A PJM Interconnection power generators trade group said it is concerned about the viability of PJM’s capacity markets because wind and solar resources have been acquiring capacity obligations greater than what they can deliver, but other stakeholders say all resources need capacity reevaluation.
Recent actions by PJM and the Federal Energy Regulatory Commission “have served to materially destabilize the market,” the PJM Power Providers Group, or P3, said in a letter to PJM’s board of managers that the grid operator shared with stakeholders Feb. 2. P3 lists a dozen members on its website, including Calpine, Vistra, Tenaska, NRG, LS Power and others. It is a market-focused group that owns 67 GW of generation.
PJM told stakeholders this past summer that it has over-accredited certain intermittent resources hundreds of megawatts of capacity that do not meet PJM’s capacity resource requirements because these resources are not deliverable at peak times, P3 said.
“The erroneously awarded resources can only provide approximately 50% of the purported capacity rating that PJM is purchasing in the capacity auctions to be paid for by customers,” the group said.
Accredited wind and solar power MWs “supported by non-deliverable energy” have been included in and cleared in previous capacity market auctions and currently are included in the supply stack for the upcoming 2023-2024 auction, the letter said.
Approximately 50% of the total wind power capacity offered into the auction has been accredited this way and PJM has not provided any metric regarding solar power, according to P3, which went on to say that half of the wind MWs and an unknown portion of the solar MWs offered “provide no reliability” because they are not supported by deliverable energy as required to qualify as a generation capacity resource.
The groups suggests that PJM should remove these wind and solar resources from the upcoming capacity auction.
“The only logical remedy under the circumstance is to remove these MWs from the supply stack for the 2023-24 planning year as well as subsequent auctions, until these resources are physically deliverable in the same way required of every other resource in the PJM system,” P3 said.
Thermal resource valuation
PJM has spent roughly two years developing Effective Load Carrying Capability, or ELCC, methodology to value the capacity contributions more accurately from solar, wind, storage, hydropower, and other resources.
PJM developed the ELCC methodology in response to the rapid growth of renewable energy and energy storage resources that are intermittent and thus typically have lower capacity factors than thermal resources such as coal, natural gas, oil, and nuclear power.
Despite the rapid growth of renewables, however, the capacity valuation used for thermal resources that account for 93% of PJM ‘s installed capacity – a methodology which is based on estimated forced outages, or EFORd – has not been updated in decades, a large group of stakeholders has argued.
In response, PJM’s board said in October that it is important to investigate the capacity valuation of all resources. PJM is currently doing so within a Resource Adequacy Senior Task Force.
Additionally, most of the other US wholesale power markets run by independent system operators are dealing with capacity valuation issues as more renewable energy resources enter the various generation fuel mixes.
Jeff Dennis, general counsel and managing director of the trade group Advanced Energy Economy, agreed in a Feb. 2 phone call that all resources must be evaluated with the same methodology, but he said P3’s letter leaves out some important details.
“Treating all resources on a level playing field with respect to the accreditation of their capacity value is needed,” Dennis said.
“Notably, this letter fails to acknowledge that the capacity accreditation methodology applied to thermal resources has not been reevaluated for quite some time, even as extreme weather has shown vulnerability in those resources and their fuel supplies,” he said.
“To fairly discuss capacity accreditation, it must be done for the entire fleet,” Dennis said.
“The letter asks the PJM Board to get ahead of that process and completely remove wind and solar resources from the market immediately, which would have massive consequences for advanced energy companies, increase costs to consumers who would be forced to buy duplicative capacity, and harm state and customer clean energy goals,” he said.
The capacity auction for delivery year 2023-2024 has been delayed from January to June 2022.
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