CERAWEEK: FERC's Christie calls the need for more gas-fired power 'a rendezvous with reality'

US Federal Energy Regulatory Commission Chairman Mark Christie said March 13 that the agency must focus on wholesale power capacity market designs to help ensure US grid reliability as the nation braces for a new period of major growth in electricity demand.

"FERC has to look very closely at our regulation of those markets, particularly capacity markets, as to whether those markets are encouraging the development and the construction of new generation," Christie said during remarks at the CERAWeek by S&P Global energy conference in Houston.

Christie also argued that five-year delivery backlogs for new combined-cycle natural gas-fired turbines — a key theme throughout the weeklong conference — should not weigh against the pursuit of more gas-fired generation and related pipeline infrastructure to help meet an expected demand surge from datacenter operations.

"We're going to need pipelines to service the combined-cycle gas, and that is simply what I consider a rendezvous with reality," Christie said.

FERC Chairman calls for more dispatchable power

Christie noted that the PJM Interconnection LLC, the Mid-Atlantic region's 13-state wholesale power market and grid operator, hit a winter demand record in January during a prolonged cold snap blanketing much of the East Coast. The grid operator reported a peak demand of about 145 GW Jan. 22, surpassing the previous record of 143.7 GW set in February 2015.

PJM managed its January peak with an energy mix comprising about 44% gas-fired generation, 22% nuclear, and 22% coal, Christie said.

"Now, what those numbers tell us is not that wind and solar don't have an important role to play at different times as far as the mix," Christie said, "but when PJM — the largest grid operator in America — hits their winter peak, the resources that were keeping the lights on and the heat pumps running so people didn't freeze were 88% dispatchable."

Christie cited an updated forecast from Dominion Energy of up to 40 GW of new datacenter demand in subsidiary Dominion Energy Virginia's service territory alone, representing nearly 25% of PJM's all-time peak demand.

Christie, a former state utility regulator with the Virginia State Corporation Commission, said he believes "very strongly" that utilities should meet new customer demand in a nondiscriminatory manner.

"Whether it's a datacenter or a single residential customer living on a Social Security check, we need to take into consideration treating all customers fairly," Christie said. "The rendezvous with reality is if we're going to serve what's coming, and it's already here in Virginia, we have to have the generating resources to serve it, and that's going to be combined-cycle gas."

At the same time, Christie noted that FERC does not have the authority to direct the construction of new gas plants. One way the commission can help ensure the correct future resource mix is by taking a hard look at regional capacity markets, he said.

To that end, FERC has scheduled a technical conference June 4-5 to explore resource adequacy in regions with capacity markets and those without them.

"What is FERC's role?" Christie said March 13. "It depends on what part of the country you're in."

PJM's three-year forward capacity auctions, for example, are intended to send price signals that guide decisions to invest in new sources of power generation. The Mid-Atlantic grid operator recently implemented a capacity market overhaul in response to a severe December 2022 winter storm that resulted in a nearly ten-fold increase in PJM capacity prices.

The auction for PJM's 2025/2026 delivery year cleared at $269.92/MW-day for much of the grid operator's footprint, up from $28.92/MW-day for the 2024/2025 auction.

PJM CEO defends high prices

PJM CEO Manu Asthana acknowledged during a March 13 panel discussion that consumers are feeling the historic price spike.

"I don't think we can develop markets in a vacuum, away from what people can bear to pay," Asthana said at CERAWeek.

The state of Pennsylvania, for example, filed a complaint with FERC in December over billions of dollars in PJM price increases, later securing a preliminary agreement with the grid operator in January to lower the capacity auction price cap to $325/MW-day for future auctions from more than $500/MW-day.

Nevertheless, Asthana argued that higher capacity prices are already working as intended.

"We're seeing retirement notices from generators rescinded," he said, adding that PJM's new fast-track approach for processing its generator interconnection queue is also bringing additional power supplies online.

Dylan Seff, head of utilities and sustainable energy at the global energy and commodities firm Vitol, noted during the discussion that wholesale power market operators must carefully balance the need for accurate price signals with consumer costs.

"When you have countervailing forces that are not allowing for the revenue to get to the prices needed for generation to come online and for debt to be issued, I think you've got a struggle," Seff said.

Asthana stressed that PJM's capacity market is intended to serve as a residual source of revenue.

"If it's a residual market, I think high prices are fine," Asthana said. "We need to make sure people are transacting outside the market and are using the market as a residual source of balancing."