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FERC invokes NYISO buyer-side mitigation rules on renewables

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Simon Thompson's picture
Publisher - Rethink Energy, Rethink Research

I work for "Rethink Energy”, the unique research service offering reports and forecasts about energy transition, renewables and their investment possibilities.It's about the new wave of business...

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  • Oct 1, 2020

Another spat has broken out between the US state and the Federal government energy regulator FERC, with the equivalent of a minimum price order being introduced for New York renewables projects which have benefitted from state subsidies. It mirrors the PJM Minimum Price ruling made last year and will mean that renewable resources will have trouble placing their energy through the capacity and wholesale markets, despite it being policy in New York state to push renewables. The move is made under an existing regulation of New York Independent System Operator (NYISO) to prevent marketers from artificially suppressing prices, and when NYISO proposed an adjustment to the rules to exempt renewables, FERC simply rejected it out of hand without considering the details.

FERC is now running in complete opposition to US state policy, possibly illegally, and it is likely that it will hold its line until after the current Presidential Election in two months. If that goes to the Democrats, it is unlikely to lead to a courtroom battle, but if Donald Trump surprisingly gets a second term, this move will more than likely lead to all-out war among multiple Independent System Operators (ISOs) with FERC, with the potential for New York to take its transmission fate into its own hands, and bypass Federal involvement.

Lawyers for NYISO have said that the Public Service Commission will consider resource adequacy issues and “if it should take back control” of how the state’s resource mix is determined – in other words, run its own state-bound transmission.

Right now most individuals involved have made statements about working together to resolve it, but from past experience that’s not going to happen.

Separately NYISO has also this week said that it has reached the end of a multi-year process to open its wholesale markets to Energy Storage Resources. What is not said is whether or not an energy storage project that has state subsidies will be force to overbid it in price terms, making a mockery of any energy storage installations, in direct contravention to FERC’s own ruling number 841.  Under the mitigation rules that is likely.

The energy storage move by NYISO is claimed to make it the first ISO/RTO to allow full participation of energy storage, because it allows the creation of a “hybrid storage model,” so solar plus storage is officially supported, although California seems to have done something similar already.

And in the same week as all of this breaks out, FERC has now reversed a ruling under the Public Utility Regulatory Policies Act (PURPA), redefining the qualifying criteria to be small power production facility, usually based on it being below 80 MW in output. It has done this by denying an installation the privileges of PURPA in Montana, saying that it has a 160 MW nameplate capacity, so it cannot qualify as a small installation, even though it will not be able to physically put out close to 80 MW consistently.

This is a simple case of a utility asking for a change, and all previous precedent being ignored from around the country and FERC just doing what it is told by the utility. The order is a departure from a host of precedents set by FERC in its 1981 case Occidental Geothermal, which determined that a facility’s eligibility under PURPA should be based on net capacity, not nameplate capacity.

In every instance FERC is now behaving as an instrument not of central government, but of the fossil fuel industry. Renewables in the US will have to be very careful that if Trump IS returned to power, that it fights each case directly in court, so that none of this can stand long term. The tendency must be tempting to just wait and hope Trump doesn’t get in, but it would put renewables at a disadvantage for some time to come.

It is true that some energy storage projects, and many solar projects are beginning to be able to operate in the US without subsidies, but this makes nonsense of any moves by individual states to spend money stimulating renewables. If New York had to stop offering subsidies to renewables, it would certainly slow both wind and solar across the state.

In a statement Democrat FERC commissioner Richard Glick, said “Today’s order is just the latest in the Commission’s ever-growing compendium of attempts to block the effects of state resource decision making.  To achieve that end, the Commission has perverted NYISO’s buyer-side market power mitigation rules into a mind-boggling series of unnecessary and unreasoned obstacles aimed at stalling New York’s efforts to transition the state toward its clean energy future. As a result, those rules have become an unprincipled regime that has little to do with buyers or the exercise of market power.”

FERC’s mission is to ensure economically efficient, safe, reliable, and secure energy for consumers – and setting a minimum price for the cheapest form of generation has the precise opposite effect.

State regulators say they will ask FERC to reconsider and we know it will not do so and that depending upon the outcome from the election this will ultimately be appealed to federal district court.

The US voting public should be incensed that cheap reliable energy for consumers has been sold out to rich and wasteful fossil fuel interests, which cannot even be bothered to cover its tracks. This is true the world over, with most fossil fuel resources worrying more about preventing the spread of renewables through controlling politicians, and less about benefiting from the energy transition themselves.


Originally published in Rethink Energy


Matt Chester's picture
Matt Chester on Oct 1, 2020

Right now most individuals involved have made statements about working together to resolve it, but from past experience that’s not going to happen.

Is that based on the players involved or just the issue being too contentious, in your opinion? 

Michael Keller's picture
Michael Keller on Oct 12, 2020

Renewable energy is neither cheap nor reliable. To claim otherwise demonstrates a complete decoupling from reality.

Simon Thompson's picture
Thank Simon for the Post!
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