REA concurs with the insightful observations provided by Monitoring Analytics in their FERC Filing for the FERC conference on PJM market reforms. The proposal submitted by PJM lacks insights, or design concepts, to support State Energy Goals - this is a big gap in the design. I'm wondering if this implies the retention of MOPR to prevent price dilution and retirements.
REA concurs with the following Market Monitor statements filed with FERC, which are in-sync with foundational concepts underlying the AOCE design that was presented to PJM on June 1:
- Capacity market revenue is essential to the economic viability of capacity resources in PJM. Linking payment of those revenues to hourly performance is a strong incentive to invest in reliability.
- No one expects solar resources to be available in the middle of the night. Solar resources do not have a performance obligation in the middle of the night and solar resources will not be paid for capacity in the middle of the night.
- a solar resource that is 45 percent available will never be available in the middle of the night
- The solution is to clear the annual capacity market, accounting for the expected availability of resources on an hourly basis.
- The purpose of accounting for hourly availability is not to set an hourly price for capacity but to ensure that the system will be reliable in every hour based on expected demand and expected availability of resources to provide energy to reliably meet the demand
- Accounting for hourly availability on a locational and resource specific basis more accurately defines availability than offering capacity based on derating by a simple class average, non locational availability factor, e.g. PJM’s use of technology class ELCC availability factors for all hours and for the entire PJM market
- Relying instead on a long term, predictable incentive provides an ongoing, measurable incentive to ensure that resources have maximum availability, including availability during high stress hours.
- The hourly approach is a natural evolution in the capacity market design, given the increased heterogeneity of resources.
- ELCC applies flat derating factors by broad technology classes that do not vary by hour or by location. In Elliott, that approach resulted in the assessment of penalties to solar resources for not producing in the middle of the night, a clearly illogical result. Paying for performance is not possible when using only a simple average annual capacity market payment approach.
- it is essential to have resource specific, locational hourly availability in order to match resource availability with the reliability objective. A simple assumption of average annual availability, or the assumption of an equivalent perfect resource at a derated MW value, will not accurately reflect actual expected availability.
- The proposed design matches payment with availability to produce energy and ensures the opportunity for all resource types to cover their net avoidable costs if their actual availability matches their expected availability. The result is to provide a long term, stable incentive for investment in maintenance and investment in new, reliable resources.
AOCE achieves all of the above AND it accommodates the desires of each State to achieve energy goals, or not, as expressed by the State Commissioners during the final panel. This was also expressed in the AOCE objective function goals and objectives during the presentation. AOCE also properly values essential grid services needed for reliability during each hour.