The federal policy coordinator of the U.S.'s largest regional grid operator asserted that moves by the Trump administration to support struggling coal-fired and nuclear power plants worsens a "headache" over accommodating public policies and state-mandated energy subsidies in competitive markets.
"The actions of President [Donald] Trump and Energy Secretary [Rick] Perry … complicates this issue even more," Craig Glazer, the PJM Interconnection’s vice president of federal government policy, told attendees of the U.S. Energy Information Administration’s 2018 annual conference in Washington, D.C., on June 4.
"We can't blame the market for not retaining nuclear or coal" if you do not have the policy to do so, continued Glazer. "People sort of use the markets as a whipping boy."
In addition to Trump’s June 1 directive for Perry to find a way to stave off retirements of coal-fired and nuclear generation in the name of national defense and grid resilience, a draft document leaked the same day outlined plans to require grid operators to buy electricity from coal-fired and nuclear power plants.
In a statement, PJM dismissed the plans as unnecessary and forewarned that "any federal intervention in the market to order customers to buy electricity from specific power plants would be damaging to the markets and therefore costly to consumers."
PJM's response comes as the grid operator awaits a Federal Energy Regulatory Commission decision on two market reform proposals aimed at accommodating government-directed energy subsidies, including New York’s and Illinois’ "zero-emissions credit" initiatives for at-risk nuclear power plants.
One proposal being considered by FERC, known as capacity repricing, would split the PJM region's annual base residual capacity auction into two stages, while the second proposal by PJM's internal market monitor, known as MOPR-Ex, would modify PJM's existing minimum offer price rule, or MOPR.
Glazer expressed concern over what he perceived as "plant-by-plant" and "state-by-state" piecemeal re-regulation of electricity markets that puts the power industry in a dangerous position between deregulation and regulation.
"You have competitive generation ... competing with regulated subsidized generation," said Glazer. "I'm not sure that is sustainable, to be honest. It leads to skewed investment signals."
Glazer warned industry and policymakers of the dangers of nostalgically pining for "the good old days" of regulation. He reminded them that the industry and consumers during the regulated-era were all like Howard Beale in the 1976 film, Network, who said he was "mad as hell and I'm not going to take it anymore."
For instance, Glazer recounted that regulated-era transmission access had to be negotiated system-by-system while consumers balked at high rates to cover various public interest groups and grid build-out costs, investments stagnated, and litigation took so long that favorable FERC decisions were dubbed "refunds for a corpse."
"We didn't restructure this market to pick technologies; we restructured this market to drive efficiencies in technologies and that's what the market is doing," said Glazer. "If the policymakers decide that they want to back a particular technology, they can do that. We've done that in the past. It hasn't always worked but if we want to go back... to some of those, we can do that."
In addition to today’s competitive markets efficiently driving investments, such as the shift to using more natural gas-fired power plants to provide baseload power instead of just peaking power, Glazer said deregulation has required investors to take on more risk, instilled more market transparency, and led to more regional planning.
"The challenge for all of us is to make this restructured industry work, rather than make it a golden memory of yesteryear," said Glazer.
