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July 9, 2018

FERC rejects PJM capacity market reform proposals, seeks quick resolution

  • Government
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Utility Dive – In a 3-2 decision that drew sharp dissent from two commissioners, the Federal Energy Regulatory Commission late Friday rejected both of PJM Interconnection's proposals to address failures in its capacity markets due to state subsidies supporting preferred generation resources.

Whether to add more renewable energy or to keep struggling emissions-free nuclear online, many states are increasingly supporting power plants that might not be economic but provide the clean energy needed to meet renewable portfolio standards and other policy goals.

State policies that support these plants are intruding into wholesale markets, ultimately depressing capacity prices, opponents argue. But a solution has been hard to come by. In March, FERC approved capacity market reforms proposed by ISO-New England, setting the stage for contentious decisions over similar proposals from other grid operators in the months to come.

FERC's order rejecting the various proposals to update PJM's capacity market exposed a commission sharply divided over several issues, including how much control states will have on their generation mixes. The decision sets PJM Interconnection on a rapid course to adjust its market to find an equitable method of incorporating all of these resources.

As renewables and cheap gas threaten not just coal plants but also nuclear facilities, how wholesale markets incorporate preferred resources could mean the difference between retirement and availability for some plants, as well as the extent of renewables development.

Read more at Utility Dive.

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