Okay, I'll bite. Here's three places where I think @gtpwr and @RdSweeney run afoul of economic theory in their analysis of the PJM MOPR, plus one more general though (thread, 1/).
First, it's at best incomplete to refer to resources as "uneconomic" to mean "unprofitable given the gaping market design flaw that is the lack of carbon pricing." 2/
Glen mentions that he would be open to some state policies if they don't affect the markets, but it's unclear to me what he (or the MOPR) has in mind. 3/
Second, it is simply inaccurate to claim that the capacity market has resulted in "reliability at least cost." The simple reason PJM gets so much new entry despite the market clearing well below the "cost of new entry" is that the administrative cost of new entry is incorrect. 4/
Somehow believing that the administrative estimate is more correct than the empirical results seems incompatible with a belief in competitive markets, so I think more explanation is in order. 5/
Third, the analysis of the beneficiaries I think misses the point. The proximal effect of the MOPR is a wealth transfer from consumers to anyone who clears in the capacity market. With the new rules in place, it seems likely that will predominantly be coal and gas. 6/
(As an aside, the entire discussion of state level subsidies would benefit from more recognition of the distributional effects. It seems to me that the reason states might prefer unit-specific subsidies to more general instruments is precisely to limit wealth transfers.) 7/
Fourth, on a higher level, I don't think the discussion so far (not just the podcast) has really hit on the philosophical issues at stake here for the competitive markets. 8/
The reason we have competitive markets is we believe that, if they are working well, we will maximize social surplus. Strictly speaking, we don't need to care about distributional effects when doing that. 9/
The intent of CASPR (though we can take issue with the implementation) is to maximize social surplus (with the calculation strictly within the bounds of the market), but then facilitate a wealth transfer to resources negatively impacted by state policy. 10/
The expanded MOPR, on the other hand, intentionally leads to a suboptimal capacity mix (again, as measured by surplus within the market) as part of its effort to facilitate a wealth transfer. 11/
Implicitly, PJM is claiming that they know something about social surplus that market participants and states do not. This should be philosophically troubling to anyone who cares about competitive markets (and arguably, democracy). 12/
More pragmatically, I think it's incredibly difficult to implement in a non-arbitrary way. 13/
So there's two separable questions here: 1) should PJM/FERC facilitate a wealth transfer to compensate resources negatively affected by state policies? and 2) should PJM/FERC assert that they have a better gauge of social surplus than states and market participants? 14/
Critics of the MOPR maybe haven't been engaging on (1) as much as they could be, but I don't think the defenders of the MOPR have really acknowledged the leap they are making on (2). All told, to me the available compromise seems like answering yes on (1) but no on (2). 15/15
(With apologies for interrupting your Sunday, cc: @drvox @EnergyLawJeff)
