FERC's Norris calls for long view on energy

By Bobby McMahon

April 24, 2013 - John Norris, a commissioner at the Federal Energy Regulatory Commission, is highlighting the need for electric grid planning that goes far beyond three-year forward capacity auctions and into the coming decades, while at the same time touting the role hydropower can play in the future energy grid.

“What we lack to today is a vision beyond one or two or three years, and that’s a problem,” Norris said on April 23 at the National Hydropower Association’s annual conference in Washington.

And while optimistic on the prospects for pumped storage hydropower as an energy storage resource on the grid, he said that questions remain over how to fairly compensate pumped storage for what it provides.

Calling climate change “the elephant in the room,” Norris said that transitioning the grid in order to reduce greenhouse gases during the next decades will likely require a shift away from carbon-intensive energy sources, including natural gas-fired generation.

“There is a path. There is a vision forward for meeting the elephant in the room’s issues,” Norris said, saying that it will be key to invest in resources that can be used both now and in 2050.

In doing so, he highlighted steps FERC is taking to transform the grid, including Order 1000 requirements for regional transmission planning and cost allocation as well as Order 764, which requires transmission utilities to provide customers the option of using more frequent transmission scheduling intervals within each operating hour.

Norris said FERC has “some obligation for consumers to make sure we transition in the most efficient way possible,” adding that several of the operational changes FERC is making on the electric grid are in sync with findings by the National Renewable Energy Laboratory about the need to manage the variability of renewable energy resources like wind and solar and how to address the challenges of climate change.

Norris said that hydropower can play a significant role in the future of the grid, given the benefits it can provide both now and in the decades to come. Hydropower, he said, can be a “huge winner if we can reestablish building a system for the long haul and not just responding to cheap gas and three-year capacity markets, and actually have a vision for this country for long-term sustainable energy.”

He also said that it is “paramount” to develop energy storage resources in the United States in order to help manage variable resources, and that hydropower pumped storage can play a “huge role” in that. The question that remains, Norris said, is how to fairly compensate energy storage “for all the value it provides to the system.”

“How do you enable it to capture the value stream” for the services it provides to the transmission, distribution and generation aspects of the system, Norris asked, suggesting that it may require “a unique fourth category . . . that compensates storage differently.”

But the prospects for pumped storage appear uncertain in the short term. The Electric Power Research Institute in a recent report found that although the resource could prove useful for integrating new wind and solar generation, it is unlikely there will be enough market revenues to justify building new pumped storage projects through 2020.

Similarly, Philip Jones, a Washington state regulator and the president of the National Association of Regulatory Utility Commissioners, told the same event that large pumped storage projects are “not cost effective now.” But Jones said that the resource is one that “we need to keep our eye on” given uncertainty over long term natural gas prices, greenhouse gas reduction efforts and integrating renewable energy resources in the grid.

“There are a whole host of reasons we need to be looking at these solutions more carefully,” Jones said.

Jones also told the gathering that increasing the role on the electricity grid for large hydropower projects likely will require support from renewable portfolio standards that include such projects or other “top-down” policies like greenhouse gas reduction targets.

http://www.platts.com/newsfeature/2013/electricpower/uspower/index