By: Tyler Stoff
January 27, 2021
An examination of the way the new Biden administration can use its executive authority to accelerate the deployment of renewable energy might well begin with a look at the Federal Energy Regulatory Commission (FERC). Among several important functions, FERC regulates the nation’s wholesale power markets. President Biden recently appointed Commissioner Richard Glick, a longtime clean energy champion, as the agency’s new Chairman.
FERC orders have been vital to securing the clean energy progress we have made to date. A series of orders in the 1990s created today’s wholesale power markets, which have cost-effectively integrated gigawatts of renewable power. FERC orders in the 2010s opened those markets to new types of power delivery, like energy storage. Under new leadership that recognizes the potential of the clean energy sector and the magnitude of the climate crisis, today’s reinvigorated FERC can achieve the long-overdue regulatory reforms needed to accelerate the energy transition.
Though the FERC Chairman needs the consent of at least two of his four colleagues to enact major regulatory reform, his ability to set the agenda is a powerful tool. As we welcome Chairman Glick to his new role, we note several important policy areas where FERC can accelerate the transition to a renewable energy economy.
- Reversing the market-distorting minimum offer price rules in the nation’s capacity markets. By forcing consumers to pay more money than they should for clean, cost-effective renewable energy, FERC’s Minimum Offer Price Rule (MOPR) and Buyer-Side Mitigation orders have raised electricity prices and depressed investment in the PJM and NYISO power markets, respectively. The American Council on Renewable Energy (ACORE) is challenging the MOPR order in court, and FERC can immediately pull its defense from the 7th Circuit Court of Appeals in preparation for the opportunity to issue a new decision. Repealing these rules will lower the cost of clean energy, which would increase demand and spur new investment. Additionally, returning to FERC’s prior policy would provide the industry with important regulatory certainty and establish a starting point for more substantial capacity market reform in preparation for the resource mix of the future. Read more about the MOPR’s impacts here.
- Revisiting transmission planning policies. In 2011, FERC passed Order No. 1000, which governs how the large transmission lines that bring electricity to market are planned. Ten years have now passed since Order No. 1000’s finalization, and not one interregional transmission line has been built using the process it established. By not considering the full benefits of new projects and not allocating project costs proportional to their benefits (among other shortcomings), Order No. 1000 has failed to deliver on its initial promise. Revised electric transmission planning rules would help foster the creation of a Macro Grid. A fully planned and integrated Macro Grid can connect centers of high renewable resources with centers of high electric demand. FERC should also work to break down the increasingly evident obstacles to the integration of offshore wind facilities in wholesale power markets, such as the lack of cost-allocation methodologies for offshore wind transmission facilities.
- Reforming generator interconnection policy to speed the development of renewable projects languishing in grid interconnection queues. Specifically, FERC should discontinue the policy of participant funding for new generation, a process analogous to the next car entering a crowded highway paying for the full cost of a lane expansion. Allocating interconnection costs to all beneficiaries, not just the next interconnecting generator, will enhance project economics, increase grid reliability, reduce congestion and ultimately allow more renewable power to join the grid. Read more about the need for a new generator interconnection policy here.
- Finalizing an October 2020 proposed policy statement that would allow wholesale power markets to price carbon with FERC’s approval. Finalizing this policy statement would be an important first step toward integrating climate externalities into market rates, continuing FERC’s tradition of enhancing market efficiency. FERC should also host a technical conference on accommodating clean energy standards in wholesale power markets. Clean energy standards are an increasingly popular tool for providing investment certainty through the energy transition. Read more about carbon pricing and FERC here.
- Expanding and standardizing hybrid resource integration across wholesale power markets. Hybrid resources, power plants that combine multiple types of generation or storage resources together, leverage the best qualities of generators with modern technology, leading to smoother output and optimizing project economics. A less resource-specific grid framework and greater standardization of market rules would remove barriers to the expansion of the hybrid resource fleet. Read more about the opportunities and challenges of hybrid resources here.
ACORE and its member companies look forward to working with the Commission to enact these reforms in the months and years ahead.
This post is part one in a series examining how to combat climate change and accelerate the transition to a renewable energy economy through executive action.