PJM sees more new generation, off-system imports in latest auction

The PJM Interconnection annual capacity auction attracted a record amount of new generation as well as record imports of capacity from the Midcontinent ISO and other areas.

PJM, the administrator of the wholesale power market, announced on May 24 the results of its annual Reliability Pricing Model (RPM) auction. The current auction ensures there is enough electricity for the period June 2016-May 2017. The RPM establishes contracts with suppliers who commit to make 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.

The RPM auction procured 5,463 MW of new generation, which broke last year’s record of 5,346 MW. Imports of capacity from outside of PJM nearly doubled from last year’s auction to 7,483 MW this year; capacity imported from the Midcontinent ISO (MISO) more than doubled to 4,723 MW from 2,078 MW last year.

This year, the auction procured 169,160 MW of capacity resources at prices ranging from $59 to $219 per megawatt hour. A megawatt is enough electricity to power 800 to 1,000 homes. PJM’s all-time peak demand is 163,848 MW. Prices were generally lower in most areas of the PJM footprint compared to last year’s auction.

“Capacity prices were pressured by a combination of factors,” said Andrew Ott, PJM’s senior vice president – Markets. “Prices were generally lower than last year’s auction due to competition from new, gas-fired generation, low growth in demand because of the slow economy and increased imports from other regions, primarily to the west of PJM. These factors also contributed to a reduction in commitment of demand resources.”

The PJM capacity auction procured 12,408 MW of demand response. The auction also procured 1,117 MW of energy efficiency, about 21% more than last year.

“The results of this year’s capacity auction reaffirm that well-designed, mature markets are a powerful tool for procuring new resources at competitive prices,” said PJM president and CEO Terry Boston. “Again this year, we see record amounts of new conventional generation and strong showings from renewables and energy efficiency.”

The RPM provides a long-term price signal, consistent with the PJM Regional Transmission Expansion Planning process, for capacity resources and load serving entities’ unforced capacity obligations. 

The RPM provides:

  • procurement of capacity three years before it is needed through a competitive auction;
  • locational pricing for capacity that reflects limitations on the transmission system’s ability to deliver electricity into an area and to account for the differing need for capacity in areas of the PJM system;
  • a variable resource requirement to help set the price for capacity; and
  • a backstop mechanism to ensure that resources will be available to preserve system reliability.

PJM Interconnection, ensures the reliability of the high-voltage electric power system serving 60 million people in all or parts of Delaware, Illinois, Indiana, Kentucky, Maryland, Michigan, New Jersey, North Carolina, Ohio, Pennsylvania, Tennessee, Virginia, West Virginia and the District of Columbia.

About Barry Cassell 20414 Articles
Barry Cassell is Chief Analyst for GenerationHub covering coal and emission controls issues, projects and policy. He has covered the coal and power generation industry for more than 24 years, beginning in November 2011 at GenerationHub and prior to that as editor of SNL Energy’s Coal Report. He was formerly with Coal Outlook for 15 years as the publication’s editor and contributing writer, and prior to that he was editor of Coal & Synfuels Technology and associate editor of The Energy Report. He has a bachelor’s degree from Central Michigan University.