FERC Wins Case Over PJM Capacity Rules ‘Discriminating’ Against Wind And Solar

Betsy Lillian
Written by Betsy Lillian
on June 21, 2017 No Comments
Categories : Featured, Policy Watch

On Tuesday, the U.S. Court of Appeals for the District of Columbia upheld the Federal Energy Regulatory Commission’s (FERC) approval of the PJM Interconnection’s new electricity market rules. According to several clean energy advocacy groups, by requiring all energy resources to perform year-round, the new rules threaten to pile on extra costs for customers and discriminate against wind and solar power.

Last year, the Sierra Club, the Natural Resources Defense Council (NRDC), the Union of Concerned Scientists and Earthjustice filed a lawsuit against FERC’s approval of the rules, which they claimed were “tailored to suit fossil fuel resources” and would “impose significant costs on customers and severely handicap participation in PJM’s capacity markets.” The lawsuit claimed that FERC “did not sufficiently scrutinize” the rules.

According to the groups, PJM “rushed” to establish the rules after extremely cold weather in 2014 caused the failure of several fossil fuel plants. In turn, PJM proposed that “all resources perform any time of year and be compensated even more than under the current rules.”

The groups claimed that the “always available, all-year requirement” looked “resource-neutral” on the outside, but it actually put resources such as wind and solar power at a disadvantage, considering wind and solar would more likely “perform reliably and cheaply” in the winter and summer, respectively. They also pointed out that these resources “played a critical role in keeping the lights on during the 2014 winter emergencies.”

Jennifer Chen, an attorney with the Sustainable FERC Project, housed within the NRDC, says in a statement that the new ruling “upholds rules that restrict clean energy resources from fairly competing with fossil fuel and nuclear power plants.”

“This decision hits 65 million Americans in the pocketbook,” Chen says. “It hits all of us where it hurts most: our right to breathe clean air. It impedes American clean energy innovation and sets back real progress in the fight against climate change.”

In a recent NRDC blog, Chen claimed that “eliminating seasonal resources and only procuring annual resources could further inflate costs to consumers by the billions of dollars … both by over-procuring capacity during the off-peak seasons and by restricting competition in the capacity market to expensive, fuel-burning power plants.”

Instead, if PJM were to “allow for capacity procurement on a seasonal basis,” it could “more flexibly procure economical, clean and reliable resources, such as solar, wind and customers’ smarter use of air conditioning while avoiding costly and wasteful over-procurement in the off-peak seasons,” Chen argued.

However, in the end, Chen says the court ultimately took FERC’s side, “largely deferring to the agency’s expertise on grid reliability” – “despite our arguments that FERC failed to satisfy its duties and explain its reasoning: a position shared by state oversight agencies, rural electric cooperatives, public power and clean energy advocates.”

PJM, which is based out of Pennsylvania, serves approximately 65 million customers in Delaware, Illinois, Indiana, Kentucky, Maryland, Michigan, New Jersey, North Carolina, Ohio, Pennsylvania, Tennessee, Virginia, West Virginia and the District of Columbia.

In a statement released by the regional transmission organization, PJM says it “appreciate[s] the court’s decision to uphold FERC’s order and PJM’s capacity market rules.”

“We recognize there was a fair amount of debate on the issue, and we are pleased with the court’s thorough and thoughtful review,” states Craig Glazer, vice president of federal government policy at PJM. “The ruling affirms the just and reasonableness of the market rules, which support PJM’s mission of maintaining a fair and competitive market and a reliable grid.”

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