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After more than a year of delay, the two-Republican majority at the Federal Energy Regulatory Commission has told mid-Atlantic grid operator PJM how it must revamp its $10 billion-per-year capacity market. And at first glance, it could be even more harmful to state-subsidized renewable energy than previously imagined.
Thursday’s order would force almost all future state-subsidized resources in PJM’s 11-state territory to use a “minimum offer price rule,” or MOPR, that would limit how low they can bid. Because almost all state subsidies and incentives are for zero marginal-cost clean energy, this would create an artificial floor that masks their true cost-effectiveness — and effectively forces them out of the market — against existing coal, nuclear and gas-fired generation, critics say. […]
[FERC Chairman Neil Chatterjee], a former senior aide to Senate Majority Leader Mitch McConnell (R-Ky), defended Thursday’s order as an attempt to “level the playing field” for all resources amidst a rising tide of state incentives for clean energy that are “suppressing prices in capacity markets.”
Except there’s no evidence that this is happening, but they’re intent on propping up coal-fired generators.
So, how does this impact Illinois?
* The cost projections in this press release are based on a study which can be found here. From the Illinois Clean Jobs Coalition…
A federal ruling today will increase Illinois power bills by $864 million – believed to be the largest electricity increase in state history – unless the General Assembly takes immediate action to offset the controversial ruling by two federal regulators appointed by President Trump.
In a 2-1 ruling earlier today, two of the Trump-appointed members of the Federal Energy Regulatory Commission (FERC) adopted a policy that will force people in Illinois and other states to pay extra for electricity generated from coal and other dirty sources not needed to serve local demand for power.
To avoid Illinois electricity consumers paying more for unnecessary generation, the Illinois Clean Jobs Coalition urged state lawmakers to pass the Clean Energy Jobs Act (CEJA), sponsored by Rep. Ann Williams and Sen. Cristina Castro. The legislation would give the state more control of its energy future, avoid the $864 million in higher bills for customers and instead secure lower bills for them.
“The impact of this ruling on ComEd customers would be nothing short of devastating, but the General Assembly has the power to prevent it from happening,” said David Kolata, executive director of the Citizens Utility Board and Coalition member. “Illinois lawmakers must take action before their constituents are hit with jarring increases in power bills.”
A new analysis, “Consumer Impacts of FERC Interference with State Policies,” by Michael Goggin and Rob Gramlich of the consulting firm Grid Strategies, estimates that FERC’s decision could raise costs for consumers across the power grid by up to $5.7 billion a year. Northern Illinois would be one of the hardest hit areas: Electric customers here could pay up to $864 million a year extra.
The FERC decision comes amid an ongoing campaign by the Trump administration to prop up coal-fired power plants struggling to compete in the electricity market. Fossil fuel generators have been pushing for such a change for more than a year, as it becomes more difficult for their outdated plants to compete in the face of more modern technology, like solar and wind farms, and state policies that promote cleaner forms of energy.
Specifically, FERC’s ruling applies to PJM, an organization that manages the power grid and plans for long-term electricity needs—especially when demand is highest. The nation’s largest grid operator, PJM covers a vast territory that includes northern Illinois and all or parts of a dozen other states. PJM assembles this long-term power supply – known as “capacity” – from electricity generators that participate in a competitive auction that it conducts. Illinois customers pay for these capacity costs through the supply charge on their electric bills.
The new rules approved by FERC will change auction rules in a way that rewards polluters that generate power from coal- and gas-fired plants, giving them the license to charge inflated prices and then foist the added costs on customers in northern Illinois and throughout PJM’s territory.
As a result of the FERC decision, electric customers across the Chicago region and most of northern Illinois are facing an imminent increase in the amount they pay to reserve enough power – known as the “capacity price” – to meet projected future demand for electricity. FERC’s action also undermines the state’s 2016 passage of the Future Energy Jobs Act that promotes clean energy goals and consumer savings through increased investments in energy efficiency and zero-carbon emissions sources, such as wind, solar, and nuclear power.
To shield electric customers from the higher bills, the Clean Energy Jobs Act would authorize the state to assume the responsibility for managing its capacity needs. Instead of Illinois relying on PJM’s capacity auction, a state agency, the Illinois Power Agency (IPA), would be put in charge of running Illinois’ own capacity auction.
The IPA already manages the power purchases of the state’s biggest electric utilities, and part of its mission is to protect consumers from unnecessary increases in their supply costs. The agency is better positioned to run Illinois’ capacity auction and ensure that northern Illinois consumers save money while the state’s clean energy goals are advanced.
Capacity market reform is one part of the Clean Energy Jobs Act, the most comprehensive and consumer-friendly energy bill in Springfield. The legislation also:
Aims for a carbon-free power sector by 2030, and provides financial and other assistance to communities and workers impacted by coal plant retirements;
Moves Illinois towards 100% renewable energy by 2050, attracting $39 billion in clean energy development;
Develops transportation electrification to give Illinoisans access to cleaner and more affordable forms of transportation;
Expands energy efficiency programs that have already cut utility bills by billions of dollars;
Sparks business development, workforce training and jobs so all Illinois residents can benefit from the clean energy economy.
* From the Environmental Defense Fund…
Because of this decision by federal regulators, Illinois consumers will be forced to pay more than $864 million in higher energy bills, and all of us will be forced to breathe dirtier air. It underscores the urgent need for members of the Illinois General Assembly and Gov. Pritzker to take swift action on the Clean Energy Jobs Act, which will lower bills for consumers, create jobs and empower Illinois to take control of its energy future. Rather than be stuck with an obsolete system imposed by out-of-state decision-makers, it’s time for to Illinois set its own course by developing an energy mix that prioritizes carbon-free resources and puts money back in the pockets of consumers.
Other groups, however, aren’t so sure about CEJA, including a group made up mostly of clean energy generators. The Illinois Clean Jobs Coalition is mostly activists. Exelon/ComEd was also supportive because it has all those nuke plants.
*** UPDATE *** Path to 100…
While FERC’s order may have an impact on renewable energy and for consumers, we need to make sure that Illinois’ doesn’t rush to enact policies that could make the situation worse.
The renewable energy industry in Illinois is focused on the immediate funding crisis facing the state’s renewable portfolio standard. Passing the Path to 100 Act will allow renewable energy to continue growing while we evaluate potential action on capacity markets.
The FERC order has not been published yet and it’s impossible to estimate its impact on consumers. In the coming months, PJM will respond to FERC’s order. At that time, the state can begin the process of carefully considering proposals that would fundamentally reshape Illinois’ energy market. Any proposals for Illinois must include a plan to maximize capacity from all of Illinois’ diverse renewable energy sources and provide financeable solutions for a deregulated market.
posted by Rich Miller
Thursday, Dec 19, 19 @ 2:34 pm
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I think the renewable generators are a bit more split. Some see this order as a direct challenge to building more projects. Other see the nuclear plants as the main obstacle to building more renewables because of grid congestion. Others don’t care about all the other stuff in CEJA because they just want to expand the solar programs that have run out of money.
Comment by Ok Thursday, Dec 19, 19 @ 2:49 pm
This description of the rule is a pretty opaque. Persons writing the article do not really say what the order does and the purpose. Only that it helps base load plants, These are the plants that are necessary when all the wind stops and sun goes down. These base plants should be on all the time providing cheap energy, not acting as peakers for subsidized wind and solar.
Comment by SW Thursday, Dec 19, 19 @ 3:00 pm
In a statement, FERC said the order would protect the competitiveness of PJM Interconnection’s capacity market, which pays generation providers to keep their power plants available for service to maintain system reliability.
Comment by Donnie Elgin Thursday, Dec 19, 19 @ 3:02 pm
Grid Stategies is a biased consulting firm. IMO
Comment by Blue Dog Dem Thursday, Dec 19, 19 @ 3:12 pm
Illinois Clean Jobs Coalition is backed by ComEd. Take their numbers with a big grain of salt.
Comment by Chicagonk Thursday, Dec 19, 19 @ 3:13 pm
FERC is essentially saying that when states are building all these renewables, that it suppresses prices in the capacity market. Which means: prices are too low for the coal and gas generators.
So, they took action to raise prices.
The problem is that people - homes and businesses - pay those prices. Its part of our electric bill. So they are forcing us to pay more because they felt that the market wasn’t providing enough money to the power plant owners. And then effectively excluding new renewable resources from the market by resetting their bids to an artificially higher price (and same with nuclear).
The word they used today was that the capacity market is supposed to provide the “missing money” for the traditional power plants to operate that the regular energy market doesn’t provide.
I think most people are saying: That’s not actually “missing”…
Comment by Ok Thursday, Dec 19, 19 @ 3:14 pm
I should clarify and say that their interests align and that the group has a lot of dark money at their disposal. I just don’t trust any energy related numbers from Springfield these days.
Comment by Chicagonk Thursday, Dec 19, 19 @ 3:17 pm
The Coalition seems to be ignoring the following from the Independent Market Monitor (the group that monitors the PJM markets to ensure transparency and competitiveness):
1. The Monitor called conclusions of the study cited by the study used by the Coalition “broad and incorrect” (https://www.monitoringanalytics.com/reports/Market_Messages/Messages/IMM_Response_to_Grid_Strategies_Report_201909217.pdf)
2. The Monitor estimates that the capacity market changes demanded by the Coalition and Exelon would add hundreds of millions of dollars in annual costs for ComEd ratepayers (https://www.monitoringanalytics.com/reports/Reports/2019/IMM_Potential_Impacts_of_the_Creation_of_a_ComEd_FRR_20191218.pdf).
I think that the findings of the Market Monitor are far more credible than the claims of the Coalition.
Comment by Working night and day... Thursday, Dec 19, 19 @ 3:31 pm
subsidized resources always have a cost
Comment by Donnie Elgin Thursday, Dec 19, 19 @ 3:46 pm
All of these actions by FERC were foreseeable when Illinois and other states (New Jersey, I think, in the PJM) decided to affect the markets by subsidizing certain producers. You can’t put your thumb on the scale and then complain when someone else does the same.
Comment by Anon Thursday, Dec 19, 19 @ 4:03 pm
Anon- heard of climate change?
Comment by A Thursday, Dec 19, 19 @ 4:05 pm
One of the only things Illinois has going for it both for residents and businesses is reasonable energy prices. Let’s hope our Dem pols don’t screw that up but I guess hope springs eternal
Comment by Sue Thursday, Dec 19, 19 @ 4:21 pm
A. How is your solar array doing these days.
Comment by Blue Dog Dem Thursday, Dec 19, 19 @ 4:22 pm
Relax. Mark, Rush and Sean say global warming is a hoax.
Comment by don the legend Thursday, Dec 19, 19 @ 4:34 pm
Given the unknown outcome of the investigations, it will be interesting to see how Exelon does in CEJA.
Comment by nadia Thursday, Dec 19, 19 @ 5:01 pm
Frankly, I’m always skeptical when a former aide to a coal state Senator votes to help coal burning power plants.
Comment by MyTwoCents Thursday, Dec 19, 19 @ 5:25 pm
Working night and day … I don’t know anyone could trust your numbers given your dark and shady track record.
Comment by The Long Ball Thursday, Dec 19, 19 @ 10:08 pm
PJM works for Illinois not the other way around. If PJM continues to push policies and revamp rules to mitigate the path Illinois has chosen to go down, maybe it’s time PJM is removed from the equation. Seems pretty simple. It’s awful ironic that the Path to 100s mouthpiece comments on who’s numbers we should believe, when it was his very own numbers that turned out to be bogus during the last campaign.
Comment by The Long Ball Thursday, Dec 19, 19 @ 10:23 pm
The Long Ball, you have no idea what you’re talking about. PJM doesn’t work for Illinois. Also, I don’t understand why you say you don’t trust the numbers from Working Night and Day, but they aren’t his/her numbers. They are the numbers of the INDEPENDENT Market Monitor. The IMM has no bias and no side. Their job is to perform analysis and be an independent validator of information in the PJM grid. And their analysis shows that the study cited by the “Clean Jobs” folks study is completely bogus.
Comment by Chicago Cynic Thursday, Dec 19, 19 @ 11:07 pm
PJM manages a portion of Illinois’s grid, at the request of Illinois not the other way around - clearly PJM is doing the work here. Illinois could leave PJM and mange capacity on its own or go to MISO. The point being if Illinois doesn’t like how PJM is stifling it’s clean energy programs it can choose to leave. Seems to me you are wrong.
Comment by The Long Ball Thursday, Dec 19, 19 @ 11:44 pm
The IMM’s numbers weren’t being disputed - it was the person it was coming from, someone bogus.
Comment by The Long Ball Friday, Dec 20, 19 @ 12:00 am
How does the cost of solar / wind energy compare without the taxpayer subsidies?
Are foreign energy companies the main benefactors of the wind / solar subsidies?
Are 9 of the top 10 solar panel producers in America still foreign owned?
Comment by logic not emotion Friday, Dec 20, 19 @ 8:25 am