By Christen Smith

PHILADELPHIA — PJM’s anticipated increase in renewables over the next decade won’t succeed without the support of more reliable fossil fuels and nuclear reactors, industry analysts said last week.

The predictions came during presentations at the Mid-Atlantic Renewable Energy Summit hosted at The Bellevue Hotel on Thursday, where experts from all corners of the energy sector gathered to discuss the future of PJM’s resource mix and the anticipated shift from policy-based investment to more economic drivers.

The Mid-Atlantic Renewable Energy Summit convened at the Bellevue Hotel in Philadelphia on July 18. | © RTO Insider

“The increase we’ve seen so far is nothing compared to the increase that looks like it’s coming at us in the future,” said Stu Bresler, PJM’s senior vice president of markets and planning. “We ain’t seen nothing yet.”

Data from the National Renewable Energy Laboratory and U.S. Energy Information Administration show PJM’s installed wind and solar capacity currently exceeds 11,000 MW — the majority of which joined the grid during the last 10 years. ICF Resources said 70% of the renewables scheduled for connection through 2030 will come online in New Jersey, Maryland and D.C., where elected officials have set aggressive clean energy targets and other policies to reduce the effects of climate change.

Stu Bresler, PJM | © RTO Insider

The Garden State alone will install 3,500 MW of offshore wind power over the next decade. It announced last month that Denmark-based Ørsted will construct the first 1,100 MW 15 miles off the coast of Atlantic City beginning in the early 2020s. (See Ørsted Wins Record Offshore Wind Bid in NJ.)

“We are living amidst a revolution right now, a revolution in terms of technology change, a revolution of climate change … and finally a revolution of electricity decarbonization,” said Stuart Caplan, partner at Troutman Sanders. “Beware of what you ask for … treat fossil fuels not as an enemy of renewables. The pendulums can swing quickly.”

Caplan said that the intermittency of current renewable technologies means fossil fuels will continue to have a place in PJM in order to “preserve balance.” In March, the Independent Market Monitor said natural gas-fired energy output exceeded coal in PJM’s market last year for the first time ever. (See Monitor Says PJM’s Capacity Market not Competitive.) Economists on Thursday said coal retirements in favor of more efficient combined cycle units will continue — but the cheap price will not, providing a valuable opening for nuclear energy in the market.

D.C. Public Service Commissioner Greer Gillis said reaching the district’s goal of 100% renewable energy and 50% carbon emissions reduction by 2032 will be challenging, but possible. D.C. set the targets in December 2018, making it the most ambitious clean energy policy enacted nationwide, she said.

“We are very optimistic,” she said. “But I think one thing we are all concerned about is the pricing.”

Judah Rose, ICF Resources | © RTO Insider

Judah Rose, executive director of energy markets for ICF, said zero-emission credits and renewable energy credits will likely increase between 2022 and 2025, temporarily spiking energy costs. Post 2025, he said, the combination of carbon pricing and states meeting their renewable portfolio standard mandates will cause renewable energy prices to fall.

ICF’s market forecast assumes the implementation of a national CO2 program with a price of $4/ton, though Rose said the “real action” could happen through the Regional Greenhouse Gas Initiative, where policy in the participating states could create “big upward pressure” on the price of carbon. It wouldn’t wipe out gas development entirely, however.

“We still see huge economics for combined cycle units … mostly located in western PJM,” he said. “For coal and nuclear, we see unfavorable economics for both areas. In the long run, however, as gas prices increase and we have some kind of carbon price, we see nuclear becoming economic.”

New Jersey and Illinois have already enacted ZEC programs for their own nuclear plants, despite criticism that the subsidies distort prices in the wholesale electricity market. Ohio legislators also appear close to consensus on a bill to rescue FirstEnergy Solutions’ reactors at Davis-Besse and Perry nuclear plants near Lake Erie. (See Ohio Senate Clears Nuke Rescue.) Supporters of the programs argue PJM’s existing market structure doesn’t value the carbon-free reliability of nuclear energy and that allowing the units to retire would not only be irreversible, but foolish.

Jason Barker, Exelon | © RTO Insider

“Nuclear has to be part of the equation,” said Jason Barker, director of wholesale market development for Exelon. “If you take just the carbon output in one year of those three [retiring nuclear] units, it’s equal to all of the wind that’s ever been installed in PJM. It’s undeniable in the short run if we want to reach our societal targets.”

Exelon manages the largest nuclear fleet in the country, including the remaining operating reactor at Three Mile Island near Harrisburg, Pa. The company said in June it will deactivate the unit in September after state legislators stalled on a plan to keep it running via ratepayer subsidies and changes to Pennsylvania’s RPS. (See Nuclear Subsidies Still on the Table in Pennsylvania.)

“Because of the intermittency of current dominating renewables, we need something to pick up when the wind stops blowing and the sun stops shining,” Barker said. “We need to value the flexibility attributes of those units, and that will be what drives LMP.”

He also said PJM’s minimum price offer rule (MOPR) — currently pending approval at FERC after initially being rejected last year because it didn’t include the impact of renewable and nuclear subsidies — “doesn’t matter” in terms of carbon pricing policy, noting the way Illinois designed its ZECs to decline as revenue for nuclear units increase (ER18-178). PJM stakeholders are currently reviewing ways to reduce economic and emissions leakage throughout the RTO if some states adopt carbon pricing and others don’t. (See Carbon Pricing Steers Discussion on PJM’s Future.)

“So, if there were border adjustments … it would increase the energy value and therefore decrease the cost of the ZEC, therefore making the MOPR less destructive,” Barker said. “Depending on what this MOPR ruling looks like … the carbon pricing could be a substitute or a type of substitute in the absence of more global policy.”