Changes in PJM Interconnection’s generation mix are likely to spur badly needed transmission upgrades, PJM President and CEO Terry Boston said May 17 at the PJM members committee meeting in Cleveland.
PJM’s reliability pricing model (RPM) has attracted and retained enough capacity to meet the region’s growing needs, has fostered competition to minimize energy costs, and has increased the amount of cost-effective demand resources. However, like other regions of the country, PJM is seeing a tectonic shift in the fuel mix of generators due to environmental regulations compounded with the unprecedented drop in forward-prices for natural gas.
“Managing a large industry-wide change in the relatively short period of time that we have to respond to the EPA rules is a huge challenge,” Boston added.
The RPM is creating new capacity that, when combined with energy prices, is lower-cost than it would have been without the RPM, he said, adding that the cumulative net impact, calculated after last year’s RPM, is more than 42,000 MW of capacity that would not have been available otherwise.
The regional transmission expansion planning (RTEP) process, with its focus on reliability, is the most proven transmission planning process in the country, he said.
“[T]he transparent way that RTEP identifies needed infrastructure upgrades, combined with the capacity market results we will see on Friday [May 18], are the best mechanisms for responding to the challenges of this rapid fuel mix change,” he said.
Boston said he does not mean to imply that the transition to less coal will be easy, but the “reliability safety valve” that PJM has developed, and which EPA adopted in its final rules, will lower reliability risks.
Separately on May 17, PJM said its board approved almost $2bn in electric transmission upgrades that will maintain reliable electric power supplies in the wake of recently announced power plant retirements.
Specifically, the board approved more than 130 transmission upgrades related to the generation retirements, ranging from simple equipment replacements to new substations to rebuilding existing transmission lines and building new lines, PJM added.
Since November 2011, generation owners in PJM have announced plans to retire almost 14,000 MW of generation between May 2012 and the end of 2015.
“Even with the retirement of older coal-fired generators, we will have enough existing and new resources in the region to keep the lights on,” Boston said in the statement. “The transmission upgrades the board has approved ensure we will continue to deliver power to wherever people need it.”
Strengthening the grid through PJM’s transmission planning process allows all resources to be used effectively, including renewable resources, demand response and storage, he said.
With the newly announced ugrades, the PJM board has approved $23.4bn in investment in transmission additions and upgrades since 2000, PJM said.
In his remarks at the committee meeting, Boston said that 2011 was a banner year for PJM, noting that on the transmission side of the business, two new 500-kV lines came into service including the Trans-Allegheny Interstate Line (TrAIL) line, connecting western Pennsylvania and northern Virginia. The lines “immediately relieved congestion and greatly improved our ability to maintain reliability during heavy demand,” he said.
According to TransmissionHub data, the TrAIL project is a 165-mile, 500-kV line that originates at 502 Junction, Pa., and terminates at Loudoun, Va. The project, sponsored by FirstEnergy (NYSE:FE) subsidiary Allegheny Energy, improves system reliability, east-west transfer capability and growing electric demand.
On the financial side, PJM annual billing in 2011 was $35.9bn, up from $4.7bn a decade ago. Boston also said generating capacity within the PJM footprint has grown to 185,600 MW, with 4,200 MW connecting to the PJM system last year, including 614 MW of wind and 120 MW of solar.