MOPR expansion to improve coal economics in PJM: trade organization

Fort Lauderdale, Florida — PJM Interconnection's changes to its minimum offer price rule, or MOPR, will improve the economics for coal plants, but it will not be a game changer, an executive of a trade organization said Wednesday.

Speaking at the American Coal Conference's Spring Coal Forum in Fort Lauderdale, Florida, Michelle Bloodworth, CEO and president of America's Power, said the changes, which were ordered by the Federal Regulatory Commission in December 2019, will mitigate the effects of state-subsidized resources in its 13-state footprint.

The order only applies to the capacity market and places a floor on offers from all new and existing resources that receive subsidies, unless an exemption applies, as opposed to the previous rule which was for new natural gas capacity only.

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"The whole goal of the MOPR was to make sure that any generation resources are bidding in at their true costs," Bloodworth said. "So putting aside the subsidies, what is the true cost of that unit?"

Bloodworth said estimates vary, but most, including PJM, expect capacity prices to be flat. However, consulting firm ICF International said prices could increase by up to 10%, according to Bloodworth.

On the flip side, Bloodworth said reserve margins will be higher as states pursue their clean energy goals, while energy prices will be lower because of extra capacity in PJM.

Bloodworth added that the MOPR does not force PJM to burn more coal but it does "allow coal to live another day" and that the order "levelizes the playing field."

The capacity market is becoming more and more important to coal fleets, Bloodworth said, because coal adds fuel security and helps maintain grid reliability and resilience.

"It's the biggest way of playing on a level playing field, while valuing fuel security," Bloodworth added. "We hope fuel security will be mandated."

In 2019, coal averaged about 23.7% of PJM generation share, while gas averaged about 36.1%, compared with 28.5% and 30.4%, respectively, in 2018, according to PJM data.