Outlook 2024: PJM to add 10 GW of renewables but no new gas

The PJM Interconnection LLC is working through its jammed new resources queue, overwhelmed by planned solar projects, and gearing up for its next capacity auction in an era of suppressed prices.

Developers plan to add more than 10 GW of capacity across PJM's mid-Atlantic footprint in 2024, including more than 9 GW of solar, according to an analysis of S&P Global Market Intelligence data.

PJM, which serves all or parts of 13 states and Washington, DC, also is expected to add 508 MW of wind and 184 MW of energy storage in 2024. There will be no new natural gas-fired units added in 2024, according to the analysis, but there has been movement among companies looking to add the fuel to ensure reliability in anticipation of intense electrification and demand growth.

Meanwhile, the analysis reflects only 80 MW of scheduled retirements.

Leeward Renewable Energy LLC in January completed the repowering of its 80-MW GSG Wind Farm in Illinois. The repowering involved decommissioning and replacing 40 wind turbines with 26 new turbines powered by General Electric Co.'s latest technology, according to Leeward.

On the solar side, the biggest projects include the 427-MW Fox Squirrel Solar Farm in Madison County, Ohio, being developed by EDF Renewables North America and Enbridge Inc. EDF Renewables North America, a subsidiary of France's EDF Renouvelables SA, and Canada's Enbridge at the end of 2023 completed the first, 150-MW phase of the Fox Squirrel Solar Farm, which will have 577 MW of capacity once fully operational.

The 400-MW Mammoth Solar Project in Pulaski County, Ind., and 400-MW Mammoth North Solar Project in Starke County, Ind., are being developed by Doral Renewables LLC and expected online this year.

The 325-MW AEUG Union Solar Project in Union County, Ohio, is set to begin operating in April, according to Market Intelligence data. The solar project is being developed by Acciona Energy USA Global LLC, a subsidiary of Spain's Acciona SA.

Apex Clean Energy Inc.'s 189-MW Timbermill Wind Farm in Chowan County, NC, is the largest wind project in the queue and is expected to be completed in December.

Alphabet Inc. subsidiary Google LLC has signed a power purchase agreement for the full output of the Timbermill wind farm to help power its datacenters in the PJM region.

Clearing the queue

Through its new "first-ready, first-served" approach, PJM expects to clear more than 260,000 MW in proposed generating capacity by the end of 2026. More than 95% of those projects represent renewable energy, battery storage or a hybrid of both.

PJM's queue reform plan, approved by the Federal Energy Regulatory Commission in late November 2022, includes a transition process with a special "fast lane" for projects that are found to have "only a minimal network impact or only have minimal cost responsibility for network upgrades."

In a December 2023 news release, PJM said it expects "300 new generation projects totaling 26,000 MW" to move through the reformed interconnection process in 2024. In addition, PJM said "46,000 MW of nameplate generation capacity" should clear its study process and be ready for construction by the middle of 2025.

There were 734 projects eligible to be evaluated as part of the first step of the grid operator's interconnection reform process, but 118 projects "either dropped out of the process or did not post sufficient readiness requirements by the due date."

Of the remaining 616 projects, 308 qualified for the expedited process and will receive "final documentation" in 2024, according to PJM.

Retirement risks

Monitoring Analytics, PJM's independent market monitor, said in its 2023 "State of the Market" report that between 24 GW and 58 GW of thermal generation is at risk of retirement from 2024 through 2030. This includes 4,285 MW of announced retirements, 19,635 MW of retirements due to state and federal environmental regulations and 33,744 MW of capacity that is deemed uneconomic, based on expected forward power prices.

The market monitor also pointed out that, compared to 2022, generation from coal-fired units decreased 27.9% and generation from wind units decreased 8.1%, while gas-fired generation increased 8.4% and solar generation increased 20.1%.

"No one will build a new coal plant," Monitoring Analytics President Joe Bowring said during a March 14 conference call with reporters. "There is no way that a coal plant would ever be profitable in PJM markets."

PJM has warned about the potential for thermal generation retirements to outpace new resources in an era of increasing electricity demand.

"They were already sort of saying, 'OK, how do we think about resource adequacy in this sort of new world where the generation mix is harder than it was before?' Now, you sort of say, 'Oh, and by the way, here's a big new load ... for AI and datacenters that we weren't accounting for in the same degree as 18 months ago,'" Steve Piper, director of energy research at S&P Global Commodity Insights, said in a March 13 interview.

In its annual regional transmission expansion plan released March 7, PJM said solar "has overtaken natural gas" in new services requests, representing about 40% of the generation in its interconnection queue as of the end of 2023 at nearly 75 GW of planned capacity. That amount equals a nameplate capacity exceeding 106 GW.

The queue also has 54 GW of planned storage projects, a significant increase from 2022, and about 22 GW of wind capacity seeking interconnection to the grid.

Meanwhile, PJM said it received deactivation notifications for 31 units representing about 5.8 GW in 2023.

Balancing act

Monitoring Analytics recommended that power generators be required to provide notice of unit retirements at least 18 months in advance, so the markets have time to respond.

"The units that are going to retire is a complicated question and it's important to be aware that the risk is there, but also that it can be managed," Bowring said.

Commodity Insights energy analyst Tanya Peevey pointed out that generators "only have to tell PJM three months in advance they are going to shut down."

"PJM doesn't have much leverage other than ... somehow we'll make you whole to keep them around," Peevey said.

Low forward power prices in PJM's capacity auction add to the pressure facing fossil generation.

PJM in February 2023 announced a systemwide capacity clearing price of $28.92/MW-day for the 2024/2025 delivery year, marking the third consecutive decline in capacity prices.

Research analysts with Commodity Insights said they have fielded questions on whether prices in PJM's 2025-2026 capacity auction, which is set for mid-July, will clear above $100.

"And our forecast as of [the fourth quarter] is like that is never going to happen outside of maybe [the southwest portion of the Mid-Atlantic Area Council], where there are some constraints," Piper said.

Power prices

PJM forward power prices in the PJM AEP zone are expected to peak at $97.30/MWh in July for the summer and $88.65/MWh in December for the winter, according to Platts M2MS data. PJM West Hub forward power prices peak at $98.40/MWh in July and $96.50/MWh in December.

Transco Leidy Line wholesale forward gas prices peak at $1.86/MMBtu in August and $2.66/MMBtu in December, according to Platts data. Texas Eastern gas prices peak at $2.12/MMBtu in July and $3.85/MMBtu in December.