COMPETE's Massey Sees RTO Changes To Push Demand Response, Wind

COMPETE's Massey Sees RTO Changes To Push Demand Response, Wind
Energy Washington Week
January 28, 2009

FERC is likely to continue making minor adjustments to organized wholesale electricity markets with the explicit goal of coaxing more renewable energy and demand side resources into the mix of market offerings, according to former FERC Commissioner William Massey, a staunch defender of the increasingly controversial organized markets.

Massey, who is counsel to the COMPETE Coalition -- comprised of suppliers, consumers, service providers and others supporting organized markets -- in an interview with EnergyWashington said he believes FERC will tweak the wholesale market rules to allow for greater percentages of renewable energy and demand side resources in meeting demand. He served as FERC commissioner from May 20, 1993 to Dec. 9, 2003.

While the markets are under attack from publicly owned utilities and consumer groups, who charge that some market price-setting systems produce unjust rates, renewable energy and demand response providers have come out in support of the markets, arguing that they are the best forums for deploying many new energy technologies.

When asked how FERC will change organized markets, Massey said the commission will administer "tweaks to ensure that the innovators have a platform that welcomes them. I would say that is what FERC is interested in right now."

Massey also said that the Obama administration's goal of expanding renewable energy and reducing greenhouse gas emissions will be most effectively met by competitive markets. He described several key areas in which he believes FERC will alter market rules to bring more low carbon resources to market.

"I think the commission feels we need to continue to refine the DR rules so we incentivize even greater percentages" of it, he said. "I think to the extent these markets have capacity markets, the commission will refine those so that DR providers" can participate.

A central question FERC will seek to answer with regard to DR, in the hopes of increasing its deployment, is "what kind of commitments does the DR provider need to make to the RTO so [the RTO] can count on this resource," he said. "There is a lot of work and activity going on in that area." The activity, he said, is primarily at the staff level and through DR providers submitting filings with the commission.

At the same time the North American Energy Standards Board (NAESB) has proposed a first-ever "framework" for measurement and verification of energy savings from demand response, a framework that has won significant support but has also prompted large industrial energy consumers to urge the NAESB board to reject the proposal, arguing that it gives ISO and RTO systems too much discretion in imposing DR requirements (EnergyWashington, Jan. 21, p18).

Massey also expects the commission to modify rules to bring more renewable energy -- particularly wind -- into the markets. This will start with the continuation of interconnection queue reform, which the commission has been grappling with for more than a year. "They will continue to tweak the interconnection queue rules overtime," he said. "There are hundreds and hundreds of renewable projects in the interconnection queues. They've done some work on that but I think they will do more."

Another way the commission may encourage greater deployment of renewable energy is by spreading the cost of renewable energy transmission over a wide range of consumers. "Some of the renewable producers have said: 'Look, FERC, it's really national policy to encourage renewables. FERC, you have said you want to encourage renewables, we really need to smear the costs of these transmission investments over a broader footprint,'" Massey explains. "And the commission has been responsive to that."

Finally, he said that commission policies will continue to change to account for the intermittent nature of renewable resources. "They simply are not generating facilities that you can ramp up and down by pushing a button. And I think the commission's policies are recognizing that more and more," he said. For example, "They've changed the penalty provisions" to reflect that.

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