pjm©2013 resource adequacy in pjm adam keech director, market operations pjm

PJM©2013www.pjm.com

Resource Adequacy in PJM

Adam Keech

Director, Market Operations

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


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 Evolution


PJM Responsibilities


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.


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


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.


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


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


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)


-

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


Coal Retirements by Year (MW)

MW


Generation Deactivations


Offered and Cleared by Fuel Type Over Time


Source: Ventyx*Coal – Gas Equivalent

Gas vs. Coal Over Time


PJM Market Evolution of Fuel Mix for Annual Electricity Production

In GWhs


Fuel Mix for 2012 Annual Electricity Production


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


Current - PJM Queued Generation (Nameplate Energy)

As of 03/2013


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


DR Participation Over Time


Energy Efficiency Participation in RPM Over Time


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

pjm©2013 resource adequacy in pjm adam keech director, market operations pjm

Documents

rpm pjm

energy capacity

market operations pjm

pjm evolution slide

capacity revenues

pjm emergency

priced delivered energy

delivery year rpm