PJM’s compensation reforms could impact renewable energy markets

In early January, the Federal Energy Regulatory Commission (FERC) terminated the ill-advised and possibly illegal rulemaking for a bailout of coal and nuke power plants that had been directed by Energy Secretary Rick Perry. Energy and climate geeks joined fans of good governance and rule of law in raising a glass to toast its death, and it was over. Right?

Maybe.

While the Grid Resiliency Pricing Rule did indeed die that day, FERC also directed the grid operators which it oversees to report back to the agency on how they define resiliency, and what they think could be done to improve the resilience of the grids that they operate.

In response to that, PJM Interconnection has filed comments which ask for “market reforms and related compensation mechanisms to address resilience concerns and advance operational characteristics that support reliability and resilience”.

Despite 84 pages of comments, it is not clear at this time exactly what PJM is asking for. Unlike the “Grid Reliability and Resiliency Pricing” initiated by Secretary Perry, there is no mention of 90-day supplies of fuel, and it is not clear in the body of the document that PJM is pushing for a specific bailout for coal and nuclear power plants – which make up 2/3 of the generation on its grid, as opposed to only half of the nation’s power supply.

However, UtilityDive notes that that coal- and nuclear-heavy PJM is the only grid operator to specifically ask for compensation reforms in its initial comments. And while the CEO of PJM has denied that this is what he is doing, concerns remain.

As reflected in comments by former commissioners in the Grid Reliability and Resiliency Pricing rule, changes to wholesale power market pricing that provide additional compensation to certain classes of generators will impact wholesale markets. And this, in turn, will affect the economics of renewable energy generation.