[UPDATE 5/24/2023]: Massachusetts Report on FCEM - very insightful and profound."Massachusetts must collaborate with its regional partners and explore more expedient market‐based approaches to support the development of clean energy, the achievement of state decarbonization requirements,"and reduced consumer costs
On Friday, Feb 3, I attended a meeting hosted by the MA DOER to present the latest (rev 3) Forward Clean Energy Market (FCEM) design proposal. During the call, in the chat, I was asked “What’s the difference between AOCE and FCEM?” I hadn’t thought about this before but here is what I said:
“AOCE procures a capacity commitment for specific grid services [hourly] and FCEM procures a certificate”.
IMO, there is a big difference between a capacity commitment and a certificate; a capacity commitment obligates a party to deliver real grid services needed for reliability and is tracked for progress. AOCE is designed to take advantage of Green Energy Buyer momentum and achieve State Energy Goals, while ensuring a reliable electric grid every hour of the year, using a Capacity Exchange concept used by Green Energy Buyers today. I highly recommend a YouTube video from Constellation Energy describing Green Buyer programs and hourly capacity commitments.
FCEM: https://www.mass.gov/info-details/clean-energy-markets
AOCE: https://github.com/rjb4standards/Presentations/raw/master/2021-0224-Filing-TechDesign.pdf
FYI: The footnotes in the above document contain the detailed design concepts of AOCE.
AOCE offers and bids specify the specific grid services being transacted on an hourly basis over a given commitment period, usually based on seasonal periods. For example, a solar resource would offer capacity only during hours when they are capable of generating energy, for each hour specified in their offer. A bid for capacity from a Green Buyer, such as Microsoft, may specify hours of highest consumption. The hourly capacity offer for a solar resource would look very different for capacity offered in June versus capacity offered in December. Both the range of hours and MW capacity offered would be different in June versus December. This is why AOCE applies hourly offers and bids for grid services to secure capacity commitments in sufficient quantity at proper grid locations to ensure reliable operations each hour of the year.
There is no need to "guess" capacity contributions using ELCC and MRI. Let the market work by enabling generators to make long term capacity commitments in AOCE and properly pay them for the valuable grid services capacity they commit to provide, and hold them accountable using pay for performance rules if they fail to perform during a capacity commitment period. We need to shift our thinking from acquiring "resources" to acquiring "grid services" in capacity markets, which can be supplied by any eligible resource. Focusing on the acquisition of grid services supplied by any eligible resource also addresses concerns over "preferential treatment" for specific fuels used to generate electricity. The transition to acquire grid services in capacity markets is occurring in other areas with high variable energy resources, like the UK
PJM itself provides the best justification for why guessing capacity contributions is not a viable method to forecast capacity contributions
- PJM states that system conditions are expected to undergo significant changes in the coming years due to decarbonization efforts. [1] PJM asserts that as a result, the assumption that individual Variable Resource historical outputs and curtailments are reflective of future aggregate outputs and curtailments is no longer certain. PJM explains that the changes in the aggregate resource mix, along with other factors, are expected to significantly alter the PJM transmission system in a manner that may change flows and constraints in future years from what they were historically.
[1] Id. at 11.
There are other factors that PJM needs to consider that could impact "expected operational efficiency" (EOE). IBR are operated by software, which can be easily configured and changed to adjust performance, unlike spinning mass resources which follow kinetic and electro-magnetic laws. This is part of the "digitalization" that is occurring across the energy industry, which will profoundly impact how we plan and manage the electric grid.
Heard during a NERC webinar on IBR's, 6/22 "Software is what drives performance related to grid performance. Hardware is less of importance. We do very frequenct software updates that significantly impact grid performance"
AOCE relies on the use of Integrated Resource Planning processes and procedures to determine the amount of grid services capacity that is needed to satisfy reliability requirements. An ISO performs an IRP process to clear capacity market commitments when issuing capacity supply obligations and capacity payments. The IRP process is also used to determine ISO Reliability Bid requirements (ISORB)
PJM is certainly facing some challenges, but PJM is also facing these challenges head-on in a responsible manner
The original AOCE concept paper was published on Energy Central in 2019, and is available here.
AOCE was modeled on the capacity exchange concept applied by Clean Energy Buyers, where momentum continues to accelerate.
Both FCEM and AOCE were submitted to NEPOOL and ISO New England for consideration as a Pathway Forward:
https://nepool.com/future-grid-initiative/reference-library/
My suggestion to capacity market designers is to follow the wise words of "The Great One" Wayne Gretzky "Don't skate to where the puck is, skate to where it's going".
NOTE: People from all over have differing views on the energy transition. Lawyers, politicians, regulators, economists, system planners and lots of others each have their views. Here is how this software engineer views the energy transition:
Software Engineers focus on solving for the objective function, which is to ensure a reliable and resilient electric grid every hour of the year, by acquiring the proper amount of grid services capacity while also achieving Green Buyer and State energy goals as the energy transition unfolds, while providing consumers with reliable electric service at just and reasonable costs and generators with adequate and reasonable revenues to ensure their ability to meet capacity obligations under all weather conditions.