PJM reports progress on fuel assurance issues in its region

PJM Interconnection told the Federal Energy Regulatory Commission in a Feb. 18 filing that it is working in several areas to address market and system performance issues associated with generator access to sufficient fuel supplies and the firmness of generator fuel arrangements.

The commission last November asked each regional transmission organization and independent system operator (RTO/ISO) to: describe the nature of fuel assurance concerns specific to the RTO/ISO; describe the strategy or strategies the RTO/ISO has implemented or intends to implement to address market and system performance issues in  light of its fuel assurance concerns; and detail the programs and mechanisms that the RTO/ISO will employ to carry out its strategies.

“Risks associated with fuel insecurity were highlighted in PJM during the extreme weather events of January 2014, when fuel supply inadequacies and generator outages in the PJM region led to tight system conditions,” said PJM. “That experience made clear that enhancements were needed in PJM’s market and system processes regarding fuel assurance.

“For example, fuel-related contractual constraints on generator availability during the extreme weather events of January 2014 challenged PJM operators and contributed to sharp increases in uplift payments in January 2014. Moreover, inflexible pipeline tariff provisions and gas marketer demands for multi-day gas commitments severely constrained generators and drove up prices during this critical period, even during weekend and non-peak hours.

“Adding to the urgency of its fuel assurance efforts, PJM is experiencing a trend toward greater reliance on gas-fired generation, with substantial retirements of coal-fired resources and a generator interconnection queue overwhelmingly weighted towards gas-fired resources. Cumulatively since 2008, and projecting forward to 2019, over 26,000 megawatts of coal- and oil-fired generation in the PJM region have retired or are  expected to retire, driven by environmental regulatory changes, changing fuel prices, and the development of new, more efficient gas-fired generators. PJM’s fuel assurance activities are significant and continuing, with ongoing stakeholder discussions, a number of manual and tariff changes, and active Commission dockets.”

The most significant PJM initiative to improve fuel assurance in the PJM region is the Capacity Performance Proposal now before the commission. While this proposal maintains the successful, overall structure of the Reliability Pricing Model, it represents a significant enhancement to the definition of the capacity product procured via that mechanism, PJM noted.

Under the proposal, owners and operators of generation capacity resources, including capacity storage resources, would have strong economic incentives to invest in fuel assurance and improved operation and maintenance, including firm fuel transportation arrangements, dual-fuel capability, on-site storage, and weatherization. Those investments would provide the PJM region with greater assurance of energy delivery and reserves during emergency conditions.

In preparation for winter 2014-2015, PJM pointed out that it engaged in numerous activities that affect fuel assurance. Those activities included: a winter study and sensitivity analysis conducted by PJM’s Operations Assessment Task Force, which included a gas shortage scenario based on pipeline restrictions; a survey of generator fuel inventories and operational capabilities; the development of a cold-weather resource capability test and preparation checklist for generators; the rollout of new dispatch training that covers the changes since the winter 2013-2014 and reviews emergency procedures; and the development of a gas-fired generator database including information on dual-fuel capabilities and natural gas service provider (e.g., interstate pipeline or local distribution company). 

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.