FERC ruling seen as setback for Northeast renewables

Source: By Arianna Skibell, E&E News reporter • Posted: Monday, December 14, 2020

The Federal Energy Regulatory Commission has scrapped a rule that was used to boost emerging energy resources and renewables in New England’s power markets.

The move is now eliciting concern among battery storage advocates who say it’s the latest example of federal market rules favoring fossil fuel developers over renewable ones. But critics of the rule say its demise will level the electricity playing field.

FERC this month ordered New England’s grid operator to end the rule, which locked in prices for new capacity market participants for up to seven years. Capacity markets offer a way for grid operators to secure enough power generation to meet demand in the future. Generation resources like a coal plant or wind farm bid into periodic auctions to qualify to provide future electricity.

The rule had been intended to incentivize new power producers to join the capacity market, but critics have long argued it’s no longer necessary to bring in new investment and resources to New England. Supporters said the rule could have boosted the ability of renewable and storage technologies to compete in the Northeast.

A spokesperson for FERC declined to comment on the order.

Dan Dolan, president of the New England Power Generators Association, said his members, which include fossil fuel and renewable generators alike, are happy to see the end of the policy, which they have long opposed.

“After years of NEPGA and individual members raising these concerns, it is an important step to have this mechanism struck,” he said. “This Order is a strong statement that New England’s Forward Capacity Market has matured to be an investible market that, when properly structured, can support reliability and new investment.”

Dolan said the capacity market is “rightfully” fuel and technology neutral and dismissed the idea that there should be different rules for different resources.

“I don’t like the idea of carving up the market and creating specific rules for fuel and technology type,” he said. “That starts undermining the basis of a more open and competitive marketplace.”

But Francis Pullaro, executive director of Renew Northeast, a renewable trade group that argued against a complete end to the rule, said the policy was integral for expediting efficient natural gas development, and some version of it could have greatly benefited storage technologies.

“We’re not sad to see it go away for the gas generators,” he said. “But we were looking to support retention of something like it [for storage] to be used in concert with the development of state policy initiatives.”

Pullaro said he is hopeful that renewable and storage technologies that would have benefited from the seven-year price lock-in will find opportunities through state policy initiatives.

“I want to be optimistic and say it’s a minor setback, because the states see how effective battery energy storage is,” he said. “They see the need and the low-cost nature of energy storage, and it wouldn’t surprise me if we see more state initiatives to make sure we get more storage on the grid.”

The Energy Storage Association joined Renew Northeast in asking FERC to retain some version of the rule for emerging renewable and storage technologies.

FERC’s decision to end the rule highlights the growing tension between efforts by federal regulators to keep markets fuel neutral and state clean energy targets. A number of states are weighing a market exit in order to assert more control over their resource mix (Energywire, June 8).

Despite the dispute, Phelps Turner, a senior attorney for the Conservation Law Foundation in Maine, said the rule change overall does little to the underlying structure of the capacity market.

“The people who like the capacity market still like it, and those who think it’s flawed still think it’s flawed,” he said. “It doesn’t eliminate the market, and it doesn’t improve it.”

FERC’s decision comes two years after a federal court ordered the agency to reevaluate concerns of the rules’ critics. Independent power producers had filed complaints with the agency saying the rule benefited new electricity suppliers at the expense of existing ones by suppressing auction prices. Initially, the agency rejected their complaints, but the U.S. Court of Appeals for the District of Columbia Circuit said FERC did not provide an adequate explanation for upholding the price rule.