The Federal Energy Regulatory Commission on Tuesday signed off on the PJM Interconnection’s proposal to end capacity market payments for energy efficiency.
The move reverses PJM’s 15-year policy of treating the resource as supply in the increasingly constrained market. It also clarifies FERC’s position on a fight sparked by the region’s market monitor, who filed complaints with the commission over the summer calling for the nation’s largest power market to stop paying efficiency resources “immediately.”
Clean energy proponents had argued that terminating capacity payments for energy efficiency resources could stifle the growth of demand-reducing technologies at a time when the power grid is facing skyrocketing load. They also argued it was contrary to the agency’s position that efficiency is a critical resource and the power markets should not hinder it and other smaller resources from competing alongside traditional power plants.
But the commission found that “sunsetting” efficiency’s participation in the market will save customers money while maintaining the benefits of the resource, which PJM and the region’s independent market monitor had argued was not driven by capacity payments. Payments to efficiency providers will end with auctions for capacity in the 2026/2027 delivery year.
