PA Environment Digest Blog: Sen. Yaw To Introduce Bills To Establish PA Baseload Energy Development Fund Based On Texas Model; And Have One Permit For Power Plants

On August 28, Sen. Gene Yaw (R-Lycoming), Majority Chair of the Senate Environmental Resources and Energy Committee, announced he would be introducing legislation to establish a Pennsylvania Baseload Energy Development Fund.

The Fund would provide low-interest grants and loans to finance the construction, maintenance, modernization and operation of electric generation facilities.

On August 29, Utility Dive also quoted Sen. Yaw as saying he planned to introduce a companion bill that requires a single “statute of limitations” for all of a power plant project’s permits.

“What happens is you get one permit, and then the groups that are opposed will delay things so that by the time you get to the end of the permitting process, the first permit has run out,” Sen. Yaw said.

Having a single statute of limitations on the permits would give project developers more certainty about the legal status of their permits, Sen. Yaw said. Read more here.

“Pennsylvania alone supplies nearly 25% of baseload electric generation capacity to the grid,” Sen. Yaw said. “We must play a more active role in incentivizing generation and addressing looming reliability challenges with market-based solutions. The Pennsylvania Baseload Energy Development Fund can help us supply the grid with reliable, cost-effective energy, as well as the infrastructure and workforce to maintain it.”

Sen. Yaw has not released the actual language of the legislation, but said his Energy Fund will be modeled after the Texas Energy Development Fund, which he said has been successful in attracting baseload electric generation capacity.

Initially funded at $5 billion of taxpayer money, the Texas fund was increased to $10 billion due to overwhelming response.

As reported by Utility Dive, the initial $5 billion Texas Energy Fund would fund loans to cover 60% of project costs for at least 100 MW that can connect to the Texas ERCOT grid before June 1, 2029.

More than 150 proposals were received for the funding in Texas, including 41 GW of mostly natural gas-fired generation.

One goal of the Texas program, according to Lt. Gov. Dan Patrick, is to get "more natural gas plants in the ground as soon as we can get them."

PA Exports Electricity

The Independent Fiscal Office reported in March Pennsylvania generated 236 million MWh of electricity in 2023 and exported 83 million MWh to other states.

Pennsylvania is fundamentally different from Texas, which maintains its own separate electric grid for political reasons and relies on its own electric generation with limited connections to surrounding grid operators for importing power. Read more here.

A Third, A Third, A Third

The IFO said Pennsylvania is now dependent on one fuel for 59% of the state’s electricity generation-- natural gas-- followed by nuclear power-- 31.9%, coal-- 5.4% and 3.7% from other sources.

This mix is far from the one-third, one-third, one-third electric generation base that previously fueled Pennsylvania’s electric grid so it could export power to other states.

Sen. Gene Yaw (R-Lycoming) said in March of last year we need base electric generation fueled by a diverse mix of “fuels” to remain stable. Read more here.

“I think about five years ago I toured with the Committee, the PJM site in Valley Forge. And I know one of the comments made at the time was that Pennsylvania had almost a perfect energy mix at that time,” said Sen. Yaw.

"We were about a third, a third, a third [in sources of fuel to generate electricity-- coal, natural gas and nuclear].”

“We didn't have any reliability issues at all.” Read more here.

Diversifying PA’s Electric Grid

Diversifying Pennsylvania’s electric grid doesn’t mean force feeding the grid to become more dependent on one fuel subject to significant price spikes caused by international market conditions.

It was just in November of 2023, the Public Utility Commission alerted the public to huge price swings in the cost of natural gas-- 149% increase to 64.2% decrease-- and the cost of electricity-- 18.8% increase to 18% decrease-- driven by the price of natural gas. Read more here.

The state certainly has plenty of gas-fired generation, but as we’ve seen gas infrastructure has vulnerabilities and is subject to price spikes, and nuclear electricity generation capacity is significant.

What we haven’t decided is what will make up that third leg to restore fuel mix diversity-- but there are significant renewable and storage facilities already approved by PJM for connection and coming online.

The question is-- will it be fast enough?

Market Moving To Renewables + Storage In Big Way

The new electric generation projects in the PJM Interconnection queue to be connected to the grid shows the market is moving in a big way to renewables + storage.

On January 22, the PJM Interconnection reported 40 Gigawatts of new electric generating capacity had cleared its review process in 2023. It expects to clear another 26 GW of capacity in 2024 and 46 GW of new generation in 2025. Read more here.

PJM said the new generation capacity includes almost all investor-driven renewable energy and storage-- 50.8% solar, 14.1% solar+storage, 12.7% storage and 6.1% wind.

Of the 72 GW of new generation in the queue, there are 108 projects in Pennsylvania with a capacity of just over 5 GW, according to PJM. Read more here.

PJM has been saying for some time fossil fuel generation resources are retiring faster than they are being replaced by renewable generation and storage and urged states to avoid policies to push generation off the grid before adequate capacity can replace it. Read more here.

PJM recommended states enact policies to facilitate quicker deployment of new generation and electricity transmission infrastructure in the transition to a clean energy grid. Read more here.

PJM and its stakeholders have also been working to overcome the vulnerabilities experienced in the natural gas infrastructure during Winter Storm Elliott in December 2022 and Winter Storm Gerri in January 2024 that caused significant, unanticipated gas-fired power plant outages. Read more here.

In addition to questions about the reliability of natural gas during more extreme weather events, electricity generators have said the historically low PJM wholesale electricity prices are not high enough to support baseload power plants like coal, natural gas and nuclear. Read more here.

But, that is changing due to changes in the electricity market.

Dramatic PJM Price Increases

On July 30, the PJM Interconnection reported its latest electricity auction produced a wholesale price of $269.92/MW-day for much of the PJM footprint for delivery in 2025-26-- 933% more than the $28.92/MW-day cost for delivery in the 2024/2025 auction.

Auction prices were significantly higher across the RTO, PJM said, due to decreased electricity supply caused primarily by a large number of generator retirements, combined with increased electricity demand (data centers and cryptocurrency mining) and implementation of FERC-approved market reforms.

PJM said the higher prices send a clear investment signal across PJM’s 13 states and the District of Columbia.

PJM remains concerned with the slow pace of new generation construction.

PJM said approximately 38,000 MW of generation-- again mostly renewables and storage-- have been approved by PJM, but not built due to external challenges, including financing, supply chain and siting/permitting issues. Read more here.

Need To Diversify Generation Mix

Tom Rutigliano, senior advocate with the Sustainable FERC Project at the Natural Resources Defense Council--

“The bill is suddenly due for an overreliance on fossil fuels and inadequate planning for a more affordable, diverse power grid in PJM. And customers throughout 13 eastern and midwestern states and D.C. will be the ones who pay the price.

“Make no mistake: this was foreseeable and preventable. This is what happens when regulators sideline a wealth of historically affordable clean energy resources waiting at their doorstep and the transmission needed to bring them online.

“For years, the largest grid operator in the eastern U.S. has all but refused to diversify its resource mix and bring new energy online, and instead opted to depend excessively on an aging fossil fuel fleet while ignoring its reliability failures.

“This sticker shock is a direct result of recent regulatory changes made to address those reliability failures.

“With so few gas alternatives online in PJM to absorb the shock, making up the difference is coming at a steep price that hard-working families and businesses in the region will pay – and revealing what a bad deal they had been getting for a supposedly reliable gas-run power system.

“Diverse power grids are critical for reliability, and now we see just how critical they are for affordability.

“With wind and solar only making up an abysmal two percent of resources in this auction, but the overwhelming majority of PJM’s project queue, it is clearer than ever that PJM needs to rapidly scale up new energy resources to protect customers and resilience.

“The cost of PJM’s interconnection delays has now reached billions of dollars. Leaders in PJM states must demand accountability and solutions from their grid operator before they have to pay billions more in the next auction just five months from now.”

Some other thoughts--

-- Kleinman Center For Energy Policy: The High Price Of Failing To Transition To Clean Energy In PJM Footprint; Next PJM Auction Is In December [PaEN]

-- PennFuture: Dramatic PJM Electricity Price Increases Due To Forced Outages Of Gas Power Plants; Huge Backlog Of New Generation Projects; Demand Growth Driven By Data Centers, Cryptocurrency Mining [PaEN]

-- Utility Dive Guest Essay: Getting Real About Electric Grid Reliability In PJM After July Capacity Auction - By Glen Thomas, Former Chair of the PA Public Utility Commission

NewsClips:

-- The Center Square - Anthony Hennen: Natural Gas Subsidy Plan Rolled Out To Stabilize Grid [Sen. Yaw’s Energy Development Fund ]

-- Utility Dive: PA Senator [Sen. Yaw] To Introduce Energy Fund Bill, Bill To Require One Permit With One ‘Statute of Limitations’ For Power Plant Projects

-- Utility Dive: PJM December Electricity Auction Prices Could Jump 157% Over July Auction, Morgan Stanley

-- Utility Dive: Texas Energy Fund Elects 17 Gas-Fired Power Plant Projects Totaling Almost 10 GW For Possible Loans

-- Reuters: Texas Energy Fund Approves Gas-Fired Power Plants For Next Stage Of Consideration

Resource Article Links - Electric Grid:

-- Pennsylvania’s Electric Grid Is Dependent On One Fuel To Generate 59% Of Our Electricity; Market Moving To Renewables + Storage [PaEN]