Covering grid regionalization in the West, David Roberts at Vox spoke with Near Zero’s Danny Cullenward:
There are proposals to expand the EIM to day-ahead markets, and we’ll look more at that in a second, but for our purposes here, the thing to note is that the EIM is a voluntary market. Power plants choose whether to join and bid in. And if they bid in, at least to California’s part of the EIM, they agree to report their carbon emissions and pay a “carbon adder” reflecting those emissions.
In this way, California straightforwardly applies its carbon price to imports.
That carbon adder represents the only FERC-approved tariff in a FERC-administered market that reflects a carbon price. And FERC made it clear when it approved the tariff that it was doing so only because it was voluntary.
So how would California enforce its carbon price in a multi-state ISO? Will all states in a Western ISO have to report their carbon emissions, even in states with no carbon price? FERC won’t allow a carbon price to be imposed on other states, so how will carbon-priced power be distinguished from unpriced power once it is fed into the regional grid?
One possible answer is that trade with California is made voluntary, subject to a carbon adder. According to Danny Cullenward, an energy analyst and lawyer at the climate nonprofit Near Zero, “If all one can do is replicate the voluntary trading rules, where out-of-state generators choose whether or not to sell to California, then the final market would look exactly like the CAISO EIM” (or at least an expanded, day-ahead EIM).
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As I described in detail in March, FERC is also getting up to some more subtle but shady efforts to save coal.
In a nutshell, PJM in the mid-Atlantic and ISO-NE in New England are arguing that state clean energy policies are a kind of market distortion that FERC should allow them to “correct” by, for instance, implementing minimum offer price rules (MOPRs) in capacity markets. A MOPR would require capacity bids to meet a minimum price that would often exclude cheap renewables, helping keep higher-priced coal (and nuclear) alive.
(If you want to dig in on this, check out “The Quiet Undoing: How Regional Electricity Market Reforms Threaten State Clean Energy Goals,” a recent analysis by Cullenward and Shelley Welton. Here’s a shorter, op-ed version.)
Read the full article, “California’s huge energy decision: link its grid to its neighbors, or stay autonomous?” by David Roberts, on the Vox website.