Capacity Reserve Needs Shrink With Increased Generator Efficiency

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Continued improvements in generator performance in the region served by PJM are helping to reduce the percentage of reserve capacity needed to ensure the reliability of the system.

This is reflected in the results of PJM’s 2020 Reserve Requirement Study, endorsed Nov. 19, by the Members Committee. The PJM Board of Managers approved the new Installed Reserve Margin (IRM) on Dec. 9 while also accepting the Reserve Requirement Study.

The IRM is the amount of reserve generation resources needed to satisfy PJM’s reliability criteria and meet the forecast demand.

The three-year-forward study’s results for the 2024/2025 Delivery Year recommend an IRM of 14.4 percent, down from 14.8 percent for the 2019 study.

Lower Forced Outage Rate a Driving Factor

The 2020 capacity model is the main factor behind the decrease in IRM, Patricio Rocha Garrido, Senior Lead Engineer – Resource Adequacy Planning, told stakeholders at the Nov. 19 Members Committee.

In particular, the IRM reduction is driven by a lower average Effective Equivalent Demand Forced Outage Rate (EEFORd) – the forced outage rate used for reliability and reserve margin calculations. The PJM average EEFORd in the 2020 PJM Capacity Model was 5.78 percent, compared with the average EEFORd of 6.03 percent in the 2019 PJM Capacity Model, meaning the thermal generation fleet is expected to experience fewer outages.

This occurs as more efficient generation, including combined cycle units and gas turbines, joins the grid, and less efficient generators retire.

A net addition of approximately 12,700 MW of generation is predicted for the PJM system from 2020 to 2024. This reflects approximately 16,600 MW of new generation and 3,900 MW of retired generation.

The impact of this lower average EEFORd is large enough to counter the upward pressure put on the IRM by the slightly lower Capacity Benefit of Ties (CBOT). The CBOT represents the emergency electricity imports available from outside of PJM, such as from neighboring systems in New York, the South or Midwest. The CBOT decreased from 1.6 percent in the 2019 study to 1.5 percent.

Decreases in the IRM may result in lower wholesale capacity costs, as consumers are asked to purchase less installed capacity to ensure the reliable delivery of power.

Wind, Solar Move to ELCC Study

For the first time, wind and solar resources were excluded from the capacity model in this year’s study. Their capacity values are now calculated in a separate Effective Load Carrying Capability study.

This change has a negligible impact on the parameter used to calculate the reliability requirement.

PJM’s capacity market ensures long-term grid reliability by securing the appropriate amount of power supply resources needed to meet predicted energy demand on a three-year-forward basis. These resources can be called upon in cases of unplanned outages or higher-than-expected electricity demand.

Due to the delay in the capacity auction schedule, the study results will be used in the 2022/2023 and 2023/2024 Base Residual Auctions. PJM has scheduled the next capacity auction, for the 2022/2023 Delivery Year, to open May 19, 2021.