PJM taking various steps on gas-electric coordination

Due to the overall amount and diverse nature of PJM Interconnection’s capacity resources, and factors like the abundance of shale gas resources within its footprint, PJM is in a better position than regional transmission organizations (RTOs) in other regions to handle a growing reliance on natural gas to generate electricity.

That point was among the responses that PJM filed July 3 with the Federal Energy Regulatory Commission, which on June 4 had asked the RTOs to answer a series of six questions. These questions are part of a FERC look at issues of natural gas supply reliability as the grid becomes increasingly reliant on volatile gas supplies for power plant usage.

The FERC questions and PJM answers are:

FERC Question:

Many ISO/RTOs have ongoing stakeholder processes looking at various issues associated with gas-electric coordination issues. What are the specific recommendations emerging that can be implemented quickly (by January 2014), for example, without requiring expensive and time-consuming software changes, while stakeholders are evaluating longer-term solutions? Please explain whether these require tariff changes.

PJM Response:

Due to the overall amount and diverse nature of PJM’s capacity resources, the extent of the existing natural gas and electric infrastructure, and the abundance of shale gas resources within its footprint, PJM is in a better position than RTOs in other regions to handle the growing reliance on natural gas for power generation. Also, PJM’s energy and capacity market structures provide specific design elements to provide incentives for generators to perform when obligated.

Despite these geographic and market structure features, PJM has formed a Gas Electric Senior Task Force in order to proactively explore, identify and prioritize gas-electric issues. The task force has held three meetings so far, which have, as an initial matter, focused on educating stakeholders on the natural gas-electric systems interface. At this time, the task force has not developed specific recommendations, short- or long-term.
The work of this group is expected to last through the integration of a significant amount of new gas-fired generating capacity, which presently is forecasted through the 2016/2017 delivery year.

As to future initiatives where FERC involvement may be appropriate, PJM said it does believe it is beneficial to share Day-Ahead Market results with pipeline operators in its footprint to aid the pipeline operator in creating a plan for the operating day. The commission could facilitate the sharing of sensitive market and operational information by declaring that open communications and sharing of such information between gas and electric system operators is acceptable at all times under the established Codes of Conduct, so long as applicable confidentiality requirements are upheld.

FERC Question:

Some of the challenges associated with gas-electric coordination occur when gas-fired generators are asked to obtain gas supply and pipeline transportation capacity, or additional gas supply and pipeline transportation capacity, on short notice or outside of the normal day-ahead nomination cycles. Is your independent system operator (ISO) or RTO exploring ways to improve the day-ahead scheduling process to better reflect the expected real-time generation requirements? Are there “best practices” in this area that each ISO/RTO should be considering? ISO-New England recently implemented changes to its day-ahead schedule to better align the gas and electric trading days. Is your ISO/RTO considering similar modification for bidding and clearing in the day-ahead market?

PJM Response:

PJM is exploring ways to improve the day-ahead scheduling process. At the most recent meeting of the Gas-Electric Senior Task Force, the merits of moving both the electric and gas schedules in conjunction were discussed. An example was provided that moved the electric day-ahead market ahead by two hours so that offers are due at 10 a.m. and electric awards are announced at 1 p.m., in conjunction with moving the gas timely nomination cycle back two hours, so that the electric awards are known 1.5 hours before the timely gas nominations are due. This proposal would reduce the gas risk of generators by providing more operational certainty to procure firm gas contracts. Ideas such as this should be evaluated now so future gas-electric coordination issues are averted.

PJM has a mechanism whereby generators may switch schedules to reflect higher, in-day fuel costs when requested by PJM to operate outside of the initially established day-ahead schedule. Allowing the generator to reflect its increased fuel procurement cost both allows the PJM operator to evaluate the economics of continuing to run the generator versus other potential resources, and also allows the generator to recoup any such additional cost through the PJM settlement processes if the operator elects to continue operating the unit at the higher cost. The higher cost is also reflected in the calculation of Locational Marginal Prices such that the increased fuel costs are transparent to the rest of the market. PJM said it is amenable to modifying its day-ahead market to better coordinate with the gas system, and intends to address this issue in the Gas-Electric Senior Task Force.

FERC Question:

What are the specific concerns that your region has for this coming winter? Are there specific actions the Commission can take to help address those concerns?

PJM Response:

PJM has performed a reliability assessment for winter 2013/14 and found that overall gas supply and deliverability will not impact its winter weekly reserve margin. PJM’s winter installed reserve margin has historically been about 45%, which is above the weekly winter target of about 29%. Thus, currently there are a fair amount of capacity resources available in the winter to address contingencies. PJM’s concern during the winter is more focused on the potential for local impacts due to weather-related generator fuel unavailability, such as: natural gas pipeline capacity constraints due to cold temperature related heating use; lack of oil inventory due to storm related interruptions, or; freezing coal piles. PJM may employ market mechanisms such as shortage pricing in real- time operation along with demand response as a way to manage extremely tight conditions.

FERC Question:

There has been some discussion about shifting the start of the gas operating day ahead of the electric morning ramp. Would such a change improve gas-electric coordination in your region?

PJM Response:

Shifting the start of the gas operating day ahead of the electric morning ramp, to, for example, 6 a.m to 6 a.m. EPT could, potentially, be helpful, because the peak electric period would no longer split the gas day. More importantly, shifting the timing of timely gas nominations to occur after the close of the organized electric markets would help ensure that proper gas transportation arrangements are made. Such a change would encourage the use of firm transportation service by power generators, which would send the proper signals to expand the gas pipeline system.

FERC Question:

Are gas system contingencies included in your ISO/RTO system planning? If so, what are they, how were they selected and how often are they updated?

PJM Response:

Gas system contingencies are a generator availability issue, and as such, gas system contingencies that result in generator outages are reflected in forced outage rate calculations, which reduce generator availability for system planning purposes. PJM does not, per se, forecast gas system contingencies as part of routine planning analyses. However, PJM is looking to ramp up its capabilities in this area. Moreover, PJM is the Lead Principle Investigator in commissioning a U.S. Deparement of Energy-sponsored study through the Eastern Interconnection Planning Collaborative (EIPC). The EIPC study will evaluate the impact of gas system contingencies on the electric transmission system. PJM and the other study participants have crafted several complementary regional and inter-regional stakeholder processes which are designed to provide input into the EIPC analysis.

FERC Question:

What specific steps is your region taking to improve situational awareness of local conditions, such as planned or unplanned maintenance of natural gas pipelines? Are these steps on track to be implemented before the next winter heating season? What actions should FERC consider taking to facilitate improvements in this area?

PJM Response:

PJM has established a call list between major pipelines in the PJM area so that any operational situations can be discussed between back office operations people on both sides without interrupting the activities of the on-shift system operators. PJM also utilizes an application which maps pipeline notices to impacted units to help improve situational awareness.

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.