PJM reviewed three separate proposals it plans to file with FERC by the end of the year to address the urgent need for new generation while refining market rules to address specific stakeholder concerns before the next capacity auction.
The proposals will be the subject of Section 205 filings that PJM intends to make with the Federal Energy Regulatory Commission next month, and the session was the first of two being held to consult the stakeholder community. Stakeholders are invited to apply by Nov. 12 to present their views on the issues at the Nov. 21 meeting of the Members Committee.
In his opening comments, Stu Bresler, Executive Vice President, Market Services and Strategy, said that the confluence of trends giving rise to the larger issue of resource adequacy are well known: unprecedented load growth, deactivation of generators whose contribution to reliability requires multiple megawatts of renewable generation to replace, and the inadequate pace of new resources connecting to the system.
PJM is pursuing a number of initiatives to address these trends, but has targeted the following immediate actions (to be filed in December) to address short-term resource adequacy and market concerns:
- Adjust capacity market rules to address a limited number of issues.
- Open a temporary, one-time window for shovel-ready generation projects to join the interconnection process to address near-term reliability needs.
- Allow for generation to pair with intermittent generators to generate electricity when those generators are not producing power, known as Surplus Interconnection Service.
Capacity Auction Adjustments
On Nov. 8, FERC accepted PJM’s proposal to move the next capacity auction (for the 2026/2027 Delivery Year) from December 2024 to June 2025 while PJM and stakeholders consider limited refinements to the capacity market rules to address stakeholder concerns. PJM plans to submit a separate Section 205 filing to FERC to address resource adequacy issues related to capacity market rules.
While PJM’s markets currently reflect the tightening of generation supply against increasing demand, Bresler said the delay will give PJM and stakeholders time to refine rules that will help promote reliability and affordability through the energy transition.
“We think immediate actions were necessary to address those issues in order to provide as much certainty as possible and ensure that the outcomes of the markets fulfill their intended function – and that’s reflect the anticipated supply and demand that we will see in future delivery years,” Bresler said.
The proposed adjustments to auction rules are expected to be approved and implemented before mid-2025, when PJM seeks to conduct the auction for the 2026/2027 Delivery Year.
The scope of proposed changes focuses on three areas, said Adam Keech, Vice President, Market Design & Economics:
- Seeking to keep the combustion turbine resource as the reference technology used for the calculation of the Cost of New Entry, rather than change to a combined-cycle gas-power resource, as the current Tariff would require
- Addressing concerns raised regarding very low or zero value Non-Performance Charge Rates in some areas of the PJM footprint and not others
- Addressing availability of Reliability Must-Run resources to contribute to resource adequacy needs
Reliability Resource Initiative
As PJM has been transitioning to its reformed interconnection process, it became clear that there also might be resources out there that could be constructed quickly and contribute to reliability, Bresler said.
“It is entirely consistent with PJM’s reliability mandate to do everything we can to get them online for reliability,” Bresler said. “We will need everything in the generation queue, and then some, if we are going to keep up with the trends.”
The Reliability Resource Initiative (RRI) was introduced at the Oct. 8 meeting of the Planning Committee. A straw proposal was discussed at a special meeting of the Planning Committee Oct. 18.
Donnie Bielak, Director, Interconnection Planning, said PJM used feedback from the meetings to modify its proposal.
As to need, he cited the key conclusions from the February 2023 report, Energy Transition in PJM: Resource Retirements, Replacements & Risks (PDF).
The addition of “large load” submissions for new, energy-intensive customers has increased since the report, he said. If these trends continue, PJM’s models show increased risk of having insufficient resources later in this decade to maintain the reliable electricity service that consumers expect.
Comprehensive queue reform is advancing on schedule, he noted, but the existing queue might not be sufficient to meet reliability requirements in the short term.
“The risks are certainly accelerating around resource adequacy,” said Aftab Khan, Executive Vice President, Operations, Planning & Security. “Although we’re taking this expedited action, we appreciate stakeholder feedback.”
The RRI would target resources not currently in the queue, creating a one-time expansion of eligibility criteria for Transition Cycle #2 beyond the active requests, which were received before September 2021.
In response to stakeholder feedback in previous meetings, PJM made the following changes:
- Eliminated gating criteria – all projects can apply
- Reduced number of projects eligible under RRI
- Proposed a scoring approach to select projects in case RRI is oversubscribed, informed by recent CAISO and MISO orders
- Added a locational component to formula proposal
The RRI includes a discrete application window and specific criteria to determine eligibility and limits on the number of entrants. A formula was developed to determine a relative score for each project, looking at market impact and project viability.
Submissions would be ranked and a maximum of 75 chosen. They would be studied along with the status-quo-eligible projects in TC2.
RRI projects that remain in the study process and reach their final interconnection service agreement would be required to participate in the capacity market for 10 delivery years.
Dec. 17 is the application deadline for TC2 for status-quo-eligible projects. PJM would open the TC2 window for RRI projects in the first quarter of 2025. If PJM is unable to obtain FERC approval prior to the start of TC2 Phase I, the status quo rules will prevail.
Surplus Interconnection Service
Bielak also presented proposed Tariff modifications to its Surplus Interconnection Service (SIS) rules, which would also be the subject of a 205 filing.
SIS refers to the unused portion of service for a facility that cannot or does not operate continuously, every hour of every day year-round. It does not increase the maximum output of the generation fleet but improves the ability to use these limited resources.
It is an expedited process that allows the installation of generation resources to use the unused service. This is done outside of the queue because it does not require network upgrades.
PJM is considering the adjustments for several reasons, Bielak said. It’s part of a broader look at near- and long-term resource adequacy. SIS can improve the overall performance of a facility. PJM’s current approach may be more conservative than other RTOs, and stakeholders have commented that it is too restrictive to maximize system benefits.