an attempt to combine subsidies and the market to reach an intermediate solution between the market and a governmentdirected, low-carbon investment plan. Their sad conclusion: the consumer and macroeconomic impact is likely to be negative. Our next article takes a careful look at a darling of some alternativeenergy proponents: renewable portfolio standards, as they’re being enacted at the state level. Lynne Holt and Mary Galligan ask, Are they really serving the public interest? Given lower natural gas prices, declining prices for renewable technologies, and political pressure, many states are asking the same questions lately. But the authors point to several countervailing factors on the way to concluding: RPS remains
a viable tool for pursuing fuel diversity and reducing carbon emissions. Next, Jennifer Mersing, wanders deep into the weeds of Federal Energy Regulatory Commission policymaking, examining the inclusion of non-public utility revenue requirements into FERCjurisdictional RTO/ISO rates. We next head overseas to explore how they do things in Brazil and India. Erik Eduardo Rego discusses an innovative methodology employed in Brazil to contract capacity that employs an index designed to allow comparison among the expected generation costs of electricity from different types of fuel sources. His analysis, though, shows that the methodology presents several worrisome distortions. During a stay in India, Colin Gunnar Beckman had a chance to examine the country’s new cost allocation method for interstate transmission that shifted the approach from a regional postage stamp method to a flow-based cost allocation charging method. The author views this as a definite improvement: less congestion and losses will likely ensue as generators and distribution entities respond to prices that more precisely reflect their use of the system. Lesley Fleischman, Rachel Cleetus, Jeff Deyette, Steve Clemmer and Steve Frenkel update their analysis of members of the U.S. coal fleet that are ripe for retirement and conclude that, contrary to the dire predictions emanating from some quarters, these uneconomic plants can be replaced with
The Electricity Journal (ISSN 1040-6190) is published monthly, and bi-monthly in January/February and August/September by Elsevier Inc., 360 Park Avenue South, New York, NY 10010-1710.
Web site: www. elsevier.com/locate/tej
Editor Richard Cohen [email protected] Managing Editor Gerry Khermouch [email protected] Publisher Henri van Dorssen [email protected]
affordable alternatives in each region of the country. Lindsay Dubbs, Andrew G. Keeler and Theresa O’Meara explore the permitting processes surrounding an exciting alternative energy technology: hydrokinetic energy. The existing permitting process, they argue, places significant burdens on MHK testing and prototyping that are significant impediments to technological progress. With energy storage also coming on strong as a technology that is well suited to providing regulation service, Kiran Kumaraswamy and Jamie Cotrone evaluate the relevant ISO and RTO rules, which so far have not fully accommodate these technologies. The passage of FERC Order 755 in 2011 forced market operators to remove institutional barriers to storage resources. The authors’ assessment suggests that PJM has the most forwardthinking, inclusive market to date, while ERCOT, ISO-NE, and SPP are continuing to refine their processes in response to FERC regulations and market needs. We conclude with a thoughtful essay by Steven A. Mitnick that examines the principle of customers’ value in electric rate cases. There is relatively little said, he notes, about whether individual customers’ costs have been proportionate with the service that they have received, and with what they will receive if a requested rate increase is approved by regulators. ■
Richard Cohen Gerry Khermouch
Subscription rates: euro 114 for European countries and Iran; USD 123 for all countries except Europe, Japan and Iran (personal price). Euro 725 for European countries and Iran; USD 812 for all countries except Europe, Japan and Iran (institutional price). Editorial office: 954-659-0061 Fax: 954-659-0062
The members of The Electricity Journal’s Editorial Advisory Board listed below have graciously agreed to assist us in identifying appropriate topics and authors for each issue, and to review articles in advance of publication when asked We and our readers are continually enriched by their generosity, their ideas, and their critical comments. Responsibility for what appears on these pages is, however, entirely our own.
John A. Anderson, Executive Director Electricity Consumers Resource Council
Miles Bidwell, President Bidwell Associates, Inc.
Edward Kahn, Principal Analysis Group/Economics, San Francisco
Sue Kelly, Vice President of Policy Analysis and General Counsel American Public Power Assn.
Ashley C. Brown, Executive Director, Harvard Electricity Policy Group John F. Kennedy School of Government, Harvard University
Ralph Cavanagh, Senior Staff Attorney Natural Resources Defense Council, San Francisco
Frank A. Felder Bloustein School of Planning and Public Policy, Rutgers University, New Jersey
Scott Hempling, Attorney-at-Law, Executive Director National Regulatory Research Institute
Benjamin Hobbs, Professor, Department of Geography and Environmental Engineering, The Johns Hopkins University
J. Robert Malko, Professor of Finance Utah State University
Steven A. Mitnick, President, Build Energy America Senior Energy Advisor, Bates White Economic Consulting
David K. Owens, Executive Vice President, Business Operations Group, Edison Electric Institute
Joshua Z. Rokach Lexicon Strategy Group, Washington
Mohammad Shahidehpour, Bodine Distinguished Professor and Chairman, Electrical and Computer Engineering Department Illinois Institute of Technology Chicago
F.P. Sioshansi, President William W. Hogan, Raymond Plank Professor of Global Energy Policy John F. Kennedy School of Government, Harvard University
Paul L. Joskow, Elizabeth and James Killian Professor of Economics and Management Massachusetts Institute of Technology
Menlo Energy Economics, San Francisco
Irwin Stelzer, Director, Regulatory Policy Studies, Hudson Institute
Richard D. Tabors, Vice President Charles River Associates, Boston