New UK Report on Stranded Asset Liabilities for Fossil Fuels Likely Off the Mark: Stranded Assets Are a Concern in All Technologies

    While stranded asset concerns have long been touted by environmentalists who erroneously think we are somehow on the verge of eliminating fossil fuel use, the facts do not support such a conclusion. Alternative energy sources are not yet even keeping up with demand growth, although they have been getting closer. However, when such issues are examined on a regional basis, there may be some legitimate concerns.

     A new report from the UK: Stranding: Modelling the UK’s Exposure to At-Risk Fossil Fuel Assets by the UK Sustainable Investment and Finance Association reports that in order to meet decarbonization pathway goals, some fossil fuel assets risk becoming stranded in the UK. Of course, the report assumes that those pathway targets will be able to be met, by utilizing technologies like offshore wind, which have become more expensive in recent years. The report seems to focus on the goal of staying below 1.5 degrees C, which may have never really been technically possible. It’s all but certain that the 1.5 deg C goal will not be met. They calculate $2.28 trillion in global losses due to stranded assets by 2040 and $141 billion of UK exposure to possible strandings. The list below of how assets may become stranded is telling. The first one given, climate policies and regulations, can be seen as self-imposed limitations on something in high demand. Second, the notion that fossil fuel infrastructure will become uneconomical due again to emissions regulations and also declining demand, is both self-imposed and unlikely in the near-term demand is still robust. Thirdly, advances in solar, wind, and battery technologies can help them be more competitive, but no big breakthroughs are appearing on the horizon at present. Fourth, the idea that it will become uneconomical to drill for hydrocarbons, is also not going to happen in the foreseeable future due to robust demand. Fifth is the idea that consumers will demand more renewable energy and less fossil fuels. This is another hope that does not seem realistic anytime soon. Sixth, are legal and reputational risks, more self-imposed regulatory control. I think it was the CEO of Duke Energy who once said that all technologies have stranded asset risks and that these were more manageable than often depicted. There are ways to reuse, repurpose, and more likely to write down such assets. Devices like securitization bonds can be employed.

     Unfortunately, stranded asset risks have been used as a tool of influence to discourage and scrutinize fossil fuel investments. This should not be used for controlling financing decisions, especially for projects in developing countries where affordable modern energy access is more important than emissions.

     Below is a depiction of something called the FRANTIC model of four stages of asset stranding that was used in the report.

     As can be seen in the graph below, the U.S. and Russia are most exposed to stranded assets according to the report. This is no doubt due to the well-developed oil & gas industries in both countries, including exports. The 2nd graph below shows liabilities by regional owners, whether governments, corporate entities, financers, individuals, fund owners, or others.

     The whole notion of stranding assets through regulation is self-imposed, as I noted. It does not consider market conditions and supply and demand issues. It also does not consider power reliability. There is a robust demand for natural gas around the world. There is also an abundant supply of natural gas. It aids power reliability. Most future power models, including sufficiently decarbonized models, show increased use of natural gas in the near term. At some point later, probably beyond 2035, demand may drop, if other technologies are more competitive.

     The report gives four recommendations:

1.        Create positive, enabling conditions for decarbonising investment opportunities

2.        Industrial decarbonisation strategies

3.        A clear regulatory framework to support sustainable finance and transition finance, including robust transition planning

4.        UK leadership on investor stewardship should be further cemented and continue to evolve, including accounting for systemic stewardship approaches

     The report cites Bloomberg New Energy Finance that total global energy investment and spending from 2024 to 2050 will be between $181 trillion and $215 trillion. The report also notes the lack of detail in corporate energy transition plans. That, I believe, is necessitated by the unknown cost and the generally high cost and low profitability of clean energy investments. They want to address the issue with a regulatory framework for energy transition financing. As always, I prefer the carrot approach over the stick approach as does the private sector. The report favors a regulatory approach to decarbonization, a stick approach. I think that the best way to get more private sector approval is to focus on carrot approaches like voluntary market mechanisms, tax credits, and subsidies. Subsidization is a necessary carrot approach to make low-carbon energy more competitive but shooting yourself in the foot by using stick approaches to make fossil fuels more expensive when they are clearly in heavy demand is just not smart. Oil demand is expected to plateau around 2030, says the IEA, but the IEA does not have the greatest predictive record. It could plateau for a decade. Any talk of the death of fossil fuels is greatly exaggerated at best and delusional at worst.

    

 

References:

 

New analysis predicts that $2.3 trillion worth of assets could be 'stranded' by 2035 — here's what that means. Beth Newhart. The Cool Down. March 24, 2025. New analysis predicts that $2.3 trillion worth of assets could be 'stranded' by 2035 — here's what that means

Stranding: Modelling the UK’s Exposure to At-Risk Fossil Fuel Assets. UK Sustainable Investment and Finance Association. March 2025. UKSIF-Stranded-Assets-Report-March-2025.pdf

Presidential Exemption from Compliance with the Clean Air Act? Apparently, It's Real

 Just when you thought things couldn’t get more whacky, power plants, industrial facilities, and other entities that emit air pollutants can send an email requesting a presidential exemption from compliance with Section 112 of the Clean Air Act. According to Heatmap the president himself will review and decide if the exemption applies. I initially doubted that it was true, but upon further investigation, it seems to be the case. According to the EPA it applies to situations where the technology to come into compliance is not available. Although that sometimes happens, I believe there is available technology for the vast majority of pollution sources to come into compliance. All you have to do is make a case and the EPA will submit it to the president for approval or disapproval. However, as noted below this is time limited, and email requests will only be accepted until March 31.  

“The EPA said in a statement to CBS News that section 112(i)(4) of the Clean Air Act "specifically states that the President may exempt any stationary source 'if the President determines that the technology to implement such standard is not available and that it is in the national security interests of the United States to do so.'"

“Environmental law experts believe the policy will be challenged in court. "I've never seen anything like this before," said Mary Nichols, a distinguished counsel for the Emmett Institute on Climate Change and the Environment at UCLA Law School. Nichols says because the statute is so broad, it is subject to abuse. "I think the likely first lawsuit is a blanket challenge to the entire procedure," she said.

“CBS News asked the EPA if it could explain how all the emails will be processed and assessed, whether each one will be individually considered by President Trump, and how many emails the agency has already received, but the EPA did not address those questions.”

“But sending the email request to the EPA does create a paper trail that companies may want to consider. "This is something that we will fight to make public," said Joe Bonfiglio, executive director of the U.S. region of the Environmental Defense Fund, a prominent environmental nonprofit. "For companies who take advantage of this hall pass, there are organizations like ours who will make sure communities around those facilities know about the requests."

“Companies have until March 31 to email the EPA with the required information for the president to consider.”

     According to E&E News:

“Walter Mugdan, former deputy administrator for EPA’s New York City-based regional office and Superfund director, said the move is “highly unusual” and he’s not aware of the authority being used, especially in such a sweeping manner that affects myriad technologies.”

“Mugdan pointed out that the exemptions would affect rules limiting the release of ethylene oxide, which is used in the pharmaceutical industry as a sterilizing agent but is also an incredibly dangerous and carcinogenic chemical that needs to be carefully controlled to protect nearby communities.”

     Does this make a mockery of environmental protection? Or is that the point? Donny Knows All. (sarcasm).

     Below is the section about it from the EPA website, including the rules EPA is considering changing which includes some of the most toxic substances known like mercury, arsenic, coal coking plants (which have literally killed many people), and ethylene oxide.

 

Clean Air Act Section 112 Presidential Exemption Information – on U.S. EPA Website

To advance President Trump’s Executive Orders and Power the Great American Comeback, EPA has set up an electronic mailbox to allow the regulated community to request a Presidential Exemption under section 112(i)(4) of the Clean Air Act. You may submit a request for a Presidential Exemption to this email address: airaction@epa.gov by March 31, 2025.

The Clean Air Act allows the President to exempt stationary sources of air pollution from compliance with any standard or limitation under section 112 for up to two years if the technology to implement the standard is not available and it is in the national security interests of the United States to do so.   Submitting a request via this email box does not entitle the submitter to an exemption.  The President will make a decision on the merits.

An exemption may be extended for up to two additional years and can be renewed, if appropriate. On March 12, 2025, EPA requested that facilities and/or affected sources subject to the regulations below submit information about why their facility and/or affected source meets the requirements under Clean Air Act Section 112(i)(4) for a Presidential exemption while EPA reconsiders these rules:

"National Emission Standards for Hazardous Air Pollutants: Coal- and Oil-Fired Electric Utility Steam Generating Units Review of the Residual Risk and Technology Review” (89 FR  38508; May 7, 2024) (MATS Rule)

“New Source Performance Standards for the Synthetic Organic Chemical Manufacturing Industry and National Emission Standards for Hazardous Air Pollutants for the Synthetic Organic Chemical Manufacturing Industry and Group I & II Polymers and Resins” (89 FR 42932; May 16, 2024) (HON rule);

“National Emission Standards for Hazardous Air Pollutants: Ethylene Oxide Emissions Standards for Sterilization Facilities Residual Risk and Technology Review” (89 FR 24090; April 5, 2024) (Sterilizer Rule);

“National Emission Standards for Hazardous Air Pollutants: Rubber Tire Manufacturing” (89 FR 94886; November 29, 2024) (Rubber Tire Rule);

“National Emission Standards for Hazardous Air Pollutants: Primary Copper Smelting Residual Risk and Technology Review and Primary Copper Smelting Area Source Technology Review” (89 FR 41648; May 13, 2024) (Copper Rule);

“National Emission Standards for Hazardous Air Pollutants: Integrated Iron and Steel Manufacturing Facilities Technology Review” (89 FR 23294; April 3, 2024) (Iron and Steel Rule);

“National Emission Standards for Hazardous Air Pollutants: Lime Manufacturing Plants Technology Review” (89 FR 57738; July 16, 2024) (Lime Rule);

“National Emission Standards for Hazardous Air Pollutants for Coke Ovens: Pushing, Quenching, and Battery Stacks, and Coke Oven Batteries; Residual Risk and Technology Review, and Periodic Technology Review” (89 FR 55684; July 5, 2024) (Coke Ovens Rule); and 

“National Emission Standards for Hazardous Air Pollutants: Taconite Iron Ore Processing” (89 FR 16408; March 6, 2024) (Taconite Rule).

   

 

 

References:

 

Clean Air Act Section 112 Presidential Exemption Information. U.S. EPA. Clean Air Act Section 112 Presidential Exemption Information | US EPA

Want to avoid costly environmental regulations? Just email the EPA. Tracy J. Wholf. CBS News. March 27, 2025. Want to avoid costly environmental regulations? Just email the EPA.

Want a Clean Air Act exemption? Just email EPA. Hannah Northey. E&E News. March 27, 2025. Want a Clean Air Act exemption? Just email EPA. - E&E News by POLITICO

Ice Flow Via Ice Quakes with ‘Stick-Slip’ Motion Along Layers of Sulfates Deposited by Volcanoes: Upgrading Flow Models to Account for Temperate Ice

     Knowledge of the mechanisms for ice flow in glaciers is incomplete but new research is adding more details to that knowledge. The new knowledge involves mechanisms of brittle deformation produced by “ice quakes,” small seismicity events within the ice. Implications of the new research findings include better predictions of future sea level changes. Currently, there is a contrast between modeled and observed sea level changes that the new research may be able to bridge by adjusting the models. The new research justifies changing those models. Specifically, it leads to lower projections for future sea level rise that should be included in future climate modeling.

     A January 2025 paper by Schohn et al. in the journal Science addresses shear deformation in ice. The authors note that the standard equation for ice flow, Glen’s Flow Law, needs to be revised to account for temperate ice, which is described below. Specifically, the new research predicts that actual ice flow velocities will be less than those predicted by Glen’s Flow Law. This paper was based on sophisticated laboratory experiments.  

     A February 2025 paper by Fichtner et al. in the journal Science describes the new mechanisms that were discovered within the Greenland Ice sheet with borehole fiber optics.

     New research reported in two different papers in Science addresses what is called ‘temperate ice’ in contrast to ‘cold ice’ which is colder and less vulnerable to slippage. The temperate ice has some liquid water at grain boundaries that allows it to flow. Increased pressure at depth causes the slight melting at these boundaries. The presence of small grains of sulfates from nearby volcanoes sets the conditions for the ice to flow.

     Thus, we have two different papers, one based on laboratory experiments and the other based on borehole fiber optics, that address and attempt to quantify total ice flow by taking into account temperate ice flow rather than just cold ice flow.

     Below is the abstract to the Schohn et al. paper.

Abstract

Accurately modeling the deformation of temperate glacier ice, which is at its pressure-melting temperature and contains liquid water at grain boundaries, is essential for predicting ice sheet discharge to the ocean and associated sea-level rise. Central to such modeling is Glen’s flow law, in which strain rate depends on stress raised to a power of n = 3 to 4. In sharp contrast to this nonlinearity, we found by conducting large-scale, shear-deformation experiments that temperate ice is linear-viscous (n ≈ 1.0) over common ranges of liquid water content and stress expected near glacier beds and in ice-stream margins. This linearity is likely caused by diffusive pressure melting and refreezing at grain boundaries and could help to stabilize modeled responses of ice sheets to shrinkage-induced stress increases.

 

     The abstract to the Fichter et al. paper is shown below.

Abstract

Ice streams are major regulators of sea level change. However, standard viscous flow simulations of their evolution have limited predictive power owing to incomplete understanding of involved processes. On the Greenland ice sheet, borehole fiber-optic observations revealed a brittle deformation mode that is incompatible with viscous flow, over length scales similar to the resolution of modern ice sheet models: englacial ice quake cascades that are unobservable at the surface. Nucleating near volcanism-related impurities that promote grain boundary cracking, the ice quake cascades appear as a macroscopic form of crystal-scale wild plasticity. A conservative estimate indicates that seismic cascades are likely to produce strain rates that are comparable in amplitude with those measured geodetically, providing a plausible missing link between current ice sheet models and observations.

     According to Discover Magazine’s Avery Hurt:

"Inside the ice stream are thin layers of sulfates left over from volcanoes," explains Fichtner. "These impurities make the ice in these areas a little weaker than the surrounding ice, and the stresses localize near these weak layers, causing them to crack. This is what produces the ice quakes."

This discovery shows that ice streams move with what Fichtner calls a "stick-slip" motion rather than always flowing smoothly like viscous honey.

Glacier ice flows by means of many different mechanisms, explains Kristin Poinar, a University at Buffalo scientist who studies the Greenland Ice Sheet.

"It can ooze slowly and viscously; it can move rapidly and elastically," she says. "What we haven't appreciated before is that these micro-slip events might add up to be fairly significant to the overall amount of flow."

     Fichtner plans to study alpine glaciers next to determine if they also follow the newly discovered flow mechanism. It makes me wonder if there will be enough volcanic ash or fallen aerosols to make grain layers that can flow similarly to the glaciers in Greenland.  

    

 

 

References:

 

Ice Quakes Cause Glacial Ice to Flow Toward the Ocean. Avery Hurt. Discover Magazine. March 26, 2025. Ice Quakes Cause Glacial Ice to Flow Toward the Ocean

Hidden cascades of seismic ice stream deformation. Andreas Fichtner, Coen Hofstede, Brian L. N. Kennett, Anders Svensson, Julien Westhoff, Fabian Walter, Jean-Paul Ampuero, Eliza Cook, Dimitri Zigone, [...] , and Olaf Eisen. Science. February 6, 2025. Vol 387, Issue 6736. pp. 858-864. DOI: 10.1126/science.adp8094. Hidden cascades of seismic ice stream deformation | Science

Linear-viscous flow of temperate ice. Collin M. Schohn, Neal R. Iverson, Lucas K. Zoet, Jacob R. Fowler, and Natasha Morgan-Witts. Science. January 9, 2025. Vol 387, Issue 6730. pp. 182-185. DOI: 10.1126/science.adp7708. Linear-viscous flow of temperate ice | Science

Glacier Experts Uncover Critical Flaw in Sea-Level Rise Predictions. Iowa State University. SciTech Daily. January 14, 2025. Glacier Experts Uncover Critical Flaw in Sea-Level Rise Predictions

 

 

Rampant Demand Response Fraud Prompts MISO to Change Its Demand Response Rules

    I don’t like it when I read about fraud, especially when it’s perpetrated by businesses and ultimately paid for by consumers. The Midcontinent Independent System Operator (MISO) has been dealing with rampant demand response fraud for at least a couple of years now. Chemical company Linde agreed in January 2024 to pay $59 million to settle charges that it manipulated the MISO’s demand response program. Northern Indiana Public Service Co. (NIPSCO) was also involved and agreed to pay $7.7 million making the total $66.7 million. FERC approved and doled out the enforcement action.

“To cover the amounts it paid out to Linde Inc. and NIPSCO, MISO assessed charges to certain market participants in its footprint, including the utility, according to the commission. NIPSCO paid the largest share of those charges and passed them on to its customers, FERC said.

“Linde Inc. and NIPSCO fully cooperated with FERC’s enforcement office. The companies admit to the facts in the agreement but neither admit nor deny the alleged violations, according to FERC.

Perhaps it’s a standard way of dealing with corporate cheating – to admit that the facts are correct while not admitting or denying the allegations. It seems no one takes responsibility for cheating anymore, only paying fines. It is possible that inadequate employee training is an issue but that is not confirmed.

     About 10% of MISO’s power is derived from demand response, some from industrial customers like Linde. This is higher than the national average.

     Another industrial customer, Big River Steel, who operates a steel mill in Osceola, Arkansas 300 MW of peak load, agreed in August 2024 to return $15.9 million in demand response payments and pay a $6 million fine, according to FERC. Entergy Arkansas, serving as the market participant for the mill, agreed to pay $5 million.

     In December 2024 FERC ordered Ketchup Caddy to pay $27 million “for using bogus demand response resources to make offers” in MISO’s capacity market.

“Ketchup Caddy and Philip Mango, the company’s owner, “engaged in a fraudulent device, scheme, or artifice to defraud the MISO market and market participants,” FERC said.”

In testimony to FERC, Mango acknowledged that what he was doing was illegal and deceptive, including submitting “mock test” information for customers to MISO to meet a registration requirement “submitting “mock test” information for customers to MISO to meet a registration requirement,” and enrolling “unwitting customers” in the program.

     In January 2025 Voltus agreed to pay a $10.9 million penalty and return $7.1 million in profits to settle allegations that it registered uncontracted and over-stated demand response resources with MISO, according to FERC.

“…the demand response company’s former CEO Gregg Dixon engaged in a “fraudulent scheme” in MISO, in part by directing Voltus employees to obtain customer data by scraping an Ameren Illinois website, FERC said.

“Dixon agreed to pay a $1 million penalty and to step down from Voltus’ board of directors.”

     At least in this case, there were some consequences for cheating, but as seen below there was no official admission of wrongdoing.

“FERC’s enforcement office contends Dixon caused Voltus to register demand response resources with MISO without the owners’ knowledge or consent and to clear load-modifying resource capacity that would not have performed if MISO dispatched the resources from Oct. 1, 2016, through June 1, 2020, according to the agreement.

“Voltus and Dixon stipulated to the facts in the agreement, but neither admitted nor denied the alleged violations. Voltus and Dixon fully cooperated during FERC’s investigation, the agency said.

“We have not been accused of, let alone admit to, any market manipulation,” Voltus said in an emailed statement. “Rather, we are entering a no-admit/no-deny settlement on tariff violations … Voltus will continue to work with regulators, including FERC, to ensure that tariffs that govern demand-side resources are clear and consistently applied.

     It seems like they are trying to blame the ease of getting away with the violations on MISO for not doing enough due diligence in confirming that the demand response resources were actually available. MISO has since strengthened its DR requirements and vetting. However, it appears to me these companies knew they were cheating.

“MISO has taken steps to protect its market from similar abuse, according to Brandon Morris, a spokesman for the grid operator. “And we are strengthening our formal tariff requirements and dedicating additional resources to evaluate participation of demand-side resources in our markets.”

     In March 2025 MISO proposed rule changes for market participation of DR resources. They proposed changes for four interrelated issues:

·        Payment for nonexistent or overstated curtailments;

·        Inaccurate or inflated baselines that curtailments are based on;

·        Fraudulent registration of resources; and,

·        Tariff changes dealing with issues such as audit rights, and changes to testing and “make whole” payments.

One change is that companies will no longer be allowed to self-schedule. Thus, a demand response resource must now adjust load when called upon to do so. Another change is that an entity offering into its markets must have the legal right to make a resource available. While MISO believed that was true before, after the actions of Voltus and Ketchup Caddy they felt the need to reiterate it and formalize it in stronger legal language. According to Howland:

“Also, because of the “egregious” behavior of Ketchup Caddy and Voltus in submitting availability information and getting paid for non-existent resources, MISO proposed requiring an officer of companies that aggregate demand response resources to attest that the company follows the grid operator’s rules and will not engage in fraud, market manipulation or gaming.”

“MISO asked FERC to let its proposal take effect by July 19.”

     I have always been interested in promoting business ethics and deriding fraud, especially corporate fraud. These kinds of cases piss me off. These are well-paid professionals who are knowingly perpetrating fraud in most cases. They should have known better. While there have been some consequences in some cases, they got away with a lot for a long time. Where there is obvious fraud but no official admission of wrongdoing there is a disconnect, a clear cognitive dissonance. 

 

 

   

References:

MISO proposes demand response rule changes to stem market fraud, gaming. Ethan Howland. Utility Dive. March 24, 2025. MISO proposes demand response rule changes to stem market fraud, gaming | Utility Dive

Voltus agrees to pay $18M to settle allegations it violated MISO demand response rules. Ethan Howland. Utility Dive. January 7, 2025. Voltus agrees to pay $18M to settle allegations it violated MISO demand response rules | Utility Dive

FERC orders Ketchup Caddy to pay $27M for MISO demand response fraud. Ethan Howland. Utility Dive. December 6, 2024. FERC orders Ketchup Caddy to pay $27M for MISO demand response fraud | Utility Dive

Big River Steel to pay $22M for receiving MISO demand response payments without cutting load. Ethan Howland. Utility Dive. August 28, 2024. Big River Steel to pay $22M for receiving MISO demand response payments without cutting load | Utility Dive

NIPSCO, Linde to pay $66.7M to settle charges for gaming MISO demand response program. Ethan Howland. Utility Dive. January 8, 2024. NIPSCO, Linde to pay $66.7M to settle charges for gaming MISO demand response program | Utility Dive

U.S. National Power Demand Study: Executive Summary. March 2025. by S&P Global Commodity Insights: Review and Summary

     This new study was commissioned by The American Clean Power Association, American Petroleum Institute, Alliance to Save Energy, Clean Energy Buyers Association, Nuclear Energy Institute, the U.S. Chamber of Commerce, and the National Electrical Manufacturers Association.

     It forecasts staggering demand growth for power over the next few decades and bucks a trend of nearly two decades of stagnant demand growth in the power sector. The near-term demand growth forecasts to 2040 are driven by manufacturing and data centers. The longer-term demand growth is driven by the electrification of heating and transportation. Economic growth and population growth also factor in. Some of the key highlights are given below:

▪ The next five years pose a major risk of supply and demand imbalance, as datacenter buildout is expected to go through major development, while near-term supply response is constrained. Load flexibility and co-location stand out as the few options to help meet rising demand in the short-term

 ▪ The supply pathways involve renewables providing the bulk of energy volume, while natural gas-fired capacity and other firm resources like batteries will be critical to provide capacity and balancing support

 o By 2040, the US will require net additions of between 60 and 100 GW of gas, and over 900 GW of renewables and batteries, while continuing to support energy efficiency savings remain essential to maintain reliability

 o All current generation technologies face differing challenges in deployment, and load profiles across the grid are diverse, therefore, a diversified portfolio of generation technologies will be needed to ensure planning reserve margins are met and grid reliability is maintained.

 o Additionally, there is a role for clean firm technologies not currently deployed at scale (advanced nuclear and geothermal), especially if carbon emission mitigation is prioritized

 ▪ Significant challenges remain to quickly bring online large amounts of generation, as the supply response is constrained by outdated interconnection processes, local opposition, siting/permitting delays, ongoing challenges in developing economic transmission projects, supply chain constraints, and other limitations to deploying energy delivery infrastructure

 o Thoughtful policy reforms and a diversified supply response portfolio will be needed to reduce the demand/supply tension

     The report predicts that power demand over the next decade will see unprecedented growth with nameplate capacity of all energy sources combined expected to double over the next 15 years. Renewables and natural gas will provide the bulk of those needs.

     Planning reserve margins by market are shown below and it can clearly be seen that PJM and ERCOT will need more natural gas power in the near-term even with long waits for gas turbines in order to ensure reserve margins.  It is unclear how this problem will be resolved; however, it is likely that gas turbine wait times will be reduced in a couple of years at most.

     Thus, we can conclude that between now and the early 2030s many new natural gas-fired power plants will be built. That also means new pipelines to deliver that gas to them will be built. The difficulty in meeting near-term demand means that coal-fired plant retirements will be delayed. The need for renewables, batteries, and more transmission will remain robust. Market reform issues are currently slowing down many of these projects. Public opposition to utility-scale renewables and fossil fuel pipelines likely will also slow buildouts. Permit reforms are still sorely needed. These will likely be introduced and approved by the current GOP-controlled Congress, probably with bipartisan support. The study recommends the following interconnection queue and grid reforms.

 

References:

 

U.S. National Power Demand Study: Executive Summary. S&P Global Commodity Insights. March 2025. US_National_Power_Demand_Study_2025_ExecSummary.pdf

‘Dispatchable’ Power Credits Trading Program Passed in Texas Senate

     The Texas Senate just passed a bill to incentivize new dispatchable generation, mainly natural gas. This involves a dispatchable power credits trading program that requires utilities, generation companies, and electric cooperatives in the Electric Reliability Council of Texas (ERCOT) territory to offset new renewables and battery capacity — with an equal amount of new dispatchable capacity beginning as early as next year. The bill excludes batteries as a dispatchable source of power. Detractors argue that due to long wait times for gas turbines which I wrote about earlier this month. Projected power demand increases due to AI, onshoring of manufacturing, and electrification are the main reasons for the supply chain delays for gas turbines. According to Utility Dive’s Brian Martucci:

“S.B. 388 requires the Texas Public Utilities Commission to establish a program through which covered utilities and power generation companies would buy dispatchable power credits to cover any deficit in dispatchable generation capacity under the companies’ ownership or control. Each megawatt of qualifying dispatchable capacity would qualify for one credit, the bill says.”

“The PUC must activate the credit trading program if it “determines that dispatchable generation may provide less than 55 percent of all new generating capacity installed in the ERCOT power region after January 1, 2026,” the bill says.”

     The gas turbine wait times issue means that even with a goal of incentivizing gas resources to meet rising demand, it may not happen in time to meet that demand if non-dispatchable resources like wind, solar, and batteries are stifled in favor of gas. Texas power-sector analyst Doug Lewin wrote:

“The bill is “the most heavy-handed, anti-market kind of legislation … [that] would bring economic growth in Texas to a screeching halt” amid supply chain issues that have pushed gas turbine deliveries out to 2030 or beyond.”

“The bill would bring economic growth in Texas to a screeching halt. Supply chain issues are making it historically difficult to build gas plants — however one feels about clean energy vs. fossil fuels, we should ALL agree that the state needs to bulk up on renewables and storage at least long enough for the gas-turbine supply chain to get replenished. Gas turbines, unless already booked, can’t be had until 2030 or beyond. Renewables and batteries have become, ironically, a bridge to gas.”

     Clearly, with demand set to skyrocket, Texas needs both dispatchable gas generation, renewables, and batteries. The state has already incentivized natural gas generation through the Texas Energy Fund (TEF) which I wrote about in August 2024. The bottom line is perhaps that gas is desperately needed but in the near term so are renewables.

 

References:

 

Texas Senate passes bill to establish ‘dispatchable’ power credits trading program. Brian Martucci. Utility Dive. March 24, 2025. Texas Senate passes bill to establish ‘dispatchable’ power credits trading program | Utility Dive

The Texas Senate Is a Threat to U.S. Energy Security. Doug Lewin. The Texas Energy and Power Newsletter. March 19, 2025. The Texas Senate Is a Threat to U.S. Energy Security

Implications of PJM’s Proposed Price Collar for Capacity Auction Payments

     I first wrote about PJM Interconnection’s capacity auction payments increase in August 2024. The resource clearing price at the annual auction went from about $29 for the 2024/2025 delivery year to about $270 for the 2025/2026 delivery year, a nearly ten times or 1000% increase. This reflects a perceived shortfall in generation resources in the region beginning in the 2025/2026 delivery year due to a supply and demand imbalance. The latest proposal from PJM is for a price collar, which includes a price floor and a price cap, a roughly $325/MW-day price cap and a $175/MW-day floor for its 2026/27 and 2027/28 delivery year capacity auctions. According to Utility Dive’s Ethan Howland who has covered the issue:

“The “price collar” proposal would resolve a complaint filed on Dec. 30 by Pennsylvania Gov. Josh Shapiro, D, over PJM’s capacity auctions. The next auction is set to be held in July.”

Ratepayers, however, strongly objected to the price floor as too high. I am one of these ratepayers and I am poor, so I agree. Detractors have argued that the price floor could raise prices for consumers without any real reliability benefits.

“PJM’s market monitor also urged FERC to reject the grid operator’s proposal, partly over the price floor provision. “The inclusion of a minimum price greater than zero is a radical break from the definition of the [variable resource requirement] curve since its introduction and does nothing to resolve the complaint,” the market monitor said.”

“PJM has not alleged — let alone shown — that a price floor is needed to correct a market flaw and ensure just and reasonable rates,” six ratepayer advocates said in a filing. “PJM’s price floor would cause overpayments at different times by requiring customers to pay more than needed for reliability when adequate supply is available at lower prices.”

“While a narrow band of administratively allowed prices may inject price certainty in the near term, the impact this proposal may have on the willingness of market participants to make long-term investments in the PJM marketplace remains to be seen,” the PUCO office said. “The Ohio FEA is concerned that confidence in the integrity of the PJM markets, already severely undermined by years of constant litigation, negotiation, and uncertainty, will be further eroded.”

“The “price collar” proposal highlights the need for fundamental capacity market reform, according to American Municipal Power, a wholesale power supplier. “Despite years of tinkering, [the capacity market] is failing to produce an adequate supply response at just and reasonable costs to consumers, AMP said.”

     Thus, we can see that there is widespread disapproval of the price floor. With rising power demand from AI data centers, more intermittent renewables on the grid, and other factors, there is a perception that power reliability could be eroded. As a PJM region ratepayer, I say, why should we have to pay for these issues caused by tech companies wanting to make more money and renewable energy developers wanting to get more projects online? Residents should not bear the costs for businesses, especially very profitable businesses. I say we should assure residential power at a fair price before we add new power for businesses. However, there are several parties supporting the price collar proposal.

“Parties supporting PJM’s price collar proposal include the Pennsylvania Public Utilities Commission, the New Jersey Board of Public Utilities, Constellation Energy, Dominion Energy and Duquesne Light.”

“Facing the current rate of load growth and a compressed auction timeline, PJM’s proposed symmetrical capacity auction price cap and floor strikes a balance between protecting customers from excessive capacity costs and incentivizing generation to participate in PJM’s wholesale capacity markets,” Dominion said.

     In Pennsylvania’s January complaint urging for a price cap they noted:

“Pennsylvania ratepayers face potentially the largest unjust wealth transfer in the history of U.S. energy markets due to [PJM’s] capacity auctions,” Pennsylvania said in its complaint. “Three unexpected developments — (1) significant load growth; (2) the country’s most snarled interconnection queue; and (3) a compressed capacity auction schedule — have collided with PJM’s inapt design decisions to produce record high prices that are ineffective at delivering new power generation.”

“FERC should order PJM to lower its price cap to no more than 1.5 times Net Cost of New Entry, or Net CONE, and PJM should use that cap to set the minimum price cap for all locational deliverability areas, according to the complaint.”

They also warned of potential astronomical two-digit increases on monthly bills that may offer no power reliability benefit. This, they said, could undermine trust and confidence in the fairness of PJM’s capacity market.

     In October 2024 the governors of five states, Delaware, Illinois, Maryland, New Jersey and Pennsylvania, called for PJM to reform its capacity market. The concern is that the high-capacity prices are not really incentivizing new power projects on the grid as designed due mainly to the inherent delays in the interconnection queue, often caused by the difficulty of integrating variable generation like wind and solar. The governors asked that the capacity auction include reliability must-run (RMR) units after Sierra Club and other environmental groups pushed for it. However,

 “…Calpine and LS Power told FERC that they oppose the environmental groups’ “misbegotten” RMR complaint. However, they said they support resetting the parameters PJM uses in its capacity auctions, such as how much capacity the grid operator plans to buy in local deliverability areas.”

     They also noted that PJM’s capacity market has not operated consistently or transparently for a number of years, which stifles investment. LS Power is considering 2400 MW of power generation and 2000 MW of battery deployments in the PJM market but is concerned about the state of the PJM market. PJM asked for a six-month delay so they can reconfigure the market. They noted they would also include the resource adequacy benefits of RMRs into the auctions.

“These types of projects require us to develop long-term capacity market revenue expectations that will underpin the capital investment,” Hanson said. “However, the lack of stable market rules undermining price signals and expectations of risk will hinder our ability to deploy the levels of capital required to bring these projects online.”

     In November 2024 ratepayer advocate groups filed a complaint with FERC, seeking to change PJM’s capacity market design. The rise in capacity costs for consumers from $2.2 billion in the 2024/2024 delivery year to $14.7 billion in the 2025/2026 delivery year for the base residual auction (BRA) is expected to cause consumer prices to rise by 10-20%. I know that would cut into my budget. Ratepayer groups have complained that the auctions benefit incumbent generators at the expense of ratepayers.

“PJM also plans on using a combustion turbine instead of a combined cycle turbine for its reference technology to help set the capacity auction’s demand curve and adopting uniform non-performance charges across its footprint, according to the presentation. It plans to propose conducting its capacity auction for the 2026/27 delivery year in July followed by one in December 2025 for the next delivery year.”

     This whole capacity auction issue is confusing to me and many others. As a ratepayer, I want fairness and reasonable costs. PJM wants new generation to be economical for generators. The goal of incentivizing new generation needs to be reconciled with ratepayer concerns. That seems to be the basic problem to be solved. I will probably report back on this in July when the next capacity auction happens.  

 

References:

 

PJM’s capacity ‘price collar’ proposal sparks market confidence concerns. Ethan Howland. Utility Dive. March 18, 2025. PJM’s capacity ‘price collar’ proposal sparks market confidence concerns | Utility Dive

Pennsylvania asks FERC to lower PJM capacity price cap to prevent ‘runaway’ costs. Ethan Howland> Utility Dive. January 2, 2025. Pennsylvania asks FERC to lower PJM capacity price cap to prevent ‘runaway’ costs | Utility Dive

5 governors call for PJM capacity market rule changes to reduce ‘unnecessary’ consumer costs. Ethan Howland. Utility Dive. October 28, 2024. 5 governors call for PJM capacity market rule changes to reduce ‘unnecessary’ consumer costs | Utility Dive

Ratepayer advocates press FERC for PJM capacity market changes, citing ‘crushing’ prices. Ethan Howland. Utility Dive. November 19, 2024. Ratepayer advocates press FERC for PJM capacity market changes, citing ‘crushing’ prices | Utility Dive

 

Ohio Energy Issues at the Statehouse: Old Coal Plant Bailouts, Electric Security Plans, Behind-the-Meter Power for Data Centers, Solar, Tax Cuts, and Refunds

     This post is a summary of an article in the Cleveland Plain Dealer by Jake Zuckerman about some Ohio energy issues being considered in the Ohio Senate and House. He notes that Senate Republicans are promoting natural gas as the solution to powering data centers and replacing retiring coal-fired plants.

 

Bailout Subsidies

 

“Under Senate Bill 2, utilities still would not be allowed to own both the means of generating electricity and its distribution. Their current businesses revolve around distributing power, not making it. That legal certainty – along with property tax breaks – will lure gas developers to invest in Ohio, said state Sen. Bill Reineke, a Tiffin Republican.”

“The legislation also eliminates two subsidies – about $1 billion for two coal plants and $140 million for six solar projects – written into state law by Ohio’s last major energy bill in 2019.”

These subsidies were enacted as a result of the largest bribery scandal in the state’s history perpetrated by then-House Speaker Larry Householder, executives at FirstEnergy, and the late PUCO chairman Sam Randazzo, who committed suicide, presumably due to his involvement. The legislators now want to eliminate the subsidies. As the graph below shows, Ohioans have paid $679 million over the past decade to bail out those energy sources, with higher costs in 2023 and 2024, and about $172 million in 2024. I definitely noticed those higher costs on my electric bill, and I wasn’t able to keep my home as warm as I would like in the winter. The proposal is to end the bailouts for the two coal plants and the six solar projects.

 

Electric Security Plans (ESPs)

 

     Since 2008, Ohio has allowed utilities to file “electric security plans” (ESPs), one-time requests for capital expenditure projects that get charged to electric bills as “riders.” These are mostly localized projects and include things like smart meter installations. The problem with them is that they are paid for entirely by ratepayers through the “riders” even as the utilities end up saving money after they are implemented – in the case of smart meters by eliminating the need for meter readers.

“The legislation would eliminate the use of riders. Instead, all utilities would need to undergo a full rate review every three years.”

"Some utilities, like FirstEnergy, have gone more than a decade without a rate review, instead relying on ESPs, which critics have cast as a telltale sign they’re charging customers too much.”

 

Behind-the-Meter Gas and Solar

     This issue concerns new data centers' desire to power themselves behind the meter with their own power generation facilities, rather than buying directly from the utilities. 

“SB2 would change the law to say utility companies can only “supply” such behind the meter service if the generator is “in operation” before the law takes effect. And it states utilities cannot recover any costs associated with a behind the meter project from anyone but the specific customer who asked for the service.”

Of concern is how much of these projects would end up being paid by ratepayers rather than the utilities and developers. Certainly, ratepayers should not have to foot any of these costs. 

 

Redistribution of the Solar Generation Fund

     This proposal involves the redistribution of a solar generation fund paid for by ratepayers that have not led to utility-scale solar projects as planned due to red tape and other factors.

“The 2019 energy bill forced Ohioans to pay about $20 million per year into a solar generation fund, to be distributed to six of the first utility-scale solar projects around the state. The subsidy acted as a bargaining chip for renewables, which won a pittance compared to sums handed over to coal and nuclear power.”

“Sluggish implementation and red tape have bottlenecked the fund, with only $8.5 million having gone out the door and about $54 million gathering dust in a state account.”

“The Senate’s legislation would take that money and allow the state to issue it as a low-interest (2% over no more than 10 years) loan to school districts to install solar panels on their roofs.”

 

Tax Cuts to Incentivize New Development, Particularly Natural Gas Plants

     The tax cut proposal aims to lure developers to build more natural gas generation.

 “The legislation would exempt electric generation sites built in 2026 or later from tangible property taxes and do the same for natural gas pipelines or electric utility infrastructure built after 2027.”

The tax cut savings are expected to be passed on to power consumers in the form of lower costs.

“The bill also allows governments with brownfields or former coal mining sites in their borders to create five-year property tax exemptions for electricity transmission infrastructure, and it speeds up the permitting process for new power projects in those areas.”

 

Possible Refunds to Customers Overcharged By ‘Riders’

     This issue involves riders paid by ratepayers who were later found to be overcharged. An example is the $456 million charged by FirstEnergy as a “distribution modernization rider” where the money collected was not confirmed to have been spent on distribution modernization. The proposed legislation:

“…forces utilities to pay refunds on all costs after the Supreme Court finds any charge to customers as “unreasonable, unlawful, or otherwise improper.” That would span the time between a Supreme Court ruling and the PUCO issuing a subsequent ruling detailing how to proceed.”

 

References:

 

More gas, fewer surcharges: Breaking apart the Senate’s plan to solve Ohio’s energy crisis. Jake Zuckerman. Cleveland Plain Dealer. March 18, 2025. More gas, fewer surcharges: Breaking apart the Senate’s plan to solve Ohio’s energy crisis