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Published on July 26th, 2016 | by James Ayre

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Lawsuit Against FERC Alleges New Rules For Capacity Resources Put Undue Burden On Renewables

July 26th, 2016 by  


A new lawsuit filed against the Federal Energy Regulatory Commission (FERC) by a coalition of 4 environmental groups — including the Natural Resources Defense Council and the Sierra Club, amongst others — alleges that the new rules for capacity resources approved last year are going to raise costs for consumers and are “unduly” burdensome to renewable energy, according to recent reports.

FERC logoThe new FERC-approved rules for capacity resources (guaranteed electricity supply) were pushed by PJM — the overseer of utility companies in the Mid-Atlantic, parts of Appalachia, and the Midwest — following the natural gas energy issues that accompanied the polar vortex of 2014. The intent is to ensure that local utility company power supply is more reliable in the future.

The new rules will reportedly make it difficult for renewable energy providers to participate in PJM’s capacity market, owing to the generation capacity irregularities of most renewables — the rules require providers to provide consistent year-round production.

An attorney with NRDC’s Sustainable FERC project, Jennifer Chen, commented: “The new rules will funnel billions of dollars from electricity consumers to fossil and nuclear power plants while severely limiting clean energy participation in PJM’s capacity market.”

Think Progress provides some context on that assertion: “To explain that last part, it starts with the premise that building large-scale electricity generation is expensive. It doesn’t matter whether the plant is solar, wind, or coal. If it needs to produce a lot of electricity, it is going to cost money. Correspondingly, financing electricity projects is complicated and usually long-term. Investors and developers are looking for the most secure revenue stream possible over the longest period of time. Participating in capacity markets provides secure revenue — which renewable generators need in order to attract investors.”

And more: “This is just one source of revenue for electricity generators — they also can make long-term power purchase agreements with utilities or participate in shorter-term electricity markets. But the capacity market remains an important and stable means of doing business in PJM territory. Chen and her colleagues argue that making it difficult for renewables (and demand response) to participate in the capacity market will push the auction prices higher — prices that, again, will be passed on to consumers, while disincentivizing developers and investors from pursuing renewable energy projects in PJM.”

An attorney for the Sierra Club, Casey Roberts, commented: “The way that PJM’s rules operate basically doesn’t acknowledge the contribution of anything but fossil fuel resources that operate year-round. What regulators need to bring about a smarter energy future is rules that are more flexible and recognize the different capabilities that different resources offer.”

Notably, during the polar vortex, wind energy actually performed quite well — slashing consumer electricity costs by around $1 billion, according to the American Wind Energy Association.

 
 

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About the Author

James Ayre's background is predominantly in geopolitics and history, but he has an obsessive interest in pretty much everything. After an early life spent in the Imperial Free City of Dortmund, James followed the river Ruhr to Cofbuokheim, where he attended the University of Astnide. And where he also briefly considered entering the coal mining business. He currently writes for a living, on a broad variety of subjects, ranging from science, to politics, to military history, to renewable energy.



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