Reconciling Subsidized Resources

Reconciling Subsidized Resources

In PJM's Competitive Electricity Markets
August 24, 2017

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On May 4, 2017, the Kleinman Center for Energy Policy (Kleinman Center) at the University of Pennsylvania organized a one-day, invitation-only workshop to discuss the effects of subsidized resources in competitive electricity markets and different options for the reconciliation of states policies and cost efficient market operation in PJM Interconnection (PJM).

32 participants attended the workshop including a group of academic economists, PJM market participants, PJM staff, PJM’s market monitor, and representatives from the Federal Energy Regulatory Commission (FERC). Kleinman Center staff facilitated the workshop, which was conducted under the Chatham House Rule.

Options discussed to reconcile state policies and competitive market outcomes included:

  • Integration of state environmental goals through a carbon price administered in the energy market;
  • Accommodation of subsidized resources through a “two-tier” capacity pricing mechanism;
  • Mitigation of the effects of discounted capacity market bids resulting from subsidies, through implementation of a bid price floor.

Many related topics were explored, including: perspectives on the performance of PJM’s energy and capacity markets, the short and long-term needs of the markets, the issue of subsidies, and identification of a research agenda that could inform future thinking on these topics.

The proceedings report attempts to capture the wide variety of perspectives shared during the workshop.

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