PJM Executives Speak on Resource Adequacy at FERC Technical Conference

PJM Seeks to Accommodate State Policies While Maintaining Reliability

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The PJM capacity market has provided great benefits for customers, but it must evolve to align with a changing energy landscape, PJM President and CEO Manu Asthana and Stu Bresler, Senior Vice President – Market Services, said at a March 23 technical conference called by the Federal Energy Regulatory Commission to discuss “Resource Adequacy in the Evolving Electricity Sector.”

The day-long, remote conference drew dozens of industry leaders and was divided among three panels:

  • Panel 1: Commissioner-led discussion of capacity markets in ISO New England, the New York Independent System Operator and PJM
  • Panel 2: Staff-led discussion on the implications of the status quo Minimum Offer Price Rule (MOPR) in the PJM capacity market
  • Panel 3: Alternative approaches for the PJM capacity market

In conjunction with PJM’s other markets, the capacity market has achieved reliability, affordability, reduced emissions, and investment in innovative demand response and energy efficiency resources, PJM stated in its submitted statement [LINK]. It also facilitated a smooth transition during the time of a dramatic fuel switch from coal to natural gas and renewables.

But the fuel mix is shifting again, and it’s time to explore comprehensive reform that accounts for both state policies and the reliability and operational impacts of operating a future grid with a significantly increased level of renewables.

PJM’s testimony (PDF) was informed by three stakeholder workshop sessions it held on potential capacity market reforms in February and March, as well as ongoing dialogue with stakeholders. A fourth session is scheduled for March 26.

In its statement, PJM outlines preliminary recommendations for a path forward, informed by this engagement, along with a set of principles that emerged during the stakeholder workshop sessions.

Specifically, PJM believes that any changes to the capacity market should: 

  • Function to help support reliability
  • Respect and accommodate state resource preferences and facilitate competitive, least-cost procurement of these policy choices
  • Be flexible in design, thus ensuring the long-term viability of the market
  • Be limited to and targeted toward the specific problems we’re trying to solve
  • Embrace competitive principles and send appropriate price signals for efficient entry and exit of resources
  • Ensure appropriate mitigation of market power

“Within these broad principles, stakeholders have shared a wide variety of proposals, ranging from surgical fixes to address the Minimum Offer Price Rule (MOPR), to a complete market redesign,” PJM stated to FERC. “Although multiple areas of improvement have been identified, there appears to be a growing consensus that – as a first priority – the MOPR in its present form is not sustainable in the long run.”

Stakeholders recognized that it is important that any reforms adopted enhance rather than subtract from the underlying purpose of the capacity market – namely, to ensure that there exists a portfolio of resources that can provide the reliability the region needs, not only under normal conditions but also under extreme conditions.