FERC rules clean energy sources must bid higher market price

Source: By Scott DiSavino, Reuters • Posted: Monday, January 6, 2020

(Reuters) – The U.S. Federal Energy Regulatory Commission directed the largest U.S. power grid operator to force state-subsidized solar and wind electricity providers to raise market bids, a move that renewable energy companies and environmental groups blasted as a partisan attempt to protect fossil fuels.

In a statement, FERC said the order would protect the competitiveness of power grid operator PJM Interconnection’s capacity market, which pays generation providers to keep their power plants available for service to maintain system reliability.

FERC’s two Republican commissioners voted in favor of expanding the capacity market price floor to state-subsidized generators, with the one Democrat, Richard Glick, dissenting.

FERC Chairman Neil Chatterjee said in the statement that the commission had an obligation to “provide a level playing field for all resources.”

Chatterjee and the panel’s other Republican, Bernard McNamee, were appointed by President Donald Trump, an outspoken proponent of fossil fuels.

PJM, which operates the grid in all or parts of 13 U.S. Mid-Atlantic and Midwestern states, said in an emailed statement that it had not yet received FERC’s order and would begin to discuss its substance with stakeholders at a January meeting.

Renewable energy resources such as wind and solar that are incentivized by many states will be required to meet a minimum price in the capacity auction even though cost declines in their technologies now often make them cheaper than fossil fuel alternatives.

Environmental groups including the Sierra Club and the Union of Concerned Scientists said the decision would add billions of dollars to consumers’ energy costs.

In recent years, many states have adopted policies that support the continued operation or construction of certain types of generation, like nuclear and renewables, to meet carbon reduction and other environmental goals. Operators of natural gas power plants have opposed those subsidies because they argue that they reduce what their plants receive in capacity and energy markets.

The American Wind Energy Association, in a statement, said the ruling “threatens states’ rights and hinders their ability to bring more clean energy to their communities.”

FERC’s action builds on a previous order from June 2018, which found that out-of-market payments provided by PJM states to support operation of certain generation resources threaten the competitiveness of PJM’s capacity market.

In his statement, Chatterjee said states would still be able to choose which generation sources to support.

PJM has 90 days to comply.

Reporting by Scott DiSavino; Editing by Diane Craft and Leslie Adler