Trade groups say the time is now for carbon pricing in wholesale electricity markets

carbon tax

A diverse coalition of power generators, trade associations and think tank this week asked the Federal Energy Regulatory Commission (FERC) to examine the policy options and implications of carbon pricing policies in competitive wholesale electricity markets. The request comes at a time when many states, utilities and electric markets are already considering policies that reduce carbon emissions in the electric sector and grappling with whether to integrate carbon pricing directly into the markets.

The signatories note “The unique features of organized wholesale electricity markets create an opportunity for integrating policies that directly price carbon emissions into energy market operations.” The coalition highlight that a number of organized markets such as the New York Independent System Operator have supported or are considering how to incorporate a price on carbon.

The request does not draw conclusions nor recommend that FERC institute a rulemaking proceeding or implement or encourage a specific policy. Instead, it urges the commission to use its convening authority to gather a wide range of stakeholders to examine a variety of mechanisms and to discuss the implications of states or other entities adopting carbon pricing policies in regions with organized wholesale electric energy markets. The stakeholders note the time is ripe for such a conversation, writing “This dialogue would complement state, regional, and national discussions currently taking place.”

The full list of signatories includes Advanced Energy Economy, the American Council on Renewable Energy, the American Wind Energy Association, Brookfield Renewable Partners, Calpine Corporation, Competitive Power Ventures, the Electric Power Supply Association, PJM Power Providers Group, the Independent Power Producers of New York, the Natural Gas Supply Association, LS Power, NextEra Energy, the R Street Institute, and Vistra Energy.

Statements from the petitioners

Jeff Dennis, general counsel and managing director, Advanced Energy Economy:
“Two overwhelming factors are impacting wholesale energy markets today. Low- and zero-carbon advanced energy technologies have become the most cost-effective options for meeting consumer needs. And state policymakers are enacting policies and large corporate customers are making commitments to 100 percent clean energy. Pricing carbon emissions is one of the tools, along with complementary policies, that states are considering to make this transition quickly and cost-effectively.”

Gregory Wetstone, president and CEO, American Council on Renewable Energy:
“As America’s wholesale power markets weather unprecedented turmoil, thoughtful carbon pricing can serve as an effective complement to state policies like renewable energy standards which are designed to accelerate the transition to pollution-free, renewable power.”

Amy Farrell, senior vice president, American Wind Energy Association:
“These proposals have the potential to reduce carbon emissions in a way that complements the competitive structure of electricity markets—improving market efficiency, lowering costs to consumers, and ensuring reliability—making this approach an important opportunity for wholesale market stakeholders to consider.”

Dena Wiggins, president and CEO, Natural Gas Supply Association:
“Our hope is that FERC’s willingness to convene a broad stakeholder discussion on carbon pricing will prompt states to seriously consider it as a solution to meeting consumers’ needs and clean energy targets. State and regional efforts to price carbon in the power sector, especially when well-designed and implemented in conjunction with other states on a regional basis, represent an important step toward alignment with broader carbon reduction.”

Glen Thomas, president, PJM Power Providers Group:
“The piecemeal carbon policies that are emerging in the PJM footprint are growing increasingly problematic and leading to less efficient markets for consumers. It is time for a regional and national conversation in order to evaluate whether there is a better regional solution out there. We hope that FERC accepts this opportunity to facilitate that conversation.”

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