New York — Energy project developers and US power market participants have a varying wish list ahead of PJM Interconnection's much-anticipated capacity market compliance filing with federal regulators due Wednesday. A divergence of views remains regarding the expanded minimum off price rule's impact on renewable energy projects.
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The Federal Energy Regulatory Commission ruled (EL16-49, EL18-178) in December to expand the MOPR to almost all new and existing electricity resources eligible to receive state subsidies in order to mitigate the impact of those subsidies on capacity market competition.
New resources that receive state subsidies and want to enter PJM's capacity market will be subject to a minimum offer price that will be calculated using the resource's net cost of new entry (CONE).
CONE reflects a resource's capital investments and fixed operations and maintenance costs. In calculating the MOPR, expected energy and ancillary service market revenues are removed in order to show the capacity revenue needed for a resource to remain profitable, according to PJM.
For existing resources eligible for or already receiving state subsidies, their net avoidable cost rate (ACR) will be used to calculate the price floor required when bidding into capacity auctions.
ACR reflects an existing resource's annual going-forward costs, meaning costs that would be avoided if the unit would otherwise retire, according to PJM. It is intended to reflect a resource's lower threshold for remaining in the market than to initially enter it.
In its filing with FERC, PJM will propose the CONE and ACR values to be used in upcoming capacity auctions that procure power supplies three years ahead based on expected demand and other calculations.
PJM did not hold an auction in 2019 as ordered by FERC, which said to wait until it had finalized its ruling. PJM provided guidance on its proposed auction schedule at a stakeholder meeting last week.
The proposed schedule is also required as part of the compliance filing and PJM indicated it will look to compress pre-auction activities into six months to conduct the next, 2022/2023 base residual auction as soon as possible after FERC approval of the compliance filing.
"If FERC approves PJM's compliance filing by September, March 31, 2021, is the last date by which PJM would complete the next auction," the market operator said.
Going forward, PJM has proposed conducting the 2023/2024 thru 2025/2026 BRAs at six-month intervals with a six week pause between posting auction results and commencing activities for the next BRA, and compress pre-auction activities into 4.5 months.
MARKET PARTICIPANT VIEWS
"It's absolutely critical that FERC acts on the PJM's filing in an expeditious manner and directs PJM to conduct the capacity auctions as soon as possible," Tom Rumsey, spokesman for power plant developer Competitive Power Ventures, said in an email Tuesday.
"The delays in the auction have been manageable, but it's important to get them back on track so private investment and orderly retirements can occur," Rumsey said.
Todd Snitchler, president and CEO of merchant generator trade group Electric Power Supply Association largely agreed, saying in an email EPSA hopes PJM's filing will "help secure continued benefits for consumers and our grid and shed greater light on how the MOPR will impact the market."
"In order for that to happen, FERC must act expeditiously so that PJM can move forward and hold its long-delayed BRA as soon as possible," Snitchler added.
Asked about the impact the order could have on renewable energy project development, Rumsey said it will "provide the regulatory certainty for renewable projects to progress, similar to our 150-MW Maple Hill Solar project we announced after the initial ruling."
"Renewables can compete in an open market, eliminating subsidies for nuclear generation and sending accurate market signals for investment will be a significant improvement and catalysis for growth," Rumsey said.
Renewable energy groups have been more concerned about the order's impacts, saying in a January joint request for rehearing submitted to FERC that the order, "with little explanation, drastically and arbitrarily expanded the application of the MOPR to the point where it 'could potentially apply to any conceivable state effort to shape the generation mix.'"