the year to date in pjm: operations and markets · 2014. 8. 1. · 7/31/2014 1 pjm©2014 kerry...

7/31/2014

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PJM©2014 www.pjm.com

Kerry Stroup

Manager, State Government Policy

PJM Interconnection

OMA Energy Committee

July 30, 2014

The Year to Date in PJM:

Operations and Markets

PJM©2014 2 www.pjm.com

OMA Energy Committee Presentation Outline

• PJM’s mission: maintaining reliability of the bulk power

system

• Bottom line to date: lower wholesale prices

• Challenges facing the electricity industry

• PJM Capacity Market outcomes and design changes to

assure continued reliability

• New challenges: USEPA 111(d) rule and Order 745

remand

• Operational challenges and market outcomes associated

with January cold weather

• Stay tuned for PJM’s High Availability Capacity Product

proposal

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PJM’s Role

• Ensures the reliability of the high-voltage electric power system

• Coordinates and directs the operation of the region’s transmission

grid;

• Administers a competitive wholesale electricity market that sends

price signals to supply resources and load consistent with reliable

bulk power system operations;

• Plans regional transmission expansion improvements to maintain

grid reliability and relieve congestion.

www.pjm.com


PJM as Part of the Eastern Interconnection

KEY STATISTICS

PJM member companies 900+

millions of people served 61

peak load in megawatts 165,492

MWs of generating capacity 183,604

miles of transmission lines 62,556

2013 GWh of annual energy 791,089

generation sources 1,376

square miles of territory 243,417

area served 13 states + DC

externally facing tie lines 191

• 27% of generation in

Eastern Interconnection

• 28% of load in Eastern Interconnection

• 20% of transmission assets in

Eastern Interconnection

21% of U.S. GDP

produced in PJM

www.pjm.com

As of 4/1/2014

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PJM Evolution

www.pjm.com


PJM ‒ Focus on Just 3 Things

Markets • Energy

• Capacity

• Ancillary Services

Regional Planning • 15-Year Outlook

Reliability • Grid Operations

• Supply/Demand Balance

• Transmission monitoring

2

1

3

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PJM Wholesale Electricity Prices 2008-2003


Top Challenges Facing the Industry

• Electricity Demand

• World’s Largest Fuel Switch

• Natural Gas Interoperability

• Integration of Intermittent and Demand Side Resources

• Man-Made and Natural Disasters

• Extreme Weather

Each Challenge is Also an Opportunity

Adapted from: EPRI

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Lingering Low Electricity Demand


Transitioning from Coal to Gas

2009 to Date: 26,000 MW in Retirement Notices

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Renewable Energy in PJM

www.pjm.com


PJM Renewable Integration Study Findings

• The primary focus of the stakeholder-requested study was to evaluate the effects on

reliability of a higher penetration of renewable resources, not the economic

competiveness of renewable generation versus other generation.

• The study’s main conclusion is that the PJM system, with adequate transmission

expansion (up to $13.7 billion) and additional regulation reserves (up to an additional

1,500 MW), would not have any significant reliability issues operating with up to 30

percent of its energy (as distinct from capacity) provided by wind and solar

generation.

• The estimated electricity production-cost savings from increased renewable

resources depend upon the study’s assumptions about future fuel prices, load growth

and environmental policies. Current low gas prices have made renewable power less

competitively priced.

• Also, there was no attempt to estimate the effect on capacity prices resulting from

lower energy prices. (To maintain adequate capacity resources in the face of lower

energy prices capacity prices may increase.)

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What is RPM?

• Reliability Pricing Model (RPM) is the PJM 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 generation and other capacity resources with overall system reliability requirements

• RPM provides forward investment signals


Highlights of RPM Auction Design

• PJM invites resource-specific sell offers for planning each year, three years in advance

• Products that may be offered include: existing and planned generation; planned transmission upgrades; and existing and planned demand resources including energy efficiency

• New generation, new demand response alternatives, and new transmission solutions can compete directly with existing resources

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Capacity Resources Cleared, 2007/8-2017/18


Demand Resources in PJM’s Capacity Market

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RPM BRA Clearing Prices – “Rest of RTO”


2017/2018 Base Residual Auction

Clearing Prices ($/MW-Day)

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Future Capacity


PJM’s Changing Fuel Mix

2007 PJM Installed Capacity

Capacity Cleared Market for

2017/2018 Delivery Year

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New Generation by Fuel Type Since RPM Implementation in 2007

35,040 MW Total

Gas = 75%


PJM Capacity Market Reform

• Clearing of limited DR accepted 1/30/14

• Capacity import limit accepted 4/22/14

• DR operational flexibility accepted 5/9/14

• Replacement capacity filing rejected 5/12/14;

PJM request for rehearing filed 6/9/14

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RPM Parameter Triennial Review

• Brattle review determined VRR not achieving performance

objectives at system or LDA level and EAS offset is not accurate,

especially for combined cycle technology

• PJM recommendations are under stakeholder review include:

– Shift VRR curve right and establish convex shape to better

protect against market shocks

– Adjust CONE values to Sargent/Lundy study estimates; align

CONE values more closely with LDAs; maintain CTs as

reference to preserve continuity and market stability; adjust

certain LDA CONE values to include dual fuel capability and

mandate firm transportation only for Cove Point LNG export

considerations

– Calibrate E&AS offset model to reflect actual historical net

revenues


USEPA Section 111(d) proposed rule and Order 745 Remand

• have the potential to significantly affect reliability

and market outcomes

• ISO-RTO Council recommendations address

reliability and market outcomes

• PJM has joined Maryland, DC, and other parties

in requesting an en banc rehearing of the 6th

District’s Order

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PJM States System Emission Reduction Standards


IRC Reliability Safety Valve Proposal

• Similar to the Reliability Safety Valve for MATS

– Keeps generation resources on-line to maintain reliability until a transmission

solution can be implemented to ensure retirements do not jeopardize reliability

• Proposed Reliability Safety Valve for 111(d) has additional features

– Up front analysis of SIPs to check for possible reliability issues intra-state and

inter-state both long-term retirements and short-term operations.

– On going analysis after implementation as generation resources may retire well

after compliance obligations begin depending on flexibility of SIPs…in contrast

MATS has a hard deadline for emissions rate compliance

– Ongoing analysis of retirements same as MATS retirement analysis…standard

deactivation analysis

– Ongoing analysis of commitment and dispatch operations as this could be

impacted depending how states implement 111(d)

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Measuring Compliance on a Regional/RTO Basis

• Provide an option for state-submitted plans to measure compliance on

a regional/RTO basis

• Leverages the economies of scope and scale and cost-effectiveness of

RTO-wide markets and institutions

– Cost-effective security constrained economic dispatch across an RTO is already

taking place and would make compliance more cost-effective

– Resource adequacy constructs allow for the cost-effective sharing and transfer of

resources across the region

– Region-wide transmission planning process

– Market rules already exist in RTO markets to account for the cost of

environmental compliance in general


DC Court of Appeals Order Vacating FERC Order No. 745

• 5/23 Order is directed at FERC, not PJM whose market operations are governed by

its filed rates, unchanged by the court order.

• Court mandate withheld until requests for rehearing by DC Court of Appeals filed and

acted upon; status quo until mandate issued.

• PJM participated in the appeal supporting FERC and Order 745 despite not agreeing

with all elements of the final FERC rule, which concerns compensation for economic

demand response in daily energy markets. The Court’s Order, however, also

suggests that demand response is entirely retail-jurisdictional and has no place in

wholesale power markets.

• PJM is disappointed with the Court’s jurisdictional analysis that served as the basis

for the majority decision.

• PJM filed a motion for an en banc rehearing by the DC Court of Appeals of the Order

on July 7; FERC, Maryland and the District of Columbia had previously filed for an en

banc rehearing. . PJM asserted that rehearing en banc is warranted because EPSA

presents a question of exceptional importance—whether FERC has authority under

the Federal Power Act to approve compensation for voluntary demand-side

participation in wholesale electric markets.

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January 2014 Low (& Wind Chill) vs Historical Temperatures

Unseasonably Cold Weather in January

Region Week of

Jan 6th

Week of

Jan 20th

Week of

Jan 27th

Avg Jan

Low Temp

All-Time

Record Low

Philadelphia 4° (1/7)

-18° WC

4° (1/22)

-17° WC

10° (1/30)

-3° WC 25.5°

-7° (1982 & 84)

-16° & -33° WC

Richmond 10° (1/7)

-8° WC

7° (1/23)

-2° WC

4° (1/30)

4° WC 28.4°

-12° (1940)

WC N/A

Chicago -16° (1/6)

-41° WC

-6° (1/24)

-24° WC

-11° (1/28)

-30° WC 16.3°

-27° (1985)

-57° WC

All temperatures are in Fahrenheit and WC denotes Wind Chill


PJM RTO Highest Historical Winter Demands

2014 Demands are Preliminary Telemetered Data

Pre-2014 Demands include Coincident Demands of Not-Yet-Integrated Zones

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January Forced Outages Compared to History


Tuesday, January 7, 2104 - Peak – Generation by Fuel type

Fuel Types

01/07/2014 HE 19

ICAP

(MW)

Ambient

Air (MW)

Generation

Outages

(MW)

Maintenance

/ Planned

(MW)

Forced

(MW)

Forced

Outages

(% of

ICAP)

All Fuel Types 188,106 -1,491 40,890 1,104 39,786 21%

Gas 48,243 -734 16,553 428 16,125 33%

Plant Outages 11,819

Gas

Curtailments 4,734

Coal 65,070 -4 12,936 372 12,564 19%

Nuclear 33,316 -455 1,150 -455 1,605 5%

Hydro 8,198 12 755 707 48 1%

Wind 5,597 0 1,430 32 1,398 25%

Oil 9,364 -119 4,379 -59 4,438 47%

Other 18,318 -191 3,687 79 3,608 20%

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Gas/Electric Coordination Issues Raised by Polar Vortex

• Information sharing and coordination enabled by FERC Order 787

Emergency Waivers: daily communication of generation

commitment to gas pipelines and implementation of joint status

calls

• Gas pricing Issues January 22 – 28: gas unit variable costs

exceeded the $1000/MWh offer cap for cost-based offers,

resulting in FERC approving PJM’s emergency waiver request to

waive the offer cap through March 31. A PJM Senior Task Force

is considering a change or elimination of offer caps for cost-based

and price-based offers in the energy markets,if they are

determined to be necessary going forward.

• Differences in gas and electric market schedules

• Sufficiency of gas infrastructure: EIPC Stucy


Cold Weather Demand Response

Date Peak Duration Zones MW

7-Jan Morning 5 ½ Hours RTO 1,720

7-Jan Evening 2 Hours RTO 2,920

8-Jan Morning Cancelled RTO 1,960

22-Jan Evening 6 Hours BGE, PEPCO 160

23-Jan Morning 3 Hours Mid-Atlantic,

DOM, APS 570

23-Jan Evening 4 Hours Mid-Atlantic,

DOM, APS 1,280

24-Jan Morning 3 Hours Mid-Atlantic,

DOM, APS 585

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0

500

1000

1500

2000

2500

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24

MW

Red

uctio

n

Hour

Demand Response in PJM: January 7, 2014

Emergency DR

Economic DR

Notes:Emergency DR Amounts are Emergency Energy Settlement Reductions.


Day-Ahead LMP vs Real-Time LMP- Jan 7

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Natural Gas Prices – January 2014

$-

$20

$40

$60

$80

$100

$120

1/1 1/6 1/11 1/16 1/21 1/26 1/31

Gas

Pri

ce p

er M

MB

tu

Henry Market (East) Market (West) Production


Load-Weighted LMP, Monthly

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January 2014 Daily Uplift


RPM Committed Resources


15.7%

37.3%

Availability

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Winter Generation Availability Study


15.7%

37.3%

X% Winter available units

DR not available in Winter

Study determines “x” such

that the PJM LOLE is

maintained at 1 day in 10

years.


New Winter Capacity Minimum


Set a new minimum

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Generation Performance Problem Statement -- MRC

• Problem / Opportunity Statement

• During the extreme cold weather conditions experienced on the PJM system in January of 2014, generator forced

outage rates were extremely high. As fully described in the PJM analysis of those January events1, “At the all-time

winter peak at 7 p.m. on January 7, PJM experienced a 22 percent forced outage rate, which was far above the

historical average of 7 percent, with a total of 40,200 MW unavailable due to forced outages.” As further

highlighted in the report, the forced outage rate during the winter storms later in January was also more than

double what would typically be observed on a winter day. The report also indicates that a portion of these outages

were due to unavailability of fuel to natural gas-fired generating units.

• Recommendation #1 at the conclusion of the PJM report states as follows:

• Unit Performance

• PJM, in conjunction with members, should consider the following topics and develop adjustments to improve unit

performance:

• 1. Review the penalties for non-performance during peak days and/or days when emergency procedures are

issued for capacity emergencies

• 2. Review incentives for performance during peak days

• 3. Investigate a process for unit testing and preparation of resources in advance of winter operations, including

testing dual-fuel capability

• 4. Review generator outage rates outlined in PJM Manual 13: Emergency Operations.

• Items 3 and 4 from the recommendation are already under consideration in the PJM Operating Committee. The

purpose of this problem statement is to initiate stakeholder discussion regarding items 1 and 2 in the

recommendation.

• Issue Source

• PJM initiated this problem statement based on the recommendation stemming from the analysis of the January

cold weather events.


High Availability Capacity Product

Operational

Availability

and

Flexibility

Fuel Security Performance

Incentives

and Penalties

the year to date in pjm: operations and markets · 2014. 8. 1. · 7/31/2014 1 pjm©2014 kerry...

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