FERC Deadlock Allows PJM Rule Backing Renewables To Take Effect
The rule by PJM Interconnection, which covers 13 Eastern and Midwestern states, reverses a Trump-era federal policy intended to favor fossil-fuel generators in “capacity” markets intended to secure sufficient long-term power needs.
The move is being hailed by renewable energy advocates and could help the Biden administration achieve its climate policy goals, including a transition to a net-zero emissions electricity sector by 2035.
“The Commission did not act on PJM’s filing because the Commissioners are divided two against two as to the lawfulness of the change,” FERC says in a Sept. 29 notice announcing that the PJM’s “focused” Minimum Offer Price Rule (MOPR) is going into effect.
FERC in 2019 issued an order that directed PJM to eliminate perceived advantages for state-subsidized renewable power from its capacity market, a move that was seen as an attack on renewable energy supported by state clean energy mandates.
The policy generally expanded the types of sources that must submit “minimum offers” in PJM’s capacity auctions to account for the value of their state “subsidies,” making them less likely to be selected to receive lucrative payments under PJM’s capacity process.
Current FERC Chairman Richard Glick, who was the sole Democrat on the commission at the time, vigorously opposed the 2019 order, and PJM’s subsequent rule to implement the federal MOPR order prompted a backlash from state officials and utilities required to meet renewable energy standards.
After the Biden administration took office, however, FERC signaled a change in course and PJM in April floated a plan to largely scrap its prior policy, significantly narrowing which sources are subject to the MOPR.
“Today is a great day for millions of ratepayers in PJM, America’s largest electricity market, who will be saved from paying more money than they should for clean power,” says American Council on Renewable Energy (ACORE) President Greg Wetstone in a Sept. 29 statement.
“The MOPR, as previously designed, was a poorly disguised effort to undermine the success that low-cost renewables have enjoyed in competitive electricity markets nationwide by financially bolstering uneconomic fossil fuel generators. We commend PJM for working to reverse a destructive policy that distorted the market and directly conflicted with state efforts to accelerate the transition to pollution-free renewable power,” Wetstone says.
FERC’s inaction may shut the door on a major policy fight over state low-carbon policies, likely clearing the way for increased purchases of wind and solar power throughout the PJM region, which includes New Jersey, Pennsylvania, Maryland, West Virginia, Virginia, Kentucky, Tennessee, Michigan, Delaware and Illinois.
“States across the mid-Atlantic and Midwest are promoting clean power, and today’s decision ensures that renewable energy sources like solar and wind have a fair chance to replace obsolete and dirty fossil fuel plants,” says Natural Resources Defense Council’s (NRDC) Tom Rutigliano in a Sept. 29 statement. “The energy transition is upon us, and it’s time to accelerate progress. It’s heartening that PJM is helping to lead the way.”
Possible Rehearing
Earlier this year, Glick directed PJM to resolve the dispute, threatening that the commission would otherwise step in to set a new pricing structure. After its initial proposal in April, PJM submitted a revised, “focused” MOPR to FERC in July. Under the Federal Power Act, the PJM rule would take effect unless FERC acted within a statutory timeline, which expired Sept. 29.
Yet the fight over baseload power versus state-backed renewables in PJM pricing may not be over, according to a Sept. 29 note from consulting firm ClearView Energy Partners. The group says natural gas-fired generators that opposed the revised PJM MOPR may request a rehearing on the matter as a potential tie-breaking commissioner, the Biden administration’s FERC nominee Willie Phillips, awaits Senate confirmation.
“We think that the predominantly natural gas-fired independent power producers who opposed the filing are likely to seek rehearing; but it is far from clear that Willie Phillips — nominated to the seat left vacant by the departure of Neil Chatterjee — would be confirmed in 55 days to provide a deciding vote for substantive action in that scenario,” ClearView says. “That said, the interval also leaves time for the Commissioners to potentially resolve the deadlock,” the group adds, suggesting PJM may hold its next capacity auction this December to ensure sufficient grid capacity for 2023-24.
FERC’s notice says “any written statement explaining the views of a Commissioner with respect to PJM’s filing will be added to the record,” though no such statements had been posted as of press time.
Under PJM’s revised pricing plan, it “will not apply the MOPR to a resource that is the subject of state support unless FERC grants” a complaint that the state policy is an exercise of “buyer-side market power,” according to a “preliminary” proposal submitted to FERC in April.
However, PJM suggests that a state policy offering a subsidy contingent on capacity market participation would “likely be problematic” and subject to a FERC complaint. If FERC agrees, it would have to submit a “minimum offer” in capacity market bids to account for the state subsidy.
PJM adds that demand response, energy efficiency and “price responsive demand” programs would automatically be exempt from its new rules because they are “demand side products that are intended to result in reducing capacity purchases and costs.” — Rick Weber (rweber@iwpnews.com)