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PJM fuel diversity study lacks discussion of nuclear and storage, experts say

A fuel diversity study released in March did not adequately address the preservation of nuclear power, participants in a recent PJM Interconnection meeting said.

SNL Image

PJM Vice President of Operations Michael Bryson
speaks at Grid 20/20 symposium.

Source: S&P Global

During an April 19 Grid 20/20 meeting, Michael Bryson, PJM's vice president of operations, discussed various scenarios that PJM modeled for its long-term fuel mix as part of a March 30 fuel diversity study. Among the scenarios, PJM considered nuclear and coal retirements and the replacement of that capacity with new gas, solar and wind.

An "elephant in the room" issue that lacks discussion in the paper is that nuclear plants are retiring, Public Service Enterprise Group Inc.'s Associate General Regulatory Counsel Cara Lewis said during an April 19 Grid 20/20 meeting. Lewis added that heavy reliance on any one fuel type heavily impacts resilience and negatively impacts customers. In its paper, PJM modeled scenarios with up to 86% penetration of natural gas.

The importance of nuclear power was echoed by New Jersey Board of Public Utilities President Richard Mroz. Nuclear power makes up 45% of New Jersey's generation, with another 45% from natural gas and the rest from renewables and other resources, Mroz said. Though Exelon Corp.'s Eastern RTO Director Bill Berg did not have a "silver bullet" solution for resilience, he asked questions about whether capacity prices adequately price reliability benefits of generation sources. "When we think about diversity in the future, we need to recognize that PJM is using market prices to incent the right diversity. Do we have the right market prices? Have we identified the right reliability products? And are those products being reflected in the price?" he asked.

Panelists spotlighted the issue of nuclear retirements as a number of states in and outside PJM's footprint including Illinois, Ohio, Connecticut, Pennsylvania and New Jersey are facing nuclear retirements and debating whether to subsidize those units. Illinois and New York in 2016 adopted zero-emission credit, or ZEC, programs that allow nuclear generators to earn payments to support their continued operation.

Preserving competitive markets

Gas generator Calpine Corp. spoke on the solutions panel against subsidies for nuclear. The Houston-based competitive generator owns about 26,000 MW of capacity of which 97% is gas-fired, according to a March investor presentation.

Rather than subsidize nuclear units, an "easy solution" for supporting nuclear and renewable generation would be to have a "uniform" carbon price nationwide, said Andrew Novotny, Calpine's senior vice president of commercial operations. Novotny recognized, however, that implementing a nationwide carbon plan is "somewhat unlikely" at this point and in the near future. "As we debate ZECs and nuclear subsidies, it is important that we maintain the capacity market that PJM has put together. We need a strong RPM price in order to maintain our fuel back up," Novotny said. Part of the back-up fuel goes toward meeting market requirements under PJM's new capacity performance design, Novotny said.

Some attendees were skeptical about PJM's paper because it modeled so much gas as part of its long-term fuel mix, but Novotny highlighted the growth of gas development in the region. Natural gas pipeline projects have "exploded" across the northeast since the 2014 polar vortex. The pipelines seek to get the low-cost Marcellus and Utica shale gas to high-market areas, he said. There are three types of gas plants getting built in the PJM footprint: projects built on top of gas wells; dual-fuel combined-cycle plants like Calpine's York 2 Energy Center in Pennsylvania that has ultra-low-sulfur oil as a back-up fuel; and other plants that contract to buy natural gas.

Energy storage

Among audience members, Peter Fuller, NRG Energy Inc.'s vice president of market and regulatory affairs, asked about the lack of energy storage considered in the scenarios, which can potentially change an outcome of backing up intermittent generation with fossil fuels.

"We talk about storage in the paper, but we don't add that in as a factor in solar," Bryson said, adding that PJM is beginning a sensitivity study assuming some solar and wind are paired with storage. The exclusion of storage in the initial study is because there is not a significant penetration of storage in the eastern grid as there is in the California ISO, Bryson said.

In closing remarks, PJM staff said the comments will help the grid operator learn about its changing fuel mix and what future conditions can raise reliability issues.