It’s been a tumultuous year in the power sector. Renewables and storage hit new cost lows, multiple utility mega-projects failed and U.S. utilities were hit with three hurricanes.
Amid all that, federal policymakers sought to remake wholesale markets, roll back regulations on generators and pass the first corporate tax overhaul in a generation.
In an environment like that, it’s easy for the news of a year to become a blur — a series of frantic headlines, each only persisting in the public consciousness until the next crisis. Often, that’s how 2017 has felt.
Fortunately, you — the Utility Dive audience — give us a way out of that trap. By following reading patterns throughout the year, we can construct a high-level timeline of 2017’s biggest news, as determined by you. It’s a series of events that only a year before would have seemed impossible and one that sets the sector up for a hectic year to come.
With that, here are your most-read Utility Dive stories of the year:
NRG CEO Mauricio Gutierrez gave a bleak preview of the year to come on his Q4 2016 earnings call in February. Faced with historically low natural gas prices and the decreasing cost of renewables, the CEO of the nation’s largest independent power producer declared the merchant generator model “obsolete,” saying his company would refocus on regulated businesses.
The comment was prophetic in more ways than one. In July NRG announced it would restructure, shedding 6 GW of generation capacity and numerous renewable energy assets in the process. The market dynamics forcing it and other IPPs out of wholesale markets would also become a central justification for a Department of Energy proposal to subsidize coal and nuclear plants.
Soon after Gutierrez’s statement, it became clear merchant generators would not be the only ones to struggle in 2017. That was when reports began to surface that Westinghouse Electric, the lead contractor for two nuclear plants then under construction, would go belly-up.
Westinghouse officially filed for Chapter 11 bankruptcy protection days after that article, blaming cost overruns due largely to its faulty designs for new reactors in South Carolina and Georgia. The loss of the main contractor would ultimately prove fatal for the South Carolina project (see below), while Georgia regulators are expected to decide this month if their reactors will be finished.
Later in the spring, attention shifted to the California wholesale market, where expanded renewable energy production was causing more headaches for existing generators. Thanks to a wet winter and windy spring, wholesale power prices in the state were routinely dipping into negative territory — the phenomenon averaging, at its peak, twice a day in March.
The California grid operator responded with higher levels of curtailment for some resources, but the low power prices would still prove troublesome for the state’s natural gas plants throughout the year. Analysts would later tell Utility Dive that market dynamics mean up to 6 GW of natural gas capacity is at risk of early retirement in the state. Those realities, combined with regulatory preference for zero-carbon resources, have many observers asking whether California has built its last natural gas plant.
May’s next news item would highlight one emerging alternative to the struggling fossil generation of California — renewables-plus-storage. On May 11, Tucson Electric Power announced it signed a power purchase agreement with NextEra Energy for a 100 MW solar array and a 30 MW, 120 MWh energy storage system "at an all-in cost significantly less than $0.045/kWh over 20 years.”
The contract was by far the lowest-price deal for a resource of this type — less than half the price of a deal signed by a Hawaii co-op in January for $0.11/kWh. Analysts later said that solar subsidies and aggressive PPA pricing were largely responsible for the eye-popping number, but such contracts could become more common as storage takes a larger role in utility planning processes.
The Westinghouse woes reached their climax in South Carolina over the summer, when utilities Santee Cooper and South Carolina Electric and Gas announced they would abandon a two-reactor expansion of the V.C. Summer nuclear plant, having already spent $9 billion in ratepayer cash.
The decision came on the heels new cost estimates saying it could cost $25 billion to finish the project, more than double the original pricetag. Utility owners sought to blame Westinghouse, but subsequent reporting revealed that utility management may have knowingly hid serious problems with construction for months leading up to cancellation. SCE&G’s parent now faces multiple lawsuits and an SEC investigation, while Santee Cooper, a public utility, could be sold off to pay for the abandoned plant.
Amid all the power market upheavals, the DOE in April ordered a review of the power grid, examining whether renewable energy policies are hastening the retirement of coal and nuclear plants and threatening reliability. Clean energy advocates recoiled, concerned that the foregone conclusion of the report is that they were.
Those critics were largely surprised, however, when DOE released the report after multiple delays in late August. The final product fell largely within the consensus views of grid operators and sector analysts, blaming competition from natural gas as the chief cause for baseload plant retirements. The report concluded that power reliability is currently not threatened, but that would not stop DOE from using the report as a central justification for its subsidy proposal for coal and nuclear plants.
The DOE released that subsidy plan at the end of September, proposing cost recovery for merchant plants that keep 90 days of fuel supply onsite. The agency, along with allies in the coal and nuclear sector, argued the plan is necessary for reliability and resilience, but a wide swath of energy stakeholders and former regulators oppose the rule, saying moving so many generators into cost recovery will “blow up” power markets.
In November, the acting chairman of FERC floated an interim compromise, proposing short-term payments while grid operators reported back to FERC on grid resilience. He has since backed off the proposal, and the new Chairman Kevin McIntyre requested 30 more days for the FERC to act on the DOE plan. Secretary of Energy Rick Perry begrudgingly approved that request this month, giving FERC until Jan. 10 to rule.
As market forces swirled into a perfect storm for generators, Puerto Rico was left to deal with a gale of its own. Hurricane Maria damaged or destroyed virtually all of the island’s electrical grid, plunging the territory into a the nation’s longest blackout from which it has yet to emerge.
Restoration work has been slow on the island, partly due to the public utility’s decision to eschew mutual aid offers from mainland utilities and opt for Whitefish Energy, a small Montana contractor. After weeks of slow progress, the Puerto Rico governor cancelled the deal in October following revelations that the contract did not include performance requirements. The FBI is now investigating the contract, and power restoration is not expected to conclude until February.
The power markets would not be the only ones to see upheaval in 2017. In October, the Environmental Defense Fund published a report detailing how Eversource and Avangrid used scheduling techniques to make a New England pipeline look fuller than it was, increasing “average gas and electricity prices by 38% and 20%, respectively,” over a three-year period.
The utilities say they were simply being conservative in their pipeline contracting to ensure reliable service, but the report sparked inquiries in Connecticut and Massachusetts, as well as a call for FERC to investigate from Sen. Richard Blumenthal (D-CT). The utilities also face a class action lawsuit from customers, and Eversource has served EDF with a cease and desist letter, threatening legal action if it keeps publicizing the study.
The last item on the most-read list also was one of the quickest to evolve. Faced with multiple legislative failures in 2017, Congressional Republicans in the autumn turned their attention to a corporate tax overhaul. The bill came together in a matter of weeks through closed-door discussions, leaving many lawmakers and industry players in the dark until shortly before bills were to receive votes.
One provision that particularly startled the power sector was the Base Erosion Anti-Abuse Tax (BEAT) provision, added on Thanksgiving eve shortly before the bill passed. Companies worried the provision, meant to counter tax dodging from multinationals, could dry up the tax equity markets for renewables. The final tax proposal includes an offset provision for 80% of BEAT payments, but also dropped tax credits crucial to nuclear power. Congress is expected to approve the bill this week.
In the year to come, each of the narratives outlined in these articles are likely to persist. Natural gas prices and renewable energy will keep wholesale prices low, consumers and utilities will accelerate their adoption of storage and distributed energy, and the Trump administration will continue its campaign to prop up the coal industry.
How you, the leaders of the power sector, respond to these realities will shape how this industry outlook reads at the end of next year. It won’t be an easy journey, but we’ll be there with you every step of the way.