First Transition Auction a Success

PJM’s first transition auction successfully procured the targeted amount of resources that meet Capacity Performance standards, according to the results which were announce today. The auction results report is posted on pjm.com.

The auction, which ran August 26-27, was for the 2016-2017 delivery year.

The price for resources able to meet the pay-for-performance standard was well below the price cap for the auction, illustrating the competitiveness of the auction.

The auction procured 95,096.6 megawatts of resources at $134 per megawatt-day for all areas in the PJM footprint. As part of the phase-in of Capacity Performance standards, PJM sought to procure resources meeting the new stringent requirements for 60 percent of capacity needs for 2016-2017.

“The results of the auction were consistent with expectations, and the fact that the clearing price was below the offer cap indicates resources were efficiently valued,” said Stu Bresler, senior vice president- Markets. “Prices were consistent with requirements to keep generating units and the system reliable.”

Capacity Performance requires that resources – generation, demand response and energy efficiency – produce electricity called upon regardless of weather conditions or extreme system conditions. Committed Capacity Performance resources that do not perform when called upon will face significant non-performance charges.

“We see evidence that Capacity Performance is incenting improvements such as increases in maintenance and investment in dual-fuel capability,” Bresler said. “Customers can be assured that power supplies will be available when most needed because resources have the incentive needed to make investments in performance.”

The transition auction procured 619 MW of demand response – 392 MW from the previous commitment for the delivery year and 227 MW of new demand response. The auction also procured 950 MW of energy efficiency – 527 MW from the previous commitment and 423 MW of new energy efficiency new resources.

Bresler noted that the demand response participating as Capacity Performance has even greater value than in base capacity demand response because of its capability to be called upon at any time of the year, at any time.

A spreadsheet with details on the auction results is also available.

The second and final transitional auction will be held September 3-4 to procure Capacity Performance resources for 2017-18.