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FERC Takes Baby Steps on Carbon Pricing while Tripling Down on Anti-Renewable Market Rules Amid Legal Challenge

On Thursday, the Federal Energy Regulatory Commission (FERC) released a proposed policy statement on carbon pricing that, if formally adopted, would convey the Commission's sense that RTO-level carbon pricing based on state policy decisions may be acceptable. This is a constructive signal but has no immediate applicability since it was not adopted as official policy. Unfortunately, however, FERC acted with more force with regard to a compliance filing from wholesale power market operator PJM Interconnection on FERC's Minimum Offer Price Rule (MOPR) order, which imposes new costs on ratepayers to subsidize fossil generation at the expense of more cost-effective renewable power. 

Following is a statement from American Council on Renewable Energy (ACORE) President and CEO Gregory Wetstone:
 
“While we are grateful for the signal that FERC may eventually look positively on carbon pricing in the nation’s electricity markets, the Commission’s binding actions on its Minimum Offer Price Rule (MOPR) reflect a continued commitment to effectively subsidize fossil generation in the nation’s largest electricity market, the PJM Interconnection, imposing massive unnecessary costs on millions of ratepayers and overtly discriminating against renewable power generators. While we’ll need to see future orders on compliance to determine the precise severity of this action, renewable energy investment decisions in the Mid-Atlantic region are already impacted by the MOPR, and preferential treatment for fossil fuel generators will only grow in subsequent auctions as costs for renewable power continue to decline. These policies take us in the wrong direction from where we need to be to address our climate imperatives and grow the renewable energy economy, and are being challenged in court by ACORE and allied groups.”


Background: 
ACORE Statement on FERC’s Original MOPR Order (December 2019)
Clean Energy Associations Request for Rehearing of FERC’s MOPR Order (January 2020)
Clean Energy Sector Statement on FERC’s Rejection of the Joint Request for Rehearing (April 2020)
DC Circuit Court of Appeals Challenge of MOPR Rulings (June 2020) 

On Wednesday, the DC Circuit Court of Appeals transferred ACORE’s legal challenge to the PJM MOPR to the 7th Circuit Court of Appeals for consolidation with the large number of diverse parties similarly impacted by FERC’s shortsighted actions. Beyond PJM, FERC has instituted similar anti-renewable rules in parts of the New York Independent System Operator (NYISO). Also Wednesday, two natural gas generators petitioned FERC to expand these rules to all of NYISO. If successful, this action would see the federal government step in to slow New York's transition to clean energy by overruling yet another state’s policymaking prerogatives.

Alex Hobson's picture

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Bob Meinetz's picture
Bob Meinetz on Oct 16, 2020 4:15 pm GMT

Alex, one can view it as either "anti-renewable market rules" or "fair market rules that don't benefit intermittent, unreliable energy."

Renewables are their own worst enemy.

Bob Meinetz's picture
Bob Meinetz on Oct 16, 2020 4:35 pm GMT

Bob, did you notice who the petitioners are in the challenge?

"AMERICAN WIND ENERGY ASSOCIATION, SOLAR ENERGY  INDUSTRIES ASSOCIATION,  ADVANCED ENERGY ECONOMY,  and AMERICAN COUNCIL ON RENEWABLE ENERGY."

Industry trade groups that stand to profit from selling solar panels and wind turbines, and not a single ratepayer or environmental group.

Matt Chester's picture
Matt Chester on Oct 16, 2020 4:23 pm GMT

the Commission’s binding actions on its Minimum Offer Price Rule (MOPR) reflect a continued commitment to effectively subsidize fossil generation in the nation’s largest electricity market

Example of those indirect FF subsidies some people will talk about when tallying up where and how much the government thumb is indeed on the scale of the markets!

Richard Brooks's picture
Richard Brooks on Oct 16, 2020 4:39 pm GMT

Wholesale market operators could avoid the whole MOPR/CASPR bandaids by working toward a more accommodating solution to acquiring Green Energy, following the lead of Renewable Energy Buys, such as REBA and Level Ten, by implementing an Always on Capacity Exchange as a wholesale market offering that allows green buyers (i.e. Corporations and States) to establish long term capacity/PPA's/REC's contracts while enabling grid operators to acquire grid services through the same competitive process to meet reliability needs. 

Bob Meinetz's picture
Bob Meinetz on Oct 16, 2020 5:02 pm GMT

Richard, if an IOU buys electricity months or years in advance the assumption is it will be reliable, that it will be "always on". That was the original purpose of PJM's capacity market. It made sense.

Say an IOU has a PPA for solar power, and solar isn't available to meet its needs on a certain date. Though the IOU isn't out any money for the solar power, it's forced to buy gas-fired electricity at day-ahead, hour-ahead, or even spot market prices - multiples of what it would have cost for power purchased in advance.

What's in it for the customer - the party whose interests FERC is supposed to represent?

 

Richard Brooks's picture
Richard Brooks on Oct 16, 2020 10:18 pm GMT

Thanks for sharing your insights, Bob. There a couple assertions in your statement that may not be entirerly accurate. By saying "multiples of what it would have cost for power purchased in advance." it seems you are suggesting that Real Time prices will always be higher than buying in advance. There is plenty of evidence showing that this "correlation" is not a guaranteed outcome. I've seen many times where Real Time (RT) prices are lower than Day Ahead (DA) prices. You're more likely to see negative prices in RT than in DA. It's not uncommon to see energy prices in New England below $70/MWh, with many wholesale LMP's in the $20 - $50 range.  Certainly, there are times when a system emergency results in super high RT LMP's, but that is the exception, not the nominal case. What's in it for the customer: well if you're a State with a defined Energy Target to reduce GHG, then you will be making progress toward your goal. If you're a utility customer, then your are relying on your utility to secure adequate supply at a just and reasonable cost - usually in the DA Electricity market. Some marketers of power will "roll the dice" and hope that RT LMP's won't exceed levels that will case severe damages. I would not recommend the dice roll strategy - hedging is your friend, if you're worried about extreme losses. 

Wayne Lusvardi's picture
Wayne Lusvardi on Oct 17, 2020 7:38 am GMT

Mostly garbage in-garbage out comment. Sure electricity is lower at 3 am and higher at 6 pm in California. So what?   And what about your assumption that reducing carbon should be at any cost, not matter how high?  

Bob Meinetz's picture
Bob Meinetz on Oct 17, 2020 3:19 pm GMT

I still don't see how AOCE (or any participation in a capacity market) doesn't equate to a subsidy for intermittent sources of energy, though. Customers are paying twice for the same electricity - once, for the electricity itself, again, for real-time "capacity" that may or may not exist.

Like portraying demand-response as "energy" and not the lack thereof, it's salesmanship that misleads customers into believing they're getting something of value - reliability - for their money.

"There is plenty of evidence showing that this 'correlation' is not a guaranteed outcome."

Where would I find this evidence? It's my understanding average advance LMPs are below average day-ahead, hour-ahead, or spot prices, and average PPA prices well below them.

 

Richard Brooks's picture
Richard Brooks on Oct 19, 2020 7:43 pm GMT

Bob, here's the LMP info for ISO New England:

DA LMP

RT LMP

Monthly side-by-side comparison of HUB LMP's (DA/RT)

 

You'll see from the above data that RT LMP's are frequently less than DA LMP's for on-peak hours.

Bob Meinetz's picture
Bob Meinetz on Oct 20, 2020 5:46 pm GMT

Thanks Richard, but the link to the comparison returns

"We're sorry, we are unable to process your request at this time. Please try again later."

Whether RT LMPs are frequently less than DA LMPs or not, the argument seems to be "knowing one day ahead of time that renewables will probably be available justifies charging customers an additional fee for 'capacity' - though other sources are capable of providing guarantees of reliable capacity up to three years in advance."

365 x 3 = 1,095

In a truly competitive marketplace that might make sense if actual payments to renewables producers were divided by 1,095 first. But with the AOCE you describe, wind and solar sources would be paid over one thousand times more for capacity than the value they offer. A subsidy - or more accurately, a fraud.

 

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