A Review of Resources Adequacy Risk in PJM

On May 17, 2022, PJM released the second phase of its “living study”, titled Energy Transition in PJM: Emerging Characteristics of a Decarbonizing Grid, which analyses the potential impacts associated with the evolving resource mix. The report, which follows the initial framework released in December 2021, studies three scenarios: Base, Policy, and Accelerated (see Figure 1). Each scenario represents an increasing amount of annual energy in PJM served by carbon-free generation in 2035: 40%, 50%, and 70% respectively. For reference, according to Monitoring Analytics, the grid operator’s market monitor, in 2021 39% of the power produced in PJM was from carbon-free resources.

Pennsylvania joins RGGI, Largest Coal-Fired Power Plant Announces Continuation of Operations. 

On April 23, 2022, Pennsylvania became the 12th member of the Regional Greenhouse Gas Initiative (RGGI), a market-based cap-and-invest initiative that sets an allowance on CO2 emissions and requires power plants to pay to offset their carbon emissions. As part of RGGI, PA will be required to make annual emissions reductions of 3%.

A Two-Year Pause on Solar Projects in PJM

The geographic area served by the PJM Interconnection spans from Virginia all the way to northeast Illinois. And despite the name of the hit show, “It’s Always Sunny in Philadelphia”, this is not a particularly sunny part of the country. It may be a surprise, then, to learn that PJM is overwhelmed by applications for new solar farms. In fact, PJM is proposing a two-year pause on reviewing new generation projects (most of them solar) that seek interconnection with its power grid to slow the influx.

What Caused the Most Recent PJM Capacity Auction Delay?

On December 22, 2021, the Federal Energy Regulatory Commission (FERC) ordered PJM to change its reserve market rules. This move, yet again, delays the 2023/2024 capacity auction, previously set to occur on January 25, 2022.

On December 15, 2021, PJM released the initial findings of a multiphase, multiyear "living study" that captures the potential impacts of an evolving grid resource mix that includes more electricity from renewable energy resources such as wind and solar assets. PJM's paper, "Energy Transition in PJM: Frameworks for Analysis," identifies critical gaps and opportunities within the current market construct and offers insights into the future of market design, transmission planning, and system operations with additional renewable generating assets in the grid. The paper cautions that the study’s assumptions are continually refined based on internal and external stakeholder feedback. PJM’s five key areas of focus are summarized below.

EPA’s stricter wastewater rules among reasons for additional coal-fired power plant retirements across PJM

In July 2021, the Environmental Protection Agency (EPA) announced new initiatives to strengthen wastewater pollution regulations for power plants that use steam to generate electricity and use coal as their fuel source. These initiatives are expected to affect 75 coal-fired power plants nationwide. The new rules would require these power plants to reduce their level of toxic metals, such as mercury, arsenic, and selenium, from plant wastewater before discharge into streams and rivers. Noncomplying plants had an October deadline to show state regulators how they plan to comply with the EPA’s regulations by 2028.

In July 2021, the Federal Energy Regulatory Commission (FERC) unanimously voted to approve an Advanced Notice of Proposed Rulemaking (ANOPR), allowing the public to provide comments and recommendations on how the commission can best improve transmission planning, cost allocation, and interconnection process. Responses were due back in mid-October. With the future generation mix shifting toward more renewable energy, FERC is considering requiring transmission providers to identify geographic regions that expect high renewable development and prioritize transmission planning appropriately. PJM, Amazon, and the Department of Energy (DOE) were among the respondents, recommending a more forward-looking planning process.

Illinois Passes Nation-Leading Climate and Equitable Jobs Act

On September 15, Illinois Governor J.B. Pritzker signed historic clean energy legislation, known as the Climate and Equitable Jobs Act (CEJA). Among many things, the CEJA requires Illinois to achieve a 100% carbon-free power sector by 2045, becoming the first Midwestern state to commit to ending the use of fossil fuels.

“Sue” is the nickname given to the largest and most complete T. Rex specimen ever found. Today, she has a place of distinction in the Field Museum of Natural History of Chicago. And while Sue most likely died 67 million years ago, she seems to have come to life again in the wake of the New Jersey Board of Public Utilities (NJBPU) TRECs program through its successor - “SuSI”.

The big energy news in PJM this summer was the completion of the first capacity auction in three years, which was held in late May. This was an important event on several fronts. Most importantly, the price for capacity in all parts of PJM was set for the period of May 2022 through June 2023. As shown in Figure 1, the price of capacity is typically the second-largest cost component of a retail electricity agreement, and like any other commodity or security, uncertainty creates risk and increases cost. This recent capacity auction provides the transparency necessary to reduce risk premiums associated with this important cost component.