Dive Brief:

• PJM Interconnection has proposed modifications to its new seasonal capacity rules, seeking to allay concerns that more stringent requirements would mean demand response resources would be unable to bid into the market.
• Under the proposed changes, summer-only and winter-only resources would be able to pair together as a qualifying bid, and aggregation of resources across the grid’s footprint would be allowed.
• The grid operator has been phasing in a new capacity performance product with more stringent reliability penalties and deeper payouts, but demand response providers argued the new restrictions effectively locked them out of the capacity market.   

Dive Insight:

PJM Interconnection this week issued draft rule changes that aims to keep demand response as a resource in its capacity auction, dropping some restrictions to allow the resource to continue to make viable bids.

PJM’s proposal would eliminate counterparty arrangement barriers in order to allow the capacity auction process to match winter-only resources with summer-only resources, as well as aggregation of resources across the grid’s footprint, removing geographic restrictions.

The proposed changes, filed with FERC on Nov. 17, also modify rules for measuring demand response performance during the winter.

"Aggregation provides an opportunity for resources with greater availability in different times of the year to be paired to create an annual resource," PJM said in a blog post. "While this ability has been in place since the implementation of capacity performance, few aggregated offers were submitted in recent auctions."

Since the Polar vortex of 2013-2014, PJM has been working to ensure capacity resources are online when needed. At one point during that icy winter, 20% of generation in PJM was unavailable. Building on lessons learned from the extreme weather event, the grid operator wrote new performance standards, which for the last few years they have been gradually integrated into the market.

In the last two forward capacity auctions, 80% was allocated to a new Capacity Performance product and 20% to Base Capacity. The full transition occurs next year, meaning the grid operator needed to introduce new rules before the 2017 auction.

But because demand response resources tend to focus on summer peaking, requirements that they be available in winter as well were effectively poised to shut out some bids. PJM formed a task force earlier this year, with hopes of getting recommendations out by the summer. The deadline for a final decision, however, is the next auction, for the 2020/2021 delivery year, which will be held in June.

The results of PJM's most recent auction results were released this summer, and and 10,348 MW in demand response resources cleared – the lowest point in years.