Where Will a President Trump Take FERC and Federal Grid Policy?

President-elect Donald Trump has vowed to decimate the United States' funding for clean energy and combating climate change. But how his choices will impact the country's main grid czar, the Federal Energy Regulatory Commission, is far less clear.

FERC's role — managing the interplay between state and federally regulated electricity and gas networks — is more behind the scenes and less of a political target than, say, the Environmental Protection Agency's Clean Power Plan, or the Department of Energy's multibillion dollars in support for renewable energy. That's left FERC untouched by threats of being shut completely out of the federal budget, as Trump has said he will do with clean energy funding and climate change programs. 

Still, FERC's decisions under the Obama administration have been critical for opening energy markets to non-fossil-fuel alternatives such as demand response and solar and wind power. For most of that time, markets have also been guided by former Chairman Jon Wellinghoff — now with SolarCity — who put promoting clean and carbon-neutral energy systems at the forefront of the agency's mission. 

In January 2017, two of the five seats on the FERC board will open up, giving the Trump administration the opportunity to appoint individuals with a different view of what FERC should do with its power. And while those seats were reserved for Republicans in any case, given Trump's statements of support for coal, oil and natural gas, it stands to reason that he will seek out candidates who will represent those industries’ interests.

FERC by law can’t have more than three commissioners of the same political party, and right now all three sitting commissioners — Chairman Norman Bay, Colette Honorable and Cheryl LaFleur — are Democrats. In October 2015, Republican commissioner Philip Moeller left the agency to join the utility group Edison Electric Institute, and the remaining Republican member, Tony Clark, left the agency last month.

And while the biggest policy changes out of FERC haven't broken along ideological lines, they've consistently featured economic conflicts between two competing factions. On one side has been the fossil fuel power industry, seeking to limit changes that opened them to market competition or regulatory restraint. On the other side has been a coalition of states, federal agencies and private industry, tied together by their support of cleaner — and, hopefully, equally cost-effective — alternatives to big power plants.

So far, FERC orders and court rulings have largely fallen on the latter side of the equation. But “tensions between state and federal policies are likely to continue,” according to an October report (PDF) from Duke University, Harvard Law School and the University of North Carolina on energy policies the next administration will need to handle. “Ongoing disputes relate to the generation mix, resource adequacy, compensation for distributed energy resources, implementation of the Public Utilities Regulatory Policies Act of 1978 (PURPA), and competition policy.”

FERC’s decisions and orders apply to the independent system operators (ISOs) and regional transmission organizations (RTOs) that run much of the U.S. power grid. About 70 percent of the country is served by ISOs and RTOs, which fall under federal jurisdiction because they cross state lines.

Some of the biggest orders to come out of FERC during the Obama administration include FERC Order 745, which required ISOs and RTOs to pay customer-side capacity resources such as demand response an equivalent value to what power plants and other supply-side resources earn; FERC Order 755, which required ISOs to create programs to reward “fast-responding” resources such as batteries for frequency regulation; and FERC Order 1000, which has set up a new regime for transmission operators and utilities to plan for, and pay for, regional grid investments.

Complicating the picture is the fact that some of the most important decisions affecting FERC's mission have come through the courts. In 2014, the U.S. Court of Appeals for the District of Columbia Circuit upheld FERC Order 1000 against legal challenges from 45 different petitioners, including utility groups and state utility regulators. And in January, the U.S. Supreme Court upheld FERC Order 745 in a 6-2 decision, reversing a lower court opinion that found that it violated state’s jurisdiction over retail energy pricing, and dealing a blow to the utility group that brought the original lawsuit. 

Demand response providers and environmental groups supported FERC Order 745, noting that it has opened markets that have brought significant new demand-side capacity to the country’s grid operators. Order 745 also helped reduce the need for fossil fuel-fired power and lowered overall electricity costs for consumers. But the underlying legal question behind the lawsuit — the bounds between federal and state jurisdiction over energy markets — could be brought back to the court to define.

Meanwhile, “although disputes involving the generation mix and resource adequacy are most pertinent to states with restructured electricity markets, other issues — including compensation for distributed resources, PURPA implementation, and competition policy — have broad implications regardless of a state’s system of utility regulation,” the universities' October report noted. 

More unclear still is how a Trump administration will direct FERC’s activities on bringing distributed energy resources (DERs) like solar PV, behind-the-meter batteries, plug-in vehicles or energy-smart buildings into its purview, GTM Research analyst Elta Kolo noted. Right now, FERC's involvement in this arena has largely been second-hand — setting up ISO markets for fast-responding DERs, or keeping open the door for demand-side resources for grid capacity. 

But the agency is also reviewing a host of ISO decisions, such as mid-Atlantic grid operator PJM's new rules for capacity procurement, or California ISO's creation of a market construct for DERs, that could have an impact on DER markets, Kolo said. While it's hard to predict how newly appointed commissioners and a change in administration will influence FERC's approach to these issues, Trump's avowed hostility to green energy doesn't bode well for keeping up these efforts at the agency. 

“If Trump goes down this path of doing away with clean energy and supporting resources and technologies, then the blurry lines of FERC's jurisdiction become much more clear,” Kolo said. “DERs at the distribution level are causing a stir for the wholesale markets. If the Trump administration sticks to supporting large central generation, FERC's powers are clearly bound.”

Whether or not Trump voters would support a dismantling of policies that enable green energy on the grid isn’t completely clear, however. According to a Pew Research poll, while Trump voters are far more supportive of coal and fracking than are Clinton supporters, a majority also support solar and wind energy development.

Meanwhile, FERC still has a three-Democrat majority, at least for the next six months — Commissioner Colette Honorable’s term expires in June 2017. Chairman Norman Bay’s term expires in June 2018, and Commissioner Cheryl LaFleur’s term expires in June 2019. 

from GTM Solar https://www.greentechmedia.com/articles/read/where-will-a-president-trump-take-ferc-and-federal-grid-policy

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