The PJM Quadrennial Review process culminated Oct. 1 with the filing of the PJM proposal approved by the PJM Board of Managers for consideration by the Federal Energy Regulatory Commission.
The proposed solution (PDF), informed by PJM stakeholder input, seeks to maintain essential reliability with appropriate reserve procurement in the capacity market. Occurring at least every four years, the study process establishes elements of the market constructs for the Variable Resource Requirement, which is the capacity required for reliability. This includes establishing the maximum price PJM will pay for a given quantity of capacity balanced with the price signal required to incentivize generation resources for reliability.
As part of PJM’s fifth Quadrennial Review, stakeholders for the first time contributed insight and feedback alongside the study by The Brattle Group, the PJM consultant retained for the analysis. During prior Quadrennial Reviews, stakeholders have provided feedback only upon completion of the consultant’s study.
Resource Adequacy for Reliability
The recent Quadrennial Review study process, which started in 2021, focused on appropriate levels of procurement to support PJM’s one-in-10-year loss of load (LOLE) standard. The final proposal:
- Adopts a combined cycle as the reference technology, replacing the combustion turbine
- Employs a demand curve design that ensures sufficient resources to meet the reliability requirement while mitigating price volatility and over-procurement
- Revises the formula for a generator’s Net Cost of New Entry (CONE) to be calculated with forward-looking energy and ancillary services revenue to more appropriately reflect investors’ views of future market conditions