PJM Interconnection and Calpine have indicated that they are willing to come to the table and negotiate alternative long-term solutions to the minimum offer price rule (MOPR) approved by federal regulators in December.
The tentative signals come as New Jersey and Maryland ramp up their efforts to explore potential alternatives to the capacity market, frustrated by the order's anticipated consequences on the offshore wind market in the near term, as well as long-term costs. While the grid operator's independent market monitor has found costs will not rise in the next auction, recent analysis from energy consulting group Grid Strategies found the policy could cost customers in the market billions of dollars over the next decade.
Competitive power suppliers "finally got what they wanted and apparently now recognize what was obvious to the MOPR opponents - discarding state policies is not a durable solution," Ari Peskoe, Director of Harvard University's Electricity Law Initiative told Utility Dive in an email. "If one state's utilities exit, all that the merchants gain from the MOPR expansion disappears."
Opponents to the Federal Energy Regulatory Commission's MOPR order have long decried the rule as an affront to state clean energy policies. States across the PJM market have been fighting back since the commission in April decided to uphold the order and market participants are taking those threats seriously.
"[T]he MOPR decision does not present a long-term, durable solution for the capacity market, and especially offshore wind," PJM spokesperson Jason McGovern told Utility Dive in an email last week. "We hope to engage stakeholders on what a longer-term solution could look like for the capacity market" and work with states in the meantime, he said.
It's unclear what such a solution would look like — Calpine Senior Vice President of Government Affairs and Managing Counsel Sarah Novosel floated the idea of replicating something like the New England ISO's Competitive Auctions with Sponsored Policy Resources (CASPR) project, during an April webinar, but experts say that likely wouldn't be met well by stakeholders. Calpine did not respond to Utility Dive's requests for further comment.
"I wouldn't start with CASPR," Rob Gramlich, a former FERC adviser and current energy consultant at Grid Strategies, told Utility Dive.
CASPR was developed by ISO-NE and approved by FERC in 2018 as a way to bring more state sponsored resources online. But critics say it favors fossil fuel incumbents over new, clean energy resources.
"CASPR requires clean generators to essentially buy their way in[to the market] by paying an old resource to retire," said Gramlich. Renewables "should have automatic access and if they have capacity to sell, they should be able to sell it and get the same price as everybody else."
PJM generally would make such a decision through its stakeholder process, as it has indicated, said Peskoe, but through Section 205 of the Federal Power Act the grid operator could also file a capacity auction proposal.
"Although FERC rejected PJM's April 2018 filing as unjust and unreasonable in its June 2018 order, there is a long history of FERC deference to RTO market design proposals," he said.
Meanwhile, states are accelerating their own plans to mitigate the MOPR's potential impact on long-term resource plans.
One longer-term solution states are exploring now is the Fixed Resource Requirement alternative — Maryland's head regulator has indicated the state is taking a "serious look" at the option, while New Jersey's rate counsel requested a feasibility study on a potential FRR from PJM's independent market monitor. Illinois has previously indicated such a solution may be necessary for it as well.
Legislators have largely been limited in their ability to react to the order because many legislative sessions were ended historically early this year due to the threat of COVID-19.
But Maryland legislators last week urged state and federal regulators to take action that could temporarily mitigate the MOPR's harm to its offshore wind market, and leave the door open for developers to add more capacity in the future.
"I hope [Calpine, PJM and other generators are] willing to offer some ideas ... And I hope they're not just crumbs," Maryland Delegate Lorig Charkoudian, who led the movement in Maryland, told Utility Dive. "I hope they get around to making things right. But we've got to keep moving forward. We're doing everything we can because the future of the planet is at stake."