FERC MOPR order may have ‘paradoxically unintended consequences’: PJM

Source: By Catherine Morehouse, Utility Dive • Posted: Thursday, January 23, 2020

Clean energy advocates and competitive interests have raised concerns that FERC’s December order is too wide-sweeping and will harm the ability of new clean energy technologies to enter the market.

Under PJM’s original order, the MOPR was largely intended to apply to new natural gas resources, where it expected most interference to come from, according to the grid operator’s comments on the FERC-proposed MOPR. But FERC’s action was much more wide-sweeping, proposing to administratively raise the bids of any new resource in the market that receives a state subsidy.

“Throughout this proceeding, PJM has strongly advocated reasonable exemptions to and constraints on an expanded MOPR to keep the focus on resource offers that present the greatest concerns, in terms of likelihood and extent, of interfering with efficient price formation,” the grid operator wrote.

PJM also expressed concern that the order directs the grid operator to establish a set minimum offer price, “based upon a prescriptive formulation.”

“That new approach is over-broad and over-prescriptive and will dramatically curtail new resource options for integrated utilities,” according to PJM, adding the approach “needlessly” interferes with state policies beyond what is needed to maintain a competitive and efficient market.

Further, the grid operator had specific suggestions on what should be exempt from the MOPR, including voluntary renewable energy credits, carbon pricing and energy efficiency offers.

Despite PJM’s concerns, however, Glazer said the rule will not be “the death knell of renewables or nuclear.”

“I don’t think in the short run this [will] quite have the impact that people think it has,” he said.

The MOPR was intended to address low capacity bidding prices, which the grid operator and some of its participants had blamed on state subsidies, mostly targeting nuclear and renewables, which they said suppressed overall market prices by presenting falsely low prices for those resources.

“State subsidies to be honest, are a problem,” said Glazer. “I think this conversation might’ve been really interesting if instead of the nuclear subsidies in Illinois that sort of kicked this off, if West Virginia had passed a coal subsidy.”

Competitive energy companies like Calpine Corporation advocated for changes to address some of these suppressants, and also said that despite some bumps in FERC’s order, the impacts may not be as devastating as observers think.

“Competitive generators, like Calpine rely exclusively on the competitive market for our revenue. And so we need a level playing field,” Sarah Novosel, senior vice president of government affairs for Calpine said Wednesday, calling subsidies for non-competitive generators “side payments” that allow them to bid lower and skew prices for competitive generators.

“We think it’s a good decision. You do have to do something about subsidized units,” she said.

Renewable energy advocates including the Solar Energy Industries Association, the American Wind Energy Association, the American Council on Renewable Energy and Advanced Energy Economy filed together for rehearing on Wednesday as well.

The proposed rate, “if ultimately implemented, will weaken confidence in PJM and its markets, drastically alter investment and development decisions related to all resources in PJM and will significantly and negatively impact the public interest,” the groups wrote in their comments.

A FERC spokesperson told Utility Dive the commission could not comment on pending matters, but rehearing petitions will be considered by the Commission.