Published Feb. 29, 2024 (Ethan Howland – Senior Reporter – UtilityDive) — The top issues facing the PJM Interconnection this year are capacity market reforms, power plant retirements and the development of a new transmission planning paradigm, according to key stakeholders and industry consultants.<\/p>\n
Adding to the complexity of PJM\u2019s challenges, the issues are intertwined.<\/p>\n
\u201cEverything is connected,\u201d said Steve Lieberman, American Municipal Power vice president of transmission and regulatory affairs. \u201cWe might talk about them in silos on different days, but the rules for the capacity construct, the rules for the energy market, the way the interconnection queue works, the way we do the transmission planning \u2026 it\u2019s really all together.\u201d<\/p>\n
One of the key issues that threads through PJM\u2019s expected focus this year is ensuring that enough new generation \u2014 expected to be mostly inverter-based resources like solar \u2014 can come online to replace retiring power plants so that grid reliability is maintained.<\/p>\n
Talen Energy\u2019s planned retirement of its 1,282-MW Brandon Shores power plant outside Baltimore is the biggest potential blow to PJM\u2019s overall system stability announced in the past year, according to\u00a0Bill Dugan, director of optimization \u2014 wholesale for Customized Energy Solutions, an energy management company.<\/p>\n
In response to Talen Energy\u2019s announcement last year that it planned to retire the plant,\u00a0PJM decided to advance nearly\u00a0$800 million in transmission projects<\/a>\u00a0needed to maintain reliability. The grid operator also plans to enter into a \u201creliability must-run,\u201d or RMR, contract with Talen to keep the power plant running while the transmission is being built.<\/p>\n At the same time, PJM \u2014 which runs the grid in 13 Mid-Atlantic and Midwest states, plus the District of Columbia \u2014\u00a0is contending with load growth in areas like Northern Virginia, which triggered a\u00a0$5 billion transmission expansion plan<\/a>\u00a0approved in December.<\/p>\n \u201cPJM has to face the task of getting all these [projects] approved, and also explaining if they\u2019re really the right solutions,\u201d Dugan said. \u201cThey have the classic problem of \u2018our only hammer to fix this problem is build transmission\u2019 so that\u2019s what they\u2019re stuck doing, even if that isn\u2019t the most effective solution.\u201d<\/p>\n One of the issues related to power plant retirements like Brandon Shores and Talen\u2019s\u00a0H.A. Wagner generating station<\/a>\u00a0are RMR contracts, which are used by grid operators to keep retiring power plants operating if they are needed for grid reliability.<\/p>\n PJM is going through a \u201crobust conversation\u201d on RMR units, according to\u00a0Glen Thomas, president of the PJM Power Providers Group, or P3,\u00a0which represents generators.<\/p>\n It includes \u201cgetting the rules straight around RMR agreements and making sure that reliability is maintained, while making sure prices are being sent so that new generation can come on board,\u201d he said.<\/p>\n PJM expects to be using RMR contracts more often, according to Lieberman. \u201cIt\u2019s a lot of money that\u2019s not captured in a pricing signal,\u201d he said. \u201cThat\u2019s bad because it\u2019s not good for competition.\u201d<\/p>\n PJM last year established the \u201chigh priority\u201d\u00a0Deactivation Enhancements Senior Task Force<\/a>, which is looking at possible changes to the grid operator\u2019s RMR practices and the timeline for generators to notify the grid operator they plan to shutter a power plant. Currently, power plant owners must give PJM at least three months warning when they plan to shutter a generating unit so the grid operator has time to study whether the retirement would lead to violations of reliability standards.<\/p>\n It\u2019s a sign that PJM\u2019s capacity market isn\u2019t effective when a plant like Brandon Shores wants to shut down and PJM has immediate transmission problems, according to\u00a0Tom Rutigliano, a senior advocate at the Natural Resources Defense Council.<\/p>\n Through a fast-track stakeholder process last year, PJM developed two sets of proposals to revamp its capacity market. The Federal Energy Regulatory Commission\u00a0approved one set<\/a>\u00a0partly aimed at better measuring a resource\u2019s reliability attributes, but rejected\u00a0the second set<\/a>\u00a0over concerns about a proposed offer cap and other issues.<\/p>\n PJM plans to hold its long-delayed\u00a0forward capacity auction in mid-June<\/a>\u00a0and then conduct three more auctions every six months before returning to its annual schedule. Dugan expects the approved changes will affect existing and planned generating resources while putting upward pressure on capacity prices, which will provide additional revenue to power plant owners.<\/p>\n Looking ahead this year, PJM will focus on \u201ccapacity market reform 2.0\u201d by considering issues that were left unaddressed in last year\u2019s capacity market reform proposal, according to\u00a0Kent Chandler, president of the Organization of PJM States Inc. and chairman of the Kentucky Public Service Commission.<\/p>\n \u201cA lot of generation is being built in PJM, but most of it, I would argue, has nothing to do or little to do with the PJM markets,\u201d Chandler said.<\/p>\n A significant amount of that generation development is driven by state policy, according to Chandler. \u201cThe economic calculation is not necessarily looking at the energy markets, ancillary services, the capacity markets, it\u2019s looking at who can I get to sign a [power purchase agreement] with,\u201d he said.<\/p>\n \u201cThe one constant to [the capacity market] is it\u2019s never quite right,\u201d Lieberman said. \u201cWe are at this juncture where we know [the market\u2019s] not right and we\u2019re trying to figure out can we make this square block fit into the round hole, and the round hole is the energy transition.\u201d<\/p>\n Another key initiative for PJM this year centers on making sure it has enough reserve power supplies to meet unexpected changes in real-time supply and demand.<\/p>\n Recent winter storms and other events have indicated that PJM isn\u2019t buying enough reserves or the right kind of reserves, and the procurements are requiring out-of-market payments, according to P3\u2019s Thomas.<\/p>\n PJM\u2019s\u00a0Reserve Certainty Senior Task Force<\/a>, launched in October, is looking at options for making sure PJM\u2019s reserve products are performing well and are paid for what they provide, according to Dugan. It\u2019s a relatively narrow topic and the task force should be able to offer a \u201cquick fix\u201d to the issue, he said. Any solution will likely increase reserve prices, he said.<\/p>\n On the other side of the generation retirement issue, PJM has launched a new generator interconnection process after a multi-year pause to help speed the arrival of new power supplies onto the grid.<\/p>\n PJM expects it will process about 72,000 MW in interconnection requests by mid-2025 and 230,000 MW over the next three years, according to Jeff Shields, a spokesman for the grid operator. More than 90% of the projects are renewable energy or energy storage, he said, noting that PJM will likely work with stakeholders to craft additional reforms.<\/p>\n \u201cWe\u2019re going to get to see [later this year] if the new queue system is really better,\u201d Dugan said. \u201cIf we can actually get shovel ready projects moving faster than before.\u201d<\/p>\n In the last few years, minimal generation has come online on PJM\u2019s system and there is little thermal generation in its interconnection queue, Thomas said. The composition of the queue may change in the next year once PJM\u2019s capacity auctions begin running again and price formation issues get addressed, according to Thomas. \u201cThat could help solve that supply side problem,\u201d he said.<\/p>\n In a pending change, PJM aims to shift this year to a\u00a0scenario-based long-range transmission planning process<\/a>\u00a0that includes consideration of multiple benefits over 15 years.<\/p>\n \u201cThis is the year of transmission planning,\u201d Rutigliano said. PJM has essentially no forward-looking transmission planning, he said.<\/p>\n However, NRDC and other groups contend the PJM\u2019s transmission planning proposal is flawed because it fails to directly account for state clean energy policies. Even so, \u201cPJM is going to start the most holistic interconnection planning they\u2019ve ever done this year,\u201d Rutigliano said. \u201cEven their limited proposal is a quantum leap ahead of what they\u2019re doing now.\u201d<\/p>\n Further changes could also be on the table for discussion at PJM.<\/p>\n \u201cSomething has to change on planning,\u201d Chandler said. \u201cWe can\u2019t just keep being reactive.\u201d<\/p>\n OPSI in November urged PJM<\/a>\u00a0to shift from a \u201creactive\u201d planning approach towards a proactive, holistic and affordable framework for maintaining grid reliability. \u201cThat\u2019s about looking at meeting customers\u2019 needs in the most reliable way, at the lowest cost, through ways that we haven\u2019t looked at to this point,\u201d Chandler said.<\/p>\n \u201cPJM has to make PJM investable again,\u201d Chandler said. \u201cThere are a lot of people putting money into transmission within PJM, but not necessarily pursuant to PJM processes, like the\u00a0supplemental projects<\/a>.\u201d<\/p>\n One possibility is to put generation on par with transmission to solve reliability issues that can be caused by retiring power plants, Chandler said, noting that under the current framework PJM\u2019s only option is to build transmission.<\/p>\n Potentially, reliability problems could be solved by advancing generation that\u2019s in PJM\u2019s interconnection queue, according to Chandler. \u201cWhat if we could pay a generator a lot less, through a market mechanism, than the transmission option?\u201d he asked.<\/p>\n PJM and its stakeholders should be thinking about possible generation retirements years in advance so it can coordinate the development of new generation, storage and transmission, according to Rutigliano.<\/p>\n \u201cYou can\u2019t hide that towards the end of the decade there\u2019s going to be a lot of fossil [plants] retiring,\u201d he said, noting that states, which have authority over generation, would have to be involved in any new process.<\/p>\n <\/p>\nRMR contracts<\/h3>\n
Capacity market reform<\/h3>\n
Reserves<\/h3>\n
Interconnection queue reform<\/h3>\n
Transmission planning<\/h3>\n