There’s a dispute going on now in the energy sector where it seems like the parties have no names, only letters. Ditto for the thing they’re fighting over: FERC can’t figure out how to handle PJM’s beef over ZECs.
Why should you care?
Because it could jeopardize the steps that policymakers in Illinois, New Jersey and Ohio have taken to protect the climate.
The Federal Energy Regulatory Commission (FERC) has a straightforward and laudable goal: to make sure that the regional organizations that run the electric grid do so with fair competition and a good price for consumers. It’s facing a question from regional grid operator PJM Interconnection, which is in moment-to-moment control of the grid through energy auctions and other tools.
What’s the main issue?
The dispute is over state programs to promote zero-carbon technologies. The immediate issue is zero-emission credits (ZECs), promised to three nuclear reactors in Illinois, three in New Jersey and two in Ohio. These ZECs are a policy tool that help compensate nuclear plants for a benefit that PJM’s market rules don’t pay them for: emissions-free energy, with no soot, no smog and no climate-forcing gases.
The ZECs were introduced in Illinois with the goal of preserving the carbon-free electricity that their nuclear plants provided and protecting the climate. And Illinois is not alone. New York, Connecticut, New Jersey and Ohio have all acted to preserve their nuclear assets, which were economically threatened by very low prices for natural gas.
How did PJM respond to ZECs?
Opponents say that the ZECs have an unfair effect on the electric market, where electricity from natural gas and coal also competes. After Illinois acted, PJM sought to change its system, to cancel out the state’s help for the three reactors.
PJM tinkered with the capacity auction, which is a second market, where electricity producers are paid for their commitment to be available when needed in the future. Under the proposed changes, plants that get ZECs would have to submit higher bids to take account of the ZEC payments, making them less likely to be chosen in the auction.
What’s the problem with that?
Nuclear plants would still be paid for the electricity they make, but for ones that are already struggling financially, losing the revenue from the capacity auctions would be a major blow. Groups that represent solar and wind generators don’t like PJM’s proposal either. They get substantial subsidies, some in cash or tax credits, from the federal government and some in the form of quotas set by the states for renewable energy.
The details are complex, but the underlying issue is clear: we’ve established lots of rules, but not priorities among them. In resolving the conflicting goals, we need to think about the future.
Here’s the big question: When will the markets evolve to protect the climate?
These markets were designed to produce reasonably priced electricity and they have done that. However, policymakers from both parties—and utilities across the nation—are increasingly moving to protect the climate by transitioning to clean energy. Reducing climate-changing emissions is likely to be viewed as more and more important in years to come, but the markets were never intended to address this issue.
Getting this right is urgent. Nuclear energy provides more than 55 percent of our carbon-free electricity and decisions that force the premature closing of nuclear plants are irreversible. Nobody’s ever restarted a plant that was shut. If we want to preserve nuclear plants and protect the climate, this dispute must be resolved in a way that moves us towards the larger goal: reducing carbon emissions.
