New initiative continues PJM quest for better fuel security

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By Andy Ott, president and CEO

As we sit here today, we know the PJM grid is reliable, fuel secure and diverse. But we also face a legitimate question – are we going to find ourselves in a situation where we are overly dependent on one fuel delivery system?

In our continued commitment to reliability and resilience, we launched our fuel security initiative Monday with the publication of Valuing Fuel Security.

We all are aware of the dynamics in the PJM footprint. The market is appropriately attracting significant investment in new, more efficient technology to deliver energy at the lowest reasonable cost for consumers.

The energy market is working as it should for consumers; it is highly competitive and is attracting investment and development of new, more efficient generation sources. That’s good for prices and for energy efficiency.

But, the energy industry and the fuel mix are evolving. This includes retirements because of market forces or aging fleet. While coal and nuclear retirements have been in the news, less-efficient gas plants also have retired.

In our 2017 study PJM’s Evolving Resource Mix and System Reliability, we found that the PJM system could remain reliable under an array of future supply portfolios. The scope of that analysis did not, however, include an assessment of the resilience of the fuel delivery systems with various potential portfolios, nor the risks associated with significant disruptive events. We think that’s important.

Through this new initiative, we will assess potential vulnerabilities and develop criteria to address any future fuel security concerns. If needs are identified, we will work to incorporate fuel security attributes into the fuel-neutral, competitive discipline of the wholesale market.

The process we launched Monday will involve three phases:

  • Identify system vulnerabilities and determine attributes such as on-site fuel requirements, dual fuel capability or others that ensure that peak demands can be met during extreme scenarios.
  • Model those vulnerabilities as constraints in PJM’s capacity market, similar to the way we would model existing transmission constraints on the power grid, allowing for proper valuation of needed attributes in the market.
  • Test the criteria to address specific security concerns determined by federal and state agencies, stakeholders and states, to look at critical physical and cybersecurity assets – or winter or summer events that strain the system.

The intent of the vulnerabilities assessment is to stress-test the system under various fuel supply disruption scenarios, to better understand potential future reliability concerns.

We also see this initiative as a continuation of our work on capacity performance; capacity performance has improved generation performance across the board.

What we are talking about here goes beyond what a single generator can prepare for. We are looking at the broader threat to capture the broader vulnerabilities of entire fuel delivery systems instead of looking at the risk entailed by one generator.

We want to examine the risks of increased reliance on any one type of fuel delivery system. Does that reliance introduce potential resilience risks that are not included under any existing reliability standards?

We will look at the criteria to value and price fuel security, promoting competition among different fuel delivery system types to meet any fuel security needs in a particular location at the lowest reasonable cost.

That value then can be incorporated into PJM’s existing market mechanisms, with reforms to be in place for next year’s capacity auction, if necessary.

In short, we want to identify the risks, value fuel security attributes of generating units and establish a market mechanism that will promote competition among all fuel delivery system types to meet established fuel  security needs.

We don’t think there is an emergency today. If we did, we’d be the first to raise our hands. We need, however, to act with expediency because these threats are real. We need to look at our infrastructure to ensure that it remains reliable and resilient.