Do capacity markets need to be redesigned to better integrate renewable energy? If so, shouldn’t the best interests of consumers be at the heart of new policies and regulations?
A recent move by the Federal Electricity Regulatory Commission (FERC) has New Jersey, Maryland and Illinois reconsidering their participation in the largest US power market.
The Financial Times reported yesterday that the new ‘minimum offer price rule’ which limits how low participants can bid, is “part of a widening schism between the US government and states over climate change.”
First proposed in December 2019, the new policy “mandates a floor price for generators bidding into capacity auctions held by PJM Interconnection” which, critics believe, will end up favouring fossil fuels over renewable energy. As more states offer incentives for renewable energy generation, aggressively targeting net zero generation, newer, cleaner generation technologies could be impacted by the new policy.
It is said that the voting of FERC commissioners was undertaken along partisan lines and will apply the rule to state-subsidised clean energy in what believed to be a direct attack on renewable energy.
Already legal challenges have been launched by both Maryland and New Jersey, the belief being that the new rule undercuts state jurisdiction and policy. However, perhaps more significantly is the possibility that these three states may consider just walking away from the PJM. This is a perspective that has been taken by others in the PJM, including the New Jersey Board of Public Utilities, and utilities Public Service Enterprise Group and Exelon.
While there are many perspectives that could be taken with regards to this story – politically and financially – we are instead going to ask the following questions:
- How do you integrate renewable energy into capacity markets?
- Is a redesign of these markets needed and if so, what would that redesign include?
- Will walking away from the capacity market drive prices up for consumers?
Your opinion is always of interest to us. What is your perspective on the questions above? Are there other things to be considered and what impact will this have on the development of renewable energy and the ability of states to set their own policy?
Wishing you well and in continued good health.
Until next time!