Reliability and Renewables in Competitive Energy Markets (Joshua Macey, Cornell Law School)

“Energy market prices have declined 30-50% since 2006. Grid operators have turned to capacity markets to make up the missing money, especially on the east coast. … Our view is that capacity markets are a blunt instrument [and] regulators have turned to specific [capacity acquisition] interventions that exclude renewables or make it difficult for renewables to compete in capacity markets.”

“As capacity markets come to represent such an enormous percentage of generator revenue, and as state efforts to favor gnerators with characteristics they care about are undermined by these capacity markets, it begins to look like FERC is violating [states’] jurisdiction. FERC also has a mandate to make sure that rates are not unduly discriminatory. … If there’s not actually a reliability justification for these regulatory interventions, then it may simply be brazenly discriminating against resources that FERC doesn’t prefer.”

“Load serving entities should be responsible for procuring an energy mix that satisfies the various qualities that grid operators want. You could tranche (or divide) this into different tiers. … There could be a capcity tranche, … a flexibility tranche, … [and] a clean energy tranche. They would also be responsible for making sure that those tranches work well together.”

Joshua Macey is an Assistant Professor of Law at the University of Chicago Law School specializing in administrative law, environmental law, energy law, corporate law, bankruptcy, and the regulation of financial institutions. Macey was previously a postdoctoral fellow at Cornell Law School and graduated from Yale College, the London School of Economics, and Yale Law School.