A new report found Pennsylvania communities could be negatively affected by the increasing financial risk in the nation’s largest electricity market.
The PJM Interconnection includes Pennsylvania and a dozen other states. According to the Institute for Energy Economics and Financial Analysis, private equity and private capital-owned power plants in the PJM face financial struggles including lower revenue generating capacity.
Dennis Wamsted, energy analyst at the Institute For Energy Economic and Financial Analysis and the report’s author, explained the PJM market had robust growth in the last decade from high-capacity prices; but those prices have collapsed, squeezing existing and new developers.
“Financial investors can essentially decide that they no longer want to operate these facilities, and they can notify and tell PJM, OK, we’re gonna plan on closing this in 90 days, 100 days,” Wamsted outlined. “Unfortunately, that leaves communities in broader areas where these plants are located at risk of losing a great deal of tax revenue, and many good jobs.”
Wamsted offered an example of a coal-fired power plant in Homer City, Pennsylvania, which recently closed due to ongoing financial trouble. The owners, who are private equity companies, gave just 90 days warning before the July 1 shut down.
The report pointed out regulatory fines related to last December’s winter storm Elliot totaled about $1.8 billion, with some private equity firms hit the hardest, pushing some existing plants into bankruptcy. He added there are no subsidies or loans available for the coal-fired power plants struggling financially.
“There are plenty of subsidies and loans and plenty of carrots, if you will available for new power plant developers, especially those that want to produce wind, solar or battery storage projects that were enacted with the Inflation Reduction Act of 2022,” Wamsted stressed.
Wamsted acknowledged no coal-fired plants in Pennsylvania have filed for bankruptcy but elsewhere in the PJM system, there are a number of gas fired plants that have. He added it is another indication of the rising financial risks for power plant owners and developers in Pennsylvania and across PJM.