Politicians looked around for a cause for control, found climate change, diagnosed it as a crisis and applied Net Zero by 2050 as the remedy. The cause of the climate change crisis was diagnosed as anthropogenic carbon dioxide emissions.

The first market targeted for control was electricity generation. The United Nations determined that global electricity generation would transition renewable generation, predominantly wind and solar. 

US President Obama, arguably in a display of excessive candor, declared that electricity prices would “necessarily skyrocket” in the process of reducing and ultimately eliminating CO₂ emissions from fossil fueled electric generating plants. Residential electricity rates have increased nationally by approximately 45% since President Obama’s declaration, though some rates have doubled over the period in states which have aggressively pursued the transition to renewable generation.

The increase in electricity prices has attracted political attention as one component of a focus on “affordability” on the part of both US political parties. New Jersey Governor Mikie Sherrill has been the most aggressive. Sherrill issued two Executive Orders, one freezing all pending electric rate hikes in the state and the second exerting emergency authority to expand power generation in the state. These executive orders are likely to be challenged by the state’s electric utilities, since the pending rate increases are based largely on investments in expanded facilities already placed in service and current operating expenses. The freeze would result in reduced utility rate of return on the already increased ratebase and expenses.

It is unclear if and how the New Jersey utilities would expand power generation investment under a rate freeze which would preclude them from earning on the increased investment. It is more likely that New Jersey, a member state of the Regional Greenhouse Gas Initiative (RGGI), would encourage connection of merchant wind and solar generation facilities which would require investment in transmission facilities to connect the new generation to the existing grid, which is operated by the Pennsylvania-Jersey-Maryland (PJM) Independent System Operator (ISO). Former NJ governor Phil Murphy had been critical of PJM for not being more aggressive in adding renewable generation to the ISO grid.

The increases in New Jersey electricity prices have been driven by several factors including: forced closure of depreciated coal, gas and nuclear generation facilities; RGGI emissions-based taxation; investments in transmission infrastructure to accommodate increased electricity imports from other PJM states, primarily Pennsylvania; and, increased PJM capacity charges resulting from renewable generation displacement of conventional generation output, which increase “Dutch Auction” prices. Capping electricity prices by freezing rate increases is unlikely to support generation increases in the state.

Further increases in PJM renewable generation capacity would lead to further increases in PJM capacity charges and, ultimately, to either increases in conventional generation capacity to provide backup for renewable generation or the addition of some form of electricity storage. Investment in new conventional generation capacity would become less attractive as renewable generation capacity increased and further reduced conventional generator operation. Investment in storage capacity would be even less desirable because of its higher initial cost and shorter service lifetime.