US states considering moving away from grid auctions to be able to continue to subsidise renewables
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Combustion Industry News Editor
The US states of New Jersey, Maryland and Illinois are considering walking away from capacity auctions under the PJM Interconnection regional transmission organisation, which as a grid currently serves around 65 million people from Chicago to North Carolina. At the heart of the matter is the “minimum offer price rule” introduced by the Federal Energy Regulatory Commission, which as the name suggests sets a minimum price at which electricity can be sold to the grid. Such a price floor limits states’ ability to subsidise renewable energy being sold to the grid, thus making fossil fuel-fired power more competitive. As the Financial Times reports, the matter is highly politicized, with FERC members voting on the rule along partisan lines, and states such as New Jersey, Maryland and Illinois opposed to it because officials believe it will make it harder to achieve their state-level climate goals. The three states have already filed a lawsuit against FERC in a federal court, arguing that the rule “usurps state jurisdiction”, and it seems that should the suit fail, the next option to be considered would be to simply not participate in the capacity auctions. Looked at from an economic perspective, the competitive price market that the auction facilitates is failing the concerned states because the cost of climate change is not fully priced into the cost of electricity. Some utilities, especially those with much renewable capacity, have supported the states’ proposed move, while others with more fossil-fired capacity have argued against it. Vistra Energy, for example, which fires gas and coal, has urged a national carbon price to help correct the market. Different energy market consultants have taken different opinions on the matter, with some arguing that exit by New Jersey, Maryland and Illinois would drive up prices for customers in New Jersey and Maryland, while others have said the effects are uncertain. More nuance on the rule is provided by Resources Mag.