NJ changes course on opting out of regional power grid

Green energy’s changing fortunes mean state can stay connected to largest energy market
Credit: (AP Photo/Charlie Riedel)
High-voltage electric transmission lines

The state is moving away from plans to exit the regional power grid market, a step it studied for the last year over concerns that policies by the grid operator and federal officials were undermining New Jersey’s clean-energy goals.

In a new report on the issue, the staff of the New Jersey Board of Public Utilities recommended that it would be premature for the state to consider leaving PJM Interconnection and its regional market structure because of regulatory developments at the regional and national levels.

At one point last year, state regulatory officials, frustrated with policies they viewed as contrary to New Jersey’s clean-energy goals, initiated a proceeding to explore dropping out of the PJM capacity market. The market ensures there are enough plants available to keep the lights on for customers.

The reversal is largely due to more receptive approaches by the PJM, the nation’s largest power grid, and the Federal Energy Regulatory Commission as a result of the change in administrations in Washington. The Biden administration is more amenable to accommodating state goals to transition to clean energy than the administration of former President Trump.

Still open to other options 

Still, recognizing the need to move quickly on initiatives to reduce climate change, the report noted the state will continue to explore options to go it alone, or with other states, if upcoming changes adopted by regulators do not do enough to facilitate cleaner energy at affordable costs to ratepayers.

“The next 12 months we will work on new market design to help reduce the cost of clean energy to ratepayers,’’ said BPU President Joseph Fiordaliso.

The report suggested incorporating the state’s clean-energy goals in the regional market is the most efficient way to provide New Jersey customers with reliable, affordable and carbon-free electricity. To do so, however, will require reforms in the power markets to facilitate the transition to clean energy and to provide that green energy faster, more reliably, and more affordably, according to the report.

But the PJM policies and those at the Federal Energy Regulatory Commission seemed to make it more difficult for new technologies, primarily offshore wind, to thrive in the competitive marketplace. The Murphy administration is betting big on offshore wind, which is projected to provide 23% of the state’s electricity by 2050.

If left unchanged, PJM’s so-called Minimum Offer Price Rule could have cost New Jersey consumers $300 million per year by 2030, the report said. That rule is widely expected to be repealed. Just yesterday, the PJM board of managers voted to scrap the rule.

Fiordaliso, however, said scrapping the MOPR rule is not enough; it should be packaged with a new regulatory design that accommodates state clean-energy goals.

Natural gas investments

In the past, the report noted that PJM markets have delivered well in providing reliable power to customers at affordable prices. For instance, since 2015-2016, PJM has attracted large investments in over 35,000 megawatts of new natural gas plants into its region.

“The fact that these investments are made in fossil fuel plants rather than clean energy resources also demonstrates the fundamental disconnect between current market design and New Jersey’s clean energy future,’’ the report said.

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