PJM Moves Forward on Fuel Security Initiative

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PJM members will vote next month on whether to establish a task force on valuing fuel security attributes, the next phase in PJM’s efforts to study and strengthen the grid’s fuel supply network through the wholesale electricity markets.

At the Feb. 21 Markets and Reliability Committee (MRC) meeting, PJM reviewed a problem statement and issue charge that would establish a senior task force to study potential market or operational changes to bolster fuel security.

Fuel security is the ability of a resource to operate for sustained periods in stressed scenarios. That can mean keeping a certain amount of fuel in reserve on-site, or having access to alternate fuel sources, or structuring commercial contracts so that fuel is not sold to other customers when prices are high. Non-fuel resources like demand response and renewables can also have fuel security attributes.

“While there is no imminent threat, fuel security is an important component of ensuring reliability,” Mike Bryson, vice president – Operations, said in presenting the item to the MRC for a first read.

The committee will be asked to vote on the initiative at its March meeting. If it is endorsed, the new, MRC-led senior task force would convene by April. Its work would be considered a high priority, and the group would meet at least once a month.

Potential enhancements to market rules or other changes, if necessary, could be filed with the Federal Energy Regulatory Commission in early 2020.

Several members questioned whether the time frame was too condensed to conduct a comprehensive review, and whether market rule changes were a foregone conclusion.

“We are very open to stakeholder input in regard to timing and solutions,” Bryson said.

PJM invites feedback from stakeholders through March 7 that can be incorporated into the second reading on March 21.

Bryson said the findings of PJM’s recent, comprehensive Fuel Security Study underscore the importance of exploring proactive measures to value attributes that make the system fuel-secure. PJM believes this is best achieved through competitive wholesale markets.

In addition to education, the new group would be tasked with determining any additional variables or sensitivities that would inform the discussion, and to address:

  • Potential attributes that would define a fuel-secure resource.
  • Whether a minimum quantity of fuel-secure resources is necessary, including a locational component.
  • Market and operational mechanisms that have the potential to ensure fuel security.

The latest stakeholder engagement is the second of three phases underway at PJM to study the security of the fuel supply chain as part of an ongoing drive to improve grid resilience.

Phase 1 culminated in the release of the Fuel Security Study in November 2018. In Phase 3 – concurrent with Phase 2 – PJM is coordinating with federal and state government agencies and impacted industries to further define fuel security assumptions and scenarios with guidance from the Department of Energy.

The study had its roots in an analysis PJM released in March 2017 that considered the system’s evolving resource mix and reliability. That review concluded PJM’s current fuel portfolio is reliable, diverse and among the highest performing of those studied.

The PJM system can remain reliable with the addition of more natural gas and renewable resources, the analysis indicated. However, an increased reliance on any one resource type introduces potential fuel security risks not recognized under existing reliability standards.

PJM’s ensuing study of fuel security stress tested the grid under more than 300 scenarios. The findings show the system can withstand an extended period of stress while remaining reliable and fuel-secure. There were combinations of extreme conditions under which the system could be subject to disruptions; any efforts on the fuel-security front would target these scenarios.

In order to enhance the fuel security of the grid into the future, PJM believes market-based mechanisms for retaining or procuring resources with the necessary fuel-secure attributes should be explored, along with other mechanisms as determined through this initiative.