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PJM Christmas power generation outages result in penalties that could reach $2 billion

Highlights

Outages reached 46 GW on Dec. 24

Power prices reached around $4,300/MWh

  • Author
  • Jared Anderson
  • Editor
  • Richard Rubin
  • Commodity
  • Electric Power Energy Transition Natural Gas

PJM Interconnection said Jan. 11 that it had an "unacceptably high" level of power generation resources unavailable for the Dec. 24, 2022, morning peak amid extremely cold weather, and its rough estimate of non-performance charges is in the $1 billion-$2 billion range.

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"Quite frankly, while a lot of generation resources did perform well, generator forced outages were unacceptable," Mike Bryson, PJM's senior vice president of system operations, said during a Market Implementation Committee meeting that was held in person and webcast.

Temperatures across PJM territory plummeted beginning on Dec. 23 and lasted into the morning of Dec. 25 with record lows in some areas as well as record drops in some regions, the grid operator said in a presentation given during the meeting. PJM said it was the most drastic temperature drop in a decade and power demand during the Christmas holiday weekend was an "extreme outlier" in magnitude and timing.

Peakload reached 134,765 MW Dec. 23, according to PJM data, and the load forecast was 126,968 MW, according to the presentation.

PJM said it called over 155,750 MW into the operating capacity for Dec. 23. Based on generator availability data, "we believed we had almost 29 GW of reserve capacity available to absorb load and generation contingencies and to support our neighboring systems," the grid operator said.

Since Capacity Performance was implemented, PJM has typically seen a forced outage rate of about 5% with that going up to about 10% in extreme weather but the forced outage rates observed during this event "grossly exceeded" those averages, Bryson said.

Capacity Performance requires that generators must meet their commitments to deliver electricity whenever PJM determines they are needed to meet power system emergencies and generators that exceed performance commitments will be entitled to funds collected from generators that underperform.

"Generation outages were unacceptably high, and they occurred at the worst possible time for system operations," he said. On the evening of Dec. 23, generation outages reached 34.5 GW and on the morning of Dec. 24 they reached 46 GW, or 23.2% of PJM's total capacity, the grid operator said.

The three main causes of the outages were plant equipment, fuel supply and startup failure with startup failures likely caused by the two former reasons, Bryson said.

"As we called reserves, a significant portion of the generation fleet failed to perform" and over 92% of all outages were reported to PJM with less than an hour's notice or with no notice at all, according to the presentation.

In addition to forced outages, roughly 6,000 MW of steam generation was called but was not online as expected per their time to start for the Dec. 24. morning peak, with the "vast majority" of these resources being natural gas-fired resources, PJM said.

The high rates of generator outages also limited PJM's ability to replenish pond levels for pumped storage hydropower prior to the morning peak on Dec. 24, leaving PJM with extremely limited run hours for pumped storage generation, according to the presentation.

PJM said that between forced outages, derates, generators that did not start on time, and the inability to fill pumped storage hydropower ponds, it was dealing with around 57 GW of generator unavailability for the Dec. 24 morning peak.

Market impacts

"The market outcomes and prices reflected the conditions we were actually seeing in operations during the two days of the event but there is a lot of work remaining with respect to the after-the-fact evaluation, the Performance Assessment Intervals involved and how we move forward with those," Stu Bresler, PJM's senior vice president of market services, said.

Generation resource performance is assessed during emergency intervals, called Performance Assessment Intervals.

Maximum Generation Emergency Actions prompted 277 PAI Intervals across Dec. 23 and Dec. 24, PJM said.

Zonal power prices reached as high as around $4,300/MWh on Dec. 24, PJM said. The highest December PJM West Hub daily average real-time on-peak price of $1,111.90/MWh was reached Dec. 23, according to PJM data.

PJM's rough estimate of non-performance charges for Dec. 23 and Dec. 24 is in the $1 billion to $2 billion range, although that estimate is provided as an initial reference point only and "can change materially," the grid operator said.

The estimate is subject to further change, either an increase or decrease, based on additional data evaluation, PJM said.

PJM is currently working through the billing timeline to account for any non-payment risk and "liquidity concerns," with additional information to be provided at the Jan. 24 Risk Management Committee meeting.