The Federal Energy Regulatory Commission (FERC) has ruled that the PJM Interconnection region must implement a “Minimum Offer Price Rule” (MOPR) to support existing fossil capacity in the face of state-level incentives for utility scale renewable energy.
This MOPR will create a price floor – estimated at 4¢/kWh – that all electricity generation resources must hit a price minimum that cancels out the effects of state level renewable energy programs.
Key wording, noted in the official ruling;
The decision by certain states to support less economic or uneconomic resources in this manner cannot be permitted to prevent the new entry or continued operation of more economic generating capacity in the federally-regulated multi-state wholesale capacity market.
The board is made up of three members, two of which were recently appointed by the current Presidential administration. Member Rich Glick has come out strongly against the ruling in his official dissenting statement, calling the action a “bailout”. Glick has suggested that, “FERC does not have this authority. FERC has the responsibility to attempt to accommodate state decisions, not overturn them.”
Glick puts the costs of the ruling at, conservatively, 4¢ per kWh — totaling $2.4 billion a year, with increases over time and broader non-direct costs.
The approximately 5 GW of currently installed wind and solar in the PJM Interconnection region will be exempted from the ruling, however, the 38 GW of capacity in the queues would most certainly be affected. The filing states they do not yet have a specific value to determine what the exact value of incentives are, and what the MOPR must be, and it dictates to the region to determine this value and implement rules within 90 days.
It has been suggested by industry observers that at least two states, Maryland and Illinois, might remove themselves from the capacity markets quickly – and that this ruling, if fully implemented, might lead to the end of the capacity markets.
The North American Electric Reliability Corporation’s 2019 Long-Term Reliability Assessment suggests that the PJM Interconnection region has one of the highest anticipated reserve margins of greater than 30%, with a perspective reserve margin of 70% – well above all other North American regions considered as noted in the above image.
This action is a continuation of the current Presidential administration’s moves to support coal explicitly, and fossils in general, via governmental agencies. The Department of Energy – then run by Rick Perry – initiated a power grid study to determine if intermittent sources of electricity and their incentives were destabilizing the power grid. The report, first leaked before allowing political edits, suggested that the grid was more stable than ever and that the majority of baseload coal and nuclear plants retirements were driven more by natural gas and changing demand than renewables.
The above image is of then Secretary Rick Perry hugging bankrupt coal magnate Bob Murray at March 2017 meeting. The picture’s release led to the photographer being fired, but also showed us an action plan that Murray submitted to the administration to give his industry financial support.
That includes “replacing members of the Federal Energy Regulatory Commission, according to the Associated Press and others who viewed the plan
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