pjm©2013 resource adequacy in pjm adam keech director, market operations pjm
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PJM©2013www.pjm.com
Resource Adequacy in PJM
Adam Keech
Director, Market Operations
PJM
PJM©20132www.pjm.com
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
PJM©20133www.pjm.com
PJM as Part of the Eastern Interconnection
KEY STATISTICSPJM member companies 800+millions of people served 60 peak load in megawatts 163,848MWs of generating capacity 185,600miles of transmission lines 59,750GWh of annual energy 832,331generation sources 1,365square miles of territory 214,000area served 13 states + DCexternally facing tie lines 142
• 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
PJM©20134www.pjm.com
PJM Evolution
PJM©20135www.pjm.com
PJM Responsibilities
PJM©20136www.pjm.com
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.
PJM©20137www.pjm.com
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
PJM©20138www.pjm.com
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.
PJM©20139www.pjm.com
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
ConditionalIncremental Auction (Effective 12/13 DY)
May be scheduled at any time prior to DY
March* June 1
PJM©201310www.pjm.com
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
Pric
e =
UC
AP
Pric
e ($
/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
PJM©201311www.pjm.com
What is a Supply Resource in RPM?
In RPM, Resources are =
Demand Resources
(DR)
Demand Resources
(DR)
Qualifying Transmission
Upgrades
(QTU)
Generation Resources
Generation Resources
Energy Efficiency Resources
(EE)(Effective with 11/12 DY)
Energy Efficiency Resources
(EE)(Effective with 11/12 DY)
PJM©201312www.pjm.com
-
10,000.0
20,000.0
30,000.0
40,000.0
50,000.0
60,000.0
70,000.0
2007/2008 2008/2009 2009/2010 2010/2011 2011/2012 2012/2013 2013/2014 2014/2015 2015/2016 2016/2017
ICA
P M
WEvolution of Supply Capability in PJM Market
nuclear
total renewablesdemand response
solar/ wind
Note: Adjusted to reflect integrations
gas
coal
PJM©201313www.pjm.com
Coal Retirements by Year (MW)
MW
PJM©201314www.pjm.com
Generation Deactivations
PJM©201315www.pjm.com
Offered and Cleared by Fuel Type Over Time
PJM©201316www.pjm.com
Source: Ventyx*Coal – Gas Equivalent
Gas vs. Coal Over Time
PJM©201317www.pjm.com
PJM Market Evolution of Fuel Mix for Annual Electricity Production
In GWhs
PJM©201318www.pjm.com
Fuel Mix for 2012 Annual Electricity Production
PJM©201319www.pjm.com
PJM Market – Average Power Generation Emissions Pounds Per MWh of Electricity Produced
PJM©201320www.pjm.comPJM©2009
2009 – Generation Interconnection Queue Volume by MW
PJM©201321www.pjm.com
Current - PJM Queued Generation (Nameplate Energy)
As of 03/2013
PJM©201322www.pjm.com
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
PJM©201323www.pjm.com
DR Participation Over Time
PJM©201324www.pjm.com
Energy Efficiency Participation in RPM Over Time
PJM©201325www.pjm.com
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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