PJM panel endorses fast-start power pricing rules ahead of Sept. 1 implementation

As PJM Interconnection works toward implementing fast-start pricing Sept. 1, stakeholders on Aug. 11 approved rule changes for the implementation and reviewed data that showed the average energy market price increase from fast start has been about $1.60/MWh over the past three months.

The Federal Energy Regulatory Commission on Dec. 17, 2020, issued its fast-start order that included a compliance obligation to address a few items including PJM's preferred fast-start pricing implementation date, according to a PJM presentation given during an Aug. 11 remotely held Market Implementation Committee meeting.

PJM made the requested compliance filing Feb. 16 and FERC approved PJM's filing May 20, 2021, with an effective date of July 1, but PJM filed a request to move the effective date to avoid implementing the new pricing structure during the summer peak period, the presentation said.

FERC approved PJM's request with an effective date of Sept. 1.

PJM's February compliance filing added a section to PJM's operating agreement that defines a fast-start resource as capable of starting up in one hour or less, with a minimum run time of one hour or less.

Fast-start resources can quickly jump on and off the grid and are called upon to rapidly respond to unforeseen system needs. But because market rules often disqualified them from setting the locational marginal price because of their operational limits, prices for energy and ancillary services did not always reflect the marginal cost of serving load.

To address FERC's concerns, PJM will better align pricing and dispatch intervals by assigning prices to the same interval for which dispatch instructions are intended, i.e., roughly 10 minutes in the future.

Pricing impacts

PJM had to update its software to implement the fast-start pricing changes and has been closely watching the impacts prior to the changes going live.

"PJM has been monitoring the fast-start results on a daily basis since the code went in," Zhenyu Fan, senior engineer II for PJM real-time market operations, said during the meeting.

The average increase to energy LMPs over the past three months has been $1.60/MWh, Fan said. And because energy, reserves and regulation are co-optimized in PJM's energy market, the ancillary service clearing prices, such as regulation, synchronized reserves and primary reserve prices, have all increased accordingly, he said.

The monthly average for those products was significantly higher in June and July than May largely as a result of hotter weather, particularly in June.

Based on over 25,000 pricing intervals over the past three months, over 50% of the time there was zero impact on energy LMPs, and about 40% of the time the energy price increases were less than $5/MWh, Fan said.

On-peak hours

Most energy price increases during May were $3/MWh to $4/MWh, increasing to about $6/MWh in early June and $8/MWh in late June, which correlates to higher load levels during those periods, especially during heat waves in early and late June, he said.

"The impact of fast-start has been predominantly during on-peak hours, which correlates with the load curve," Fan said.

The daily average fast-start eligible units ranged from five to over 50 units per day and the average percentage of time when fast-start units were marginal was 18%, according to the presentation.

Additionally, PJM compared pricing data from neighboring independent system operator-administered power markets that have implemented fast-start pricing and found the results to be comparable.

"The analysis we have now indicates fast-start is working as it is intended to work," Phil D'Antonio, PJM real-time market operations manager, said.

The committee overwhelmingly voted to endorse making the rule changes needed for fast-start pricing, with 94% in favor.

With the manual revisions endorsed, the issue will move to the PJM Markets & Reliability Committee for endorsement during the panel's Aug. 25 meeting.