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Resource Adequacy in PJM

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Presentation on theme: "Resource Adequacy in PJM"— Presentation transcript:

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

2 Adam Keech My Background Worked at PJM for over 10 yrs Education
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 as Part of the Eastern Interconnection
KEY STATISTICS PJM member companies millions of people served peak load in megawatts 163,848 MWs of generating capacity 185,600 miles of transmission lines 59,750 GWh of annual energy 832,331 generation sources ,365 square miles of territory 214,000 area served states + DC externally facing tie lines 26% 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 Evolution

5 PJM Responsibilities Wholesale Electric Markets Regional Reliability
Transmission Planning

6 LSE secures capacity to satisfy their load obligation.
PJM Capacity Market PJM Capacity Market Fixed Resource Requirement Alternative (FRR) (opt-out of RPM) Reliability Pricing Model (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. PJM Capacity Market is designed to ensure adequate availability of resources that can be called upon to ensure the reliability of the electric grid.

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

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

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

12 Evolution of Supply Capability in PJM Market
coal gas nuclear Continuing trend of a major shift in generation from coal to natural gas Natural gas accounts for 95% of new generation participation total renewables demand response solar/ wind Note: Adjusted to reflect integrations

13 Coal Retirements by Year (MW)

14 Generation Deactivations

15 Offered and Cleared by Fuel Type Over Time

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

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

18 Fuel Mix for 2012 Annual Electricity Production

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

20 2009 – Generation Interconnection Queue Volume by MW

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

22 Energy Efficiency (EE)
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 DR Participation Over Time

24 Energy Efficiency Participation in RPM Over Time

25 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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