Given that we are halfway through July, we thought it would be appropriate to provide an update on how major power markets have performed as they relate to each ISO’s coincident peak demand management program.

So far, both weather and demand on the PJM and NYISO grids have been mild compared to recent summers and average summer temperatures. The mean temperature, compared to the average over the last thirty, fourteen, and seven days for the period ending July 13, is shown in Figures 1, 2, and 3 below. These charts show that summer has not really arrived in the middle of the country and that temperatures in the Northeast are only 2º to 3º F above the average.

Why Install Electric Vehicle Chargers?

On May 11, 2023, the U.S. Environmental Protection Agency (EPA) proposed new rules designed to limit emissions from existing and new coal and natural gas fired power plants. This is the EPA’s third swing at regulating CO2 emissions from power plants. Its first at-bat dates back to 2015 when the Obama Administration’s EPA introduced the Clean Power Plan (CPP). The CPP proposed state-by-state emissions limits. These limits were quickly challenged by numerous states, particularly those with significant amounts of coal-fired generation. While these legal challenges were ongoing, President Trump was elected. Trump scrapped the CPP and introduced the Affordable Clean Energy Rule (ACE), which overrode the CPP and gave the states more power to set their own emission limits. The ACE also faced challenges in the courts.

In June 2022, the Supreme Court issued a ruling in West Virginia v. EPA that significantly limited the ability of the EPA to regulate emissions without a clear mandate from Congress. This ruling assures that the EPA’s new proposed rules, if finalized, are likely to face a lengthy legal battle.

The latest EPA plan sets out aggressive emission reductions and is likely to further accelerate the retirement of fossil fuel generation units. By 2030, the EPA plan requires any coal plant that intends to operate past 2040 to use a carbon capture and storage (CCS) system to eliminate 90% of its CO2 emissions. Large natural gas generation units will also be required to install a CCS that captures 90% of their carbon emissions by 2035 or operate on clean hydrogen by 2038. While there are different restrictions for smaller generation units, the EPA’s rules lean heavily on carbon capture, clean hydrogen and in some instances, use of dual-fueled gas plants with both natural gas and green hydrogen. At the same time, the EPA has acknowledged that CCS and clean hydrogen are not yet in widespread commercial use.

As filed last week, the EPA plan is a proposed rule, and the EPA will need another year or so to issue a final version. Once the final version is issued, states will have another two years to submit plans to comply with the regulations. This timetable will be delayed further by the inevitable legal challenges. West Virginia Senator Shelley Moore Capito and Attorney General Patrick Morrisey have already vowed to lead congressional and legal efforts to kill the rule.

A few things are clear. First, if the rules are adopted, the cost of generating electricity from coal and natural gas plants will increase dramatically. Second, even if the prospects for the EPA’s new rule are limited by various challenges, the proposed rules will cast a shadow over new investments in existing and new fossil fuel generation. Testifying before FERC on May 4, 2023, a bipartisan panel of FERC commissioners (2 Democrats and 2 Republicans) raised their shared concern that the reliability of our electricity grid is challenged by the fact that we continue to see fossil plants retire at a rate far faster than they are replaced by new emission-free generation. Of course, we will continue to monitor this important regulation on behalf of our clients.

Shriners Children’s began out of the polio epidemic in the late 1910s, with the first hospital opening in Shreveport in 1922. Today, they operate locations throughout the US and in two other countries, all with the same mission: to change and improve the lives of children. In addition to top-of-the-line treatments for children, Shriners also excels in research and physician education. With specialties in orthopedics, burns, craniofacial conditions, and many more, the hospitals follow the vision of the Shriners Fraternity to serve mankind through the care of children.

The Inflation Reduction Act was signed into law this month. As a budget reconciliation law, it impacts federal income and spending. For 5 and our customers, this law provides increased incentives for on-site renewable projects that support the energy transition.

An Overview of Coincidental Peak Costs by ISO

Coincidental Peak (CP) is the measurement of an electricity meter’s actual usage at the time of the regional grid’s highest demand and determining that meter's share of the entire grid’s demand. This concept of identifying a facility’s share of the grid’s total maximum demand is often used in determining the allocation of specific cost components. The specific methodology of how that equation works and which cost components it impacts varies from region to region, and often even utility to utility, and even by customer class, but the overall concept is the same. In this post, we explain how this works in each of the major, deregulated electricity regions, and detail which costs are the most impacted by this variable.

For the second year in a row, 5 is spotlighting one of our most innovative and iconic clients, Empire State Realty Trust. Earlier this month, ESRT announced their groundbreaking Empire Building Playbook: An Owner’s Guide to Low Carbon Retrofits. This publication, co-supported by NYSERDA and the Clinton Global Initiative, will help existing commercial buildings implement step-by-step carbon reduction processes with proven methodologies. 5 is proud to be among the core project team that helped ESRT with this game-changing playbook.

On behalf of the team at 5, I am pleased to forward our market letter for the first quarter of 2022. In this issue, we continue our focus on the energy transition and the strain that this has put on the energy market. Our last letter quoted Larry Fink of Blackrock on the importance of navigating the “global energy transition.” The past quarter’s events add geopolitical risks to the navigational challenges associated with this transition.

Conserve Power and Prepare for Potential Outages