Houston — Facing technological, political and regulatory challenges, top executives of four of North America's largest organized power markets take different approaches in pursuit of the sometimes-conflicting goals of ensuring resource adequacy while promoting free markets.
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During a panel discussion entitled "Wholesale Power Market Evolution" at CERAWeek by IHS Markit in Houston, the following executives discussed how they cope with renewables integration, supply issues, resiliency threats, and diverse - and shifting -- political goals:
- Bill Magness, Electric Reliability Council of Texas president and CEO.
- Andy Ott, PJM president and CEO.
- Clair Moeller, Midcontinent Independent System Operator president.
- COO Robert Ethier, ISO New England vice president for market operations.
Magness, at the beginning of his comments, quoted Leo Tolstoy: "Happy families are all alike; every unhappy family is unhappy in its own way."
ERCOT has a surfeit of renewables - mostly wind - and thousands more megawatts of wind and solar in its interconnection queue, but its planning reserve margin, which takes into account the limited availability of renewables during peak periods, has reached a historic low of 7.4% for the coming summer, Magness said.
While ERCOT successfully weathered the summer of 2018 with a historic low reserve margin of about 11% without declaring an energy emergency alert, Magness said, "We anticipate there will be some sort of EEA over peak times this summer."
ERCOT's energy-only market relies on scarcity pricing to incentivize the retention and development of sufficient capacity to meet demand.
"There's not much to know," Magness said. "You show up, and you get paid. You don't show up, you don't get paid."
MARKETS VS. REGULATORS
In contrast, PJM's Ott said, "We really depend on our capacity market to maintain resource adequacy, even though we are in oversupply."
PJM has a growing natural gas-fired generation fleet, which is undercutting the baseload coal and nuclear fleet, prompting state government leaders to attempt to find ways to support those resources, Ott said.
"The market has been very successful in attracting investment, and sometimes more than we need," Ott said. "The issue is that a lot of legacy units are not retiring - they keep hanging around hoping to get some type of state funding."
In contrast, MISO has a short-term capacity market to meet residual needs, but state regulators retain resource adequacy jurisdiction in every state except Illinois.
MISO has plenty of generation as a whole, as measured by its systemwide planning reserve margin, but is constrained in how well its output can be delivered to various load pockets in the system at various times of the year, which reaches from the Hudson Bay to the Gulf of Mexico.
MISO's last few energy emergencies have not occurred during the typical summer peak, but during shoulder or winter months, Moeller said.
During the cold snap around the end of January, MISO had about 6,000 MW of wind generation in its northwest area that tripped offline because it was not designed to operate at 20 to 30 degrees below zero, Moeller said.
"My biggest contingency is a 1,400-MW nuclear plant, so 6,000 MW is a pretty fair hole to fill," Moeller said.
ISO New England's Ethier joked at the beginning of his comments that his region is "the anti-Texas," because it lacks a large renewables fleet or any fossil-fuel resources, and, he said, "Building big new infrastructure is very difficult."
As an example, Ethier said, "We are not going to build new natural gas pipelines."
More challenges are posed by "very active states, in terms of subsidizing renewable energy and energy efficiency," which is tamping down energy prices at the same time supplies are constrained, Ethier said.
In contrast, MISO's Moeller said his diverse group of 17 states features four with 100% renewable goals and "four states who probably will never say those words," which poses problems about "how to balance" those approaches to resource adequacy.
As renewables have almost zero marginal cost, the cost of delivering electricity from such facilities remains fixed, but all wholesale pricing is variable, based on supply and demand, Moeller said.
"That's a pretty big mismatch," Moeller said.
MISO has about 60 GW of renewables in the interconnection queue, about half wind and half solar.
"There's going to be a lot of days when the marginal cost is going to be zero, but when the wind dies and the sun goes down, you are going to be in trouble," Moeller said.
Ott said, "We are increasingly dependent on flexibility and the folks who are delivering flexibility ... we just have not been and still are not pricing that flexibility."
-- Mark Watson, firstname.lastname@example.org
-- Edited by Jason Lindquist, email@example.com