In the absence of federal action to address climate change, many states have adopted their own climate goals and established innovative policies that prioritize solar, wind, nuclear, and other forms of clean energy. Combined with actions in the private sector, these policies offer a measure of hope.
But now federal regulators have determined that it isn’t enough for markets to be merely neutral on the question of clean energy. Instead, regulators are actively working against states in their efforts to transition from fossil fuels. If left unchallenged, these actions will preserve a broken system, penalizing states that have tried to help clean energy producers thrive in federally regulated energy markets.
States face a stark choice. If they accept the constraints of the new federal market rules, they’ll go backward in the fight against climate change. But there is a better option. States can take back control over their energy choices by withdrawing from the federally regulated capacity market and securing clean generation for their citizens.
At Exelon, we stand with the majority of Americans who say they want more access to clean energy and increased action on climate change. Our fleet of nuclear, wind, solar, and hydro power plants produce about 12% of all the carbon-free energy on the grid today. But market policies that don’t favor carbon-free energy have put many nuclear plants across our industry at risk of early retirement. Scientists and economists from Massachusetts Institute of Technology, the Organization for Economic Cooperation and Development, and the Center for Climate and Energy Solutions agree that the fastest and most cost-effective way to meet our climate goals is to combine existing nuclear plants—which produce nearly 60% of the nation’s carbon-free energy, based on our analysis of Energy Department data—with new renewable resources and other innovative technologies.
Several states recognize this and have moved to protect their nuclear resources while they continue to promote more renewable energy. But the latest federal regulatory action will reverse that progress.
This situation came about when the Federal Energy Regulatory Commission (FERC) issued an order in December that will prevent zero-carbon energy resources that benefit from state clean energy policies from fully participating in the nation’s largest regional power market, called PJM.
PJM operates the grid and governs power sales for all or parts of 13 states and the District of Columbia. In his dissent to the decision, FERC Commissioner Richard Glick noted that the new market rules could cost consumers as much as $2.4 billion a year, while giving a lifeline to coal and other polluting power plants that might otherwise have retired to make way for cleaner energy.
The results could be devastating to our environment, public health, and economy as development of new renewable energy is hindered and more of our nation’s existing nuclear plants are priced out of the market.
Illinois provides a stark example of the damage this policy could cause. In 2016, the state passed the Future Energy Jobs Act to bolster renewable energy development and aid two Exelon nuclear plants that were slated to close due to declining power prices. FERC’s decision undermines this legislation and could stymie the state’s efforts to support renewable energy development and preserve nuclear plants, which provide about half of Illinois’s total energy supply, including 90% of carbon-free energy. Such an outcome would significantly raise carbon emissions and put the state’s goal to achieve 100% clean energy by 2050 all but out of reach.
The problem stems from the way PJM ensures that it has enough energy to keep the lights on during times of peak demand, such as on a hot summer day. It does this by requiring power producers to sell their generating “capacity”—essentially a commitment to provide power when it’s needed—in an annual auction. That auction determines what price all producers receive in exchange for making their power plants available to supply electricity to the 65 million people in PJM’s territory.
In simple terms, FERC’s order forces carbon-free power generators that are prioritized under state clean energy programs to bid into the auction at artificially inflated prices that don’t account for the state incentives they receive. The higher bids will all but ensure these generators lose out to dirtier fossil fuel plants. This will force homes and businesses to buy power at higher prices from polluting plants they would rather see retired. It also robs carbon-free energy of an essential source of revenue and will make it more expensive for states to support the clean resources needed to meet their climate goals.
This is a direct attack on states’ authority to protect their citizens from pollution and represents a massive, consumer-funded giveaway to coal and other polluting power generators.
The current order only applies to states served by PJM. But given that polluting generators pressured FERC to impose its restrictions on PJM, it’s only a matter of time before they ask regulators to extend similar restrictions to other regional power markets.
The only clear solution is for states to circumvent FERC’s order by withdrawing their utilities from the PJM capacity market and setting up their own process for securing adequate power generation to meet consumer demand. This would allow states to continue prioritizing clean energy over fossil fuels that contribute to global warming and air pollution.
In coming months, every state within PJM will have to confront this issue or pay the price in the form of higher energy costs and increased environmental and economic damage.
That’s a price none of us can afford.
Chris Crane is president and CEO of Exelon.
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