Executives reviewed PJM’s accomplishments in 2016 during the Members Committee meeting at the Annual Meeting Wednesday in Chicago.
Stu Bresler, senior vice president – Operations and Markets, presented the year in review for Operations and Markets. Vince Duane, senior vice president and general counsel – Law, Compliance and External Relations, presented Member Relations and Federal/State Policies.
Bresler detailed successes on topics including gas-electric coordination, how new modeling technology is benefitting Operations, the decline in uplift and interregional coordination.
There were no significant gas-electric problems in 2016. PJM developed a daily gas-generation risk assessment model, which incorporates additional gas pipeline data in order to improve risk evaluation. PJM also improved gas-electric communications.
Bresler also looked at both accomplishments and challenges in wholesale power markets, including the flattening energy market prices.
He described the changes in PJM’s wholesale prices over the past six years – including an energy price of $53.13 in 2014 and $29.27 in 2016. He also noted the decline in uplift, including sharply lower lost opportunity costs in the beginning months of 2017.
The stakeholder process worked through a number of market initiatives: five-minute settlements and shortage pricing, hourly offers and energy market price formation. And members debated complex rule change issues such as the fuel cost policy approval process and seasonal aggregation.
Technological advances benefitted PJM’s reliability – both with tools PJM developed and those adapted from industry best practices.
For example, Bresler described the “cascading trees,” an analytic tool for resilience in transmission planning.
The tool looks at the likelihood of cascading outages after an initial event. Resilient systems have a low probability of cascading (or the cascading is bounded to an acceptable region). The tool provides guidance on how to improve system resilience when planning transmission additions and upgrades. Transmission lines that appear frequently highlight potential areas of improvement.
At the end of 2016, PJM developed new forecasting methods for in-front-of-the-meter solar power. This includes weather data PJM can share with members for their use – generation owners for offering and scheduling and transmission owners to assist with outage coordination.
Another technology tool is “electrical distance,” which identifies external generators close enough to PJM to participate in the PJM capacity market as pseudo-tied units. The new tool gives PJM a clear and mathematical way of confirming which external units can reasonably be relied on to deliver capacity to PJM.
Bresler also pointed to successful results from two North American Electric Reliability Corporation audits, “a testament of the Operations staff,” as well as extensive PJM preparation which instills “a culture of compliance.”
Member Relations and Federal/State Policies
Duane cited PJM’s annual billings over the last five years. From 2012 to 2016, PJM’s annual billings totaled $195 billion. Energy prices are going down, showing the ability, he said, of PJM’s market construct to provide value to the region. The market design rules have reduced transmission congestion and uplift, and reforms have benefitted the customer.
Among the successes Duane mentioned is the Member Community tool, which has helped PJM provide service to a growing list of members. He said technology has provided an effective way for members and stakeholders to get answers to questions on their day-to-day activities.
Duane also praised the State and Member Training team. In 2016, PJM’s training program was accredited by the International Association for Continuing Education and Training. The team’s control room simulator provides a “hands-on” experience and gives members who must meet training requirements a realistic, dynamic training environment.
The Federal Energy Regulatory Commission’s Order 1000 provided not just PJM but the entire industry with a learning opportunity. PJM learned to “evaluate a whole host of processes, the nuts and bolts of [proposal] windows.” This included cost caps and transparency around the entire process.
“This isn’t just PJM,” said Duane. “This is a national policy. Looking forward, there may be some re-direction [with new FERC commissioners]. It’s not clear how people will judge Order 1000. We have to be prepared to accept the possibility that the new FERC may take it in a different direction.”
One of the biggest challenges facing PJM and the industry as a whole is how organized markets harmonize wholesale market objectives and state, environmental, social and political objectives.
Duane said the solution may lie in, not in a single response, but in a suite of responses – some that accommodate changes and some that promote harmonizing.
He added “when we talk about accommodating and harmonizing, that doesn’t mean litigating. That is a last resort. There are ways to do it, but it is political challenging. We don’t have solutions yet – not to say we aren’t working on them.”
Duane wrapped up with a mention of the PJM Now app. Stakeholders can track electricity use, power grid conditions and wholesale power prices in real time with the app.
Bowring Gives Market Viewpoint at Annual Meeting
Dr. Joseph Bowring, of Monitoring Analytics, LLC, the independent market monitor for PJM, presented his view of the markets during the Year in Review portion of the Members Committee meeting .
He said there are several good indicators that PJM’s markets are working – costs are down, prices are down and there is new investment. He cautioned, however, that the markets still need to improve in some areas – such as scarcity pricing.