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PJM defends treatment of seasonal capacity resources

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PJM defends treatment of seasonal capacity resources

The PJM Interconnection hit back against criticisms of proposed changes to its capacity resource requirements in a new filing with FERC.

Starting June 1, 2020, all capacity resources in PJM must be able to respond to urgent capacity needs at any time of year in order to participate in the grid operator's base residual auction. Those year-round resources are known as capacity performance resources. In addition, the PJM proposed changes in November 2016 to its transmission tariff and reliability assurance agreement to provide more ways for eligible resources, including energy efficiency and demand response providers, to submit aggregated capacity offers.

But stakeholders, including a group of load-serving entities, complained to FERC that the changes in PJM's forward capacity market construct may not allow many seasonal resources, including some renewable energy capacity, to join the auction. Old Dominion Electric Cooperative and other power marketers asked (FERC docket EL17-32) FERC in December 2016 to make PJM allow base capacity resources for another year, through May 2021, and propose a plan to ensure seasonal capacity performance resources can participate in reliability pricing model auctions.

In early January, the Advanced Energy Management Alliance (FERC docket EL17-36) requested similar relief but asked for an open-ended extension of sub-annual resources, known as base capacity resources, until a new seasonal market construct is made.

In a Jan. 25 response, PJM defended itself against the complaints and asked FERC to deny the stakeholders' requests. The grid operator said market participants have known since at least June 9, 2015, that all resources must be capacity performance resources to participate in the May 2017 auction for the 2020-2021 delivery year.

Secondly, the PJM said most base capacity resources that participated in auctions since June 2015 had been offered as capacity performance resources, discrediting claims that certain resources would be precluded from the upcoming May auction. In addition, a large share of resources offered only as base capacity resources in the last two auctions "seemed likely" to be offered as year-round assets in the future as sellers pursue resource aggregation, the grid operator said.

PJM also claimed complainants ignored "numerous deficiencies" in their proposals, including the potential adverse impacts of delaying the shift to a year-round resource market. Allowing base capacity resources to continue clearing the reliability pricing market would have a negative effect on year-round resources, the Jan. 25 response said. The grid operator also criticized opponents' push to delay - in the case of the Advanced Energy Management Alliance, indefinitely - the enforcement of penalties for non-performance throughout the year.

PJM is a summer-peaking system and sets an annual capacity requirement that seeks reserves above the summer peak. To disregard a single summer-based capacity requirement and shift to seasonal, summer- and winter-based approach would have "severe practical consequences" and "leaps far beyond any announced commission policy or precedent," the RTO said.

"Complainants' request to tolerate—not just for five years, but for six years or more—resources that do not have that fundamental, defining, performance obligation, is a sharp rebuke to [FERC's] fundamental objective in the capacity performance orders," PJM said, referencing orders the commission made in 2015 and 2016 to end reliance on capacity resources that are paid throughout the year but perform less than half the year. Those orders are currently being challenged in the U.S. Court of Appeals for the District of Columbia Circuit.