BATTLE ON CAPITAL HILL: SUPREME COURT HEARING A POWER STRUGGLE THAT WILL SHAPE OUR ENERGY GRID FOR YEARS TO COME
Unknown to most of the U.S. public, there is a major case in our highest court that could dramatically shape the functionality of our nations power grid and have huge ramifications on consumers’ rates.
Yesterday, the Supreme Court heard arguments on whether the Federal Energy Regulatory Commission (FERC) can continue to regulate demand response in wholesale energy markets which will have major implications for clean energy.
The case, known as FERC vs. Electric Power Supply Association, centers around whether FERC can make rules for demand response which is reducing energy use during high demand periods. The Supreme Court is reviewing a U.S. Court of Appeals which ruled that power plant operators and states, not FERC, have jurisdiction over demand response.
Demand response make markets operate more efficiently, limits the market power that generating companies have and reduce the risk of blackouts. It’s also a way that new technologies, such as solar and battery storage, could make the grid cleaner and lower prices.
The issue is whether FERC should be able to make rules for local power systems such as homes and businesses. FERC’s primary function is to regulate the regional grid that transports power over long distances across the US. This opinion will effect solar projects, backup generators and even Tesla’s Powerwall battery, all that can supply energy to the power grid and reduce demand.
To compound the issue, demand response resources dislodge unprofitable carbon based power and is an important part of encouraging use of wind and solar power. This issue is not only about whether demand response can participate in wholesale markets but if other clean energy resources like energy efficiency can participate going forward.
In 2011, FERC issued “Order 745” which allows homes and businesses to make an agreement to curtail their energy use. Power plant owners were unhappy at the idea of competition and challenged the order in federal court by arguing that FERC didn’t have any jurisdiction over demand response. Last May, the U.S. Court of Appeals agreed with the power plant owners. The court found that the states had exclusive jurisdiction over demand response.
But with that ruling, we have a major problem. The original order provided a way for these two groups to work together, instead of as opposition. If the appeals ruling is upheld and FERC and states can’t cooperate in the regulation of demand response participation in wholesale markets, this decision could cost consumers across 13 states an estimated $9 billion in just one year.
For FERC, this would mean a greater role in managing the regional power grid, taking the place of the electric utility. FERC currently manages a portion of the grid that accounts for 70% of all electricity consumed in the US. For the states this would allow for electric production from solar, as well as other devices like Tesla’s Powerwall, which would open the door for “micro-grids” to produce, distribute and manage electricity on a smaller localized scale.
A regional grid operator’s primary function is to ensure the lights stay on by having enough energy on the grid to meet demand. But demand response, backup generators or energy storage banks that are the emerging “smart grid” could serve the same function for regional power grids that large power plants do today. It’s widely believed this will more cost effective than building new power plants. This will also go a long way towards the US modernizing our energy policy, the same way that it would like to improve the power grid.
However this opinion shakes out, it has implications that are far ranging. This affects our grid operator, our generation plants and every plan on improving our energy grid infrastructure as well as how it is operated going forward.
To receive more information that is shaping our countries energy policy, visit us at northamericanenergyadvisory.com
Matt Helland Senior Vice President –N.A.E.A.
Originally published at northamericanenergyadvisory.com on October 15, 2015.