PJM Implements Reserve Price Formation Changes

2056

PJM has implemented new reserve price formation rules as ordered by the Federal Energy Regulatory Commission effective Oct. 1.

PJM is required by the North American Electric Reliability Corporation to maintain sufficient reserves to respond within 15 minutes to the loss of the largest single contingency on its system.

Reserve Pricing Enhances Operations-Markets Alignment

The new reserve price formation structure consolidated Tier 1 and Tier 2 Synchronized Reserve products and aligned reserve procurement in PJM’s Day-Ahead and Real-Time markets. This parity solidifies generators’ financial incentives to provide reserves.

The changes accomplish the following:

  • Establish a 30-minute operating reserve product, a 10-minute primary reserves product, a 10-minute Synchronized Reserve product and a revised Operating Reserve Demand Curve in the Day-Ahead Market
  • Establish a 30-minute operating reserve product, a 10-minute primary reserves product, a 10-minute Synchronized Reserves product and a revised Operating Reserve Demand Curve in the Real-Time Market
  • Are expected to produce more accurate reserve calculations with less PJM operator intervention, more reliable Synchronized Reserve performance, and consistent compensation and penalties for all resources providing the same service
  • Will enable PJM to model subzones with more flexibility for improved alignment between operations and market outcomes
  • Utilize an identical clearing mechanism in both markets to promote market efficiency

Market Participation

Resources eligible to provide 30-minute reserves are those that are online, as well as offline, resources within PJM that are available to provide energy within 30 minutes. Nuclear, wind and solar resources are not eligible, unless approved by exception. Hydro and energy storage must submit specific reserve offers for consideration (because PJM does not have enough information to estimate these specific reserves). Otherwise, all eligible generators that have submitted offers into the Energy Market will also be considered as offering into the Reserve Market.