FERC Technical Conference Explores Energy, Ancillary Service Market Reforms Required for the Future Grid

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PJM’s Walter Graf, Senior Director – Economics, joined other panelists Oct. 12 for a Federal Energy Regulatory Commission technical conference focused on market evolution that will be needed to meet the needs of a system that is increasingly dependent on renewable resources.

During FERC’s “Energy & Ancillary Services in the Evolving Electricity Sector” technical conference, panelists from various RTOs/ISOs, consumer advocates, market participants and other stakeholders discussed with FERC commissioners and staff approaches to reforms to reward the operational flexibility in energy and ancillary services markets that will be required as renewable generation resources – whose fuel supply varies with the wind and sun – stand poised to overtake long-established generation resources.

“It is imperative to continue to evolve these markets to meet the emerging challenges to ensure the markets’ objectives are met,” Graf said in testimony submitted to FERC.

As the penetration of intermittent resources grows, flexible resources with the ability to quickly ramp up or turn down in response to the changing generation mix and load are required. PJM believes in the ability of competitive markets to incentivize market participants to invest in flexible resources and operate generation accordingly, Graf said.

“Rules that help prices better reflect the need for and value of various market products will have the desirable effect of incentivizing flexibility, even without mandates for flexibility nor markets for additional flexibility products,” Graf said in testimony.

PJM and its stakeholders have already taken action on reserve market reform, he said, adding this work is one step in evolving efforts to improve the ability of wholesale electricity markets to reward attributes required to ensure the reliable delivery of power at the lowest cost. (PJM’s reserve pricing reform is now on remand; PJM is awaiting further direction from FERC, so these reforms can be effectuated.) PJM is considering further market enhancements, he added, including ancillary market reform to reward generators that can rapidly shift output up or down in response to grid conditions.