FERC's Glick: Carbon pricing not a 'panacea' for resolving tensions with states

Federal Energy Regulatory Commission member Richard Glick on March 3 tossed cold water on the idea that implementing carbon pricing in regional wholesale power markets would automatically defuse growing tensions between the agency and states with aggressive climate targets.

Federal Energy Regulatory Commission member Richard Glick on Tuesday tossed cold water on the idea that implementing carbon pricing in regional wholesale power markets would automatically defuse growing tensions between the agency and states with aggressive climate targets.

"I think it's a little naive to say, 'Well, if we had some sort of a carbon price, states wouldn't want to have clean energy policies," Glick said at an event in Washington DC, co-hosted by New York University's Institute for Policy Integrity and Duke University's Nicholas Institute for Environmental Policy Solutions.

The carbon pricing event was set against the backdrop of a series of FERC orders imposing price floors on state-subsidized clean energy resources in the ISO New England, PJM Interconnection, and most recently the New York ISO. All three of those grid operators use mandatory capacity auctions designed to procure enough energy supply to meet future demand.

FERC's Republican majority has argued that orders requiring some variation of what are known as minimum offer price rules, or MOPRs, in those capacity markets were necessary to guard against potential price distortion caused by states' aggressive clean energy policies. But Glick, the lone Democrat on the three-member commission, has argued that the mitigation measures trample upon states' rights under the Federal Power Act to choose their own generation mixes.

With NYISO actively pursuing a carbon pricing proposal that could pave the way for other grid operators, the commission's MOPR orders have sparked a broader debate about whether embedding a price per ton on carbon emissions in wholesale energy prices would help smooth over what has become a patchwork of state-level clean energy policies.

CO2 PRICES

Speaking in broad terms, Glick on Tuesday identified a range of potential stumbling blocks that could frustrate efforts to implement regional carbon pricing at the wholesale level. One of the first was the price of CO2 itself.

"If it's too high, obviously some states might react negatively to it," Glick said. "If it's too low, a number of states will say, 'Why should I stay out of the market with my clean energy policies if FERC's going to impose a carbon price that we don't think is going to have a significant impact."

In addition, Glick said he already has heard from individuals worried that FERC could attempt to use regional carbon pricing schemes to completely cancel out the effect of states' resource decisions at the wholesale level. "There's a legitimate concern that FERC could impose a carbon price and use that as an excuse for completely 'MOPR'ing' all state clean energy policies," he said.

Beyond that, Glick noted that some states' clean energy policies are fueled in part by the desire to preserve or create local jobs.

"I'm not entirely sure [carbon pricing] is the panacea to address the issue the commission has struggled with and will continue to struggle with for a while ... whether to accommodate state policies or quite frankly obliterate them through some of our orders," Glick said.

In closing, Glick added that one surefire way FERC can help states meet their clean energy goals is by making transmission lines easier to build.

"One thing I'm focusing on an increasing amount is the issue of transmission," Glick said. "Even with carbon pricing, and maybe because of carbon pricing, you're going to have to figure out a way to access areas where we have significant and very efficient clean energy resources."

To that end, Glick said he hopes the commission spends more time in the near future on encouraging competition among transmission developers and boosting the build-out of the grid through enhanced incentives.

"How are we going to help the states achieve these aggressive or dramatic clean energy goals?" Glick asked. "We're not going to do it unless we build out the grid."