In the ongoing conflagration between “reliable power” and “clean energy” many may have missed when last month federal energy policy declared reliability the winner with renewable energy subsidies (e.g., state renewable portfolio standards) the loser.
In a decision that critics have called “unprecedented” the Federal Energy Regulatory Commission on December 19, 2019 issued an Order Establishing Just And Reasonable Rate “to protect the competitive capacity market administered by PJM Interconnection, L.L.C.” by directing PJM to expand its current pricing rules at its wholesale electricity auctions, including to take into consideration state mandated rate payer subsidized electric generation by wind and solar.
For the unknowledgeable, PJM operates the largest wholesale competitive electricity market in the country, covering 13 states and the District of Columbia. To protect customers against the possibility of losing electric service, PJM is responsible for ensuring that its system is reliable having sufficient generating capacity to meet its resource adequacy obligations.
No one should have been surprised by the decision last month because it simply reaffirms the FERC’s June 2018 decision that found PJM’s capacity market to be “unjust and unreasonable” due to its failure to take into account state subsidized wind and solar resources. In part that decision found that PJM auction pricing failed to address the price distorting impact of state renewable portfolio standard programs including those influenced by the Regional Greenhouse Gas Initiative, which state cooperative includes most of the PJM participating states.
“FERC is affirming our obligation to safeguard the competitiveness of the PJM capacity market,” FERC Chairman Neil Chatterjee said. “I recognize, and wholeheartedly respect and support, states’ exclusive authority to make choices about the types of generation they support and that get built to serve their communities. They still can do so under this order.”
In response to claims that this was an effort to settle the broader conflict over fossil fuels versus state subsidized clean energy, in a statement making clear that the decision was generating source neutral, Chatterjee said, “An important aspect of competitive markets is that they provide a level playing field for all resources, and this order ensures just that within the PJM footprint.”
But the two Democrats on the FERC blasted the decision, saying with one writing that it puts the commission on the “wrong side of history in the fight against climate change.”
And the Maryland Public Service Commission said, the “December 2019 Order thereby thwarts state public policy decisions addressing environmental attributes” of the power generation alternatives, .. and “is particularly dangerous in that it severely curtails cooperative federalism in the regulation of generation by acting to stymie state efforts to value resource attributes.”
But others have suggested that depending on the details of a final PJM tariff, such a rule could ultimately be a boon to renewable and nuclear energy and contribute to the decay of the remaining capacity market, or not. And, of course, the hodgepodge of other state laws would still be flawed.
Last week, the Maryland Public Service Commission, joined by regulators from New Jersey and Pennsylvania, the American Wind Energy Association and Solar Energy Industries Association, filed a request for rehearing and clarification of the FERC decision articulating the weak reed that “the practical effect of the December 2019 Order will be to frustrate state polices designed to support a transition to cleaner generating resources.” But that progressive political position fails to acknowledge that this is a highly regulated space by both the federal and state governments in a Faustian public policy attempting to take into account both energy industry and environmental interests. But there is no serious dispute that these major issues of the day are being resolved by bodies that few pay attention to, from the Federal Energy Regulatory Commission to the Maryland Public Service Commission.
In 2020 when cursed energy is “out” and dark energy is “in” techno optimism, the view that technology can help us produce our way out of our demand for reliable power, is in.
In the war between “reliable power” and “clean energy” in federal energy policy, this major battle has been won by traditional longstanding reliable power sources, including expressly providing that renewable portfolio standards programs are the loser as unjust and unreasonable.