Monitor reports healthy wholesale markets in PJM in Q1 2016

PJM Interconnection‘s wholesale electric energy, capacity and regulation markets produced competitive results during the first quarter of 2016, said a quarterly report for the period released May 12 by Monitoring Analytics LLC, the Independent Market Monitor for PJM.

The report is the Independent Market Monitor’s assessment of the competitiveness of the wholesale electricity markets managed by PJM in 13 states and the District of Columbia. The report includes analysis of market structure, participant behavior and market performance for each of the PJM markets.

“Our analysis concludes that the results of the PJM Energy, Capacity and Regulation Markets in the first three months of 2016 were competitive,” Monitor Joseph Bowring said.

Energy market prices decreased significantly from the first three months of 2015 as a combined result of lower fuel prices and lower demand. The load-weighted average real-time locational marginal price (LMP) was 47.4 percent lower in the first three months of 2016 than in the first three months of 2015 – $26.80 per MWh versus $50.91 per MWh.

Energy prices in PJM in the first three months of 2016 were set, on average, by units operating at, or close to, their short run marginal costs. This is evidence of generally competitive behavior and resulted in a competitive market outcome, the report said.

Net revenue is a key measure of overall market performance as well as a measure of the incentive to invest in new generation to serve PJM markets. In the first quarter of 2016 compared to the first three months of 2015, average energy net revenues decreased by 62 percent for a new combustion turbine, 51 percent for a new combined cycle, 82 percent for a new coal plant, 85 percent for a new diesel unit, 56 percent for a new nuclear plant, 38 percent for a new wind installation, and 62 percent for a new solar installation.

Total energy uplift charges decreased by $147.3 million or 79.0 percent in the first three months of 2016 compared to the first three months of 2015, from $186.4 million to $39.1 million. The relatively low uplift charges paid in the first three months of 2016 were primarily a result of mild weather conditions and low fuel prices and correspondingly low LMPs.

Congestion costs decreased in PJM by $339.5 million or 53.7 percent, from $631.7 million in the first quarter of 2015 to $292.2 million in the first three months of 2016. Congestion reflects the underlying characteristics of the power system, including the capability of transmission facilities, the fuel costs and geographic distribution of generation facilities and the geographic distribution of load. Congestion is neither good nor bad, but is a direct measure of the extent to which there are multiple marginal generating units dispatched to serve load as a result of transmission constraints, and the costs of operating those units.

PJM operates a centrally-dispatched, competitive wholesale electric power market that, as of March 31, 2016, had installed generating capacity of 178,492 MW and 961 members including market buyers, sellers and traders of electricity in a region including more than 61 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.

Average offered real-time generation decreased by 3,886 MW, or 2.4%, in the first three months of 2016 from an average maximum of 164,790 in the first three months 2015 to 160,904 MW in the first three months 2016. In the first three months 2016, 994.8 MW of new capacity were added and 51.0 MW were retired.

PJM average real-time generation in the first quarter of 2016 decreased by 9.5% from the first three months of 2015, from 97,741 MW to 88,470 MW.

During the first three months of 2016, coal units provided 32.1%, nuclear units 36.6% and gas units 25.4% of total generation. Compared to the first quarter of 2015, generation from coal units decreased 31.7%, generation from gas units increased 19% and generation from nuclear units increased 2%.

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.