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USA Market: PJM capacity auction postponed

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Reversing parts of an earlier decision, the Federal Energy Regulatory Commission (FERC) has ordered the PJM Interconnection to revise its reserve market rules, which will delay the grid operator’s upcoming capacity auction.

Traditionally held annually in May to procure resources three years ahead, PJM did not conduct capacity auctions between 2018 and 2021 after FERC determined that the market rules were unjust and unreasonable due to their treatment of state-subsidized clean energy resources. FERC then approved a PJM proposal to overhaul its reserve market. The next auction was set to be held on 25 January, but has been postponed owing to the direction from FERC, which reversed parts of the previous determination.

In its latest decision, published late 2021, FERC said PJM “failed to meet its burden to show that the currently effective Reserve Penalty Factors and two-step Operating Reserve Demand Curves (ORDCs) are unjust and unreasonable.” It also reverses the prior determination that the prior backward-looking energy and ancillary services offset (E&AS Offset) is unjust and unreasonable, as that determination was based in part on the findings regarding the Reserve Penalty Factors and ORDCs. Given the reversal of the Commission’s prior determinations regarding Reserve Penalty Factors and ORDCs, FERC has directed PJM to revise its Tariff and Operating Agreement records previously accepted in this proceeding (to become effective May 1, 2022) to reflect the currently effective Reserve Penalty Factors and the ORDCs and restore its Tariff provisions related to its prior backward-looking E&AS Offset, effective November 12, 2020.

PJM is to revise its rules in line with the decision and is to set a new schedule for the base residual auction (BRA) for the 2023/2024 delivery year and future upcoming capacity auctions.

Wayne Muncaster, VP for North America at GridBeyond, commented:

“The electricity landscape is changing, which is significantly increasing costs and risks for businesses. Another delay to the BRA auction is of course not good news for companies relying on revenues from the scheme. But its also important to consider that revenues available from the capacity market have been on a downward trend and businesses are set to see a direct hit to their’ income statements as a result.

“The good news is that there are other options available to maximize and co-optimize your revenue and savings. By participating across the BRA, ancillary services and traded markets your business could realize significant new revenues.”

Separately PJM has said it expects net energy for load growth to average 0.8% per year over the next 10-year period, according to the grid operator’s latest load forecast.

According to the document, published on December 30 2021, Summer peak load growth for the PJM RTO is projected to average 0.4% per year over the next 10 years. The Summer peak is forecasted to be 154,381MW in 2032, a 10-year increase of 5,443MW, and reaches 157,689 MW in 2037. Winter peak load growth is projected to average 0.7% per year over the next 10-year period and in 2031/32 is forecasted to be 141,516MW, a 10-year increase of 9,414 MW.

USA Market: PJM capacity auction postponed

Source: PJM


PJM also lowered its peak load estimate for its upcoming Reliability Pricing Model (RPM) auction, which covers the 2025 capacity year, by 0.5% (763MW), reflecting the forecast reduced summer peak.

In its most recent auction, PJM procured resources for 2022-23 at an average of $50/MW per day, the lowest since 2013-14 – 64% lower than the $140/MW per day set in the most recent auction in 2018. PJM attributed the low prices to a combination of lower load forecast and reserve requirement reducing the amount of capacity needed, lower estimated costs for building new generators and overall lower offer prices.

GridBeyond Business Development Manager, North America, Alden Phinney said:

“There is an interesting around PJM systematically over-projecting load growth and capacity needed. The result is that demand response program values are increasingly shifting from capacity markets to ancillary services programs.”


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