Post: PJM proposes Capacity Market modifications to safeguard reliability

PJM proposes Capacity Market modifications to safeguard reliability

In response to the evolving grid’s resource adequacy demands, PJM has submitted a series of market reforms aimed at ensuring the continued reliability of the electric grid, particularly in the face of increasingly severe weather conditions and a changing energy generation landscape to the Federal Energy Regulatory Commission (FERC).

These proposed changes to the capacity market, as outlined in the PJM Tariff, are set to be implemented, commencing with the 2025/2026 Base Residual Auction scheduled for June 2024. The reform initiatives are as follows:

• Improving the incorporation of generator reliability-related risk into PJM’s models and setting procurement targets.
• Establishing an accreditation framework for all resources to accurately reflect the capacity value they offer to consumers.
• Reforming specific regulations associated with the Capacity Performance program, which holds generators accountable for their performance during system emergencies.
• Enhancing generator testing, both in operational and seasonal aspects.
• Adjusting the Market Seller Offer Cap and Minimum Offer Price Rule to better account for the costs incurred when undertaking a capacity obligation, along with adopting a forward-looking Energy and Ancillary Services Offset.
• Enhancing regulations pertaining to a unit-specific Market Seller Offer Cap.
• Aligning Fixed Resource Requirement rules more effectively with the capacity market’s structure.

PJM asked FERC to approve the proposals by December 12 to give time to prepare for its next annual capacity auction set to start on June 1. PJM also said it plans to consider additional changes to its capacity market, such as switching to a seasonal market.

Adam Keech, vice president of market design & economics at PJM, emphasized that the proposed changes aim to enhance reliability while upholding the core principles of competition, which help control costs for consumers and incentivize investments in new resources. He noted that these capacity market reforms are instrumental in attracting critical investments needed to maintain grid stability throughout the transition to a lower carbon-intensity grid.

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