State mulls leaving PJM capacity market

April 16, 2020, 8:57AMNuclear News

The New Jersey Board of Public Utilities (BPU) initiated an investigation into possible alternatives to participation in the regional capacity market administered by PJM Interconnection, New Jersey’s regional transmission organization.

Why:The move is in response to the Federal Energy Regulatory Commission’s December 2019 decision directing PJM to extend the Minimum Price Offer Rule to new and existing resources, including nuclear, that receive state subsidies (NN, Jan. 2020, p. 9). Many promoters of clean energy believe that the rule could prevent both nuclear and renewables from competing successfully in the wholesale market. In January, a number of entities asked FERC to reconsider its directive.

Details: FERC’s decision, made on March 27, did not sit well with New Jersey Gov. Phil Murphy, who, in May 2018, signed into law a bill that raised the target of the state’s renewable energy portfolio standard to 50 percent by 2030, issued an executive order calling for state agencies to develop an updated plan to provide a path to 100 percent clean energy by 2050, and signed into a law a bill designed to aid the state’s nuclear power plants (NN, June 2018, p. 17). That measure—estimated to be worth around $300 million in annual subsidies to Public Service Enterprise Group, owner of Hope Creek and co-owner, with Exelon, of Salem—instructed the BPU to establish a zero-emission certificate program for nuclear plants, similar to the ZEC programs implemented in Illinois and New York. ZECs allow nuclear plants to enter capacity auctions at a lower price point to compete with historically low natural gas prices and federally subsidized renewable generation.

What they’re saying: According to the BPU order launching the investigation, FERC’s order expanding the Minimum Price Offer Rule potentially disrupts New Jersey’s efforts to shape its electric generation resource base, including renewable energy certificates to support the state’s renewable energy portfolio standard, and ZECs to provide compensation for nuclear resources.

The action by the board "is an opportunity to help us achieve Governor Murphy’s goal of 100 percent clean energy by 2050, while potentially lowering costs to customers,” said BPU President Joseph L. Fiordaliso in a press release. “Taking control of our own resource mix may be the only way to stop the Drumpf administration’s attempts to prop up fossil fuels to the detriment of our clean energy program. We will do everything in our power to prevent that from happening.”

What’s next: The initial step in the investigation, the BPU said, is to open a public comment period, seeking feedback on a number of questions, including whether New Jersey can use something called the fixed resource requirement (FRR) alternative to satisfy its resource adequacy needs and clean energy goals. Comments are due to the BPU by April 29.

Background: Utilities that deliver electricity to end users in PJM generally secure the necessary supply resources through its capacity market, known as the Reliability Pricing Model, according to PJM. But under PJM’s existing rules, certain companies can opt out of the capacity market by electing the FRR alternative.

A party is eligible to elect the FRR alternative if it is an investor-owned utility, an electric cooperative, or a public power entity. Also, it must be able to demonstrate that it has sufficient resources available to meet the reliability requirement for the FRR service area, which is generally the projected future demand for electricity plus a reserve margin.

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