Energy groups urge FERC to examine carbon pricing policies

A coalition of energy industry groups recently urged the Federal Energy Regulatory Commission (FERC) to examine the implications of carbon pricing policies in wholesale electricity markets.

The request — submitted by electric power generators, trade associations, and think tank experts — comes at a time when many states are already considering policies that reduce carbon emissions in the electric sector.

“The unique features of organized wholesale electricity markets create an opportunity for integrating policies that directly price carbon emissions into energy market operations. The coalition highlight that a number of organized markets such as the New York Independent System Operator have supported or are considering how to incorporate a price on carbon,” the signatories wrote in a letter to FERC officials.

The signatories include officials from the Advanced Energy Economy, the American Council on Renewable Energy, the American Wind Energy Association, Calpine Corporation, Competitive Power Ventures, the Electric Power Supply Association, PJM Power Providers Group, the Independent Power Producers of New York, the Natural Gas Supply Association, LS Power, NextEra Energy, the R Street Institute, and Vistra Energy.

Carbon pricing could be a cost-effective tool to drive down emissions and achieve state goals while preserving the economic benefits of competitive wholesale electricity markets, they said. The market competition has saved U.S. electricity customers billions and spurred innovation, while also resulting in significant emissions reductions.

“Two overwhelming factors are impacting wholesale energy markets today,” Jeff Dennis, general counsel and managing director at Advanced Energy Economy, said. “Low- and zero-carbon advanced energy technologies have become the most cost-effective options for meeting consumer needs. And state policymakers are enacting policies, and large corporate customers are making commitments to 100 percent clean energy. Pricing carbon emissions is one of the tools, along with complementary policies, that states are considering to make this transition quickly and cost-effectively. FERC convening a dialogue on carbon pricing would be a good first step toward a much-needed conversation about how the entire suite of state policies can be better integrated into the competitive wholesale electricity markets.”

The coalition is urging FERC to use its authority to gather stakeholders to examine a variety of mechanisms and to discuss the implications of states or other entities adopting carbon pricing policies in regions with organized wholesale electric energy markets.

“As America’s wholesale power markets weather unprecedented turmoil, thoughtful carbon pricing can serve as an effective complement to state policies like renewable energy standards which are designed to accelerate the transition to pollution-free, renewable power,” Gregory Wetstone, president and CEO at the American Council on Renewable Energy, said. “Carbon pricing can play an important role in a comprehensive climate solution, and we look forward to working with FERC and this diverse coalition to explore effective carbon pricing models and other timely measures that allow us to mitigate the harmful impacts of climate change.”