Dive Brief:

• Four advocacy groups including the Natural Resources Defense Council have filed a lawsuit challenging rules in the PJM Interconnection market, arguing that requirements for resources to be available year-round will disadvantage clean energy sources. 
• PJM rushed to put enhanced capacity rules in place after the Polar Vortex of 2014, when many plants were forced offline by cold weather, but the groups say the new rules could push out renewables which played a role in keeping the lights on during that harsh winter.
• PJM has been phasing in new market rules, but the enhanced capacity changes are slated to go into full effect in 2017.

Dive Insight:

When the Polar vortex forced 20% of generation offline two years ago, PJM moved quickly to institute new rules providing both enhanced penalties and reward for keeping generation online. But several groups say the rules disadvantage renewable and clean energy sources, which could be key to keeping the lights on if the situation were to occur again.

The group, which includes the Sierra Club, Natural Resources Defense Council, the Union of Concerned Scientists, and Earthjustice, has filed a petition for review at the D.C. Circuit Court of Appeals, with legal briefs to follow at a later date.

“PJM’s rules would significantly increase costs to customers and punish the same clean energy and demand response resources that helped keep the lights on during the extreme weather events of the last couple of years,” Casey Roberts, staff attorney at the Sierra Club, said in a statement. “America’s rapidly growing clean energy sector has shown time and again that it is a vital part of our energy markets, and these new rules give polluting fossil fuels an unfair advantage to detriment of energy customers’ wallets.”

According to NRDC, while the always-available, all-year requirement "appears to be resource neutral, it disadvantages — or outright excludes — resources that perform reliably and cheaply in the winter (like wind) and the summer (like solar and smarter use of air conditioning), but not necessarily all-year-round."

In the last two forward capacity auctions, 80% was allocated to the new Capacity Performance product and 20% to Base Capacity. The demand response sector has expressed concern it could face problems as well, and the solution may be partnerships between demand-side resources and intermittent generation.

“By aggregating those resources you essentially create this year-round available product,” Comverge Senior Director of Regulatory Strategy Matthew McCaffree told Utility Dive. “The problem is that no one has participated in this aggregation product until this last auction. There was one – but one is still not enough. It shows it's a very difficult arrangement for two entities to make.”

"We're challenging FERC's approval of PJM's new rules for how it acquires electricity to serve customers in the future because they favor expensive, polluting power plants over clean energy,” said Jennifer Chen, an attorney with NRDC's Sustainable FERC Project. “That's a bad deal for consumers and the environment. PJM, which procures more electricity than any other grid operator, shouldn't be increasing its reliance on fossil-fueled power to meet future electricity demand when affordable wind, solar, and other clean energy options are readily available."

Generators, by contrast, have criticized PJM capacity market rules for not paying more to existing baseload generation, especially nuclear plants. The CEOs of AEP, Dynegy and Exelon all told Utility Dive at a recent industry conference they would push for market protections for those plants against cheap natural gas and renewables, which threaten to force them offline.