August 23 is decision day at PJM, where PJM market participants will be voting on a "plethora" of capacity market design proposals.
The focus of this article is on understanding PJM's proposal, specifically as it relates to the integration of State Energy Goals into capacity market design reforms. Let me save you from the drama, "there is no obvious, explicit support to satisfy State Energy Goals under the PJM capacity market reforms described in PJM's CIFP-RA proposal, that I can see.
The same is true for Green Buyer goals, no explicit, obvious support, from what I can tell. AOCE, presented to PJM on June 1, 2023, contains provisions to address both State Energy Goals and Green Buyer Goals.
Now that I've stated what's not in the PJM CIFP-RA capacity market reform proposal, I'll talk about what is in the proposal.
What does this proposal aim to address:
The foundation of the PJM proposals are enhancements to the underlying reliability analyses that identify resource adequacy risks, define procurement targets and result in accredited capacity levels.
Proposed Reliability Analysis Enhancements:
- Enhance reliability risk modeling in resource adequacy studies and move to Expected Unserved Energy (EUE) as the primary reliability metric.Â
- Move to hourly modeling in resource adequacy studies: RTO/LDA reserve requirement studies and capacity accreditation
- Use extended weather history back to 1993 and explicitly model load patterns as a function of weather in the resource adequacy studies
- Explicitly model how forced outages and other de-rates vary with temperature and are further correlated across the fleet even after accounting of unit-specific performance dependence on temperature.P
- Improve capacity accreditation to better reflect resources’ contribution during risk periods.
- Move accounting of supply-side availability risks to accreditation for all resource types (correlated outage effects, ambient de-rates, etc.)
- Accredit generation and DR based on marginal reliability improvement in EUE using enhanced risk modeling (consistent with expected contribution during periods of reliability risk)
- Allows for substitution of UCAP MW across resource types while maintaining equivalent reliability.
- Aligns capacity compensation with a resources ’ contribution to reliability.
- PJM proposes to implement marginal Effective Load Carrying Capability (ELCC) for all capacity resources except Energy Efficiency. This method of accreditation aligns the amount of capacity a resource is able to sell with its marginal improvement in EUE as calculated in the enhanced resource adequacy risk modeling. This method naturally aligns accredited capacity with expected performance during resource adequacy risk periods and aligns compensation with the resource’s contribution to resource adequacy. This accreditation framework is also being pursued by other ISO/RTOs as they seek to enhance their capacity accreditation methodologies.
- PJM has proposed additional changes to accreditation to include supply-side risk drivers in accreditation (rather than
on the demand side as today). These include:- Temperature-related forced outages
- Fuel availability outages and other common-mode failures
- Ambient derates
- Planned and maintenance outages
The proposal seems to be primarily focused on resource accreditation enhancements. It's less clear how procurement targets will be determined and what factors contribute to determining what "grid services" will be needed to ensure reliability each hour of the year, at all locations under all weather and atmospheric conditions. I suspect we should expect to see more on this in the future as the energy transition evolves and the supply mix introduces more challenges to reliable grid operations, which NERC identified as a top concern in its recent 2023 ERO Reliability Risk Priorities Report:
Constellation provides astute advice for PJM to consider that aims to address the NERC Risk Ranking to ensure a reliable electric grid "the auction simply did not clear the right set of resources for the operating conditions that materialized. Markets that were designed and may have worked well under prior load, supply, and weather conditions are struggling to provide the desired degree of reliability as the underlying conditions have evolved. To keep pace, these markets must also evolve.