Federal Regulators Drop Obstacle to Funding Renewable Energy… in 3 Years

An obscure rule that blocks state-subsidized renewable energy projects from finding funding in a key New England energy market will sunset in three years – but renewable energy advocates say that isn’t soon enough to keep consumers from having to pay twice for an impending rush of offshore wind projects

The Federal Energy Regulatory Commission approved a plan by ISO-New England – which operates the region’s electric grid –  to phase out a controversial minimum offer price rule by 2025.

The rule – which was intended to exclude state-funded renewable projects from entering an annual auction of future energy generating capacity at low prices – has been a point of frustration for New England states with ambitious renewable energy goals.

Those states, including Connecticut, contend the rule forces electric customers to pay twice for the same generating capacity – once for renewables through state contracts, and again for mostly natural gas plants through the regional capacity auction.

The rule also made it more challenging to develop new, large-scale renewable energy projects, said Melissa Birchard, director for clean energy and grid reform at Acadia Center.

“We don’t even know exactly how much it’s depressing the development of clean energy,” warned Birchard. “Without the financial support to develop new resources, there’s a whole world of clean energy that may not be getting developed.”

In testimony to FERC, Susannah Hatch, regional lead for New England for Offshore Wind, noted that both the 800-megawatt Vineyard Wind project set to go online next year, and three other projects totaling 2,300 megawatts scheduled to go online in 2025, won’t be able to fully participate in the next two capacity auctions funding projects for 2026 and 2027.

Hatch told CT Examiner that those projects will still be built even though they won’t be able to fully participate in the capacity market. The real issue, she said, is that their capacity won’t be counted in the regional market, so customers will be stuck paying for a different power plant providing redundant capacity, she said – likely a natural gas-burning power plant.

“It will require ratepayers to pay for unnecessary capacity, so bills are going to go up in this day and age when that’s already happening because of foreign conflicts and the price volatility of fossil fuels,” Hatch said.

Birchard said that a limited exception will allow some offshore wind projects to participate in the next two auctions, but that won’t be nearly enough.

“When you add them up, the offshore wind projects alone substantially exceed [the exception],” Birchard said. “And that doesn’t account for battery storage or other clean energy resources.”

Matt Kakley, a spokesman for ISO-New England, said the organization believes the exception is large enough to cover the offshore wind resources that would actually want to enter the market in those two auctions, and that it’s “incredibly unlikely” that the minimum price would come into play for battery storage in that time.

“We’re pleased that the Commission saw this proposal for what it is — a reasonable step forward on New England’s transition to a decarbonized future,” Kakley said. “Despite claims to the contrary, this transition will provide a clear path for clean energy resources ready to enter the market over the next two auctions, while affording the region time to tackle other needed market reforms.”

But with wind projects accounting for 60 percent of proposals for new generation, and solar and battery storage making up another 36 percent – a rule that excludes much of that new generating capacity was unsustainable, ISO-New England told FERC.

But ending the rule too quickly, the ISO warned, could disrupt the market and make the grid less reliable. If, for example, the construction of those projects was delayed after clearing the auction, the renewables might not come online before the legacy plants are shut down. That could leave the region with less electric generation than it needs.

In its decision, FERC said the two-year phase out provides the necessary time for the market to make an “orderly transition” to a new mix of generating resources, including more weather-dependent renewables.

FERC Chairman Richard Glick, who voted in favor of the two-year phase out of the rule, said that despite his vote, he believes ISO-New England could and should have “done better” to end the rule immediately.

But Glick said even the delayed end to the minimum offer price rule represented a major step forward. Glick wrote that under previous orders FERC turned minimum offer price rules into a tool for blocking efforts by individual states to sponsor renewable energy projects.

That fight threatened consumers, the environment, and the viability of capacity markets, Glick said – as frustrated states, including Connecticut, considered abandoning those markets altogether.

“We need to do better and stop stalling,” Birchard said. “We need to keep beating that drum, because there’s a slew of additional reforms that need to take place over the next two or three years so we can move forward with our decarbonization goals.”

DEEP Commissioner Katie Dykes said that the department is still reviewing the decision, but said she is glad that it affirms an end date for the MOPR.

“We must redouble our efforts now on the further, significant reforms of the markets needed for a clean, reliable, affordable grid,” Dykes said.

Read the full article in The Connecticut Examiner here.