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Greentech Media: FERC Orders PJM to Restrict State-Backed Renewables in its Capacity Market

Posted by Jeff St. John on Dec 19, 2019

Greentech Media covered FERC's new rule on capacity market pricing for the PJM region, quoting AEE's Jeff Dennis. Read excerpts below and the entire GTM piece here. 

After more than a year of delay, the two-Republican majority at the Federal Energy Regulatory Commission has told mid-Atlantic grid operator PJM how it must revamp its $10-billion-per-year capacity market. And at first glance, it could be even more harmful to state-subsidized renewable energy than previously imagined. Thursday’s order would force almost all future state-subsidized resources in PJM's 11-state territory to use a “minimum offer price rule,” or MOPR, that would limit how low they can bid.

Because almost all state subsidies and incentives are for zero-marginal-cost clean energy, this would create an artificial floor that masks their true cost-effectiveness — and essentially forces them out of the market — compared to existing coal, nuclear and gas-fired generation, critics say. And unlike FERC’s June 2018 order that found PJM's capacity market in need of reform, Thursday’s order has removed some of the few openings for state-subsidized resources to continue to earn money for their capacity value, according to Commissioner Richard Glick, the sole Democrat at FERC...

The costs of barring these new state-subsidized resources could add up to billions of dollars in higher rates for customers in PJM territorywith various projections ranging from $1.6 billion to $5.7 billion a year. Glick cited a cost estimate of about $2.4 billion per year, with costs rising in future years as more and more state-subsidized energy is built, yet barred from providing its low-cost capacity from PJM’s market for valuing that vital need. Glick also predicted that the order would face legal challenges that would prevent PJM from complying within the 90 days it demands. This will likely further delay an auction that PJM has already been forced to cancel for this year, with unclear but potentially significant impact on the natural-gas-fired generators, and to a lesser extent the renewable and demand-side resources, which rely on the market for a portion of their revenues. 

 

Initial reactions from opponents of PJM’s decision indicate a fight ahead. Jeff Dennis, general counsel and managing director at Advanced Energy Economy, called Thursday’s decision an “unfortunate and unnecessary transformation of a limited rule designed to prevent market manipulation into a price support scheme for existing coal and natural gas power plants...” 

Read the entire GTM piece here. 

Topics: AEE In The News