Six years after Congress granted FERC “backstop” siting authority for electric transmission projects in the Energy Policy Act of 2005, the regulatory landscape is still evolving as a result of...
Out of market means out of luck—even for self-supply.
tantamount to tailoring the perceived `economic-ness’ of a project,” so as to pass the MOPR test.
By separately considering each individual project financing, Hess concludes, FERC is placing PJM and the IMM in a “difficult, unnecessary and ill-suited position” of judging out-of-market bilateral deals designed to drive various financing terms and costs. (Protest of Hess Corp., p. 13, FERC Dkt. ER11-2875, filed June 3, 2011.)
Another point concerned the degree to which capacity clearing prices do or don’t affect developers and their decisions to build. In short, why put self-suppliers and state-sponsored portfolio programs at risk of not clearing the market, when the clearing price rarely dictates the development decision?
As attorney Stephen Teichler pointed out, in seeking rehearing of FERC’s New England order for clients NStar and United Illuminating, the go/no-go decision often doesn’t hinge on the clearing price.
“Existing generators,” Teichler noted, “can, and do, regularly submit bids into the FCM auctions that are calculated to be accepted.”
As Teichler argued, state-sponsored generation usually will be built on the strength of purchased power agreements, or not all:
“If a resource is going to be built anyway, an economically rational owner will tender a bid into the capacity market that is likely to be accepted.
“Some revenue,” he added, “even if less than full long-run average cost,” is better than none. (Request for Rehearing, Dkts. ER10-787 et al., filed May 13, 2011.)
This reasoning led Teichler to conclude that market clearing prices will rarely, if ever, approach the ideal of full, levelized cost:
“A bid at or above $8/kW-month—approximating the cost of new entry for certain types of capacity that may be needed for reliability purposes, for example—virtually ensures that the resource will not be selected, as it is far above recent capacity clearing prices, which are in the $3/kW-month range.
“That a certain resource must consistently bid its cost of entry is presently a death sentence.”