PJM Capacity Auction Secures New Generation, Demand Response

Renew Grid, Tuesday May 22, 2012 - 12:11:47

PJM Interconnection has announced the results of its capacity market, the annual reliability pricing model (RPM) auction for resources to meet power supply needs between June 1, 2015, and May 31, 2016. The RPM auction procured 4.9 GW of generation. In addition, capacity imported from west of the PJM region increased about 8% from last year to 4.3 GW.

The RPM establishes contracts with power producers that commit to making their facilities available to provide electricity for the PJM system for a year. Prices are established through competitive bidding. PJM's auction also includes demand-response and energy-efficiency providers.

This year, the auction procured approximately 164 GW of capacity resources at a base price of $136/MW. A megawatt is enough electricity to power 800 to 1,000 homes. PJM's all-time peak demand is approximately 158 GW. Prices were higher in northern Ohio and the Mid-Atlantic region.
"PJM is effectively, efficiently and reliably handling a massive shift in generation from coal to natural gas," says Andy Ott senior vice president of markets at PJM. "The RPM auction is addressing, in a quick and orderly manner, what could have been a prolonged and uncertain process to identify replacement resources. Simply put, RPM was put to the test and performed well."

In addition to new generation - most of it natural-gas-fired - the capacity auction also procured about 14.8 GW of demand response - a 5% increase over last year. Solar increased to 56 MW - a 22% increase over last year - and wind increased to 796 MW - a 15% increase.

PJM says it has also ensured that transmission improvements are built to deliver power where it is needed. The PJM board recently approved $2 billion in electric transmission system upgrades to strengthen the transmission grid in response to the announced retirements of nearly 14 GW of coal-fired generation because of environmental regulations.

Although the RPM auction procured sufficient resources to meet the projected demand, some generating units may need to remain available beyond their proposed retirement dates until transmission upgrades are completed. These units would be operated under "reliability must run" agreements.

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