The U.S. Federal Energy Regulatory Commission (FERC) issued a suite of orders imposing minimum bid prices on subsidized renewable energy resources in the New York energy capacity market, increasing competition for power suppliers.
State energy capacity markets, such as the market operated by the New York Independent System Operator (NYISO), are responsible for ensuring there is adequate energy in the areas they preside over. In order to decide which companies will provide supplemental energy resources for each area if the main power grid is under stress, energy resources make bids to be selected as the backup energy resource in what is known as a capacity auction.
Protecting Competition, Adequate Supply
Under FERC’s orders, state-subsidized renewable energy resources such as wind and solar will be required to meet a minimum price in NYISO’s capacity auction. FERC says its action is intended to protect competition by removing exemptions to the rules of the capacity market price floor for renewable energy sources.
“[This action will] send accurate price signals to markets and to ensure adequate supplies for consumers,” said Neil Chatterjee, FERC Chairman, at the meeting where the orders were approved. “Today’s orders protect the competitiveness of [NYISO]’s capacity market by addressing the price-distorting actions that could have unintended impacts on the future supply of electricity consumers.”
Countering Special Treatment
FERC’s orders run counter to proposals made by NYISO intended to take away buyer-side market power mitigation rules, which would have benefitted renewable energy electric suppliers at the expense of electric power from fossil fuel and nuclear power plants.
NYISO said FERC’s new order will more difficult for New York state to reach its greenhouse gas reduction targets, which include sourcing 70 percent of its electricity from renewable sources by 2030 and 100 percent by 2040.
In a public statement, NYISO said it is reviewing FERC’s action to determine if a rehearing would be necessary, but said states, not the wholesale market operator established to reduce electric prices, should dictate policy.
“Competitive electricity markets, which were originally designed to provide reliable service at the least cost, are now at an inflection point,” NYISO President Rich Dewey said in the statement. “The wholesale markets must now accommodate state policies, not conflict with them.”
Emma Kaden ([email protected]) is an assistant editor at The Heartland Institute.