PJM stakeholders mull creating a market for clean energy resources

PJM Interconnection stakeholders March 23 mulled potential power market enhancements to enable states and others to buy clean energy resource attributes on a voluntary basis through a new regional and centralized procurement system or market.

PJM and its stakeholders have been discussing potentially procuring clean resource attributes through the Resource Adequacy Senior Task Force and as part of the broader conversation about updating capacity market rules to address power generation fuel mix evolution toward resources that produce fewer or zero greenhouse gas emissions.

During a remotely held Markets and Reliability Committee meeting, stakeholders discussed a draft scoping document, or issue charge, focused on creating a new "Clean Attribute Procurement Senior Task Force" that would report to the committee.

Additionally, staff at the Organization of PJM States, or OPSI, has established the OPSI Competitive Policy Achievement Staff Working Group, or CPAWG, to develop and advance proposals that "enable the procurement of resources in line with states' policy goals," according to the draft issue charge.

Clean resource attributes are considered attributes of a resource that reflect its "value to decarbonizing the PJM grid, separate and distinct from energy, ancillary services, and capacity attributes," the document said.

These attributes may include clean energy, clean capacity, or a resource's carbon abatement characteristics. The senior task force discussing this issue will enable coordination between the CPAWG, PJM members and PJM, the daft issue charge said.

The task force would focus on the definition of clean resource attributes across jurisdictions, markets and procurement mechanisms related to the attributes, and discuss objectives for a market construct to enable voluntary procurement of clean resource attributes, along with options for product definitions that would be used, according to the draft.

It would also potentially develop representative market design options that could be used for qualitative and quantitative analysis.

Questions that could be explored through qualitative and quantitative analysis could include but would not be limited to:

• Reliability implications
• Cost impacts
• Greenhouse gas emissions impacts
• Jurisdictional implications

Additional task force work activities could include selecting one or more market design solutions for further development that would require approval from the Markets and Reliability Committee.

Ultimately, the task force would develop market rules for implementation, the draft document said.

Potential approaches

The non-profit Rocky Mountain Institute advocated for a three-year-forward clean energy market during a February PJM stakeholder meeting. RMI created a PJM market simulator that compares the status quo with a forward clean energy market and an integrated clean capacity market.

Both proposed market designs are three-year-forward markets, and thus connect to the capacity market, although the forward clean energy market procurement would immediately precede the base residual capacity auction.

States and other buyers would need to agree on a standardized clean energy attribute credit and that might require changing state laws, which while challenging would ultimately be worth the effort, in RMI's view.

Joe Bowring, president of PJM's independent market monitor, Monitoring Analytics, presented during the February meeting what he described as a simpler approach to clean energy procurement.

Bowring suggested creating a central renewable energy credit market would be a more effective way to procure clean energy than the current bilateral contract design.

PJM could operate a central RECs market using a single product definition and a single market clearing price, Bowring said. It could be a forward market, but one that could be trued up to real-time delivery so market participants would know what is being bought in real time. There would be a single REC product for all of PJM that would be consistent with state renewable portfolio standard definitions, although not all RPS resources would qualify, he said.

For example, although trash incinerators qualify for inclusion within some state RPS programs, those resources would not qualify under the central REC market design because they still generate emissions.

Stakeholders gave the draft issue charge a "first read" during the March 23 meeting and plan to vote on it during the next MRC meeting which is scheduled for April 27.