What will the future of energy markets look like? And how does the industry get there?
Those questions won’t be answered in a day, but the dialogue began in the afternoon session of the PJM Grid 20/20 forum on Public Policy Goals & Market Efficiency, Aug. 18 at PJM.
While the morning session looked at the status quo and existing market mechanisms and rules, the afternoon explored alternative ideas for restructuring the capacity market to accommodate subsidized generation in a manner that does not distort prices.
Vince Duane, senior vice president – Law, Compliance & External Relations, led the day’s third and final panel, which looked to the future and its possibilities.
As with the morning panelists, the afternoon session used the blender analogy introduced by Craig Glazer, vice president – Federal Government Policy in the morning.
Duane pointed out there were many issues “for the blender to digest,” including regional versus state-by-state approaches, and issues that are not core to the RTOs’ mission of providing electricity but are still important – such as jobs, the environment and the community.
“How do we make sure we get the volume [of capacity] correct?” asked Duane. He said that one of the results of the any new structure must be that prices must remain viable and that it brings efficiencies in generation – new entry when necessary and the signal to exit when it is no longer economic.
The panelists looked at the myriad of things that grid operators need to balance going forward – public investment, private funding, how new resources enter the market and capturing the true investment-to-cost ratio.
Peter Fuller, vice president of Market & Regulatory Affairs for NRG Energy, said that, while wholesale markets were designed to deliver reliability at the lowest cost, they were not designed to optimize for low carbon emissions. The new challenge is to adapt the operation of the markets – and protect them – while allowing merchant wind and solar to enter market in greater capacity.
John Moore, senior attorney for the Sustainable FERC Project at the Natural Resources Defense Council, said that the industry is at a fork in the road and wondered if a dynamic suite of tools – including true interregional coordination – might be the key to future capabilities of the market.
All the panelists agreed that there is room for alternate solutions and expansion without having a distorting effect on the market, what Raymond DePillo, senior director of Market Development for PSEG Energy Resources and Trade, termed a “holistic” approach.
Stu Bresler, PJM senior vice president – Operations and Markets, presented an alternative to expanding the application of the current Minimum Offer Price Rule to existing resources while avoiding the likely down side of resulting in the commitment of more resources than are necessary to maintain reliability.
Bresler looked at what constitutes competitive prices and how resources choose to meet demand obligation. He agreed that, at the end of the day, suite of solutions is what might be required.
PJM CEO Andy Ott wrapped up the forum. He pointed out that, while PJM believes in the value of the markets, he wanted participants to use the dialogue that started at the forum as they look toward the electricity markets of the future.
“We’re not going to make a filing tomorrow,” he said. “We want to engage in a dialogue with stakeholders. We should digest what we’ve learned today and continue to have more engaged discussion,” said Ott.