Can Pennsylvania’s electricity market become competitive again?
Americans keep hearing bold claims about wind and solar power. Advocates say wind and solar are growing more affordable, and are cheaper than natural gas or coal. But much of that advantage actually comes from significant taxpayer support. And without such hefty subsidies, a different picture emerges.
The Federal Energy Regulatory Commission (FERC)—which regulates the sale of electricity in the U.S.—recently decided to address the way that wind and solar are impacting America’s power sector. It expanded something called the Minimum Offer Price Rule (MOPR). And it did so in the largest electricity market in the nation—PJM Interconnection, which serves 65 million customers in 13 states, including Pennsylvania.
FERC’s decision tells us a lot about the state of electricity in the U.S. The agency acted because it believes that the same subsidies that once helped to launch the wind and solar boom are now upending and overwhelming the nation’s electricity markets.
Why did FERC act? Twenty-nine states and the District of Columbia follow “renewable portfolio standards” that mandate a certain percentage of their electricity must come from renewable sources. These requirements mean that taxpayer money is used to reduce the cost of electricity from wind and solar systems. While these subsidies were once marginal, they’ve now snowballed—and have pushed large, baseload power plants out of the marketplace.
Key coal plants, for example, have been going out of business in the face of artificially low wind and solar prices. Some cheer this, but it’s now driving a potential grid reliability problem.