Potential federal power plant subsidies complicate PJM capacity market rulemaking
PJM doesn’t want to fight over ‘every single tax code provision’
The issue of how to define and address subsidies to power generation resources that participate in PJM Interconnection’s capacity auctions proved to be a challenge Wednesday when stakeholders met to discuss capacity market rule fixes ordered by federal regulators.
The US Federal Energy Regulatory Commission June 29 directed the grid operator to develop new capacity market rules, particularly around minimum offer prices, because the existing rules were determined to be unfair (EL 16-49, ER 18-1314 and EL 18-178).
Upon finding PJM capacity market rules were unjust and unreasonable, FERC suggested PJM come up with a minimum offer price rule that contained as few possible exceptions and also suggested the grid operator consider a resource-specific carve out, which PJM has dubbed “ReCO.”
The growth of state-level programs like renewable portfolio standards, renewable energy credits and zero-emissions credits for nuclear power plants has created capacity market friction between resources receiving subsidies that bid against those that do not. The first part of any potential solution would be to define “actionable subsidies” or out-of-market payments that should be excluded from capacity auction bids.
Additionally, potential US Department of Energy action to subsidize certain coal and nuclear plants has only added to the complexity. In June, US President Donald Trump directed DOE Secretary Rick Perry to take emergency steps to help financially struggling coal and nuclear power plants and a leaked memo indicated DOE is considering using the Defense Production Act and Section 202c of the Federal Power Act to that effect.
“I think we all know about action at DOE,” Adam Keech, PJM’s executive director of market operations, said during his presentation at the webcast special session of the Markets and Reliability Committee….