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FERC Abolishes MOPR in ISO New England // How Not to Read a Chart

FERC Abolishes MOPR in ISO New England

Late last Friday night, Federal Energy Regulatory Commission's chairman, Rich Glick, tweeted this:

For those new to electricity markets, this move will have a radical impact on the New England area, which falls under the stewardship of Independent System Operator New England. ISONE's job is to "balance" their regions of the grid. They take policies handed to them by the states and by FERC and try to maintain reliability given those policies. The policies play out in an electricity spot market called a Regional Transmission Organization.

Unlike a regulated utility area, where one company owns or part-owns the plants, the wires, and the distribution hubs and then that company sends you your bill, an RTO runs auctions for which plants will provide electricity.

So what's the big deal about MOPR (or Minimum Offer Price Rule)?

In her book, Shorting the Grid, author Meredith Angwin describes MOPR (pronounced "moper") in ISONE "as a rule requiring generators to offer capacity at a price at or above a floor set for each type of resource. MOPR does not allow generators receiving out-of-market revenue to reflect the supportive revenue in their capacity-price offers.” MOPR is part of what's called a "forward capacity market" wherein power plants are paid to be "on call" in the future. So, MOPR helps traditional power plants make money by agreeing to wait in the wings for a tough summer or winter spike in demand.

It also gives them refuge from heavily subsidized renewables, which often out-compete them in the 5-minute ahead-type auctions. Otherwise, renewables can offer prices so low that they force traditional powerplants out of the market. Renewables advocates, however, argue that this amounts to a rigged game meant to keep non-competitive resources on the grid while lining the pockets of their owners. If ever these plants receive any kind of advantage these advocates cry "market power" and demand a more "neutral" market for their state-subsidized wind and solar projects.

Yet by 2024, ISONE will no longer have MOPR as a reliability tool. Strangely, in his decision, Glick sniped at fellow commissioner Danly (who voted against this resolution), saying, "In his dissent, Commissioner Danly continues to beat the drum via an ahistorical attempt to recast the MOPR as a reliability tool. Not only is that characterization unsupported by Commission precedent, the evident antipathy to state resource decision-making—equating states’ exercise of their authority [...] to a 'manipulative scheme'—only underscores the extent to which nullification [of state all-renewables clean energy policies] was the goal all along."

Yet in the next paragraph, Glick implies that MOPR is about reliability: "I recognize that the changing resource mix is forcing the Commission, RTOs, and the states to take a new tack to ensuring reliability. No one can dispute that. But the right way—and, in my view, the only just and reasonable way—to do so is by designing wholesale electricity markets to ensure reliability in light of that changing resource mix rather than trying to roll back the resource mix clock."

What Glick means is that MOPR is about reliability, but not the reliability that we should prefer because it protects dispatchable power plants. We should instead do something that accommodates renewables more gracefully while maintaining reliability. How can that be done? Glick provides no real suggestions. It's like asking, "How would you break into Fort Knox?" and getting "Very carefully." as the reply.

FERC clearly ruling in favor of a grid that does not yet exist and whose existence is likely impossible: a grid made up of batteries, wind, and solar.

Grid Brief reached out to Meredith Angwin for comment. "Those who object to MOPR generally object on the basis that it interferes with the state’s ability to set their own policies," she said. "They usually set these policies with subsidies for various preferred types of plants. Without MOPR, capacity auction prices would be lower, because heavily subsidized plants such as wind turbines could bid in very low, and they would lower the clearing price for everyone."

But, while "lower prices" might sound good for consumers, it's not that simple. Angwin went on to explain, "Many traditional load-following plants, such as gas-fired plants and hydro, often depend on capacity payments to provide a significant portion of their revenue. If the capacity payments go down, such essential plants might go out of business. MOPR can protect existing plants that provide reliability. However, in terms of new plants, the horse is out of the barn anyway in New England. In New England, 60% of newly-proposed generation is wind, and only 3% is natural gas."

A quick scroll through the Twitter responses reveals that many renewables advocates are furious with Glick. Two years is too long, MOPR too unjust. Those concerned about grid reliability should pay closer attention to just how political FERC's role has become and how self-aware green advocates are about what FERC policies mean for their ambitions. Glick, after all, used to work for the renewables giant Iberdola.

How Not to Read a Chart

This is Canary Media's "chart of the week" from May 27. The headline that accompanies it reads, "Fossil fuels are a big driver of inflation."

Of course, it's an indisputable fact that inflation and energy prices often coincide. So many things we need to make and do require fossil fuels, higher fossil fuel prices translate to higher prices overall.

But the takeaway that Canary presents baffles me. Their conclusion is that this shows how clean energy (translation: renewables) will save Americans money. But last I checked renewables are only an input in electricity. And they also require fossil fuels to make.

So the takeaway from this isn't "wow we have to blame fossil fuels" for all our woes, but "wow I bet a lot of things are about to get pricier--including renewables." Turns out, that's what's happening. High steel prices have been clobbering wind. High polysilicon prices have plagued solar all year. Both steel and polysilicon require fossil fuels--along with the skyrocketing minerals needed for both.

Conversation Starters

  • UK Chancellor Rishi Sunak's windfall tax on energy companies sent several UK energy titans tumbling last Friday. Under Sunak's tax, oil and gas companies will get slapped with a 25% surcharge on profits. But, under a new tax relief scheme, they can offset about 90% of their investment spending against their tax bill.

  • The US seized a Russian tanker smuggling Iranian crude near Greece. Neither Russia nor America has commented on the matter, but the Iranians are calling it an act of piracy. Tensions, already high during the US's nuclear negotiations with Iran, just got higher.

  • Adam Neumann, the former co-founder of WeWork, has launched a new carbon credit venture called Flowcarbon. The start-up sells carbon credits and records the transactions on the blockchain—serious stuff.

Word of the Day

inflow control valve

An active component installed as part of a well completion to partially or completely choke flow into a well. Inflow control valves can be installed along the reservoir section of the completion, with each device typically separated from the next via a packer. Each valve can be controlled from the surface to maintain flow conformance and, as the reservoir depletes, to stop unwanted fluids from entering the wellbore. A permanent downhole cable provides electric and hydraulic conduits to relay commands from the surface to each valve. (source)

Crom's Blessing