New Jersey looks to exit PJM, worried the MOPR will impede its 100% carbon-free goals

Source: By Robert Walton, Utility Dive • Posted: Tuesday, March 31, 2020

  • The New Jersey Board of Public Utilities (BPU) wants to consider alternatives to participation in PJM Interconnection’s capacity market, and on March 27 launched an investigation into how the state can achieve its clean energy objectives that include reaching 100% carbon-free energy by 2050.
  • The investigation is a response to the Federal Energy Regulatory Commission’s (FERC) December 2019 decision to expand the Minimum Offer Price Rule (MOPR) in the regional capacity market, effectively raising the floor prices for state-subsidized resources. Clean energy advocates believe the rule could prevent new renewable resources from competing in the wholesale market.
  • Experts say New Jersey’s alternatives to the capacity market could include developing a Fixed Resource Requirement (FRR) approach, or adopting a statewide clean energy standard that requires load-serving entities to deliver higher percentages of carbon-free energy.

Dive Insight:

A sweeping clean energy plan released in January by New Jersey Gov. Phil Murphy, D, accused FERC of “actively attempting to support fossil fuel interests” through the expanded MOPR. Now, the state is considering leaving the regional capacity market.

“Taking control of our own resource mix may be the only way to stop the Trump Administration’s attempts to prop up fossil fuels to the detriment of our clean energy program,” BPU President Joseph Fiordaliso said in a statement. “We will do everything in our power to prevent that from happening.”

Regulators will accept comments through April 29, and the BPU expects to conclude the investigation in the third quarter of 2020.

PJM on March 18 issued a compliance filing to align its policies with FERC’s expanded MOPR. And the grid operator told Utility Dive it “has been engaged in discussions” with New Jersey regarding the new rules and resource adequacy more broadly.

“We stand ready to assist New Jersey and any state/jurisdiction in the PJM footprint examining its capacity market options in light of the Order,” PJM spokesperson Jeff Shields said in an email. “To note, we do believe that PJM’s compliance filing will serve to lessen the Order’s impact on state clean energy objectives if adopted in full by FERC.”

PJM’s compliance filing did ease some concerns in the renewables industry by allowing projects to advocate for lower MOPR floor prices and lowering the overall adjusted floor prices for clean energy technologies to clear future auctions.

New Jersey’s investigation will consider several questions, including whether an FRR alternative can satisfy the state’s resource adequacy needs, and if modifications to the state’s default Basic Generation Service construct could facilitate resource adequacy procurements aligned with its clean energy objectives.

An FRR approach would mean New Jersey effectively “withdraws one or more service areas from the broader PJM capacity market,” according to a blog post by law firm Preti Flaherty. It could also mean “adopting a statewide clean energy standard that would require load-serving entities to source increased percentages of renewable or other clean energy.”

“Under the MOPR, New Jersey is going to be unfairly targeted both in its clean energy program and in costs,” Jeff Tittel, director of the New Jersey Sierra Club, told Utility Dive.

New Jersey is also a member of the Regional Greenhouse Gas Initiative, a regional cap and trade program, and is planning to bring significant offshore wind resources online, which will also increase costs, Tittel said.

“What FERC is trying to push on PJM, is to penalize states that put a price on carbon,” he said. “We’re going to be targeted to pay more for electricity and use that money to subsidize dirty fossil fuels. … We’ve done a lot of work in this state to move forward with renewable energy and energy efficiency and to reduce carbon. And this flies in the face of 20 years of New Jersey policy.”