By Paul McGlynn, senior director – System Operations
Events like late January’s severe cold spell put PJM Interconnection to the test as operator of the country’s largest electrical grid, and I am happy to say that the system was up to the challenge.
As temperatures dipped below minus-20 in Chicago and near zero in many of the 13 states we serve, PJM and its members in power generation, transmission and distribution were able to meet the electricity needs of 65 million people – which is no simple task when Mother Nature wants to freeze moving parts, strand fuel shipments and ice up critical water supplies.
Throughout the cold spell, PJM utilized a diverse generation fleet that includes coal, natural gas, nuclear and renewables such as wind, solar and hydropower. And we’re happy to report that all types of resources performed well.
As we similarly reported after 2018’s extended cold snap, PJM and its members continue to demonstrate the grid’s reliability this year. Ample reserves were available throughout three days of extreme cold – which saw the fourth-highest peak of winter energy demand PJM has experienced, according to preliminary data – and weather-related generator outages were accommodated without incident.
Like last year, coal tended to supply a larger share of power than usual, and that was due to simple economics – when cold temperatures turn up the demand for natural gas, gas prices go up and coal becomes more cost effective.
Evidence from this winter and last suggests that system performance continues to improve. During the 2014 Polar Vortex, for example, PJM faced forced generation outages of up to 22 percent. Last winter, the extended Cold Snap we faced produced outages of just 12 percent; during the recent cold weather of Jan. 30 and Jan. 31, we saw outages down to 8.6 percent and 10.6 percent, respectively.
These figures are only slightly above normal for winter and suggest that we are trending in the right direction. But what has changed since 2014 to demonstrate such a marked improvement?
Better Standards
Shortly after the Polar Vortex, PJM issued a number of recommendations, including:
- Ways to improve information sharing among generators
- Initiating a process for testing and preparation of resources in advance of winter operations
- Improving interregional coordination with our neighboring grid operators
PJM then adopted changes to its operating manuals that provide best practices, including testing of generation units and a winter preparedness checklist.
This checklist helps generation operators protect their facilities and sensitive equipment from the elements to prevent mechanical failure, and reminds them to schedule staffing at appropriate levels during extreme weather events. Preparation can include insulating pipes and other sensitive control equipment, or something as simple as making sure facility doors remain shut to keep out the cold.
Better Coordination
With more natural gas-fired generation coming online in the PJM footprint, it is increasingly crucial that PJM and its members coordinate with the natural gas industry to understand the dependability, availability and security of the fuel supply to gas generators. PJM and the natural gas industry continue to work to strengthen coordination and communication to improve grid reliability and give us more flexibility in operating the system.
Recently, PJM extended the deadline for market participants to submit bids and offers in the Day-Ahead Energy Market from 10:30 a.m. Eastern to 11 a.m., better aligning our own market deadlines with the most active natural gas trading period of the day.
This refinement follows changes made in 2016, when PJM moved the Day-Ahead Energy Market schedule from 4 p.m. Eastern to 1:30 p.m. to ensure that generators know their power obligations before the 2 p.m. timely gas nomination deadline for scheduling gas transportation. At this same time, the natural gas industry added a third scheduling cycle and pushed back its timely nomination deadline by 90 minutes. The industry’s changes, in combination with PJM’s Day-Ahead Energy Market move, have added greater certainty and flexibility for generators.
During January’s cold spell, we found that most natural gas-fired generation outages were due to internal issues, such as mechanical failures, as opposed to gas supply outages. This was driven by a number of factors, including: generators “firming up” gas supply contracts, pipeline expansion projects, improved gas-electric coordination and the relatively short duration of the cold weather.
Better Incentives
As the deep freeze approached, PJM issued cold weather alerts for our footprint, which is a call to action for transmission and generation to be prepared for the bitter chill. To get ready, generator and transmission operators refrain from maintenance on critical equipment, adjust staffing plans and top off fuel backups ahead of the cold.
While cold or hot weather alerts are nothing new for PJM, since the Polar Vortex we have used markets to offer financial incentives to generation owners to be prepared to perform when called upon, and penalties for those resources that can’t perform. The Capacity Performance initiative, introduced in 2015, has motivated generation owners to invest in their resources, such as equipment overhauls and upgrades or paying extra for contracts that guarantee natural gas deliveries.
In addition, the PJM capacity market has provided the right investment signals that allow for the transformation to a more efficient (and cleaner) generation fleet and increased use of demand response and energy efficiency as resources to meet customer demand. From 2010 to 2017, nearly 27,000 MW of PJM’s oldest generators, averaging 46 years, retired from the system. They were replaced by more than 32,000 MW of new, more efficient, lower-emission generation such as gas turbines, wind and solar.
The incentives of the capacity market and our Capacity Performance requirements are working.
Ongoing Improvements
As we noted after the 2018 cold snap, an ongoing opportunity for improvement is that current market rules don’t properly compensate generation owners for all of the actions they take at PJM’s direction during stressed conditions. In other words, the price of procuring these reserves and energy doesn’t always reflect the value of those needed reserves.
Evidence from the recent cold weather demonstrates this flaw. On Jan. 31, our Synchronized Reserve Market prices were at or near zero for 19 of 24 hours. Synchronized reserves are crucial to a reliable system; these flexible resources can provide power to the grid within 10 minutes, or quickly remove electricity demand. But our market prices suggested that those reserves have little or no value.
When this occurs, PJM has to make payments to generators outside of the market to prevent them from operating at a loss. On Jan. 31, these “uplift” payments were $1.2 million, after averaging less than $21,000 a day the previous week – and this happens regularly during peak demand periods.
As the system becomes more dependent on renewable resources, reserve needs increase due to the inherent limitations on forecasting actual wind conditions and cloud cover on a given day, as well as the intermittent nature of these resources.
To address these issues, which impact both generation owners and eventually end-use customers, PJM plans to file a proposal with the Federal Energy Regulatory Commission in the near future to improve how reserve prices are formulated. The wholesale electricity market and PJM’s grid operations provide tremendous value for the region we serve, resulting in a dependably reliable and affordable system. We will continue to analyze the performance of the PJM system and those of our partners in our quest to ensure a resilient power grid.
