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With varying degrees of enthusiasm among its members, the US
Federal Energy Regulatory Commission issued its final word 15 April on how it
will consider plans submitted by regional grid operators to
incorporate state-determined carbon prices in FERC-regulated
wholesale power markets.
Currently, FERC said, 12 states impose some version of carbon
pricing, with additional states considering it, but it has received
no grid operator plan to date.
The agency charged with overseeing wholesale electricity markets
acknowledged carbon pricing has emerged as an important
market-based tool in state efforts to reduce GHG emissions,
especially in the absence of any GHG regulation in the power
sector.
FERC, however, made it clear that its policy statement should
not be read as a preference for carbon pricing over any other state
policy. Rather, the agency said it "affirms that whether and how a
state chooses to address greenhouse gas emissions is a matter
exclusively within that state's jurisdiction."
Helpful guidance
FERC Chairman Richard Glick said the policy statement provided
guidance to states about how it "might accommodate [a] state carbon
program, [but] the devil is always in the details."
"Until we get a specific request to act, I don't think there's
much benefit to weighing in on further hypotheticals," he
added.
The American Council on Renewable Energy (ACORE) said the policy
statement provides certainty to market operators that FERC will
give proposals that incorporate a state-determined carbon price due
consideration.
The New York Independent System Operator (NYISO) has been
developing a carbon pricing proposal for its market, which FERC
would have to approve. NYISO has not yet submitted its proposal to
FERC and does not plan to do so until it receives state
support.
"And we have said we would only bring [a proposal] up for a vote
before our stakeholders if the state signals its support," NYISO
spokesman Zachary Hutchins wrote in a 16 April email to IHS
Markit.
It is unclear whether Governor Andrew Cuomo would back the grid
operator's plan as consistent with his aggressive effort to build
out renewable generation in the state.
However, NYISO CEO Rich Dewey in a 15 April statement said he
was pleased with the carbon pricing policy. He added that NYISO
will continue to work closely with FERC and New York State "to
explore opportunities that leverage the power of wholesale electric
markets to help meet the respective decarbonization and renewable
investment goals."
According to ACORE CEO Gregory Wetstone, "pricing carbon not
only sends market signals to emitting resources that they should
retire, but also drives investment in new, low-carbon resources by
helping them compete."
American Clean Power Association General Counsel Gene Grace also
welcomed the policy from FERC, saying it encourages states that are
considering carbon pricing in organized markets.
Chatterjee enthused
Meanwhile, the member of FERC who was most enthused about the
policy was Republican Commissioner Neil Chatterjee, who risked the
ire of the Trump administration when as FERC chairman he launched
the initiative a year ago that led to the carbon pricing
policy.
Shortly thereafter, President Donald Trump removed Chatterjee as
chairman, replacing him with fellow Republican Commissioner James
Danly, who subsequently was replaced by Glick, President Joe
Biden's pick to head the agency, in late January.
In comments on the carbon policy 15 April, Chatterjee said he
was "extremely pleased that we're taking this step forward on a
bipartisan basis."
"When I initiated this proceeding last year, I did it with open
eyes," he added. "Sometimes leadership requires sticking your neck
out in order to make progress toward common goals."
Less enthusiastic about FERC's statement was Danly, although he
said he had no objections to the agency clarifying the regulatory
framework under which it would consider carbon pricing proposals.
He was quick to add though that he considered the statement a
"nullity" because there was no such proposal before FERC.
In addition to the varied group of stakeholders that asked FERC
last year to issue such a policy statement, Chatterjee noted there
has been growing support for carbon pricing from other groups,
including the American Petroleum Institute.
FERC held a September 2020 technical conference on carbon
pricing at which participants identified a range of potential
benefits from incorporating state-determined carbon pricing into
wholesale markets, including the development of technology-neutral,
transparent price signals in the market.
--Based on original reporting in The Energy Daily's 16 April
edition.
Posted 16 April 2021 by Amena Saiyid, Senior Climate and Energy Research Analyst