Inside Climate News reports that PJM Interconnection has reached a settlement with Pennsylvania to cap capacity auction prices, aiming to mitigate soaring electricity costs. United's Jon Gordon emphasized the importance of PJM completing the auction quickly and efficiently to reduce market uncertainty.
In a Jan. 21 letter to PJM’s Board of Managers, Moore urged them to make necessary adjustments to capacity market rules to address the unprecedented spike in capacity costs. “I remain deeply troubled by the affordability crisis Maryland residential and commercial energy customers face following PJM’s recent capacity auction, a crisis that may worsen in the next capacity auction if further action is not taken,” he wrote.
The settlement represents a crucial step, but experts say it’s only a temporary fix. Megan Wachspress, staff attorney at the Sierra Club, said the underlying problems with PJM’s capacity market remain unresolved.
“This agreement is evidence that states in PJM have leverage and that when elected officials stand up for their ratepayers and state clean energy policies, PJM listens,” Wachspress said. She criticized PJM for its “slow-walking” of the interconnection queue, which she described as a key barrier to the energy transition. With political resistance to renewable energy intensifying, “it is critical that state leaders step up and assert their authority in defense of electricity customers and everyone who benefits from cleaner, less expensive energy,” Wachspress said.
Jon Gordon, a director at the industry group Advanced Energy United, said that it is paramount for PJM to settle all these issues and controversies and get an auction done in July. “There’s been so much market uncertainty created by these auction delays and [price] changes that PJM really needs to get this auction done in a timely fashion,” Gordon said. “The clock is ticking.”
Gordon said it was also important to bear in mind that the agreed price cap of $325/MW-day is still higher than $270/MW-day from the July 2024 auction, which does not guarantee a downward revision of capacity prices.
David Lapp, the Maryland People’s Counsel, said his office filed in support of Shapiro’s complaint, but still had concerns about the process. “We don’t believe the Pennsylvania complaint goes far enough in addressing the fundamental problems affecting the capacity market,” he said, adding that the complaint only intended to limit the auction clearing price. “The relief we seek would ensure adequate auction supply and improved competition,” he said, alluding to four separate filings the Office of People’s Council has submitted to FERC.
Tom Rutigliano, a senior advocate with the Natural Resources Defense Council, a national nonprofit, said PJM is nearly six years behind in connecting projects in the queue to the grid and even though it is signaling high prices through auction for investors to build new power projects, they cannot be connected to the grid because of the snarl.
“All it really ends up being is free money for the existing generation owners because nothing can get built under the circumstances. That’s kind of how we got to this situation,” he said. To his understanding, the settlement buys about two years for PJM and the states to solve the interconnection problem and the supply issues more generally.
“Every state in PJM territory, including Illinois, West Virginia [and] Maryland, will see a price cap because of this agreement. It helps Maryland in the short term because the electricity prices were flying so high,” Rutigliano said, adding that in view of Maryland’s clean energy goals, the state should aggressively build energy storage.
“It’s the key link in any clean energy plan because wind and solar provide some reliability value, but they’re intermittent sources. But storage at this point is competitive with gas in terms of reliability it provides.” He cautioned that Maryland needs to move quickly because two years is not that much time. “They need to start working immediately to start getting storage built, and build it in ways that you can get around PJM’s interconnection delays,” he said.
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