The PJM Interconnection plans to delay its upcoming capacity auctions so they can include pending market reforms aimed at making sure power supplies are available when needed, according to a notice released Monday.
“Despite the implications of auction delay, reforms are necessary to the capacity market design in order to conduct an effective Base Residual Auction,” PJM said in an email to stakeholders.
The PJM Power Providers Group is pleased that the PJM board is recognizing that the grid operator’s capacity markets rules will not produce capacity prices that will sustain reliability, Glen Thomas, the trade group’s president, said in an email Tuesday.
“Auction delays are not a desirable result, but, unfortunately, the capacity market needs to be fixed and that must be the priority," he said.
PJM last month started a fast-track stakeholder process to bolster its capacity market following widespread power plant outages during Winter Storm Elliott in December and a report showing the grid operator could face narrow reserve margins in 2028.
Delaying the capacity auctions, with the next one set for June, would ensure that any market reforms are reflected in the next auction. The grid operator aims to file proposed market reforms for approval by the Federal Energy Regulatory Commission by Oct. 1.
PJM needs permission from FERC to change its capacity auction schedule. It said it will continue preparing for the June auction in case the federal agency doesn’t approve the request to alter the schedule. The grid operator had also been expecting to hold an auction in December.
PJM typically holds annual capacity auctions, called base residual auctions, to secure capacity three years in advance across its footprint, which covers all or parts of 13 Mid-Atlantic and Midwest states and the District of Columbia.
The grid operator has been holding the auctions under a compressed schedule to return to its once-a-year process because of a roughly three-year delay caused by FERC’s June 2018 decision finding that PJM’s minimum offer price rule unfairly suppressed capacity prices.
Meanwhile, the Critical Issue Fast Path – Resource Adequacy stakeholder group will hold its first meeting Wednesday in its effort to develop a capacity market reform proposal.
The PJM board, in a letter to stakeholders, directed the task force to consider ways to improve risk modeling, especially for the winter; enhance accreditation so a resource is paid in line with its reliability contribution; ensure that capacity suppliers are fully paid for the risks they take; and, make sure changes in the market rules are reflected in the grid operator’s “fixed resource requirement” rules for utilities that get their capacity outside of PJM’s market.
PJM staff has developed an initial market reform proposal as a starting point for discussions by the task force.
The proposal includes a marginal accreditation framework that aims to account for supply-side availability risks for all resource types. It would reflect each resource’s expected incremental contribution to system reliability during periods of risk. For thermal power plants, it would adjust for temperature-dependent forced outage rates and the effect of correlated plant outages.
In a change, PJM would shift from planning for the summer peak to identifying the least-cost, efficient portfolio of resources that would provide resource and energy adequacy every hour of the year, across all anticipated scenarios, up to a target reliability metric, according to the proposal.
Also, power plants that fail to take steps to handle winter temperatures would receive no winter capacity commitment and have an accredited value reflecting zero winter performance.
PJM aims to finalize a proposal during stakeholder meetings in June and July, with a final vote to be held in August.
Besides revising its market rules, PJM should change its interconnection and transmission planning rules, which are roadblocks to adding generation onto its system, environmental groups said in a Monday letter to the grid operator.
The groups called for immediately streamlining the process for transferring transmission rights from retiring power plants; identifying near-term grid upgrades to help resources get through the interconnection backlog; and, reducing barriers to capacity imports.
“At the same time, a sustainable long-term solution requires PJM to deeply reform its transmission planning processes to identify and build the transmission necessary to meet future needs,” Earthjustice, the Natural Resources Defense Council, Rocky Mountain Institute, Sierra Club and the Union of Concerned Scientists said.
