Wires

UPDATE 1-FERC rules clean energy sources must pay higher market price

(Adds details on vote, reaction from wind industry, background)

Dec 19 (Reuters) - The U.S. Federal Energy Regulatory Commission on Thursday directed the largest U.S. power grid operator to force state-subsidized solar and wind electricity providers to raise prices, a move renewable energy companies and environmental groups blasted as a partisan attempt to protect fossil fuels.

In a statement, FERC said the order would protect the competitiveness of PJM Interconnection's capacity market, which pays generation providers to keep their power plants available for service to maintain system reliability.

FERC's two Republican commissioners voted in favor of expanding the capacity market price floor to state-subsidized generators, with the Democrat, Richard Glick, dissenting.

FERC Chairman Neil Chatterjee said in the statement that the Commission had an obligation to "provide a level playing field for all resources."

Chatterjee and the other Republican on the panel, Bernard McNamee, were appointed to the Commission by U.S. President Donald Trump, an outspoken proponent of fossil fuels.

PJM, which operates the grid in all or parts of 13 U.S. Mid Atlantic and Midwest states, was not immediately available for comment.

Renewable energy resources such as wind and solar that are incentivized by many states will be required to meet a minimum price in the capacity auction even though cost declines in their technologies now often make them cheaper than fossil fuel alternatives.

Environmental groups including Sierra Club and Union of Concerned Scientists said the decision would add billions of dollars to consumers' energy costs.

In recent years, many states have adopted policies that support the continued operation or construction of certain types of generation, like nuclear and renewables, to meet carbon reduction and other environmental goals.

But operators of natural gas power plants have opposed those subsidies because they argue that they reduce what their plants receive in capacity and energy markets.

The American Wind Energy Association, in a statement, said the ruling "threatens states rights and hinders their ability to bring more clean energy to their communities."

FERC's action builds on a previous order from June 2018, which found that out-of-market payments provided by PJM states to support operation of certain generation resources threaten the competitiveness of PJMs capacity market.

"I recognize, and wholeheartedly respect and support, states exclusive authority to make choices about the types of generation they support and that get built to serve their communities," Chatterjee said in the FERC release, noting "They still can do so under this order."

PJM has 90 days to comply. (Reporting by Scott DiSavino Editing by Chris Reese and Diane Craft)