New Jersey is committed to actively reducing its greenhouse gas emissions. In May 2018, New Jersey Governor Phil Murphy issued an executive order that called for a transition to 100 percent clean energy supply by 2050. New Jersey has developed a number of energy policies that aim to achieve this outcome and shift energy production towards clean sources via investment and support for clean energy sources. The team was tasked with identifying New Jersey’s policies that created conflict with Federal jurisdictional mandates and wholesale electricity market design issues.
The focus of their analysis was on two State policies, Nuclear Support, which establishes a zero emission certificate (ZEC) program for nuclear power plants and Off Shore Wind Support which outlines criteria that enables off shore wind projects to qualify for state subsidies in the form of Offshore Renewable Energy Certificates (ORECs). Each policy was reviewed in respect to three sources of conflict – constitutional, competition from other generators and consumer or ratepayer outcomes.
The team found that state subsidies like the ORECs and ZECs, are constitutional and likely to withstand significant legal challenge, however present conflict for the capacity market as subsidies unfairly impacts other generators by lowering the market clearing price in capacity markets and sending inaccurate price signals. Both FERC and PJM, the independent system operator, have proposed solutions to mitigate market design conflicts created by state sponsored generators, however both proposals come at the expense of ratepayers in the form of higher costs.
The team recommended changes to New Jersey State based electricity auction called the Basic Generation System (BGS) to reduce the burden on ratepayers. All zero carbon electricity generators in New Jersey could elect to participate in a state-based solicitation that awarded them State load carved out the BGS. This option achieves the best economic outcome for New Jersey rate payers, in form of lowest cost zero carbon electricity generation.