PJM Grid 20/20 Examines Market Challenges, Solutions

glazerA kitchen appliance and American humorist Will Rogers were themes that carried the discussion at the PJM Grid 2020 forum on Public Policy Goals and Market Efficiency, Aug. 18 at PJM.

Craig Glazer, PJM vice president – Federal Government Policy, started the discussion by citing one of Rogers’ homespun bromides, “Even if you’re on the right track, you’ll get run over if you just sit there.”

Even if no one quoted Rogers the rest of the day, it stayed the theme – panelists and audience members alike noted, as the energy industry evolves, the energy markets will need to evolve with it.

The forum examined market design and public policy goals and the various pathways in which market rules can accommodate policy goals without distorting market principles.  It included an in-depth exploration of the Minimum Offer Price Rule and how a MOPR could be deployed for existing resources… and whether it should be.

While Glazer used apples to describe pricing in various scenarios, his use of a blender to illustrate the many methods to determine policy and markets proved to be the forum’s lasting metaphor. Panelists throughout the afternoon used it as they discussed energy policy on a state, regional and national level and how different components lead to different market outcomes.

montalvoMarc Montalvo, president and principal consultant – Daymark Energy Advisors, who spoke in the first panel with Glazer, pointed out that the challenges of the markets affect all RTOs, not just PJM. They include balancing reliability with reducing greenhouse emissions, support for renewables, cost containment and preserving economic competition and jobs.

In that sense, every entity in the industry needs to understand the implication of its actions and what drives energy’s complex interests.

Tony Clark, outgoing commissioner on the Federal Energy Regulatory Commission, predicted that the industry will evolve into something between vertically integrated regulation and an entirely market-oriented entity.

He said that, going forward, the FERC will need to balance state laws that seem to discriminate for or against certain types of generation.  Those generators, while not clearing the market, help a community’s tax base or job market. Clark said finding the equilibrium will not be easy but it will be the “core and heart” of what comes down the path over the next several years.

The morning panel, led by Hung-Po Chao, senior director – Economics, looked at traditional responses and solutions to the problems of the markets.

 Jim Wilson of Wilson Energy Economics and Steve Schleimer, senior vice president at generation owner Calpine, both looked at the long-term decisions that resources make when they enter into the market.

Schleimer praised the PJM market, saying that it is “fundamentally fair. The capacity market allows reasonable opportunity to receive investment on capital,” he said.

Lisa McAlister of American Municipal Power was critical of the current market structure and feels it does not properly serve the needs of public power. She contended the current PJM capacity market is not robust enough to accommodate unforeseen events and it is time to look at simpler constructs that she said would be more resilient in the face of constant change.

Susan Bruce, representing the PJM Customer Coalition, pointed out that the markets are not stagnant.

“I think we have to remember how we got to the idea of markets,” she said. “Technology and innovations were drivers. Industrial customers were seeing big [electric] bills. The idea of markets shifting the risk away from customers was attractive to industrial customers in the Northeast [part of the country]. It reduced the cost and risk for customers.”

Joe Bowring of Monitoring Analytics, the PJM independent market monitor, stressed the markets’ success in providing clear, transparent price signals for maintaining long-term resource adequacy, and that the markets’ construct does not allow it to pick “winners and losers.”

 A video of the forum is available.