Chatterjee, Others Tell USEA of Market Changes, Challenges and Opportunities

The energy industry is not immune to the partisan acrimony in Washington, D.C., but policymakers and industry leaders at a U.S. Energy Association meeting focused on positive market developments and opportunities for enhancing energy security in America.

FERC Commissioner Neil Chatterjee addressed energy market changes, his belief in narrow interpretations of statutes, cybersecurity issues, and lessons learned from recent international travels in an April 12 speech at the USEA Annual Membership Meeting. He also mentioned possible changes to FERC’s policy statement on certificates for natural gas pipelines and the Commission’s handling of the notice of proposed rulemaking (NOPR) on power grid resilience from Energy Secretary Rick Perry.

Other speakers at the event touched on cybersecurity concerns, competition among fuels in the generation market, workforce turnover in the industry to a younger generation, and the energy renaissance that fracking and modern technologies ushered in with abundant oil and natural gas supplies.

Some of the market changes, such as LNG import terminals changing to export terminals and Congress lifting the ban on crude oil exports, were not foreseeable several years ago, but they present opportunities for America to address societal challenges, said Jack Gerard, president and CEO of the American Petroleum Institute (API). With more than 1 billion people around the world in energy poverty, without access to basic energy resources or steady electricity supplies, U.S. resources and technology can be used to transform relationships in other countries, Gerard said.

Technology gains and market changes can alter the future, but it is hard to step back and reflect on developments when you are amid the changes taking place, said Gerard.

“I think there are unlimited possibilities in the future,” with artificial intelligence, smart cities, electric vehicles, the growth of renewable resources and big data transforming the power grid and energy sector, added Tom Kuhn, president of the Edison Electric Institute (EEI).

The growth of energy storage technologies could yield big dividends for battery manufacturers and renewable power project developers, Chatterjee said. After hearing from a variety of participants at FERC’s technical conference on distributed energy resources April 10 and 11, Chatterjee said “I’m excited about the possibilities” for storage to participate in wholesale markets and proud of the recent final rule (RM16-23) to remove barriers for storage to do so.

“We’re in the midst of a rapid and exciting and accelerated transformation in our energy markets and our energy mix,” Chatterjee said. The abundant and affordable natural gas supplies and renewable resources are fostering changes in the generation market and putting economic pressure on coal and nuclear power plants. “The train has left the station on renewable energy and it is not going to stop,” but regulators need to ensure that the train runs smoothly, with no impact on grid reliability, resilience or safety, he said.

Protecting grid resilience was the force behind the NOPR that Perry sent to FERC while Chatterjee was chairman, before the Senate confirmation of current Chairman Kevin McIntyre. Chatterjee deemed it unfortunate that the proposal became politicized, with FERC observers worried that he would ignore the legal principles of the Federal Power Act (FPA) and favor coal-fired generation due to his background from coal-heavy Kentucky.

Chatterjee hopes that the way FERC addressed the NOPR, with a unanimous rejection while continuing to examine resilience issues, provides assurance “that FERC will continue to be a beacon of stability in an otherwise volatile regulatory landscape.”

Addressing his move from the Senate to an independent agency, Chatterjee said he takes the quasi-judicial role of the Commission very seriously, with decisions based on the record before it. “I’m a conservative. I believe in a narrow interpretation of statutes,” and what he found in the NOPR was an expansive view of the FPA that was not supported by the record.

Returning to the embrace of renewable resources and technologies in the U.S. and abroad, Chatterjee said the use of digital technologies comes with a downside risk that makes power grids more vulnerable to cyber threats. FERC takes such threats seriously and works with the North American Electric Reliability Corp. (NERC) to have reliability standards in place. But those standards “are the floor and not the ceiling” for grid protections as Chatterjee believes “there are steps that we can take to stay ahead of these ever-evolving cyber threats.”

One of the steps that can aid integrating renewables and enhance energy security is being taken by the Department of Energy (DOE) as it works on a reliability and resilience model for North America, said Bruce Walker, assistant secretary for the office of electricity delivery and energy reliability at DOE. The model will benefit Mexico, Canada, and the U.S. by highlighting energy transfer points among the countries and identifying weaknesses where additional investment is needed, Walker said. DOE is working with FERC, NERC, and others on the modeling tool to help protect the power grid.

It is also putting new technology to use in Puerto Rico as a test case for grid resilience as the island rebuilds its power grid in the aftermath of Hurricane Maria, Walker noted. DOE labs and other agency resources are being used to accelerate the use of technologies on the island, he said.

Chatterjee said he gained appreciation for some of the cyber and physical grid protection measures being used in foreign countries during a recent trip to Israel. Because of the political strife and threats the country faces, officials in Israel deal with cyber and physical security issues on a constant basis, with exercises and drills specific to the challenges in that region of the world.

Jordan and Israel are working on an agreement involving Israel using renewable resources for desalination plants to send water to Jordan, Chatterjee told the USEA audience, likening the agreement to addressing “seams issues” among independent system operators in the U.S. Officials in the countries wanted guidance from FERC on such issues, he said.

Chatterjee praised a memorandum of understanding signed by McIntyre on the environmental review process to try and alleviate the burdens of other agencies when FERC reviews applications for new pipelines. He also hopes that the certificate policy statement review can lead to making the application assessment process more efficient.

“I’m very sympathetic to the plight of landowners,” he said, noting that making the process more efficient does not mean the Commission will sacrifice environmental stewardship or pipeline safety. “I want to hear from all sides” and intend to ask plenty of questions in the inquiry, he said.

The public perception of the energy industry as old and staid needs to change, because the industry is using some cutting-edge technologies to benefit consumers and attract a younger workforce, Kuhn and Gerard said during a question and answer session with USEA Executive Director Barry Worthington. With so many baby boomers in the oil, natural gas and electric utility sectors retiring in the coming years, the sectors need to appeal to younger workers who want to be clean, green and cool, they said.

Both Gerard and Kuhn received the U.S. Energy Award from USEA for their decades of leadership at energy trade groups. They spoke of similar themes that public policy should support free markets, energy should not be a partisan issue, and that abundant energy supplies in America can bring countries together in a polarized world. They both noted that opponents to energy infrastructure are becoming more vocal, with some fringe elements looking to shut down nuclear plants and halt use of fossil fuels.

“The reality is we will need more energy in the future,” and need to hold honest and fair discussions with the American people to improve their knowledge and appreciation of the energy industry, Gerard said.

Policymakers can embrace competitive markets, but it needs to be true competition that does not benefit one fuel over the other, Gerard said while speaking with reporters after the Q&A session. As he has previously, he deemed the Renewable Fuel Standard (RFS) a rule that needs to be modified because it is not in line with current market trends and favors ethanol producers. “Our view is we need to stick with the fundamental principle that you need appropriate regulation, but that regulation needs to be agnostic as to fuels,” he said.

The same principle applies to the request of FirstEnergy Solutions to have Perry issue an order to improve compensation for coal and nuclear plants in PJM Interconnection, asserting that there is a grid resilience emergency, Gerard added. PJM and others have shown that the power grid is not at risk, and the proceeding should be based on facts in an honest discussion, not inflammatory rhetoric. “We don’t need scare tactics to get people all worked up over this,” he said.

By Tom Tiernan TTiernan@fosterreport.com

 

This article appears as published in The Foster Report No. 3194, issued on April 13, 2018

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