Coal and nuclear power plants will continue to have a place in PJM Interconnection's footprint, but the regional transmission organization is not out to save "aging infrastructure with old technology," a representative said at an industry conference.
Many in the coal sector have gotten behind a push from the U.S. Department of Energy to consider incentives for coal-fired and nuclear power plants that could keep otherwise uneconomic plants from being retired. Speaking at a Virginia Coal and Energy Alliance conference May 21, Darlene Phillips, PJM's director of strategic policy and external affairs, said the organization is exploring how to best ensure pricing values the beneficial attributes of each type of generation as the diversity of generation in its footprint increases, but what has worked before may not be the solution going forward.
"In the past, we have been more heavily coal-based, but today, we're moving a little bit more toward gas, but I want to make something clear — I don't think anyone in this room, nor does PJM, believe that coal and nuclear is going away," Phillips said.
She noted PJM's wholesale costs are down significantly from less than two years ago, a period of ongoing coal plant retirements. While there are benefits to such a low price, Phillips said that perhaps more should be paid to value certain characteristics of a generation resource to be sure the grid can maintain resiliency and reliability.
"When we think about reliability from a wholesale energy perspective, from an operating perspective, from an energy marketing perspective, we think less about fuel diversity and we think more about fuel security," Phillips said. "When a unit is called upon today, will it be available when needed?"
On May 23, PJM announced that the clearing price in its 2021/2022 Base Residual Auction surged about 83% on the year at the RTO zone and most other zones. The rise in clearing prices was attributed to an ongoing decline in energy prices, which causes generators to seek revenues in the capacity market through higher offers, and to a decrease in total cleared capacity, including a reduction in new generation. Some increase was offset by a lower reliability requirement due to a lower forecast demand for electricity.
Opponents of efforts to prop up coal and nuclear power plants have ranged from environmental interests to competing generation sources. One environmental advocate, the Sierra Club, said the auction demonstrates there is substantially more power generation than needed.
"These results continue to reinforce the fact that the Department of Energy should not intervene to keep nuclear and coal plants slated for retirement online because there is no reliability emergency, and the Federal Energy Regulatory Commission should reject PJM's capacity market proposals," said Thomas Schuster, Pennsylvania senior campaign representative for the Sierra Club. "We should not further distort competitive markets simply because some aging plants can't make a profit."
While supporters of coal and nuclear have touted the response of coal-fired generating units that ramped up generation during recent cold weather events, coal plants bring some disadvantages to the grid as well. For example, coal and nuclear plants are generally not very good at rapidly shifting levels of generation to match demand in real-time, as PJM tries to do.
"When we talk about intermittent resources versus baseload resources, baseload resources right now don't move as quickly as we need them to move, but intermittent resources do," Phillips told the crowd of coal supporters.
One persistent voice calling for incentives to keep older coal plants running has been FirstEnergy Corp. subsidiary FirstEnergy Solutions Corp. The subsidiary, which is in bankruptcy, has been calling for "urgent action" to preserve nuclear and coal-fired generation.
"PJM's views on resilience are best summed up by the classic image of Lucy holding a football for Charlie Brown to kick, only to pull it away at the last moment, resulting in Charlie Brown once again flying through the air and landing flat on his back," Rick Giannantonio, general counsel for FirstEnergy Solutions, wrote in a May 4 letter responding to PJM's assertion that there was no emergency need for certain FirstEnergy nuclear and coal plants.
Phillips said that while she sees potential value in some ideas that would boost coal, such as the DOE's proposal to aid in designing new, small, modular coal plants with a lower emissions profile and flexibility more similar to a natural gas plant, she said nothing PJM will do "is going to save every resource."
"There are some companies that struggle economically with the energy markets and some of the decisions they have made in the past," Phillips said. "That's not necessarily universal across the country, it's not universal against our entire footprint."
On a May 3 earnings call, NRG Energy Inc. President and CEO Mauricio Gutierrez addressed the auction ahead of the results announcement. The company operates natural gas, nuclear, coal and renewable energy generation, and the executive was optimistic about pricing reform across U.S. markets and critical of efforts to stave off retirements of uneconomic generation resources.
"As you are aware, some generators are seeking compensation for plants that are not needed for reliability and not economically viable," Gutierrez said. "While some entities are grasping at bailouts in the short run, we see capacity rationalization as a necessary first step towards a healthy market, and we are confident that there will be continued support for the competitive market-value proposition."
