Resource Adequacy in PJM
Adam Keech
Director, Market Operations
PJM
www.pjm.com
PJM©2013
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
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PJM©2013
PJM as Part of the Eastern Interconnection
KEY STATISTICS
PJM member companies
800+
millions of people served
60
peak load in megawatts
163,848
MWs of generating capacity
185,600
miles of transmission lines
59,750
GWh of annual energy
832,331
generation sources
1,365
square miles of territory
214,000
area served
13 states + DC
externally 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
As of 9/7/2012
*Map is missing EKPC zone which joined June 1, 2013
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PJM©2013
PJM Evolution
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PJM©2013
PJM Responsibilities
Regional
Reliability
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Wholesale
Electric
Markets
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Transmission
Planning
PJM©2013
PJM Capacity Market
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.
PJM Capacity Market is designed to ensure adequate availability of resources
that can be called upon to ensure the reliability of the electric grid.
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PJM©2013
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
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PJM©2013
Capacity vs. Energy
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
• 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
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.
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PJM©2013
RPM Structure
3 Years
20 months
May
10 months
Sept
May be
scheduled
at any
time prior
to DY
3 months
July
Feb.
EFORd
Fixed
Interruptible
Load for
Reliability (ILR)
June 1
May 31
Delivery
Year
(Only effective prior
to 12/13 DY)
*Certification
deadline April 1 for
11/12 DY
Base
Residual
Auction
Conditional
Incremental
Auction
March*
First
Incremental
Auction
Second
Incremental
Auction
Third
Incremental
Auction
(Effective 12/13 DY)
Ongoing Bilateral Market
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PJM©2013
Price = UCAP Price ($/MW-day)
Illustrative Example of a VRR Curve
(a)
1.5 Net Cone
Effective 12/13 DY:
Target Level = Reliability Requirement –Short
Term Resource Procurement Target
(b)
Net Cone
0.2 Net Cone
(c)
(IRM – 3%)
IRM (IRM + 1%)
(IRM + 5%)
Quantity = UCAP MW
A VRR Curve is defined for the PJM Region.
Individual VRR Curves are defined for each Constrained LDA.
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PJM©2013
What is a Supply Resource in RPM?
In RPM, Resources are =
Generation
Resources
Demand
Resources
(DR)
Energy
Efficiency
Resources
Qualifying
Transmission
Upgrades
(EE)
(QTU)
(Effective with 11/12 DY)
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PJM©2013
Evolution of Supply Capability in PJM Market
70,000.0
coal
60,000.0
50,000.0
gas
ICAP MW
40,000.0
30,000.0
nuclear
20,000.0
total renewables
demand response
10,000.0
solar/ wind
2007/2008
2008/2009
2009/2010
2010/2011
2011/2012
2012/2013
2013/2014
2014/2015
2015/2016
2016/2017
Note: Adjusted to reflect integrations
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PJM©2013
Coal Retirements by Year (MW)
7000
6000
5000
6,371
5,463
4000
MW
3000
2000
1,430
1000
475
0
2012
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2013
2014
13
2015
PJM©2013
Generation Deactivations
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PJM©2013
Offered and Cleared by Fuel Type Over Time
Offered and Cleared Installed Capacity
70,000.0
65,000.0
ICAP MW
60,000.0
55,000.0
50,000.0
45,000.0
40,000.0
2007/2008 2008/2009 2009/2010 2010/2011 2011/2012 2012/2013 2013/2014 2014/2015 2015/2016 2016/2017
Offered Coal
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Offered Gas
Cleared Coal
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Cleared Gas
PJM©2013
Gas vs. Coal Over Time
Gas & Coal Prices (2005-Present)
$18
$16
$14
$12
$10
$8
$6
$4
$2
*Coal – Gas Equivalent
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Coal*
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Gas
Jan-13
Jan-12
Jan-11
Jan-10
Jan-09
Jan-08
Jan-07
Jan-06
Jan-05
$0
Source: Ventyx
PJM©2013
PJM Market
Evolution of Fuel Mix for Annual Electricity Production
100%
90%
80%
70%
Nuclear
Renewables
Oil
Gas
Coal
60%
50%
40%
30%
20%
10%
0%
2005
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2006
2007
2008
2009
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2010
2011
2012
In GWhs
PJM©2013
Fuel Mix for 2012 Annual Electricity Production
Solid Waste
0.5%
Nuclear
34.9%
Water
0.8%
Gas
19.1%
Methane
0.3%
Oil
0.3%
Wood
0.1%
Other
3.4%
Coal
42.3%
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Solar
0.0%
Wind
1.6%
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Biomass
0.0%
PJM©2013
PJM Market – Average Power Generation Emissions
Pounds Per MWh of Electricity Produced
PJM Average Emissions (lbs/MWh)
9
1,300
1,250
Carbon Dioxide
8
Sulfur Dioxides
7
Nitrogen Oxides
6
1,200
CO2
5
1,150
4
1,100
3
1,050
2
1,000
1
950
0
2005
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2006
2007
2008
19
2009
2010
2011
SO2 and NOx
1,350
2012
PJM©2013
2009 – Generation Interconnection Queue Volume by MW
268 65 4,157 373 111 8
2
129
3,015
Wind
Solar
Nat. Gas
Coal
19,528
34,979
Biomass
Methane
Nuclear
Storage
Hydro
3,581
Other
Oil
Diesel
PJM©2009
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PJM©2013
Current - PJM Queued Generation (Nameplate Energy)
Oil, 45 MW, 0%
Other, 232 MW, 0%
Nuclear, 2,726 MW, 4%
Solar 2,192 MW, 3%
Storage 162 MW, 0%
Natural Gas, 45,432
MW, 62%
Wind MW, 19,351, 26%
Wood, 63 MW, 0%
Biomass, 381 MW, 1%
As of 03/2013
Methane, 118 MW, 0%
Hydro MW, 283, 0%
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Coal, 2,972 MW, 4%
PJM©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
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PJM©2013
DR Participation Over Time
Demand Side Participation in Capacity Market
24,000
ILR
Eliminated
22,000
RPM Implemented
New
Products
20,000
DR Plan
Enhancements
18,000
Capacity
Credit
Market
16,000
MW
14,000
12,000
10,000
8,000
6,000
4,000
2,000
0
2005/2006 2006/2007 2007/2008 2008/2009 2009/2010 2010/2011 2011/2012 2012/2013 2013/2014 2014/2015 2015/2016 2016/2017
Active Load Management
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Interruptible Load for Reliability
RPM and FRR DR
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Energy Efficiency
Committed/Cleared DR
PJM©2013
Energy Efficiency Participation in RPM Over Time
Energy Efficiency RPM Participation Over Time
1400
1200
Cleared MWs
1000
800
EE Offered
600
EE Cleared
400
200
0
2010/2011
www.pjm.com
2011/2012
2012/2013
2013/2014
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2014/2015
2015/2016
2016/2017
PJM©2013
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
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PJM©2013