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Halftime Report from the FERC Carbon Pricing Conference

image credit: FERC

I just finished wathcing the first two panel discussions and here are my takeways, so far.

Commissioners requested panelist opinions on the Commissions authority with regard to unilateraly implementing carbon pricing in whole electricity markets and preemptive approaches to address environmental impacts of CO2:

  • Majority seem to believe that FERC does not have "litigatable" authority to approve a carbon pricing policy for wholesale electricity markets
  • Some people beleive that a "broad interpretation" of FPA 202 and 205 "may" provide FERC authority to approve a carbon pricing policy, but there's a question if it could hold up in litigation
  • States defintely have authority to implement carbon pricing in retail electricity via existing programs, i.e. RPS and RGGI
  • FERC could have authority to approve carbon pricing policies IF congress were to provide cover through legislation that applies across all uses of fossil fuels, nationwide
  • Leakage across State's which have no carbon tax "adder" can impact the effects of carbon generation and electricity costs in those States that tax carbon
  • It appears that States would have to forego their existing carbon programs (i.e RGGI, RPS) in order to "open the door" for a carbon tax on wholesale electricity. It appears doubtful that States would agree to this "deal".
  • Renewable generation is growing across the country, but not fast enough to meet State energy targets
  • We must manage a clean energy transition and ensure resource adequacy (summarizing GVW's comments)
  • Green buyers such as Google and Facebook are having a profound influence on the growth of renewables
  • We're going to need more flexible balancing resources as the penetration of renewables increase it's presence/influence on supply
  • PJM, NYISO and ISO-NE were well represented; no participation was observed from MISO, SPP or ERCOT, some people seem to have association with CAISO, but not being from CAISO
  • Resource adeqaucy for reliability and a clean energy transition are far too important to ignore - something must be done to address both
  • The focus is largely about discussing economic options to address carbon emissions
  • There was no serious discussion as to direct investment in clean generation to meet State Energy Goals as a means to reduce carbon, via Wholesale markets (which is the approach proposed in AOCE)
  • Absent from these discussions is any sense of urgency to rapdily and effectively address the effect of climate change on the planet, e.g. fires in CA, droughts in New England, fierce weather systems impacting a large number of people - derecho?)
  • I know it is outside of FERC's jurisdiction to address climate change so the States have been taking up this challenge; we really need a symbiotic solution in order to ensure a reliable electric system (adequate flexible resources) and reduction of carbon emissions across all sectors of the economy to have any hope of addressing climate change.
  • The solution will require a bigger hammer than FERC is able to swing.

It's time for me to end my report and go back for the second half of what is shaping up to be a very interesting discussion.

Richard Brooks's picture

Thank Richard for the Post!

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Matt Chester's picture
Matt Chester on Sep 30, 2020 9:45 pm GMT

Thanks Dick-- it's like Energy Central has our own sideline reporter up close in the action!

Richard Brooks's picture
Richard Brooks on Oct 1, 2020 12:35 pm GMT

Thanks, Matt. I really like being part of the EC community. I receive a lot from being part of this community so I feel it's my obligation to give back to the community. The format works because we have so many people that are willing to share their knowledge and experiences - good and bad - objective and subjective, giving us a look at all sides of a topic, which I find useful.

Richard Brooks's picture
Richard Brooks on Oct 1, 2020 4:07 pm GMT

The second half of the meeting was largely testimony of more supporters for carbon pricing. There is clearly a high degree of confidence in the economic theory of carbon pricing to produce effective and efficient impacts on carbon emissions. However, there was NO representation from areas with real experience from carbon pricing policies, i.e. AESO. In other words, no empirical data was presented by the parties holding strong beliefs in the confidence of carbon pricing to achieve the desired outcome, which appears to be the reduction of carbon emissions with the ultimate goal of addressing climate change. PJM did present some modelling results which focused more on economic and emission leakage as opposed to the desired effects on climate change.  I would have preferred to hear testimony from areas with real experience on the effects of carbon pricing policies, specifically the Alberta Energy System Operator (AESO). Their testimony would have provided a "reality check" as to the likelihood of success from carbon pricing, as opposed to the strong belief and confidence in economic theory to achieve the desired outcomes.

If the goal of carbon pricing is to reduce carbon emissions with the ultimate goal of addressing climate change, then it would seem prudent to focus on developing solutions to the problem by scientists and engineers, then invite in the economists to figure out how the money needs to flow within the constraints of the proposed solution to address climate change that the engineers and scientists beleive will work. That would ensure that we are putting our best foot forward on a solution to climate change, as the primary objective,  and the economists can then apply their magic to ensure that the solution is implemented cost effectively and fairly for all stakeholders.

The meeting was a success, IMO, but it could have benefitted from empirical data to help balance the discussion.

Mark Silverstone's picture
Mark Silverstone on Oct 2, 2020 4:33 pm GMT

Thanks very much for bringing this news.  It is good to hear that the topic is under discussion.  But, I guess action from Congress is what is really required, as you say, in order to "provide cover (for FERC) through legislation that applies across all uses of fossil fuels, nationwide."

It is hard to imagine that will come to pass in any administration.  But, stranger things have happened I suppose.

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