New PJM white papers aim to integrate state power policies into wholesale markets

Just weeks after the results of PJM Interconnection’s latest forward capacity auction were unveiled, the grid operator is taking a closer look at how to reconcile state energy goals with wholesale market operations.

In the absence of a national clean energy policy, a number of states have enacted renewable portfolio standards to support the deployment of wind and solar energy. And last year, Illinois and New York instituted nuclear power subsidies to prevent a number of large plants from retiring prematurely, sparking similar debates in four other states.

“Increasingly, public policies seek to recognize value associated with generation plants beyond their cost effectiveness and reliability attributes,” PJM said.

Generators complain that these “around-market” policy goals are discriminatory and drive down power prices, potentially forcing unsubsidized fossil fuel plants offline. Those complaints were the subject of a technical conference last month at the Federal Energy Regulatory Commission, and PJM’s new working papers are updates to proposals submitted for consideration at that meeting.

The carbon pricing proposal seeks to allow states to put a cost on emissions in power markets, rather than using around-market procedures to support clean energy. The paper proposes a single carbon price among willing states with a “border adjustment” to ensure “energy exports from the carbon price sub-region could be competitive on equal footing in non-carbon price sub-region.”
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