PJM members on Thursday endorsed a revised joint stakeholder proposal to use the effective load-carrying capability (ELCC) method to calculate the capacity value of limited-duration, intermittent and combination (limited-duration plus intermittent) resources.
The Markets and Reliability Committee and Members Committee approved the ELCC over the objections of Independent Market Monitor Joe Bowring and others, who said the proposal, which could have a profound effect on the capacity market, was flawed.
The joint stakeholder proposal, Package D, received a sector-weighted vote of 3.98 (79.6%) from the MRC after a friendly amendment clarifying issues was added at the meeting. In a first-round vote at the MRC, the proposal without the friendly amendment received a sector-weighted vote of 2.56 (51.2%), failing to meet the two-thirds threshold for endorsement.
The Members Committee approved Package D with the friendly amendment later Thursday by a sector-weighted vote of 4.05 (81%).
ELCC, which is already used by MISO, NYISO and CAISO, evaluates reliability in each hour of a simulated year and compares a resource mix with limited resources against one with unlimited resources. A resource that contributes a significant level of capacity during high-risk hours will have a higher capacity value than a resource that delivers the same capacity only during low-risk hours.
Betty Watson, senior director of policy and market design at Modern Energy, one of the sponsors of Package D, praised the work done by PJM and stakeholders since April when the issue was brought to the Capacity Capability Senior Task Force (CCSTF).
“The package approved by stakeholders today represents an important step forward for the participation of energy storage and intermittent renewables in PJM,” Watson said. “Just as important, the package represents the result of meaningful stakeholder cooperation and finding common ground.”
ELCC Background
Melissa Pilong of PJM provided an update of the work completed at the CCSTF. In October 2019, FERC opened a paper hearing under Federal Power Act Section 206 on the capacity capability of energy storage resources in PJM. Pilong said ELCC, which was already under consideration for solar and wind resources in the RTO, could serve as an alternative to the 10-hour minimum run time requirement for storage that was rejected by FERC last October.
FERC partially approved PJM’s Order 841 compliance filing but set a paper hearing to determine whether its 10-hour minimum for storage seeking capacity obligations was unjust and unreasonable. (See FERC Partially OKs PJM, SPP Order 841 Filings.)
Pilong said that by January, PJM began soliciting feedback from stakeholders on proposed alternatives to the 10-hour requirement. PJM then submitted a motion to hold the FERC hearing in abeyance to pursue an ELCC construct with stakeholders. The commission ultimately granted PJM’s abeyance motion, setting a deadline of Oct. 30 for a response from the RTO.
The MRC approved an issue charge in March to consider using ELCC to set the capacity value of limited-duration resources such as battery storage. The issue was then sent to be worked on by the newly created CCSTF. (See PJM MRC Moves Forward on Storage, Hybrids.)
Proposed Packages
Andrew Levitt, PJM’s senior business solution architect, presented Package A, the main motion endorsed by the CCSTF, receiving 64% support in a nonbinding vote in the subcommittee.
Levitt said the PJM package had several key characteristics, including specifying the ELCC methodology for simulated dispatch of energy storage resources, hydroelectric resources with storage and other limited-duration resources. It also provided for an annual reassessment of derate factors, performance factors and accredited unforced capacity (UCAP) values for all applicable resources.
Levitt said the package was designed to accommodate a diversity of resource classes, including new technology like four-hour energy storage resources and hybrids.
Package A ultimately failed at the MRC, receiving a sector-weighted vote of 1.29 (25.8%).
Watson reviewed Package D at the MRC, which was the alternative solution endorsed by the CCSTF with 57% support in a nonbinding poll. Watson said the joint stakeholder transition package was formulated to find a balance between accurate and stable market signals, stakeholder preferences, the various business models of asset owners and existing and future resources.
Watson said the package was a “true negotiated outcome” and not the design of any one stakeholder. It built upon the foundation of Package A and went even further, Watson said, adding in a transition package that provides values for the class average ELCC percentages. The transition package will be evaluated in the 2026 quadrennial review, Watson said, in which PJM will “evaluate its efficacy and appropriateness and make recommendations as to whether some or all components of this package should be reconsidered through a stakeholder process.”
The friendly amendment added to Package D was developed after further discussions with stakeholders, Watson said, with an agreement to further evaluate the operations of limited-duration resources following FERC approval of the ELCC-related filing that includes a four-hour limited-duration class. PJM will also initiate a stakeholder process to further evaluate the coordination of the operation of limited-duration capacity resources with system needs and to consider rules to ensure that their operational behavior is “appropriately aligned with the resource adequacy construct and system reliability by examining issues including, but not limited to, bidding, operations, emergency procedures and energy market offer requirements.”
Also in the friendly amendment is a “clarification of intent of transition” with language recommended to the PJM Board of Managers to include in the cover letter for the proposal’s filing with FERC, stating, “Nothing in the joint stakeholder package is intended to preclude any potential changes to the structure and market design of PJM’s Reliability Pricing Model or create the expectation that the current market design will remain intact.”
“This package is not at all where the joint stakeholders started but really represents the evolution that we’ve all arrived at after months of dedicated work,” Watson said.
Besides the packages, stakeholders also voted to endorse corresponding Reliability Assurance Agreement (RAA) revisions.
Stakeholder Opinions
Monitor Bowring gave a presentation on his firm’s interpretation of the ELCC, saying it was “premature” for stakeholders to rush toward a solution on the issue. Bowring said the solutions in the packages could have significant impacts on the PJM capacity market for decades because of issues like a locked-in floor value based on a 10-year forecast of ELCC values.
Bowring said a 10-year ELCC forecast will be based on unknown inputs, including thermal and intermittent capacity levels, which would prevent a mechanism for understanding the ELCC forecast error. He said the ELCC should reflect the capacity resource mix and can only be accurately determined when incorporated into PJM’s market clearing engines.
“We just want to emphasize that the ELCC approach represents a really significant change to the capacity market,” Bowring said. “We don’t think there’s any reason to rush.”
Calpine’s David “Scarp” Scarpignato said FERC put PJM in a position where it’s difficult to meet deadlines while still adequately addressing the issues surrounding ELCC. Scarp said he hoped there would be more time to formulate a more clearly defined solution to the issue and wanted to see more data from PJM to make a more comprehensive decision.
“We weren’t given adequate time as stakeholders to truly give this justice,” Scarp said. “I imagine we’re going to have to rework some of this in the future.”
Tom Rutigliano of the Natural Resources Defense Council said both proposed packages were a “major improvement” in how PJM handles non-traditional resources and represented a “big step forward” in how the RTO handles resource adequacy in a “rapidly changing grid.”
Carl Johnson of the PJM Public Power Coalition said most stakeholder criticisms of the packages were “valid” and presented a difficult issue for members to solve as PJM makes its filing with FERC next month. Johnson said the packages provided little detail as to how resources would be represented in the ELCC model and how they would actually have to behave in real-world scenarios for the model to work.
“Above all, it’s certainly in my members’ interest that we do not send another mess to FERC or that we at least limit the mess,” Johnson said.