PJM and ISO-NE Tackle Low Capacity Market Prices Differently
The electric utility landscape in the United States is shifting, with deregulated regions using competitive capacity markets to meet demand. Recent low clearing prices in these markets have raised concerns, particularly for fossil fuel and nuclear plants. Two major Independent System Operators, PJM and ISO-NE, are addressing these issues with different approaches.
Low clearing prices in capacity markets are partly due to government-subsidized generators, like renewables and sometimes nuclear, bidding low. This puts some traditional plants at risk. The market clears when supply equals demand plus a reserve margin, with generators bidding at their operating costs.
PJM, one of the largest independent system operators, proposed a Minimum Offer Price Rule (MOPR) for subsidized generators and a two-stage auction. ISO-NE's CASPR project, launched in February 2019, also imposes a MOPR but creates two separate auctions, reducing potential oversupply and lowering costs compared to PJM's approach. FERC sided with Calpine Corporation against PJM's Open Access Transmission Tariff in 2018, finding it allowed subsidized plants to deflate prices. FERC also approved CASPR and rejected PJM's original proposal using capacity repricing, deeming it unjust and unreasonable.
The differing approaches of PJM and ISO-NE to integrate subsidized generators into capacity markets reflect regional differences in market design, regulatory frameworks, and priorities. PJM's latest proposal may be influenced by incumbent generators' interests and the Trump Administration's efforts to keep coal plants online. As these markets evolve, it's crucial to balance cost-effectiveness, market stability, and renewable energy deployment.
Read also:
- Increase in Electric Vehicle Charging Stations Across U.S., But Is It Sufficient?
- Tesla's Semi-Truck enters partnership with Uber Freight, aiming to accelerate the usage of electric trucks.
- CFS to Build First US Commercial Nuclear Fusion Plant by 2035
- The current status of green hydrogen for developing countries following the wave of hype: Assessment of remains
