Forward Clean Energy Markets: A New Solution to State-RTO Conflicts

In a recent Utility Dive article, Brattle Principals Samuel Newell, Kathleen Spees, and Johannes Pfeifenberger discuss the challenges raised by a recent Federal Energy Regulatory Commission (FERC) order that will strain states’ abilities to meet their own clean energy mandates, and offer a new market design as part of the solution.

FERC’s recent Minimum Offer Price Rule (MOPR) will require state-mandated or state-supported nuclear and renewable generation resources to offer a price floor in regional transmission organization (RTO) capacity auctions. The resultant increase in the cost of clean energy resources already has states, consumer groups, and environmental groups considering leaving organized capacity markets. This could result in a costly transition to market and regulatory constructs that are less competitive and less cost-effective.

To avoid this, the article’s authors propose a forward clean energy market (FCEM) concept. The FCEM would competitively procure clean energy commitments in a technology-neutral fashion that can complement other wholesale power market products. Adopting an FCEM can avoid the inefficiencies of imposing MOPR on clean-energy resources, by recognizing the in-market payments for environmental attributes that would otherwise be excluded from organized wholesale electricity markets.

FCEM may allow organized wholesale power markets to continue to provide well-documented benefits. It allows the organized markets to offer state policymakers and customers a market design that will help them achieve their clean energy goals.

The full article, “Forward Clean Energy Markets: A New Solution to State-RTO Conflicts,” can be found on the Utility Dive website.