The Utility Dive Outlook on 2022

At the start of the Biden administration's second year, government agencies are beginning to implement the Infrastructure Investment and Jobs Act, the bipartisan infrastructure package Congress passed last year. Concerns remain high about the reliability and security of the U.S. power grid, and the future of the Build Back Better bill and its clean-energy provisions remains uncertain. The Federal Energy Regulatory Commission, which now has a Democratic majority and a full complement of commissioners, is poised to play a key role in how much the administration's climate and energy policies advance.

States, utilities and other businesses continue to pursue ambitious clean energy and decarbonization goals, which are driving more deployment of renewable energy, storage, distributed energy resources and electric vehicles across the country. These resources are evolving too, with greater focus in the storage sector on long-duration assets and moves to build out the supply chain in U.S. offshore wind, for example.

The broad changes occurring in the U.S. power sector are prompting concerns, however, about ensuring the costs and benefits of the energy transition get distributed equitably. Utility Dive's editors and reporters summarize the top concerns, challenges and priorities across the sector for 2022 below.

Reliability and resilience concerns remain front of mind

In 2022, the power sector will likely continue to scrutinize and invest in building a grid that is more resilient to a changing climate and more severe natural disasters, said Michael Colvin, director of regulatory and legislative affairs in California with the Environmental Defense Fund. Utilities will be considering whether they should be putting more equipment underground or investing more in microgrids, for example, he said. 

Some states will need to adapt their regulatory regimes to a changing resource mix, according to Seth Hilton, a partner at law firm Stoel Rives.

"You can hit a tipping point, and all of a sudden you have a ton of solar on the system … and then you have markets or regulatory regimes that aren't really structured to deal with those types of resources very effectively," Hilton said.

Software supply chains are vulnerable, ransomware a 'nuisance,' but experts say the grid will remain stable

The electric grid will likely remain stable, experts say, due to massive investments in security and a separation between operational systems and information technology.

"There has never been even a small outage caused by a cyberattack in the U.S., and I see no reason to expect one this year," security consultant Tom Alrich said in an email.

Utilities could actually start to see insurance premiums decline if their safety record holds as the risk is better understood, said Michael Gaudet, U.S. energy, power and utility leader within Marsh's financial and professional liability practice. One problem they're up against, is that a widespread grid failure would be catastrophic.

Marsh is an insurance broker that works with underwriters who provide utilities with cyber insurance.

Lloyd's of London in 2015 estimated the economic impacts of a widespread attack on the U.S. power grid could range from $243 billion up to $1 trillion in the most damaging scenarios. But the likelihood of such an attack is scant.

"I work in the insurance markets all the time interacting with underwriters. So I hear a lot of their perspective. The underwriters have a stigma related to utilities," said Gaudet. Ransomware will continue to be a threat, he said, but actual losses in the utility sector are minimal.

Ransomware will continue and largely be a "nuisance," Mark Carrigan, cyber vice president of process safety and operational technology cybersecurity at Hexagon PPM, said in an email. "A much greater concern to grid reliability are the supply chain vulnerabilities that are being discovered on a regular basis," he said. "This issue requires very little expertise to exploit and provides an attacker with wide latitude once accessed."

Supply chain threats are growing and are not receiving much attention outside of the software community, said Alrich.   

"These are primarily IT threats and they can devastate a utility financially, even if they don't impact the grid," he said.

Transmission, gas infrastructure and market reform top FERC's agenda

The Federal Energy Regulatory Commission starts out 2022 with a full complement of commissioners, which FERC Chairman Richard Glick says will help the agency's decision-making process. Glick has set an ambitious agenda for FERC.

"It seems like there's a willingness to push pretty hard to move [the issues] through, if not on an expedited basis, at least in a pretty brisk fashion," former FERC Commissioner Tony Clark said.

Glick aims to issue a proposed rule early this year revamping requirements for transmission planning, cost allocation and grid interconnection, with a final rule coming before 2023, he said in December. FERC may break some of the issues into separate proposals, Glick has said.

Also, FERC is considering updating its criteria for reviewing proposed natural gas infrastructure projects, which haven't significantly changed since 1999. It could change how it decides whether the infrastructure is needed, how proposed facilities would affect the climate and environmental justice communities, and how greenhouse gas emissions could be mitigated. 

"There's a lot, and it's being done in a pretty hotly charged political environment as it relates to pipelines," Clark said. "Capitol Hill is interested, the industry is very interested, environmental stakeholders are interested … it has the potential to be very controversial."

FERC will continue to review market rules to make sure they don't prevent emerging technology, such as energy storage, from participating in wholesale power markets while also ensuring the electric system is reliable, according to Jeff Dennis, Advanced Energy Economy managing director and general counsel.

FERC held a series of technical conferences last year on issues such as capacity markets, energy markets and ancillary service markets, teeing up possible action this year, Dennis said.

Expect power market growth in the West, more efficient trading in the Southeast

"Regionalization is on the move, whether it's for capacity sharing, … or energy markets to transact energy in real time and day-ahead or a full [regional transmission organization]," Vijay Satyal, Western Resource Advocates regional energy markets manager, said.

Satyal said he is following three main market developments.

In the West, the California Independent System Operator (CAISO) is working with stakeholders to develop an extended day-ahead market (EDAM) that would build on the existing energy imbalance market (EIM), which has grown to cover much of the West. The EDAM would be open to EIM participants. CAISO staff aims to issue a draft EDAM proposal in mid-April.

Meanwhile, the Southwest Power Pool (SPP) is moving ahead with market options for Western utilities. The grid operator last year launched its Western Energy Imbalance Service market, which provides real-time balancing services to Basin Electric Power Cooperative, Tri-State Generation and Transmission Association and other power providers.

Some Western utilities are considering joining SPP. The grid operator is in the early stages of developing a package of day-ahead and other services it calls Markets+ for utilities that don't want to join SPP, but want market services.

Finally, the Northwest Power Pool spearheaded an effort to create the Western Resource Adequacy Program, which was launched in December. The program, which SPP would operate, has 26 participants. The program is designed to help utilities make sure they have enough capacity to meet their needs.

Meanwhile, a group of Southeast utilities will be putting in place this year a computerized platform to make their bi-lateral trades more efficient, although critics contend it isn't a true market. Advocacy groups have asked FERC to reconsider its tacit approval of the platform, called the Southeast Energy Exchange Market, which went into effect when the agency deadlocked over the plan.

The offshore wind industry is establishing supply chains on the East Coast and preparing for westward expansion

Offshore wind in the U.S. received strong signals from the federal government about long-term opportunities for deployment when Interior Secretary Deb Haaland on Oct. 13 shared a road map of leasing activities on the outer continental shelf through 2025.

In February, the Bureau of Ocean Energy Management will hold the largest offshore wind auction to date, covering six areas in the New York Bight. The agency will continue to identify leasing areas in the Gulf of Mexico and off of Northern California. States also are setting deployment targets, with New York recently announcing an additional solicitation for up to 2 GW of offshore wind. 

On the East Coast, states and the federal government continue to invest in the offshore wind supply chain in "a race to be the state that is leading the charge on that and bringing those jobs to their state," according to Autumn Proudlove, NC Clean Energy Technology Center senior policy program director.

As the federal government creates opportunities for leasing in other areas of the country, jobs and opportunities across the offshore wind supply chain will spread across the country, said Sam Salustro of the Business Network for Offshore Wind. 

"We're already seeing manufacturers in the Midwest be participants" in various solicitations for offshore wind projects, said Salustro, the network's director of coalitions and partnerships in Maryland.   

While solar and onshore wind are facing supply-chain issues right now, it's "less of an issue for offshore wind because it's still a couple of years off before installations really take off," said Patrick Luckow, an associate director at IHS Markit for gas, power and energy futures.

Storage advocates eye regulatory processes as the sector sees record-breaking growth

The U.S. energy storage industry continued to break records in 2021, installing an unprecedented 3.5 GWh of new storage in the third quarter of the year, and it was poised to surpass that number in the fourth quarter.

Several storage projects that have been under contract are expected to come online in the U.S. in 2022, said Jason Burwen, vice president of energy storage at the American Clean Power Association. In addition, storage advocates will be watching to see if some recent regulatory changes — like the change in capacity accreditation methods PJM uses — come to fruition. 

The outlook for the storage sector in 2022 also hinges to a certain extent on whether the Build Back Better Act passes, Burwen said, with its proposed investment tax credit for stand-alone energy storage. If the bill passes, this market will become "an enormously crowded place for folks to get projects built...," he said.

Despite this record growth, battery supply chains have faced constraints in the last year. Although global supply is ramping up, demand has expanded faster, and logistical challenges to moving goods could raise prices and lead to project delays. The demand might also lead to greater attention to non-lithium battery technologies, Burwen said. 

In California, a key issue for storage advocates in 2022 will be improving regulatory processes, like expediting approvals and streamlining permitting, Jin Noh, policy director of the California Energy Storage Alliance, said during a December webinar. 

"[W]e can't do just-in-time procurement, as we've seen, when we have these macroeconomic shocks like supply-chain issues or COVID. This creates a lot of risks in achieving our goals," Noh said.

The long-duration storage market gained momentum as well, with 2021 seeing the debut of one project using iron-air-exchange batteries and applications for compressed-air energy storage at two proposed facilities in California. There is "a lot of recognition by investors that if we're moving rapidly to a clean energy future, energy storage, and particularly longer-duration storage, is going to have a very critical role to play," said Burwen. Even if deploying long-duration storage at scale is some years away, developing products, getting people familiar with them, and making sales and contracts starts now, he added. 

Distributed energy resource installations will continue growing

Analysts expect distributed energy resource installations, including hybrid facilities, to continue growing this year despite ongoing supply chain problems. 

Wood Mackenzie and the Solar Energy Industries Association anticipate residential solar installations will grow 12% this year, up from roughly 4,000 MW last year, according to a mid-December report. The consulting firm expects commercial and other distributed solar installations will also grow this year. Installations will likely be even higher if Congress passes the Build Back Better legislation, the firm said.

AEE's Dennis expects to see growth in hybrid solar and battery facilities in the 1 MW to 5 MW range that are connected to the distribution system and can participate in wholesale markets.

"That's a real trend we're already seeing, particularly in places like New England, where states have incentives for those kinds of programs," Dennis said.

FERC will have a role in ensuring that these types of resources can move quickly through the interconnection process, Dennis added. FERC may consider giving states more authority to oversee their interconnection, he said.

Vehicle electrification, especially of transit fleets, also is poised to take off this year, according to Dennis, in part due to Infrastructure Investment and Jobs Act funding for electric vehicle charging stations and for electrifying transit fleets.

"I think school bus fleets, in particular, are an incredibly interesting, great resource because of how predictable they are and because of the size of the loads that an electrified school bus fleet would have in a larger school district," Dennis said, noting that some bus depots can have 5 MW of load.

Electric vehicles have reached a tipping point

EVs, including battery electric and plug-in hybrid, reached about 5% of new vehicle sales in 2021 and could reach 7% to 8% in 2022, according to Plug in America Executive Director Joel Levin. "The big limitation is going to be the supply chain problems," he said. 

Manufacturers' new offerings could result in 100 or more electric vehicle models available in the U.S. in 2022, with pickup trucks added to the mix for the first time. 

Utilities are starting to see resulting load increases, and they will be rolling out new charge-management programs and rates in response.

Some areas will see "massive" additions of new load, said Gregor Hintler, U.S. managing director for The Mobility House, which develops systems to help fleet customers manage vehicle charging. In general, however, the load will come online gradually as customers purchase new vehicles.

Experts say the growth is expected, and utilities are preparing to meet it.

"Utilities are already including EV loads into their short- and long-term planning, which includes everything from generation to transmission to distribution," said Dan Bowermaster, the head of EV research at the Electric Power Research Institute.

While utilities already use EV rates to create incentives for​​​​​​ charging in off-peak hours, Bowermaster said more smart-charging technologies will soon begin to allow the wider use of managed charging.

Maria Kretzing, director of innovation at Bidgely, said she was involved with five different regulatory proceedings or filings in 2021 that were related to managed charging, and she expects that number will triple in the next year. 

"I think people are only going to continue to realize that investment needs to be made in that area," Kretzing said. "This is only going to come faster and faster."

Cities will continue to lead on building electrification

The U.S. Department of Energy turned its focus to building electrification in 2021, rolling out new initiatives and building codes to help eliminate greenhouse gas emissions and move toward a carbon-neutral economy by 2050. But observers say the federal government is playing catch-up to local leaders on the issue after years of inaction, and cities will continue to lead the way in 2022.

"Cities often have made ambitious climate goals ... and there's a lot of political will and support at the city level to make good on those goals," Jenna Tatum, director of the Building Electrification Institute, said, whereas federal and state focus on climate change "seems to be a little bit more varied and dependent on the administration."

Research from the Electric Power Research Institute "shows a growing trend for cities and states to continue with updating their building codes to favor electrification," Ram Narayanamurthy, EPRI's advanced buildings program manager, said in an email.

Big electrification news in 2021 came in a range of cities, including Denver's ordinance on energy efficiency, renewable energy and decarbonization for commercial and multifamily buildings; New York City's gradual ban on gas hookups in new buildings and Philadelphia's study of business diversification options for its municipal gas utility.

Cities have the ability to pass codes that go beyond state rules and can require only electric heating systems, but in most cases, "these are not gas bans, with exceptions provided for uses like commercial cooking," Narayanamurthy said.

"Cities can lead and drive this transition," said Tatum. "It's really what our theory of change is based [on]."

There is also a countervailing force, said Narayanamurthy. Some states are also outlawing gas bans "which is an opposing trend that ensures that fuel-based heating systems are embedded into the building stock for a long period of time."

A consumerist push from regulators could slow the energy transition

Rising natural gas prices, growing inflation and the end of COVID-related utility bill relief programs could trigger a sharper focus by utility regulators on retail electricity costs, leading to pushback on aggressive renewable energy plans, according to Paul Patterson, a Glenrock Associates equity analyst.

Utility regulators in states including Arizona, California and Kansas are raising concerns about utility overbuild, utility return on equity and electric affordability, Patterson said.

The California Public Utilities Commission in September moved forward with a process to develop ways to ease rising electricity bills. The CPUC said that if left unchecked, rising bills could make transportation and building electrification goals harder to achieve.

In addition, the Kansas Corporation Commission, in a November decision, said it was concerned about Evergy's $10.4 billion, five-year capital expenditure plan that includes building wind and solar facilities and upgrading its grid.

"Evergy's investment decisions, including the timing of investments, should not prioritize shareholder interests to the detriment of ratepayer interests," the commission said. "Upsetting this balance of interests could result in diminished returns to the company and/or the disallowance of certain investments."

Mark Christie, a Federal Energy Regulatory Commission commissioner, last year warned there could be a backlash to the energy transition if people are hit with rising electricity bills.

"If the public sees this as something that they're going to suffer through, that they're going to suffer outages or they're going to see skyrocketing power bills, I think you're going to see a lack of political support for it," Christie said during the American Council on Renewable Energy's Virtual Grid Forum in November.

Policymakers and utilities will more often make equity part of their decarbonization considerations

Advocates say a surge in coal retirements expected this year emphasizes the importance of a Build Back Better bill provision that would create incentives for clean energy workforce development and other investments in coal communities. According to the U.S. Energy Information Administration, coal capacity retirements slowed to 4.6 GW last year but will increase to 12.6 GW this year, above the 2015-2020 average of 11 GW per year. 

To bring jobs to communities that are reliant on coal while also taking advantage of the existing interconnection points, some utilities and states are trying to site renewable resources at outgoing coal plants, according to Mike O'Boyle, director of electricity policy for Energy Innovation. Not every coal plant will have the right conditions for building wind or solar, however, he noted.

The Colorado legislature created the Office of Just Transition last year to help navigate grid decarbonization in communities that are reliant on coal. Its proposed plan outlines ways that, with support from the state, communities can attract new funding to support businesses and grow economically. It set the stage for Xcel Energy's clean energy plan in 2021, which considered coal retirement issues at the same time as renewable energy placements, O'Boyle said.

North Carolina Gov. Roy Cooper, D, recently signed an executive order that, among other things, added "environmental justice and equity" leads in each of the governor's cabinet departments and tasked them with integrating equity into the clean energy transition, in part by coordinating community engagement and public input into transition efforts.

These priorities have become a piece of policy design as well as a consideration that utilities will incorporate in certain programs, Proudlove said.

Utilities will "often set aside certain funding for specifically disadvantaged or underserved communities or provide higher levels of incentives for those communities" in programs like electric vehicle charging, she said.

The Federal Energy Regulatory Commission has a stacked agenda this year that includes topics central to the ongoing energy transition. The top items are transmission planning, cost allocation and interconnection reform, as well as power market reforms and revisions to how the agency reviews proposed natural gas infrastructure, according to experts. 

The issues were queued up last year through technical conferences, the issuance of a transmission-focused advance notice of proposed rulemaking (ANOPR) and various requests for stakeholder comments.

FERC Chairman Richard Glick, who was elevated to the position a year ago, appears eager to move forward as quickly as possible on those main issues, according to agency observers.

"It seems like there's a willingness to push pretty hard to move them through, if not on an expedited basis, at least in a pretty brisk fashion," former FERC Commissioner Tony Clark said. 

FERC's new Democratic majority

In a major change to the dynamics at FERC, Glick for the first time is working with a Democratic majority. Last year, FERC had a 3-2 Republican majority until former Commissioner Neil Chatterjee, a Republican, left the agency on Aug. 30. 

The absence of a commissioner contributed to some high-profile 2-2 deadlocks that led to effective approvals of the PJM Interconnection's minimum offer price rule replacement and the Southeast Energy Exchange Market.

The Senate in mid-November unanimously confirmed Willie Phillips Jr. to fill FERC's vacant seat. After getting up to speed at the agency, Phillips started voting on orders earlier this month.

"This is the first time that Chairman Glick has a majority," Tyson Slocum, director of Public Citizen's energy program, said. "So I think we're going to see a much different FERC in 2022 than we saw last year, because with a three to two edge, the chairman is able to not just put together an agenda, but to implement it."

Glick, Phillips and Allison Clements are FERC's Democratic members and commissioners James Danly and Mark Christie are its Republican members.

Glick intends to try to reach agreements with his colleagues on potential decisions from the agency. "My goal is always to start with trying to make sure we can try to get all the votes," Glick said during a media briefing in November.

FERC leaders typically strive to have unanimous orders, according to Clark, now a senior advisor at Wilkinson Barker Knauer, a law firm. "My hope is that having the fifth commissioner actually brings folks together in an effort of compromise so that maybe one commissioner gives a little here and another gives a little to end up with orders that are more legally durable," he said.

Slocum expects Glick will be able to get his agenda through FERC, noting that Phillips had a successful track record as chairman of the District of Columbia Public Service Commission.

"A lot of these FERC issues aren't partisan and shouldn't be partisan, but the way things shake out, having a third Democrat, and therefore a majority, is just going to make Chairman Glick's job a heck of a lot easier," Slocum said.

Slocum expects FERC will issue "a flurry of big ticket rulemakings" in the next four months.

In a sign that may bode well for the workload that will come with the expected agenda this year, FERC has successfully managed the disruptions caused by Covid-19, such as working from home, according to Slocum.

"The fact that FERC continues to churn out all of these orders, process all of these filings and, from where I'm sitting, do so without seemingly any change from pre-pandemic to mid-pandemic, is pretty impressive," Slocum said.

FERC is a key player in the energy transition

With its oversight of interstate transmission and wholesale power markets, FERC, an independent agency, has a major role in the energy transition.

"FERC's regulation is central to the resilient, reliable future grid that's already developing," John Moore, director of the Sustainable FERC Project at the Natural Resources Defense Council, said.

Potential changes to the transmission system are driven by the growth of renewable energy, especially in areas that are far from major population centers, according to Moore.

Other developments that are driving a focus on transmission planning include the development of offshore wind farms and the shift away from fossil fuels for cars, trucks and buildings, which will drive up electricity use, Moore said.

The transmission system will need to become more efficient to handle the changes, according to Moore. "FERC is very much a part of that, given its regulation of the bulk power system and its oversight of regional markets in most of the country at this point, and the likelihood that we'll see ... at least one more power market evolve in the West," Moore said.

Transmission: a lynchpin for the energy transition

Perhaps the top item on FERC's agenda this year, according to analysts, is possible reforms to transmission planning, cost allocation and the generation interconnection process. FERC started the rulemaking process last year by issuing an ANOPR and taking two rounds of public comments on multiple issues.

Glick aims to issue a proposed rule early this year, with a final rule coming before 2023, he said in December. FERC may break out some of the issues into different proposals, according to Glick.

Separating the issues into several proceedings may make sense, according to Clark.

"It seems like there's also some early wins you could get in terms of bringing the commission together on a few things, and the one that you always hear about is queue reform," Clark said, referring to the backlog of proposed generating projects seeking to interconnect to the grid.

FERC may look for "near term" opportunities to identify best practices in generator interconnection processes that could be adopted as national standards without disrupting the progress some regional transmission organizations (RTOs) and independent system operators (ISOs) are making in their stakeholder processes, according to Jeff Dennis, Advanced Energy Economy managing director and general counsel.

Dennis expects FERC to release a proposed rule in the first quarter this year.

"There's good agreement in the record that the commission needs to put in place more requirements for planning regions to plan transmission holistically and to plan it with an eye towards multiple drivers of transmission," Dennis said.

Besides reliability, economic and public policy drivers, which are typically "siloed" in transmission planning, grid operators need to also consider issues such as extreme weather and electrification in their planning efforts, according to Dennis.

Grid operators should capture the various needs for new transmission in a single process so all the benefits of new transmission facilities are identified, and the costs are allocated appropriately, Dennis said. 

The challenge will be how prescriptive FERC wants to be compared with setting high-level guidance for the regions, he added.

Energy transition drives possible market reforms

FERC will continue to review market rules to make sure they don't prevent emerging technology such as energy storage from participating in wholesale power markets while also ensuring the electric system is reliable, according to Dennis.

FERC held a series of technical conferences last year on issues such as capacity markets, energy markets and ancillary service markets, teeing up possible action this year, Dennis said.

FERC may consider pushing bigger, structural market reform this year, according to Dennis.

"Maybe changes that would de-emphasize the capacity market and emphasize putting more of the revenues that the markets provide to generators to ensure they're available and reliable into energy and ancillary services markets," Dennis said.

Clark sees the potential for major market reforms to reflect the changing generation mix, with wind and solar, which have no fuel costs, effectively agnostic to price signals.

"It changes the entire underpinning of how these markets were designed and the commission has been dealing with it for several years," Clark said. "You're going to have to have pretty fundamental [market] redesign, because you have to figure out a way to compensate those generation resources that are needed during certain parts of the day and throughout the year."

Sustainable FERC's Moore expects FERC will consider making sure grid operators accurately value the reliability and resource adequacy contributions of renewable energy and energy storage.

"Figuring out how to maximize the value and contributions of renewable energy and energy storage to reliability, resilience and resource adequacy will be a big area for FERC to work on this year," Moore said.

Also, FERC will be reviewing plans from grid operators describing how they plan to implement Order 2222, a measure that aimed to open up wholesale markets to distributed energy resources.

The California Independent System Operator and New York Independent System Operator have filed their plans while ISO New England is expected to file its plan in February, with the PJM, the Midcontinent Independent System Operator and the Southwest Power Pool following in April, according to Dennis.

"It's a really important opportunity for the commission to take the next step in the evolution of the markets to capture flexibility on the demand side, and also to capture some of the value out of trends that it has identified," Dennis said, noting electric vehicle chargers and the vehicles themselves could be grid resources.

FERC eyes changes to how it reviews gas infrastructure

In another area that could affect the power system, FERC is considering updating its criteria for reviewing proposed natural gas infrastructure projects, standards that haven't been significantly changed since 1999.

Possible changes could affect how FERC decides if the infrastructure is needed, how proposed facilities would affect the climate, how environmental justice communities near the infrastructure could be affected and how greenhouse gas emissions could be mitigated.

So far, there appears to be disagreement on the issues among FERC commissioners, with Glick and Clements on one side and Christie and Danly on the other, according to Clark.

"There's a lot and it's being done in a pretty hotly charged political environment as it relates to pipelines," Clark said. "Capitol Hill is interested, the industry is very interested, environmental stakeholders are interested … it has the potential to be very controversial."

Increasing the public's role at FERC

FERC will continue to roll out its new Office of Public Participation (OPP) this year, according to observers.

"Conducting public outreach and education, improving ease of access to documents filed in the commission's online database (eLibrary), advancing intervenor funding processes, and creating more opportunities for the Commission to hear from members of the public impacted by FERC's decision-making are key priorities for OPP and the commission at large," Glick said in a Jan. 11 letter to a group of House lawmakers.

Glick said he hopes FERC will issue a rulemaking in the "coming months"  to address mechanisms to pay intervenors for the cost of participating in the agency's processes.

The office won't likely be in full swing until 2023, according to Slocum.

Initially, the office will likely play a larger role on gas infrastructure issues, which tend to be localized, compared with electricity cases, Moore said.

"It's going to help level the playing field, which means bringing more voices into FERC," Moore said. "All the commissioners, whether or not they say it explicitly in a final rule, will get a better appreciation of the effects of their rules on a broader swath of stakeholders who are virtually unrepresented at FERC and the RTOS."

Like 2020, 2021 has been a record-breaking year for deployment in the renewable energy sector, and experts say the next year will follow that trend. With the low cost of solar and onshore wind, analysts and advocates alike see 2022 as a record-year in the making, although supply chain difficulties persist.

The Energy Information Administration (EIA) has announced planned deployments for 21.5 GW of solar and 7.6 GW of wind in the U.S. in 2022, based on surveys of developers through October 2021. For utility-scale solar, that would surpass the estimated 15.5 GW of solar additions in 2021.

Developers will continue to announce deployments for the year, and the wind projects announced last fall have more to climb before surpassing the record-high 17.1 GW of capacity that came online last year, according to EIA’s survey. S&P Global Platts Analytics has projected 11 GW of new wind to come online in the U.S. as the wind tax credit ends this year, as part of over 30 GW of solar, wind and storage deployment.

"Last year we installed more wind, solar and battery storage than any year in history… But what’s clear is, as important as 2021 was, 2022 will be the year that determines whether we accelerate progress or whether we plateau" on renewable energy deployments, Heather Zichal, CEO and president of American Clean Power, said at the U.S. Energy Association’s Annual State of Energy Industry Forum on Thursday.

One aspect that continues to raise the price of developing clean energy is supply chain impacts, but experts expect those impacts will lessen as more manufacturing capacity is developed internationally. From 2021 through about 2023, IHS Markit analysts expect to see "a very discrete bump" in costs for wind and solar due to the supply chain bottlenecks.

"Over the next 10 years, we would expect those [supply chain] constraints to abate and for new wind and solar to be the bulk of new capacity additions in the power system," Patrick Luckow, associate director of the power and renewables group of IHS Markit, said.

Another dark spot for U.S. renewables is the uncertainty of federal legislation that clean energy advocates view as essential to decarbonization: the Build Back Better bill that has failed to advance in the Senate. Stakeholders are watching closely for opportunities to pass that package and other options to extend the wind tax credit or the solar tax credit that is set to begin phasing down. President Joe Biden has voiced his support for a piecemeal approach to pass the bill's clean energy provisions.

While hydropower did not receive specific incentives in the budget reconciliation bill, plant operators are seeking to update the permitting process for plant renewal, as nearly 300 hydroelectric and pumped hydro facilities totaling about 16 GW have licenses that expire this decade, a coalition of stakeholders told a Senate committee in January.

"We’re also in a moment where we have uncertainty on critical tax policy, and unfortunately, it’s a reality that the renewables sector has had to deal with from the beginning," Greg Wetstone, president and CEO of the American Council on Renewable Energy (ACORE), said.

Solar to soar ahead despite political unknowns

Utility-scale solar "has just been taking off as the costs come down," and there’s an increasing "pressure to allow commercial and industrial customers to procure [more] clean energy," Mike O’Boyle, director of electricity policy for Energy Innovation, said.

"The low cost of these technologies is a big driver in addition to being able to say they’re clean," Luckow said.

Separately, solar and wind developers are seeking better transmission planning, shorter processing of interconnection requests and a number of other incentives from federal legislators and regulators.

Mercom Capital Group, which does not forecast but tracks transactions in the energy sector as they happen, saw 2021 as a "banner year" for solar, energy storage hybrids, and renewables development in general, Mercom CEO Raj Prabhu said.

Demand for solar assets last year also came from pension funds and infrastructure funds, who want very low risk investments, said Prabhu. "When these investors, mature investors, come into a sector, we have crossed a threshold."

The clean energy provisions in the Build Back Better bill remain "obviously, the priority," Wetstone said. Another critical priority for ACORE is to help incentivize investment in critical enabling technology like energy storage and high-voltage transmission, he said.

Despite the high focus on the Build Back Better bill's impacts on solar and wind, "historically, states have really driven renewable energy policies," Autumn Proudlove, NC Clean Energy Technology Center senior policy program director, said. But "the federal government is in a position to accelerate what’s happening in the states," she added. While policy and regulatory uncertainty can remain, the sector will look to the federal level for funding, particularly after last year’s passage of the infrastructure bill, Proudlove said.

Proactive transmission planning would also reduce barriers for competitive renewable projects to enter the market, experts say, and the Federal Energy Regulatory Commission is evaluating this issue in its transmission planning docket.

"The big problem that FERC is trying to address with this [transmisssion] proceeding is the inability [of] renewables that are economic, that would be profitable…. to enter the market in a timely fashion," O’Boyle said, pointing to a Lawrence Berkeley National Laboratory study that says interconnection times have nearly doubled in the last decade.

Offshore wind moving forward on all coasts

Offshore wind in the U.S. is set to have a big year, according to the road map of leasing activities shared by Interior Secretary Deb Haaland in October.

In February, the Bureau of Ocean Energy Management will hold the largest offshore wind auction in the U.S. to date, covering six areas in the New York Bight. The agency will continue to identify leasing areas in the Gulf of Mexico and off of Northern California. States also are setting deployment targets, with New York recently announcing an additional solicitation for up to 2 GW of offshore wind.

"Moving away from the East Coast to two more coasts, we’ve already started seeing supply chain penetration into the rest of the United States. That’s just going to continue," Sam Salustro, director of coalitions and strategic partnerships in Maryland for the Business Network for Offshore Wind, said.

As demand continues to grow for the resource, one of the key regional policies guiding deployment is state targets, especially as they ramp up high-level decarbonization goals, Proudlove said.

New York announced its third solicitation at the beginning of this year, separate from the Interior's leasing auction. And looking ahead to the Biden administration’s goals to lease offshore wind on multiple coasts, the Western Governors Association put offshore wind into their 2022 portfolio of energy priorities, which is "extremely significant… for an area that has long looked toward carbon mining," Salustro said.

2022 is also poised to mark the beginning of offshore turbine installations on the first U.S. large-scale project that has received federal approval for its construction and operations plan: Vineyard Wind.

"The first actual installation of that one monopile [for Vineyard] is going to be that source of comfort and spark for the rest of the supply chain [certainty] that they’re going to truly understand how real this is," Salustro said. Other deadlines from federal and state governments will continue to spark investments, sector activity, contracts and shipbuilding orders needed to get a lot of work done, advocates said.

While offshore wind is a huge market, "they really haven’t gotten going in earnest yet," Luckow said. "To some extent, that’s good because the supply chain issues are less of an issue for offshore wind."

As greater concentration of offshore wind emerges, better planning for transmission connection points will also be needed. "We need to solve transmission issues, especially with the leasing in the New York Bight bringing seven more gigawatts on to sort of a small area," Salustro said.

Conversations about public and private investment in an offshore grid network could also lead to more regional cooperation on transmission, especially around the East Coast, Salustro said. 

Supply chain impacts

Global ripples in the supply chain are impacting all industries and project developments, experts say, though some say solar in the U.S. is particularly vulnerable to delays and rising prices due to the need to import solar panel components.

"We almost have no capacity for [solar] module …manufacturing" in the U.S., Prabhu said. Aside from a "negligible amount, we are completely dependent on Asia for all the imports, so it’s a pretty sensitive market to all the duties and tariffs."

The Trump administration had set Section 201 tariffs on solar modules that are set to expire in February, and a bipartisan group of senators asked the Biden administration on Thursday not to extend the tariffs, which have driven up costs for solar developers according to the Solar Energy Industries Association.

"With the shipping crisis, it’s become a huge deal because everything that comes in here for solar has to get shipped from the other side of the world," he added.

This also applies to onshore wind for the materials used in the turbines, IHS’ Luckow said. He estimates supply chain constraints will play an important role "for the next year or two, but after that time, the improved performance of wind, as well as solar, will bring down … the levelized cost of electricity from those resources."

Over 7 GW of wind capacity and 6.8 GW of solar were scheduled to come online in November and December, according to EIA. Any supply chain delay or development hurdle could push some of those projects into 2022 and increase the EIA’s expected renewable energy capacity deployments, Suparna Ray, project lead of EIA's Annual Electric Generator Report, said in an email.

"When we look deeper at the supply chain, it looks like somewhere towards the end of 2022 we’re going to see it easing a little bit and then prices [will start] to come down" as China’s efforts to increase manufacturing will come into effect, Prabhu said. With pricing from supply chains easing, more sector growth is expected, experts say.

Another national change that will be impacting construction projects is the announcement in January that the Federal Reserve will be raising the interest rate this year, possibly multiple times, to counter inflation. This change affects all ongoing projects, Prabhu said.

Energy storage momentum grows

2021 was a "breakthrough year" for renewables as well as for energy storage, Mercom’s Prabhu said. Other analysts agree that storage has been deployed in record numbers, particularly through the use of the solar investment tax credit that applies to hybrid solar-plus-storage projects. 

"A lot of [hybrid projects are] driven by the tax credit structure," Luckow said. "I think that will continue to be a big driver. It sort of depends on what happens with federal legislation," he added, noting interest in battery incentives and a market need for more firm capacity from hybrid solar + storage installations.

"You are really seeing a meaningful amount of investment starting to happen in 2021," Prabhu said in January, ahead of the publication of Mercom's 2021 year-end renewables report. Mercom logged $8-$9 billion of investments for U.S. storage, breaking records of previous years. "We’ve never even had anything more than $2 billion since 2014," when Mercom began tracking energy storage investments.

According to the EIA, utility-scale battery capacity in the U.S. is expected to grow 84% in 2022, by 5.1 GW. 

"If you look at the interconnection queue [for this year], half the projects are hybrids," O’Boyle said, particularly solar projects adding storage. "With record-breaking solar will come record-breaking utility-scale storage, and I think that trend is going to be one way that 2022 distinguishes itself from 2021."

"More and more, the [requests for proposals] we see are seeking projects, or allowing projects, that are paired with storage," Proudlove said. "A lot of utilities are looking at adding storage to existing generation," as part of a larger trend of pairing things with storage.

Opportunities for developments in wind and solar

Research in further efficiencies in wind and solar designs will continue, experts say.

"The performance of onshore wind plants continues to improve, people are finding ways to get better capacity factors and continue to push costs down, so I think we see a temporary increase in costs when those tax credits go away but that doesn’t put that much of a damper on demand," Luckow said.

"There’s just so much appetite for these resources."

For wind, the industry is expected to continue studying efficiencies achieved through the use of forecasting tools and sensors, to understand shifts in wind speed based on seasonal variations and changes from day to night.

One such research effort, published last summer in the Journal of Renewable and Sustainable Energy, assesses a different wind speed probability distribution to account for wind speed both during diurnal changes and seasonal patterns, to better forecast wind resource output.

With solar, large arrays are beginning to age enough that discussions about replacement and recycling of solar panels are going to take a "bigger and bigger focus," Proudlove said.

The solar industry is "definitely looking at recycling rules and plans for solar decommissioning policies," she said, adding that some storage advocacy groups are also being forward-looking and helping lead these conversations for battery disposals.

Other clean energy technology, like hydrogen and advanced vehicle technologies as well as storage technologies will also receive more research and development funding from the federal level as part of a solution to integrating wind and solar into the grid at higher levels, Proudlove said. "Things like storage and transmission upgrades to the distribution grid… are things that clean energy advocates need to be looking at," as more wind and solar are added online.

New regulations and legislation in 2022 will continue seeking rate designs with price signals that shift customer electricity usage to more effectively benefit both customers and the power system, utility and other analysts said.  

The growing roles of variable generation in the power supply and distributed energy resources (DER) in meeting demand make effective price signals to customers critical, the analysts agreed. The emerging consensus is toward rates with signals that will reduce costly system demand peaks and lower customer bills, recognize the value of DER in doing that, and increase access to new technologies and cost savings.

Utility and regulatory leaders have realized new power system dynamics require "prices to be smarter," Brattle Group Principal Sanem Sergici said. They are increasingly aware that effective price signals to customers are necessary "for utilities serious about load flexibility, decarbonization, electrification and reliability."

Similar new multi-part rate designs approved in last year's settlements with clean energy advocates for Duke Energy in North and South Carolina typify that realization.

"The power system is changing dramatically, but traditional rate design is limited to balancing historic and future cost recovery," Duke Energy Vice President, Rate Design and Strategic Solutions, Lon Huber said. "These new designs resolve that tension by addressing system cost to serve but offering dynamic incentives for emerging technologies that meet future system needs like peak demand or reliability."

Beyond policy work on rate design objectives, there are new rate design implementations, and they are leading to better insights into the value of price signals for utilities and customers, the utility and independent analysts said. Many of the resulting new proposals about rate design may shape DER and smart technology uses toward a cleaner, more affordable, more reliable power system, the analysts added.

Time-of-use rates mature

Beyond routine rate cases, there were over 150 rate design policy initiatives in 2021 addressing new time-of-use (TOU) or time-varying rate (TVR) structures, or DER and electric vehicle charging, according to Autumn Proudlove, North Carolina Clean Energy Technology Center (NCCETC) senior policy program director.

Innovative rate designs are part of policymakers' efforts to keep up with technology as the U.S. power system transitions into "an interconnected web" of DER-owning customers, NCCETC's Q3 2021 grid modernization policy update said.

"TOU rate designs are being developed that give customers price signals to adopt new technologies that serve changing system demand," Proudlove said. The rate designs may also include an incentive, like a rebate for a new technology, that saves the utility "more than the cost of the rebate" if the customer makes the investment, she added.

Managing electric vehicle charging with TOU rates that encourage off-peak charging is an emerging national trend, she added. Some states, like Hawaii and Minnesota, have proposed three-part TOU designs with on-peak and off-peak periods and a super off-peak very low rate after midnight, or a very high critical peak rate for charging during reliability challenges.

There is no doubt TOU rates have achieved acceptance, Brattle Group Principal Emeritus and rate design consultant Ahmad Faruqui told a Lawrence Berkeley National Laboratory group Dec. 10. Analysts are watching default TOU rate developments in many states like California, Minnesota and Michigan.

New customer access to energy efficiency and DER has "flattened demand" and "eroded" utility financial viability, Faruqui said. But regulators have rejected both fixed and demand charges and more complex and dynamic TVR because using them with limited customer and utility understanding and inadequate smart meter deployments risks higher customer or utility costs.

Default simple TOU rates are a starting point and his yet to be published update of his Arcturus meta-analysis, covering 397 TVR deployments, shows they can have "statistically significant" impacts on peak demand and customer costs, Faruqui added.

Two years of customer experience with three Maryland regulator-ordered TOU rate pilots generally confirmed the meta-analysis findings, said Brattle's Sergici.

The June 2019 to June 2021 pilots were deployed by Baltimore Gas and Electric, Pepco and Delmarva Power and Light, Brattle's Maryland study reported. Short three-hour to five-hour peak price periods make responding to the rates convenient and peak to off-peak price ratios of between 4.2:1 and 5.8:1 provide customers with incentives to shift usage, it added.

TOU rates reduced the utilities' summer peak demand anywhere from 9.3% to 13.7% during the two-year pilot and their non-summer demand from 4.9% to 5.4%, Brattle found. First-year average bill savings were between 5.3% and 9.7% and second-year savings were 2.3% to 7.5%.

Importantly, low- and moderate-income (LMI) customers responded similarly to non-LMI customers, Brattle reported. And customers expected to benefit from participation because of their ability to shift their energy usage saw bigger benefits than expected, it added. These findings suggested TOU rates can work for most pro-active customers, Brattle concluded.

There are still debates about how to address policy goals, but the Maryland pilots showed rate design can drive "equitable cost recovery while providing efficient price signals," Sergici said.

Emerging DER rates

Nearly two-thirds of utility executives believe DER will provide their companies with new revenue streams, according to a 2020 Utility Dive and Generac Grid Services survey. Half of those surveyed said DER can improve grid reliability and resilience, and 54% said they help utilities meet emissions reduction mandates.

DER-specific rate designs recognizing all their potential values to the grid can enable both utilities and customers to benefit, Proudlove said. There are likely to be over 31 GW of distributed solar and over 40 GW of energy storage by the end of 2022, according to the February 2021 Energy Information Adminstration Annual Energy Outlook. There will also be over 103 million smart meters deployed in 2022, EIA forecasted.

The rate design concept "is about seeing DER as a significant resource" and allowing all types of DER to work together, agreed Regulatory Assistance Project (RAP) Associate Mark LeBel, co-author of "Smart Rate Design for Distributed Energy Resources," RAP's Nov. 1 paper for Michigan regulators. 

Rate designs for DER should allocate costs fairly, and send price signals that optimize their use, are understood by customers, and can be administered by utilities, the RAP paper concluded. There are three broad approaches to DER-specific rate design, it added.

"Gradual evolution" requires "modest improvements," that lead eventually to full DER valuation, it said. "Advanced residential rate design" is more "aggressive," with default TVR that can lower system costs but ensure cost recovery. "Customer choice and stability" combines elements of both in a more complex multi-part rate design to balance customer and utility interests.

"None is exactly what DER advocates or utilities want," LeBel said. They are options intended as a framework to show the principles and potential "trade-offs" in a DER rate design that ultimately must be "jurisdiction-specific."

California's default TOU plan, Minnesota's Value of Solar Tariff and proposals in Arizona's Value and Cost of Distributed Generation proceeding suggest values of avoided costs for things like new generation and transmission and distribution system infrastructure that are not needed because of DER, RAP's paper added.

The Duke Energy rate design could also be "a model for other states," LeBel said. Its minimum monthly bill, grid access charge to large customers, and non-bypassable charge could both recover utility costs and be manageable for DER owners. In addition, its TOU rates, critical peak pricing (CPP) and incentive for a smart thermostat purchase can reduce both customer bills and peak demand, he added.

As agreed to in the settlements with clean energy advocates, Duke’s rate designs, available in January 2022 in South Carolina and January 2023 in North Carolina, have two components, said Huber, who helped structure them. One is "a foundational consistent rate structure," and the other is "technology-neutral dynamic incentives for forward-looking technologies that meet system values."

The rate includes TOU periods, a CPP and fixed charges, he said. The incentives are for investments in solar, electric heating and a commitment to limited utility control of a smart thermostat. But other incentives could come with commitments for utility control of other smart DER like batteries, EV chargers, or smart inverters that will lower peak demand or increase reliability, he added.

New incentives could come from the North Carolina Utilities Commission (NCUC)-ordered Comprehensive Rate Review. Duke is required to create "a roadmap for how Duke plans to evolve its rates over time" by March 31, 2022, the NCUC order said. A commission-ordered stakeholder process is taking up things like TOU rates, rates for DER, dynamic pricing and equity issues.

Commercial and industrial customers are "open to exploring new rate ideas" but want options, including keeping their current rates, said Maureen Quinlan, manager, distributed grid strategy, for global consultancy ICF, which is Duke's facilitator for the process. All customers want to "easily understand and predict their bills" and they want rates "to evolve" with evolving opportunities, she added.

Last July, the Arizona Corporation Commission ordered Arizona Public Service (APS), the state's dominant investor-owned utility, to develop a technology neutral tariff "for Summer 2022," said Lisa Schwartz, a senior program manager at Lawrence Berkeley National Laboratory (LBNL), which is providing technical assistance to the commission.

The objective is a rate structure to compensate DER like energy efficiency, demand response, storage and managed EV charging for their energy and capacity, and locational values and their values in providing ancillary and grid services like reserves and voltage support, an APS October 15, 2021, filing reported. 

And the utility gets "the potential to increase reliability and decrease peak demand," Schwartz added. APS will develop the rate's design through responses to its request for proposals for resources that have the specified values, due May 31, 2022.

Five new approaches

Many are thinking about more granular, very different, or untested approaches to rate design that can capture new values.

Following Hawaii's 2021 deployment, state legislative authorizations of performance-based ratemaking, which bases utilities' compensation on performance, is an emerging trend, NCCETC's Proudlove said. There are not yet results from Hawaii, but Connecticut, Illinois and North Carolina lawmakers have authorized regulators to study how to set and compensate performance standards, she said.

"The future is likely a spectrum of both more complex and simpler pricing offerings," Sacramento Municipal Utility District (SMUD) Manager of Distributed Energy Strategy Obadiah Bartholomy said. But a TVR might be designed to leverage customer-owned DER specifically to avoid utility spending.

A rate should differentiate between variable and fixed utility costs, but should also be affordable, protect low-income customers, maximize renewables use, and drive electrification, Mohit Chhabra, climate and clean energy program senior scientist with the Natural Resources Defense Council, said. That might require "a charge or a fee for the services from the grid."

New concepts are important to give customers options and the subscription rate concept, which allows customers to pay a fixed price for a fixed amount of electricity usage, may serve those who want stability and less involvement than TOU rates or CPP require, Brattle's Sergici said.

Private sector providers are working with utilities to pilot subscription rates, said Uplight Director, Market Development and Regulatory Innovation, Angela Amos. Preliminary Uplight results from "a large Midwestern utility" show customers got a 6% bill savings with subscription rates, and in a Duke Energy pilot, "we're seeing double digit peak demand usage reductions," she added.

The 2020 California Energy Commission (CEC) Load Management Standards Protocols initiative could be "a gamechanger" for subscriptions and other rate designs, Brattle's Sergici said. And the CEC's December 22, 2021, rulemaking required California utilities to make all time-varying rates available in a commission database to be used "seamlessly by customer devices for optimizing tariff usage."

This is expected to "encourage the use of technologies for automating utility-customer negotiations and end-use load management," the CEC draft final rulemaking said. This is a step toward "prices to devices" and the use of complex rates "in almost real-time," Sergici said. As the protocols evolve, rates need to become smarter "to drive customer smart technology investments and lead to a decarbonized future."

Automation "through sophisticated price signals sent directly to smart devices and requiring little customer effort is the end destination," LeBel said. "That is likely to come in 10 years to 20 years, sooner in states like California or Hawaii."

Southern California Edison is moving as fast as it can to identify and deploy smarter rate designs and technolgies because "we are already behind on our 2030 emissions reduction goals," said Erik Takayesu, the utility's vice president, asset strategy and planning. "And we need to accelerate because if we wait for problems to show up, it will be very difficult to protect reliability."