Clean energy gets a boost from FERC decision on controversial Trump-era rule

The country’s biggest grid operator has undone the most harmful aspects of a Trump-era policy that would have restricted the long-term competitiveness of clean energy resources across its 13-state territory — and federal regulators have OK’d the move.

That’s the upshot of Wednesday’s notice from the Federal Energy Regulatory Commission allowing mid-Atlantic grid operator PJM to move ahead with a dramatically scaled-back version of its minimum offer price rule, or MOPR. For clean-energy advocates, that acronym represents one of the most potentially damaging policies to emerge from the Republican-dominated FERC that existed under the Trump administration.

The MOPR forces renewable energy, nuclear power plants, demand-response assets, batteries and other technologies seeking to participate in PJM’s multibillion-dollar capacity market to set their bids at artificially high price levels if those resources were supported by state policies such as the clean energy mandates in place in PJM states such as Illinois, Maryland and New Jersey.

PJM’s revised approach to MOPR, formally issued last month, will do away with requirements that force renewables and other resources to use minimum prices imposed by administrative rules. Instead, it will focus on blocking the ​“anticompetitive practices” that the MOPR was originally designed to prevent. For example, it will prevent utilities that both own generation and buy capacity in PJM’s market from using their market power to manipulate pricing.

Removing onerous minimum pricing rules is critical to expanding the scope of clean energy resources needed to drive rapid decarbonization of the grid. That’s because forcing these resources to set their prices at levels that would likely fail to attract buyers in PJM’s capacity auctions, which are used to secure and pay the resources that are needed to keep the grid running at times of maximum electricity demand, could deny them an important source of revenue and potentially prevent them from ever being financed and built.

These restrictions would have had a particularly harmful effect on the gigawatts of offshore wind planned for deployment off the East Coast, a fact that led Maryland and New Jersey lawmakers to consider exiting the PJM market entirely rather than face that risk.

Meanwhile, preventing existing clean energy from being recognized as available in the market could have left more expensive fossil fuels to fill the gap, raising capacity market prices to levels that could add billions of dollars per year to the electricity bills of customers in PJM’s territory, according to multiple analyses.

PJM’s capacity market auction this year — the first it has held since the MOPR was introduced in 2018 — saw prices fall rather than rise, but analyses indicate that the most harmful effects of the MOPR would come in the future, as existing resources exempted from the rule were gradually outweighed by newly built resources that would be subject to it.

Critics have long questioned using the MOPR construct to address the market impacts of increasingly cheap clean energy resources. Many have accused the Republican FERC commissioners who supported it of using the rationale of preserving market integrity as a screen to impose restrictions that would shield fossil fuel power plants from clean energy competition.

Gregory Wetstone, president and CEO of the American Council on Renewable Energy, reiterated that view in a Wednesday statement:

The MOPR, as previously designed, was a poorly disguised effort to undermine the success that low-cost renewables have enjoyed in competitive electricity markets nationwide by financially bolstering uneconomic fossil fuel generators. We commend PJM for working to reverse a destructive policy that distorted the market and directly conflicted with state efforts to accelerate the transition to pollution-free renewable power.

FERC’s Wednesday notice reflects the shifting politics at the key federal agency, which now has two Republican and two Democratic members (its fifth seat is currently vacant). It’s important to note that FERC’s action constitutes neither an approval nor a rejection of PJM’s new plan. Instead, the agency said, ​“because the Commissioners are divided two against two as to the lawfulness of the change,” it chose not to act, which allows PJM’s change to go into effect under the regulations set forth in the U.S. Federal Power Act.

While the notice didn’t clarify which members held which positions, Democratic Chair Richard Glick has been a consistent opponent of the MOPR rule, while FERC’s two Republicans, James Danly and Mark Christie, have not made their stances clear publicly.

Sean Gallagher, vice president of state and regulatory affairs at the Solar Energy Industries Association, expressed disappointment in a Wednesday statement that FERC didn’t actively affirm PJM’s new approach, which he said ​“acknowledges the right for states to choose affordable and reliable clean energy.”

FERC’s current 2–2 split may shift to a three-Democrat majority in the coming months. Earlier this month, President Joe Biden nominated Democrat Willie Phillips, a former energy industry attorney who’s now chair of the Washington, D.C. Public Service Commission, to fill the seat vacated by Neil Chatterjee, the Republican and former FERC chair who championed the MOPR rule.