EMC2 Development Company, Inc.

EMC2 Development Company, Inc.

Money on the Table:

Exploring the Forward Capacity Market

PJM Capacity Market

May 2013

2 EMC2 Development Company, Inc. March 2009

EMC2 Development Company, Inc.

May 2013

Confidential

PJM: Who We Are

21% of U.S. GDP

produced in PJM As of 7/2012

KEY STATISTICS

Millions of people served 60

Peak load in megawatts 163,848

MWs of generating capacity 185,600

Member companies 800+

Miles of transmission lines 59,750

GWh of annual energy 832,331

Generation sources 1,365

Square miles of territory 214,000

States served 13 + DC

3 EMC2 Development Company, Inc. March 2009

EMC2 Development Company, Inc.

May 2013

Confidential

PJM ‒ Focus on Just 3 Things

Market Operation

• Energy

• Capacity

Regional Planning • 15-Year Outlook

1

2

3

Reliability • Grid Operations

• Supply/Demand Balance

• Transmission monitoring

4 EMC2 Development Company, Inc. March 2009

EMC2 Development Company, Inc.

May 2013

Confidential

The PJM Electric Market

• PJM is the largest power market in world

• PJM Energy market (kWh)

– PJM coordinates the continuous buying, selling and delivery of wholesale electricity

– Pricing based upon location and time

– 8,000+ Locational Marginal Prices (LMPs)

* PJM Territory Shown in Blue

5 EMC2 Development Company, Inc. March 2009

EMC2 Development Company, Inc.

May 2013

Confidential

PJM Capacity Market

* PJM Territory Shown in Blue

• PJM Capacity Market (kW)

– Designed to ensure reliability of the grid

– Provides market signals to support

infrastructure investment

• Locational Capacity Pricing

– Annual auctions

– Pricing by location

• 27 Locational Deliverability Areas

(LDAs)

• Capacity prices primarily driven by

system transmission constraints

Shaded

area is

target

market

6 EMC2 Development Company, Inc. March 2009

EMC2 Development Company, Inc.

May 2013

Confidential

Meeting Capacity Requirements

• Capacity resources include:

• Generation stations

• Demand response actions

• Energy efficiency projects

• Electricity suppliers can meet their capacity

requirements by:

• Owning & operating generation operations

• Purchasing capacity through others

• Obtaining capacity through PJM capacity auctions

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EMC2 Development Company, Inc.

May 2013

Confidential

EE Capacity in PJM Market

• As of 2011/12 Delivery Year, PJM Capacity market includes Energy Efficiency as a capacity resource

• Projects must achieve a permanent, continuous reduction in electric energy consumption – not dispatchable

• Load reductions during peak hours between 2-6pm, June 1 to Aug 31.

• Typical projects:

Lighting Upgrades

HVAC Equipment Upgrades

Chiller Upgrades

Installation of VFDs (Variable Frequency Drives)

8 EMC2 Development Company, Inc. March 2009

EMC2 Development Company, Inc.

May 2013

Confidential

EE Projects Eligible for 4 Years of

Capacity Payments

Installation Period Fully Installed for

Summer Eligible Delivery Years

June 2009 - May 2010 2010 2013/2014

June 2010 - May 2011 2011 2013/2014, 2014/2015

June 2011 - May 2012 2012 2013/2014, 2014/2015, 2015/2016

June 2012 - May 2013 2013 2013/2014, 2014/2015, 2015/2016, 2016/2017

9 EMC2 Development Company, Inc. March 2009

EMC2 Development Company, Inc.

May 2013

Confidential

PJM EE Capacity Requirements

• Prior to Participation in Capacity Auctions

– EE capacity must be pre-qualified by PJM for participation in all

Auctions – Required 30 days before each auction.

– Measurement & Verification Plans submitted for planned ECMs

– Minimum 100kW per submission - aggregations allowed within

utility zones

– Must post credit for all planned resources

• ~$35,000/MW; $37,474, $35,205 and $36,193 for 14/15,

15/16 and 16/17

10 EMC2 Development Company, Inc. March 2009

EMC2 Development Company, Inc.

May 2013

Confidential

PJM EE Capacity Requirements

• Prior to Committed Delivery Year

– Post Installation M&V Report documents EE measures

• Measurement and Verification required during EE

Performance Hours (2-6 PM, M-F, June 1- Aug 31) to

document kW savings

• PJM requires measurement of Coincidence Factors

• Must prove out EE Resources prior to Delivery Year

• Accepted “Planned” EERs become “Existing” EERs and are

eligible to satisfy RPM commitments

11 EMC2 Development Company, Inc. March 2009

EMC2 Development Company, Inc.

May 2013

Confidential

PJM Capacity Auctions

• RPM Capacity Auctions

– Base Residual and 3 Incremental Auctions held for each Delivery Year

– Clearing Price based on supply and demand for specific auction

– Credit must be posted for all planned resources prior to each auction

– Inadequate resources subject to Deficiency Penalty and Lost Revenue

12 EMC2 Development Company, Inc. March 2009

EMC2 Development Company, Inc.

May 2013

Confidential

Recent Auction Results

• Recent capacity auctions highlight the unpredictability of the Incremental

Auctions

– EMAAC: NJ + PECO + DPL

– MAAC: EMAAC + PPL + METED + Penelec +SWMAAC

– RTO: Rest of PJM

• Value of project dependent on location and date of installation

Auction

DateMay-09 Sep-10 Jul-11 Mar-12 May-10 Sep-11 Jul-12 Mar-13 May-11 Sep-12 May-12

LDA

BRA - DY

2012/2013

($/kw-yr)

1st IA- DY

2012/2013

($/kw-yr)

2nd IA - DY

2012/2013

($/kw-yr)

3rd IA - DY

2012/2013

($/kw-yr)

BRA - DY

2013/2014

($/kw-yr)

1st IA - DY

2013/2014

($/kw-yr)

2nd IA - DY

2013/2014

($/kw-yr)

3rd IA - DY

2013/2014

($/kw-yr)

BRA - DY

2014/2015

($/kw-yr)

1st IA - DY

2014/2015

($/kw-yr)

BRA - DY

2015/2016

($/kw-yr)

RTO 6.01$ 6.01$ 4.75$ 0.92$ 10.12$ 7.30$ 2.56$ 1.48$ 45.99$ 2.02$ 49.64$

MAAC 48.68$ 6.01$ 4.75$ 0.92$ 82.54$ 7.30$ 3.65$ 10.95$ 49.82$ 6.04$ 61.12$

EMAAC 51.00$ 56.09$ 17.85$ 0.92$ 89.43$ 65.28$ 14.60$ 68.78$ 49.82$ 6.04$ 61.12$

ATSI 6.01$ 6.01$ 4.75$ 0.92$ 10.12$ 7.30$ 2.56$ 1.48$ 45.99$ 2.02$ 130.31$

13 EMC2 Development Company, Inc. March 2009

EMC2 Development Company, Inc.

May 2013

Confidential

PJM Locational Deliverability Areas

EMAAC

MAAC

RTO

(Rest of PJM)

14 EMC2 Development Company, Inc. March 2009

EMC2 Development Company, Inc.

May 2013

Confidential

PJM Resources

PJM RPM Schedule

http://www.pjm.com/markets-and-operations/rpm/rpm-auction-user-

info.aspx RPM Schudule.xls

PJM Capacity Manual: M-18

http://www.pjm.com/~/media/documents/manuals/m18.ashx

PJM EE M&V Requirements Manual: M-18B

http://www.pjm.com/~/media/documents/manuals/m18b.ashx

PJM EE Frequently Asked Questions

http://www.pjm.com/~/media/markets-ops/rpm/rpm-auction-info/rpm-

energy-efficiency-faqs.ashx

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EMC2 Development Company, Inc.

May 2013

Confidential

Questions ???