Nuclear Energy Institute Recommends Rejection of PJM Capacity Proposals
The Nuclear Energy Institute (NEI) submitted on Monday a motion to intervene and comments concerning proposed changes filed with the Federal Energy Regulatory Commission (FERC) by PJM Interconnection to the capacity market provisions of its tariff.
PJM’s proposal aims to account for zero-emissions credits and other state programs designed to support clean energy.
Ellen Ginsberg, vice president, general counsel and secretary of NEI, issued a statement on the filings.
“PJM has put forward two proposals to change its capacity market to address state support designed to promote clean energy,” Ginsberg said. “However, PJM’s filing hasn’t shown that either proposal would be solving a problem that needs fixing. Therefore, we believe rejecting both proposals is the right and proper course.”
Under PJM’s current system, generators offer their capacity in an auction that PJM operates. PJM ranks the generators according to price and then accepts offers starting at the lowest price until it has enough capacity to meet demand. The amount offered for the last portion of capacity is called the clearing price. All the generators that PJM accepted are then paid the clearing price. Generators that asked for more than that price are not accepted.
PJM has proposed two potential changes to this approach. One proposed alternative, called MOPR-ex, would require units receiving zero-emission credits (ZEC) to bid into the capacity market at a higher price, which reflects the value of these ZECs.
The other proposed alternative is a two-stage bidding process called capacity repricing. The first stage would remain the same as the current process. PJM would rank units by price and then select enough to satisfy demand. The second stage would increase the bids of units that receive ZECs to reflect those credits. PJM would then run the auction with those repriced bids to determine the clearing price. The units accepted in the first round, including the nuclear units receiving ZECs, would receive the higher clearing price.
“Wholesale markets do not compensate generators for being clean,” Ginsberg said. “This failure leads to market inefficiencies and distortions. When states price externalities, like the cost of pollutants emitted by other generators, they are complementing the wholesale markets by accounting for the benefits that would otherwise go unrecognized. Tariffs and market rules should recognize that state action to reward nuclear generators for providing carbon-free electricity actually corrects market distortions. The Federal Energy Regulatory Commission (FERC) should not undermine state choices.”
