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New England ‘Fuel Fight’ Portends Trouble for Clean Energy Grid

March 24, 2022, 9:30 AM

As Bob Kump sees it, the zero-emissions power produced by abundant Canadian waters should connect to Massachusetts customers as a way to meet clean energy goals and lower electricity prices in a region with short supplies of natural gas and an emerging renewable energy sector.

But the Avangrid Inc. executive finds his company’s $1 billion, 145-mile-long transmission line, called the New England Clean Energy Connect (NECEC) project, locked in a bitter dispute with an unlikely opponent: another zero-emissions power plant operated by Florida-based NextEra Energy Inc.

On the surface, Avangrid’s case is a one-off complaint about whether NextEra should upgrade a piece of utility equipment. More broadly, the battle between two energy giants could have widespread implications for clean energy development as U.S. energy regulators overhaul transmission planning and cost allocation.

“This is not just about NECEC,” Kump, Avangrid’s president and deputy chief executive officer, told Bloomberg Law. “It’s about incumbent generation using a piece of aged equipment—that many would argue should’ve been replaced years ago according to good utility practice—using that as a blocker for any competition.”

A NextEra spokesperson declined to comment on the case, though the company has said in filings it has no obligation to replace the equipment.

For almost two years, the Federal Energy Regulatory Commission has been wading into an intensifying battle among power plant owners—even among zero-emissions power sources—as new resources such as solar, wind, and batteries jostle for space on the grid, said Timothy Fox, vice president and research analyst at ClearView Energy Partners, an independent research firm in Washington. Existing nuclear, natural gas, and coal-fired power plants stand to lose from new competition.

“It’s a fuel fight in the generation space,” Fox said. “New capacity likely means that someone else has got to exit.”

Besieged by Legal Trouble

The dispute with NextEra is just one challenge facing Avangrid’s proposed transmission line.

In November, voters in Maine rejected the transmission project’s path through that state. Environmental groups such as the Natural Resources Defense Council railed against the local effects of tree-cutting to make way for power supplied by Hydro-Quebec destined for their neighbors to the south.

Avangrid, a subsidiary of the Spanish power giant Iberdrola, is currently challenging the Maine referendum in state court. A judge refused to block the outcome from taking effect in December, and the parties are preparing for oral arguments in May.

The forces driving the referendum are also playing out in the FERC case. NextEra, the largest utility in the world, funded opposition to the project during the 2021 campaign season, joining Calpine Corp. and Vistra Corp., Texas-based companies that own natural gas plants.

“It was a poster child for some of the difficulties of trying to get a long-distance, high-voltage transmission project built in this country these days,” said Larry Gasteiger, executive director of WIRES, a Washington trade association promoting transmission development, who worked at FERC for almost 20 years.

“The question is whether this is a road map—and then, depending on what FERC does with it, is it one that FERC essentially green-lights?” Gasteiger said.

A Necessary Upgrade

Avangrid contends NextEra is required, by open access transmission and interconnection rules under the Federal Power Act, to replace its circuit breaker at its Seabrook Station Nuclear Power Plant in New Hampshire. It initially hoped NextEra would complete the upgrade during the plant’s 2021 refueling outage, when it performed other routine maintenance, but the company didn’t oblige.

NextEra argues, however, that the circuit breaker functions as a generation asset and not a transmission device.

Avangrid filed a complaint at the commission in October 2020, after months of talks with NextEra broke down. Almost a full year later, in September 2021, the commission established a proceeding and ordered regional grid operator ISO New England to answer a series of questions.

The grid operator’s rules don’t explicitly require NextEra to make the circuit breaker upgrade, ISO New England told the commission last year. The operator puts the obligation on the transmission owner, Avangrid, to reach a deal with the generator, NextEra, to complete the upgrades.

But the operator suggested the aging circuit breaker could put New England’s transition toward a zero-emissions generation portfolio at risk. The Biden administration has set a goal of 30 gigawatts of offshore wind generation by 2030, a key milestone on the way to net-zero emissions from the power sector by 2035.

That target will require new transmission and ramp up competition among wind farms for space to plug their power into the onshore grid, energy analysts have said.

Since the Avangrid line was proposed, ISO New England has studied a “very large number” of interconnection requests that assumed the circuit breaker would be replaced, the grid operator told the commission. Virtually all of the proposed generators are offshore and onshore wind projects, solar facilities, and batteries.

“Given all of this, the replacement of the Seabrook Breaker is necessary for the safe and reliable interconnection of the NECEC Transmission Project to the system,” the grid operator wrote. A spokesperson for ISO New England didn’t respond to requests for comment.

‘Unacceptable’ Delays

It is unclear when the commission will rule on the matter, but the push for a final ruling is bipartisan.

The situation in New England is a “harbinger of a larger problem” given FERC’s commitment to transmission development, Massachusetts Attorney General Maura Healey (D) told the commission last October. Waiting until this spring or summer would “significantly compromise the spring 2023 in-service date of the NECEC project.”

The fact that “a direct competitor of NECEC can thwart a major transmission project simply by refusing to negotiate and agree to commercially reasonable terms manifests a weakness in the interconnection process that must be addressed,” Healey wrote.

James Danly, a Republican commissioner, dissented from the commission’s order last year that established a lengthy investigation into the matter.

“While transmission development faces innumerable challenges (as the facts of this case amply demonstrate), unjustifiable commission inaction should never be among them,” Danly wrote. “We have allowed the matter to languish for nearly a year and have yet to issue an order on the merits. Such delay is unacceptable.”

To contact the reporter on this story: Daniel Moore at dmoore1@bloombergindustry.com

To contact the editor responsible for this story: Zachary Sherwood at zsherwood@bgov.com

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