The new rules, approved by the Federal Energy Regulatory Commission, are designed to counteract state subsidies that support the growth of renewable energy and use of nuclear power. The rules involve what are known as “capacity markets,” where power plants bid to provide electricity to the grid. The change would require higher minimum bids for power plants that receive such subsidies, giving fossil fuel plants an advantage.
The FERC order, passed 2-1, is a response to complaints from operators of coal and natural gas power plants who say that state subsidies have led to unfair competition in the grid region managed by PJM Interconnection.
Richard Glick, the panel’s lone Democrat, cast the dissenting vote and said during the commission meeting that his Republican colleagues were trying to “stunt transition to a clean energy future that states are pursuing and consumers are pursuing.”
In his written dissent, he called the order “illegal, illogical and truly bad public policy.”
Continuing, the ICN report notes:
The Trump administration has taken other high-profile steps to try to boost the coal industry, but many of them are tied up in legal challenges. The new FERC order accomplishes many of the same goals.
But FERC’s action also is likely heading to court, where opponents will argue that the regulator has overstepped its authority and is now dictating state policy.
One issue going forward is that the order has a broad definition of “subsidy,” saying this includes direct or indirect payments, concessions and rebates, among other things. Glick said the definition is so broad that it may end up affecting many more power plants than the other commissioners intended.
In the meantime, PJM has 90 days to say how it will implement the rules, and power plant operators will need to figure out what this means for them.
Such authority would not exist if the grid were not centralized. In particular, if it were instead a loose aggregation of power islands or microgrids which had substantial authority to trade among themselves, political power would not be concentrated in organizations like PJM or, for that matter, ISO-NE or the FERC.
The economic consequences of artificial propping up of coal and natural gas are pretty straightforward: They make utility-scale zero Carbon generation more expensive, disincentivizing utilities from pursuing these options. There are other disincentives being mounted in the form of public pressure against, for example, Warren Buffett’s PacifiCorp electric utility owned by Berkshire Hathaway. There, in Wyoming, PacifiCorp has filed plans to move to wind and solar and shut down coal-fired electricity generators, raising the ire of Wyoming’s pro-coal governor. (Note I originally read this at The Financial Times and would love to link and credit them, but they have a restrictive paywall.) Specifically,
PacifiCorp this year accelerated plans to install wind turbines, solar panels and battery storage, while retiring coal-fired generators in the US west. The announcement was not received well in Wyoming, which mines 40 per cent of US coal.
It is interesting, too, that businessmen as astute as Mr Buffett and PacifiCorp’s CEO, Greg Abel, seem not in the least bit worried about the intermittency which, as some diehard Carbon worshippers who defend utilities claim:
Wind and PV in large amounts are inherently unfit for purpose; they cannot supply energy as needed, nor can they decarbonize even an electric grid by themselves.
completely ignoring the reality of utility scale battery storage.
The effect, of course, will be to raise prices to consumers of electricity, something which, no doubt, as they have in Massachusetts, utilities will claim is the fault of zero Carbon upstarts. Indirectly that’s true, but only because, as with FERC, the fossil fuel worshippers cannot compete and, so, need their price floor increased to make renewables artificially expensive.
Getting generation on your own, if you own a residence and have the means, or building your own microgrid, if you are a major consumer of electricity, such as a manufacturing facility or a university campus, has a marginally higher return as a consequence of being a customer of PJM. I don’t doubt that, as a consequence, other capacity markets will be tempted to set higher floors.
This drives the dance of electricity generation and consumption in the direction of balkanization which I’ve written about previously, and which seems to be the fate of the United States energy grid. In retrospect, how else could it be, with its collective over-optimization of measures of economic growth at the expensive of other risks, those accepted by its embrace of such costs of anarchy? (The price of anarchy has been studied extensively.)
And this is why, in part, Claire and I have configured our home as we have. We are presently participants in the local grid’s marketplace, following a rubric nearly shouted by a roundtable speaker and environmental advocate at a conference I once attended, that “You should not hoard electrons”. But that is truly a value when said grid respects you in turn. If economic or environmental reasons suggest it turns out we’re not respected so much, to the degree that happens we have lots of options to minimize our participation and increase our hoarding. Yes, we are someone limited by the silly bylaws of the Town of Westwood where we live. (See Section 4.3.2.) But technology is flowing ever onwards, and there will be increasingly more options down the river, ranging from ever cheaper battery storage, to dynamic in-home digital management of electricity flows (fans don’t need high quality voltage and power), to the ability to draw power from our Tesla Model 3 back into the home, to ever more efficient solar PV panels.
This is a contest which PJM, carbon worshippers, social capital anarchists, and even FERC will lose, for economic and environmental reasons. PJM may have more coal plants. But to keep electricity inexpensive enough to support their agriculture and manufacturing, those players will either need to move, or they’ll need to microgrid, and the PJM network will have fewer customers over time.
There is proper concern regarding the relative disadvantage which people of color and low incomes have with respect to climate impacts and environmental harms. Setting aside scientific exaggerations such as quoted in the Vimeo link there,
In a recent United Nations report, experts predict only 12 years remain to prevent unimaginable global devastation.
I’m no luckwarmer, but that’s just
But, as I said, setting that aside, much more needs to be done to provide greater equalities and opportunities to reap the benefits of zero Carbon energy sources. Some of these can be had by subsidizing such energy for communities of color and low-income others, as has our Commonwealth, and more can be had by insisting that communities which consume much electricity which is otherwise generated in dirty centralized facilities, such as the generating facilities on the Mystic River, MA, reallocate some of their own public and other lands to the purpose of doing that generation in a clean manner. They otherwise put the burden of dirty impacts upon these disadvantaged communities.
But, in my opinion, the role of relatively wealthier members of our community and region should not be minimized. As noted above, there are economic forces which are trying to reset the competitive landscape, and, being entrenched, vested, and engaging in regulatory capture, these are formidable. So while no one can expect low income people and many of communities of color to fight back, people with means and purpose can do so, and it continues to be important to encourage them. That may or may not mean retaining subsidies. As implied above, abandonment of the grid would be accelerated if subsidies were withdrawn or electricity prices directed at them were increased. (In some utilities, such price increases have even been punitively targeted at solar adopters, for example.) But I think the role should be appreciated and, in particular, it is not constructive to dismiss their and, frankly, our participation as unimportant merely because we can afford it.