Renewable Energy SPP

SPP Must Rework Rules That Penalize Wind and Solar Power

March 28, 2023

This blog is co-authored with Natalie McIntire.

A year-long dispute that could determine how quickly renewable energy advances across a broad swath of the central U.S. is back to square one.

Earlier this month, the Federal Energy Regulatory Commission (FERC) reversed its decision approving the Southwest Power Pool’s (SPP) plan for determining how much capacity a particular energy resource can be expected to deliver. Environmental groups including the Natural Resources Defense Council had challenged SPP’s plan on the grounds that it discriminated against wind, solar, and battery storage resources. FERC has now kicked the issue back to SPP, which oversees the electric grid and wholesale power market for utilities and transmission companies in 17 states.

At stake is accreditation – the value placed on energy resources – a key factor used by grid operators to determine how to integrate renewables into the system, and by utilities as they plan for future resource additions. Accreditation and capacity payments go hand-in-hand: generators only receive money up to the value at which they are accredited. A biased accreditation scheme, like the one developed by SPP, rewards coal and gas while penalizing renewables, potentially undermining grid reliability and resulting in higher consumer costs.

Recent bouts of extreme weather have exposed the flawed assumption that coal and gas resources are more dependable than renewables when the electric system needs power the most. Over the past decade during crippling weather events, including the 2011 cold weather outages in the Southwest, the 2014 polar vortex, and Winter Storm Uri  – which struck Texas and states in the SPP region in 2021 – fossil fuel plant outages exceeded expectations while renewable resources outperformed. 

That pattern held in December during Winter Storm Elliott, another extreme weather event likely driven by climate change that plunged much of the U.S. into freezing temperatures and pushed power grids to the brink of crisis just ahead of the Christmas holiday. As bone-chilling temperatures settled in, outages at fossil fuel plants began stacking up. Some couldn’t get fuel. Some just stopped working. And others failed to start when called upon. 

By Christmas Eve, an astonishing 46 GW of power plants (enough to power California) were out of service in PJM, the grid manager for 65 million people in the Mid-Atlantic and Midwest. In SPP, coal and gas performed well below expectations, with over 25% of that capacity unavailable due to forced or emergency outages. Meanwhile wind significantly overperformed, providing more than triple its accredited capacity near the height of the storm.

“In the case of SPP, there is a consistent pattern of taking a very conservative approach to the accreditation of inverter-based resources while ignoring the significant limitations of other resources,” the coalition of environmental groups said in a complaint before FERC. Inverter-based resources include wind, solar, and battery storage.

The coalition argues that SPP’s proposal would undervalue renewables relative to coal or gas generators through the accreditation process. At the heart of the complaint is an allegation that SPP is ignoring weather-related outages at coal and gas plants while fully accounting for weather-related outages of wind and solar. Such disparate treatment increases the cost of renewables and creates an “unfair playing field” as SPP and the U.S. shift away from gas and coal to cleaner, more sustainable energy sources, according to the complaint.

After initially approving SPP’s discriminatory plan, FERC reversed itself earlier this month citing a procedural flaw, and did not weigh the merits of the challenge. 

“SPP’s proposal was unjust and unreasonable because it penalizes wind and solar resources for outages, while simultaneously declining to adjust the credit of other resources when they experience outages,’’ FERC Commissioner Allison Clements said in a Tweet. “As SPP goes back to the drawing board, I strongly urge it to develop a fair capacity accreditation methodology that is consistent across all resource types.”

While the particulars of this case are unique to SPP, grid and wholesale power market managers across the U.S. face a common challenge – how to enhance grid reliability and lower costs while transitioning the electric system to renewable energy. At this moment when renewable project developers are eager to take advantage of incentives available through the recently passed Inflation Reduction Act to build wind, solar, and storage, an unnecessarily burdensome regulatory framework has stood in the way. 

Some, including Rob Gramlich, president of Grid Strategies LLC, are calling for a technical conference on capacity accreditation “because multiple very divergent methods across RTOs can’t all be just and reasonable.”  This is especially true when RTOs are being required to assist their neighbors by sharing capacity during extreme whether events.

At a minimum, regulators at the federal and regional level must stop overestimating the capabilities of gas and coal and redouble their efforts to approve renewable resources and update transmission planning policies that will pave the way for a clean, reliable, and resilient electrical system. 

SPP has an opportunity to bring fairness to the accreditation process by finally accounting for weather-related outages at all power resources. Returning to FERC with a proposal that fails to ensure equal treatment will unjustly penalize renewable energy and fail to guarantee that SPP member utilities have enough generation to meet demand during extreme winter events.