Delay of MOPR Elimination Increasing Energy Costs
Recent Energy Markets Vote Continues to Make Energy Users Pay Twice for Renewables
As in many states across the country, the clock is ticking on making the Commonwealth’s electric grid cleaner. Passed last year, An Act Creating a Next-Generation Roadmap for Massachusetts Climate Policy requires that Massachusetts cut its carbon emissions in half by 2030 and reach net zero by 2050. To accomplish this, millions of residents and businesses will need to be served by renewable energy sources within the decade.
Despite this need for timely advancements in the clean energy sector, the participants in New England’s power markets, an independent, Federal Energy Regulatory Commission (FERC)-approved stakeholder advisory group called the New England Power Pool or “NEPOOL,” voted on February 3, 2022. The vote was in support of the region’s grid operator ISO-New England’s proposal to maintain a rule that has historically blocked renewable energy from participating in the markets. This rule, the Minimum Offer Price Rule (MOPR), was voted to remain in place over the next two years in the Forward Capacity Market (FCM), as opposed to eliminating MOPR immediately, despite FERC’s previous guidance to eliminate MOPR because it was an unfair practice.
** TECHNICAL JARGON ALERT – For some technical background on this rule, read on or skip to the end of the next few paragraphs for the bottom line. **
MOPR was created as a mechanism to limit competition between fossil fuel generators and renewables, which tend to cost less due to state programs and subsidies. To do this, MOPR enables gas generators to set an artificial price floor for participation in the FCM. But creating an artificial price floor at the price of gas generators favors those already involved in the market, and consequently, means that less expensive energy supplies, like large-scale offshore wind or solar, are barred from entry. In the FCM, ISO-NE determines the amount of generation capacity the system will need for the power year three years in the future and holds an annual auction to identify the most cost-effective sources of generation.
Similar rules in the Mid-Atlantic, New York, and Washington D.C. are also under scrutiny, and requests have been submitted to FERC to eliminate the rule. And like other regional power grid operators, ISO-NE was asked by FERC to remove or amend MOPR. But after months of expressing support for the change, ISO-NE performed what many view as a bait-and-switch and reversed its stance to align with a proposal from power plant owners, which seeks to kick the can down the road and postpone the elimination of MOPR for three years. Power plant owners, ISO-NE and other proponents argue that eliminating MOPR as soon as next year’s auction would threaten grid reliability. This effectively halts any impactful change–given the FCM operates three years into the future, MOPR will continue to prevent renewables from entering the market until 2028—just two years before the deadline to cut carbon emissions by 50%.
It’s the New England ratepayer, however, who takes the biggest hit. Because MOPR remains in place, the ISO-NE capacity market will continue to procure generating capacity for the grid without consideration of renewable projects. This means that for the next 6 years, the grid operator will procure additional, redundant capacity (because it ignores that renewables in fact will be available to customers). Customers across the region must pay for the excess capacity in a higher price for electricity, through 1) the artificially decreased supply in the markets and 2) the extra “adder” the state adds to our electricity bills for these projects – a difficult pill to swallow when the region already suffers from the highest electricity costs in the Continental United States.
In short, the vote continues to block renewables from being fairly compensated for their resource for the next 6 years, or the power year beginning in 2028.
BOTTOM LINE, this means that energy users will continue to “pay twice” for the renewable energy that is being put in place and being charged on our bills by the state and utility adders.
This concern is shared by advocates and industry leaders alike. In recent weeks, the New England for Offshore Wind Coalition sent a letter to the New England States Committee on Electricity (NESCOE), a Regional State Committee recognized by FERC to advance electricity matters across New England and ensure energy consumers pay the lowest possible price over the long-term. The letter, which was signed by PowerOptions and more than 100 other organizations, highlights the disappointment in ISO-NE around the MOPR elimination and calls for NESCOE to “…unambiguously and transparently advance the New England Governors’ stated goal of prompt and comprehensive regional market reform” by pressing ISO-NE to better support clean energy resources to reach New England’s climate goals. Even Attorney General Maura Healey’s office weighed in, stating, “We were disappointed in ISO-NE’s last-minute decision to support a two-year delay in the ability of renewables to fully participate in the market…A lot can happen in two years, and this further delays the cost-saving and public health benefits customers will experience from renewables.”
The Commonwealth has set aggressive climate goals, which will not be met without making changes to the energy sources readily available to customers, and MOPR is creating a further challenge to achieving these important goals. Rather than operating as always, it is incumbent upon ISO-New England to advance creative and sound approaches that fully incorporate renewable energy into our supply mix at a pace that is in line with our regional procurements.