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PJM© Resource Adequacy in PJM Adam Keech Director, Market Operations PJM.

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Presentation on theme: "PJM© Resource Adequacy in PJM Adam Keech Director, Market Operations PJM."— Presentation transcript:

1 PJM© Resource Adequacy in PJM Adam Keech Director, Market Operations PJM

2 PJM© My Background Adam Keech –Worked at PJM for over 10 yrs 8+ years in Market Operations –Manager, Real-Time Market Operations –Director, Market Operations 2+ years in System Operations –Director, Dispatch –Education MS Electrical Engineering from Rutgers University MS Applied Statistics from West Chester University

3 PJM© PJM as Part of the Eastern Interconnection KEY STATISTICS PJM member companies 800+ millions of people served 60 peak load in megawatts 163,848 MWs of generating capacity185,600 miles of transmission lines 59,750 GWh of annual energy 832,331 generation sources 1,365 square miles of territory214,000 area served 13 states + DC externally facing tie lines % of generation in Eastern Interconnection 28% of load in Eastern Interconnection 19% of transmission assets in Eastern Interconnection 21% of U.S. GDP produced in PJM *Map is missing EKPC zone which joined June 1, 2013 As of 9/7/2012

4 PJM© PJM Evolution

5 PJM© PJM Responsibilities Wholesale Electric Markets Regional Reliability Transmission Planning

6 PJM© PJM Capacity Market PJM Capacity Market is designed to ensure adequate availability of resources that can be called upon to ensure the reliability of the electric grid. PJM Capacity Market Reliability Pricing Model (RPM) Fixed Resource Requirement Alternative (FRR) (opt-out of RPM) PJM secures capacity on behalf of LSEs to satisfy load obligations not satisfied through self-supply. LSE secures capacity to satisfy their load obligation.

7 PJM© What is the RPM? Reliability Pricing Model (RPM) is PJM’s resource adequacy construct RPM is part of an integrated approach to ensuring long-term resource adequacy and competitively priced delivered energy RPM aligns the price paid for capacity with overall system reliability requirements RPM includes pricing to recognize and quantify the locational value of capacity (effective 2007/2008 Delivery Year) and the operational value of capacity (effective 2014/15 Delivery Year) RPM provides forward investment signals

8 PJM© Capacity vs. Energy Capacity A commitment of a resource to provide energy during PJM emergency under the capped energy price. Capacity revenues paid to committed resource whether or not energy is produced by resource. Daily product Energy Generation of electrical power over a period of time Energy revenues paid to resource based on participation in PJM’s Day-Ahead & Real-Time Energy Markets Hourly product Capacity, energy & ancillary services revenues are expected, in the long term, to meet the fixed and variable costs of generation resources to ensure that adequate generation is maintained for reliability of the electric grid.

9 PJM© RPM Structure Base Residual Auction Delivery Year 3 Years Second Incremental Auction Third Incremental Auction May 31 3 months 10 months First Incremental Auction 20 months EFORd Fixed Ongoing Bilateral Market Interruptible Load for Reliability (ILR) (Only effective prior to 12/13 DY) *Certification deadline April 1 for 11/12 DY May Feb. July Sept Conditional Incremental Auction (Effective 12/13 DY) May be scheduled at any time prior to DY March* June 1

10 PJM© Illustrative Example of a VRR Curve A VRR Curve is defined for the PJM Region. Individual VRR Curves are defined for each Constrained LDA. Quantity = UCAP MW Price = UCAP Price ($/MW-day) (a) (b) (c) 1.5 Net Cone Net Cone 0.2 Net Cone (IRM – 3%) (IRM + 1%)(IRM + 5%) IRM Effective 12/13 DY: Target Level = Reliability Requirement –Short Term Resource Procurement Target

11 PJM© What is a Supply Resource in RPM? In RPM, Resources are = Demand Resources (DR) Demand Resources (DR) Qualifying Transmission Upgrades (QTU) Generation Resources Energy Efficiency Resources (EE) (Effective with 11/12 DY) Energy Efficiency Resources (EE) (Effective with 11/12 DY)

12 PJM© Evolution of Supply Capability in PJM Market nuclear total renewables demand response solar/ wind Note: Adjusted to reflect integrations gas coal

13 PJM© Coal Retirements by Year (MW) MW

14 PJM© Generation Deactivations

15 PJM© Offered and Cleared by Fuel Type Over Time

16 PJM© Source: Ventyx*Coal – Gas Equivalent Gas vs. Coal Over Time

17 PJM© PJM Market Evolution of Fuel Mix for Annual Electricity Production In GWhs

18 PJM© Fuel Mix for 2012 Annual Electricity Production

19 PJM© PJM Market – Average Power Generation Emissions Pounds Per MWh of Electricity Produced

20 PJM© PJM© – Generation Interconnection Queue Volume by MW

21 PJM© Current - PJM Queued Generation (Nameplate Energy) As of 03/2013

22 PJM© DR vs. EE Energy Efficiency (EE) –Installed device that exceeds relevant standards –Achieves reduction during ALL hours of the performance period –Installing an LED light bulb Demand Response (DR) –Capability to reduce consumption on command –Annual, Extended Summer, Limited –Shutting the light off

23 PJM© DR Participation Over Time

24 PJM© Energy Efficiency Participation in RPM Over Time

25 PJM© Trends in Resource Adequacy Coal Retirements –~ 14,000 MW by 2015 Growth in energy production of natural gas Emergence of Energy Efficiency and DR –Capacity Market revenues make these types of projects much more profitable –Offset the need for traditional generation –Efforts to “operationalize” DR Increases in natural gas capacity –More natural gas capacity than coal by 2015 –Generation queue volumes have swapped over the last few years

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