A controversial rule that makes it harder for renewable energy projects to participate in one of New England’s lucrative electricity markets will remain in place for another two years.
Late Friday night, Federal energy regulators approved a plan from the regional grid operator, ISO New England, to keep the so-called minimum offer price rule — or MOPR — until 2025.
The MOPR dictates a price floor below which new power sources cannot bid in the annual forward capacity market — a sort of futures market for power plants promising to be “on call” and ready to produce electricity when demand spikes.
The grid operator holds this annual on-call auction to lock in the power capacity it thinks the region will need three years in the future. Power generators that won a spot in the 2022 auction, for example, are on stand-by beginning in 2025.
By keeping the MOPR around longer, Melissa Birchard of the Acadia Center said it will be harder for the New England states to meet their decarbonization goals.
“The MOPR has held the region back for a long time and we need to see it go away forever," she said. "This decision falls short of providing the certainty and speed that the region deserves.”
As WBUR detailed in a recent explainer about the MOPR, most everyone agrees the rule needs to go; the debate has been over when it should happen.
Environmentalists, consumer advocates and most New England state leaders wanted the grid operator to scrap the rule in time for the February 2023 auction. But the grid operator decided to support a “transition proposal” — first put forward by a few energy companies with natural gas plants — that would keep it until the 2025 auction.
Notably, Friday’s decision from the Federal Energy Regulatory Commission, which oversees the New England grid operator, was not unanimous. Four out of five members voted in favor of the plan, though some, like Commissioner Richard Glick, did so reluctantly.
Glick, who has been outspoken about the need to reform the MOPR, wrote in a statement that he would have preferred to see the grid operator, ISO New England (ISO-NE), eliminate the rule immediately.
Tonight, @FERC voted to permanently end the use of the #MOPR as a tool to stymie state policies in @ISONewEngland. While I would have preferred this happen immediately, I voted to approve the filing with the 2 year transition. Full statement here: https://t.co/zssqltSmJC
— Rich Glick (@RichGlickFERC) May 28, 2022
“ISO-NE could have, and should have, done better,” he wrote. “Nevertheless, ISO-NE submitted a different proposal — one that delays reform of the MOPR by two years —and we must evaluate the filing before [us]. When considered in that context, I believe that the proposed Transition Mechanism is part of a just and reasonable package of reforms.”
New England adopted its MOPR in 2013 at the behest of federal regulators who were concerned about market manipulation. While the MORP was designed to prevent big electricity buyers like utilities or states from depressing auction prices, it has mostly just made it harder for state-sponsored renewables to compete with incumbent fossil fuel plants.
So far, the rule has presented the biggest problem for offshore wind — a budding, clean energy industry that Massachusetts and some other New England states are banking on to meet their climate goals.
In the most recent auction, the MOPR required Vineyard Wind — the first utility-scale offshore wind farm set to be built near Martha’s Vineyard — to bid $12.76 per kilowatt month. The auction cleared closer to $2, meaning the project never stood a chance of getting a spot in the market.
Abigail Krich, an energy markets expert and president of Boreas Renewables, said in an email that she's glad to see a "no strings attached" plan to terminate the MOPR.
"That said, I share in the disappointment expressed by the majority of the FERC commissioners that the proposal they were given included a two-year delay before this elimination occurs," Krich said. "I believe the two-year delay is bad market design based on flawed reasoning that could ultimately lead to the same or worse reliability risks that it was purported to avoid."
Our statement regarding FERC's decision to accept our proposal removing the minimum offer price rule: https://t.co/V2DtGRYaiG
— ISO New England (@isonewengland) May 28, 2022
While the grid operator celebrated the decision from federal regulators, calling it "a reasonable step forward on New England’s transition to a decarbonized future," Birchard of the Acadia Center argued the opposite is true.
“Russia's war against Ukraine has only further spotlighted the region's need to develop more clean reliability resources and end fossil fuel dominance. As the region heads toward another winter heavily over-reliant on fossil gas, it continues to pay a high price for the MOPR and other harmful regional practices. That price includes higher costs for consumers, reliability, and the climate,” she wrote in an email.
Critics of the MOPR say the cost of keeping it in place for another two years extends beyond higher carbon emissions. It may literally cost you more money if you are a New Englander paying for utilities. By shutting out new, cheaper renewables, prices at the on-call auction end up being higher. And that cost gets passed onto consumers.
What’s more, since renewable energy projects with state contracts like Vineyard Wind are going to get built regardless of their ability to participate in the on-call market, the region may end up with “excess capacity.” That may not sound like a bad thing, but the cost of building what amounts to a duplicate system of power producers is also passed onto consumers.
Not everyone was upset by the decision. In a statement, Dan Dolan, president of the New England Power Generators Association, which supported the grid operator’s delay plan, said this outcome is good for the reliability of the region’s electricity system.
“NEPGA appreciates FERC’s decision, keeping with the Commission’s long-standing practice of encouraging compromise solutions that reflect the geography, politics, and specific needs of a given region,” Dolan wrote. “It is NEPGA’s hope that this order will once and for all settle the MOPR issues and enable the region to focus on the market enhancements necessary for a reliable transition to the future grid.”
Dolan and others who supported keeping the MOPR in place for an extra two years say it will give the grid operator more time to finish separate, but related, market reforms while also planning for the integration of more intermittent renewable energy sources.
Barring any legal challenge to the decision, New England will eliminate the MOPR in time for the February 2025 auction. In the meantime, the approved proposal has small allowances for some renewable energy to bypass the MOPR and get into the capacity market — 300 megawatts in 2023 and 400 megawatts in 2024. Taken together, these 700 megawatts represent about 2% of the total capacity selected in the market.