Delaware Explained: Electric grid

Why Should Delaware Care?
As energy bills have reached shocking levels for many in Delaware this year, concern has risen over how power is produced for our homes and whether the drive to reduce carbon emissions has inflated the price of doing so.

When we flip the switch to turn on a light bulb, it’s the end product of a quite complicated generation, distribution and economic system.

It’s a system that involves multiple states, handfuls of for-profit companies and numerous governmental and private regulatory bodies.

The drive to reduce carbon emissions in the creation of power in order to address the threat of climate change has also upended the economic model that has been in effect for decades.

Here we aim to give you a primer on how power works and what these new renewable energy goals mean.

The grid

The United States’ energy grid is actually made up of four separate systems – two major ones in the East and West Interconnection, and minor ones serving Alaska and most of Texas.

That means that power created with a particular grid stays within that grid, i.e. power created in California cannot be consumed in Delaware, but power created in Ohio could.

Delaware is part of the Eastern Interconnection.

The regulators

At the top of the regulatory ladder is the Federal Energy Regulatory Commission (FERC), which is an independent federal agency that oversees the interstate transmission and wholesale sale of electricity and natural gas, among other things.

Each grid also has at least one nonprofit organization that studies and monitors reliability of the power grid to ensure that future demands are met and factors like extreme weather don’t result in brownouts, or widespread power losses. Delaware’s organization is known as ReliabilityFirst. 

The day-to-day operations of bulk power transmission in the grid, as well as annual energy price auctions, are managed by either a regional transmission organization (RTO) or an independent system operator (ISO). The difference is typically just size, with ISOs serving individual states while RTOs serve regions. Delaware is part of PJM Interconnection, the RTO for a bloc of 13 states and Washington, D.C.

At the state level, the Delaware Public Service Commission oversees requests by producers to tap into the grid and for-profit power distributors to raise rates on consumers. Its five members are appointed by the governor and confirmed by the Delaware Senate. All have been serving on the commission for at least a decade.

The producers

There are nearly 1,400 energy producers within the PJM grid, but the source of power breaks down as the following, as of year-end 2023:

1. Natural gas 40%
2. Nuclear 32.3%
3. Coal 20%
4. Wind 3.8%
5. Hydroelectric 1.9%
6. Solar 1.1%
7. Other >1%

This is important because Delaware does not create all of the power it needs to sustain homes and businesses every day. It is known as an energy importer, because it relies on energy created in other states – a benefit of being a part of the PJM system.

Delaware had the capacity, or ability to create, 3,140 megawatts of power, as of year-end 2023. It breaks down roughly as:

1. Natural gas 64%
2. Oil 21%
3. Coal 13%
4. Solar 1%

The largest power producer in Delaware is by far the Calpine natural gas plant in Edgemoor, which has a capacity of 1,136 megawatts, or enough to power more than 500,000 homes 

Notably, coal will no longer be in Delaware’s energy mix as the Indian River coal plant was shut down last month, reducing Delaware’s energy capacity further. Renewable energy advocates had hoped that offshore wind farms would be able to replace that loss, but those projects have been hamstrung by local, and now federal, opposition.

The distributors

Once electricity is created by a power plant, solar panel or wind turbine, it floods through high-voltage transmission lines to local transmission lines owned and operated by distribution companies or organizations.

In Delaware, that includes Delmarva Power, the Delaware Electric Cooperative and the Delaware Municipal Electric Corporation, or DEMEC.

The cooperative and DEMEC are nonprofit organizations that serve a handful of towns and much of Kent County and western Sussex County. 

But Delmarva Power serves all of New Castle County and most of the most-populated areas of Kent and Sussex counties. The for-profit company is owned by Exelon, a Fortune 500 company that is the largest electric utility company in the United States.

How energy prices are determined

Each year, distributors and producers participate in an auction for power that will be used in the coming years. In theory, this should hedge against future supply-and-demand problems by ensuring there is a sufficient supply of power for reliability, but also providing funding assurances to producers.

For a good step-by-step of the process, go here.

Last year, PJM’s capacity auction returned prices that were six times higher than the previous year. Following the auction, PJM published a statement saying that the bids had been competitive and would ensure that the region would enjoy a reliable supply of electricity. The statement acknowledged that prices were high, and attributed them to a decreasing supply of electricity following the mothballing of several large power plants.

But, in legal filings and public statements, PJM’s critics have sought to rebut those the organization’s assertions, arguing that the price spike was a result of too much market power held by too few power producers, and of a failure by PJM to include the entirety of the region’s electricity supply into the auction. 

Also following last year’s auction, governors in five states, including then-Gov. John Carney, said “serious flaws” had taken hold in the electricity market. And, they said that prices could more than double the next year if reforms were not made – such as changing how PJM oversees bids for wholesale electricity, and lowering a price cap back to a level used last year.

Finally, a month after the auction, an executive at Delmarva Power’s parent company, Exelon Corp., told investors that there likely will be double-digit increases on customer bills in certain jurisdictions within the PJM power grid.

The renewable impact

More than 20 years ago, Delaware adopted its Renewable Portfolio Standards. This law set goals to encourage distributors to embrace renewable energy in a push to reduce the amount of carbon dioxide emitted into the atmosphere.

For many years, Delmarva Power met its goals under the RPS by buying wind and solar power in states like North Carolina and Pennsylvania. Despite approving incentives for Delmarva Power to support the development of in-state solar or wind farms, those projects have largely failed to move forward.

Failure to meet annual benchmark goals under the RPS leads to a penalty payment known as an alternative compliance payment (ACP) of $25 per megawatt hour of shortfall. That money goes to the Delaware Green Energy Fund, which funds energy efficiency and solar projects.

Delmarva Power may also choose to pay the ACP instead of buying renewable power because the penalty is cheaper than the power, ultimately saving money for consumers.

In 2021, the state legislature extended the RPS to 2035, when it would reach a final goal of 40% of energy coming from renewable sources. That is the second lowest end goal of any state with an RPS beyond 2030.

In total, 30 states, including both Democratic and Republican-led states, have mandated some degree of renewable energy usage under an RPS. Nearly all states with 100% end goals have full Democratic control.

Correction: This story originally reported that incentives would support the development of solar or wind projects by Delmarva Power. However, those laws incentivized Delmarva Power to buy power from companies that built those assets in Delaware, but not own them directly. We regret the error.