Federal Energy Regulatory Commission Chairman Jon Wellinghoff.
There is no point at which federal regulators will be able to throw up their hands and say “mission accomplished” when it comes to power capacity markets, Federal Energy Regulatory Commission Chairman Jon Wellinghoff believes.
“Constant iteration in response to response to the industry’s dynamic flux,” is how FERC Chairman Wellinghoff describes his approach to power market design. New structures to meet new technologies and new needs, with continual modifications is the approach the senior US power sector regulator hopes to follow: “You keep tweaking” he told Breaking Energy in a recent discussion at the Platts Global Power Markets Conference in Las Vegas, Nevada.
Capacity markets are controversial, and even the definition of a capacity market is often disputed. The California Public Utility in an in-depth white paper issued following its own energy market failures said: “A well-designed capacity market stabilizes and guides the market to provide the target level of generation adequacy at reasonable cost.” Generation sources bid into markets and are given different levels of priority and access to markets based on systems designed by participants in line with guidance from FERC and other regulators.
But just because Jon Wellinghoff is open to the market’s changing structure amid new technologies and demands on the system, he does hew to certain principles he thinks are both just and best adhere to the tenets of the Federal Power Act.
Creating a market structure that can support a diversified portfolio of generation in the US is the objective, he said, answering questions about the Las Vegas conference morning sessions, where the industry showed signs of real but complex division on market design issues. Read more about that controversy in earlier coverage here.
Market design should recognize that different generation types bring different levels of value to the transmission grid and the US electricity system, Wellinghoff said. FERC’s recent Order 775 recognizes the value of fast responding generation sources when the grid is under pressure from heightened demand, and Wellinghoff says that is part of a needed trend away from disadvantaging new technologies by forcing them to fit into markets designed for older technologies.
“There are different characteristics for wind and other intermittents, and we need to recognize those in the same way that traditional sources have been recognized,” Wellinghoff said.
FERC’s approach to capacity markets has been divisive in the industry, with renewable energy proponents largely favoring rules widening access to transmission for new projects while incumbent utilities have argued that the overall cost of power is driven up and the rewards of market access are allocated to generation sources that have not paid for them.
FERC’s efforts to end the “balkanization” of the US power grid is good for integrating wind and solar into markets, Element Power Chief Development Officer Chris Taylor said at the Vegas conference. “The bigger the area operate across the easier it is to integrate these generation sources,” Taylor said.
Wellinghoff remains ready to change the existing rules if power technology develops, saying that he saw “no reason” why energy storage couldn’t bid into capacity markets, and that if there were problems integrating them “we would look at ways to ensure market structures allow participation.”
Once an energy source’s differentiation has been established and set into market design, though, it is up to businesses to move ahead with how they build and integrate projects, Wellinghoff said.