Maryland’s Public Service Commission (PSC) says it’s disappointed with The Federal Energy Regulatory Commission’s (FERC) ruling that will require PJM Interconnection, the State’s Regional Transmission Organization (RTO), to drastically alter its market operations. The PSC believes it will have strong implications for the future of clean energy in the region.
Four out of eleven states within PJM limits have in place subsidies for renewables, and fossil fuel generators complain that these subsidies put their industries at a disadvantage by driving down prices in PJM’s capacity market. Since renewables represent a significantly smaller portion of energy used on the PJM grid than other sources such as natural gas, and states within the region have potentially ambitious clean energy goals, these subsidies are viewed by many as crucial to keeping renewable energy competitive.
The PSC issued a statement claiming:
The FERC decision could not only be detrimental to new renewable energy resources, such as Maryland’s offshore wind projects, but could also stifle innovation of new energy conservation and efficiency products, by effectively pricing them out of the market and making them prohibitively expensive to ratepayers.
Greentech Media provides some background on what is required by the FERC order:
Thursday’s order would force almost all future state-subsidized resources in PJM’s 11-state territory to use a “minimum offer price rule,” or MOPR, that would limit how low they can bid. Because almost all state subsidies and incentives are for zero-marginal-cost clean energy, this would create an artificial floor that masks their true cost-effectiveness — and essentially forces them out of the market — compared to existing coal, nuclear and gas-fired generation, critics say.
What’s more, the new order’s expanded definition of “state subsidy” could force a MOPR onto a broad class of resources yet to be built, he said. That includes all new generators built by municipal and cooperative utilities, which “blows up the business model” for these public power entities, and potentially all generators in states participating in the Regional Greenhouse Gas Initiative,” he [dissenting FERC Commissioner Richard Glick] said.
The costs of barring these new state-subsidized resources could add up to billions of dollars in higher rates for customers in PJM territory, with various projections ranging from $1.6 billion to $5.7 billion a year.
From coverage in S&P Global:
Wind and solar made up only 2 gigawatts of the more than 163 gigawatts of capacity procured in its last auction, giving it little pricing power compared to the natural-gas-fired power plants that made up the vast majority of capacity.
“FERC’s decision targets, and effectively nullifies, that prerogative and only confirms our misgivings regarding the future of PJM’s capacity market,” Jason Stanek, chairman of the Maryland PSC, said. “Maryland is committed to a clean and renewable energy future, and we are considering legal options to protect the public interest of Marylanders,” Stanek said.
For more information on capacity markets, visit PJM’s webpage.