Operators of gas-fired generators could include the costs of ensuring fuel supplies in their energy market offers under changes being considered by stakeholders.
The Markets and Reliability Committee Thursday approved a problem statement authorizing a task force created in March to consider allowing generators to include the cost of firm gas transportation in energy market offers and to reflect gas price changes between day-ahead commitments and real-time operation. PJM already allows dual-fuel generators to reflect the cost of backup fuel in their offers.
The problem statement also will allow the Gas Electric Senior Task Force (GESTF) to consider potential changes to the timing of day-ahead market clearing to align it more closely with the nominating schedules of gas pipelines.
Currently, units must place gas nominations before knowing whether they will be dispatched in the day-ahead market. Thus they may have to sell gas if their offer does not clear or derate during the morning peak if they don’t have enough gas.
The problem statement was approved without opposition, although Howard Haas, of Independent Market Monitor Monitoring Analytics expressed concern that it was “very prescriptive” in its discussion of potential solutions.
Haas noted that dual fuel generators can submit multiple cost offers reflecting gas and oil operation. Before making any changes, Haas said, the task force should consider “What is the nature of the risk, given current market rules, and who should handle the risk?”
The task force was formed to study potential reliability problems resulting from PJM’s increasing reliability on gas-fired generation. (See previous coverage on gas-electric coordination.) The group’s work is expected to continue through the 2016/2017 delivery year, during which PJM expects significant additions of gas-fired generating capacity to replace coal retirements.
Natural gas’ share of PJM’s generation has nearly tripled since 2007, rising to almost 20% of electric production in 2012.
Although PJM does not face any immediate reliability problems, officials say it could take five years to build new generation to respond to potential capacity shortages.
Because natural gas generation relies on “just-in-time” fuel supplies, the Federal Energy Regulatory Commission has warned that some plants may not be able to operate on the coldest days when gas demand for heating is at its peak.
FERC has held six technical conferences on the relationship between the natural gas and electricity markets since last year (docket #AD12-12-000).
To date, PJM has been working to improve coordination with gas pipelines through information sharing and cross training of dispatch personnel. At FERC’s Oct. 17 meeting, M. Gary Helm, PJM Lead Market Strategist, said PJM’s winter reserve margin — currently about 40% and projected to remain above 30% through 2016/17 — is “more than adequate.”
The Eastern Interconnection Planning Collaborative (EIPC) announced last week the selection of Levitan & Associates, Inc. to lead a Department of Energy-funded study on the ability of gas systems to supply gas-fired generation into the next decade. Levitan, of Boston, was chosen from among six consultants that submitted proposals.
Participating in the study in addition to PJM are ISO-NE, NYISO, MISO, TVA and the Independent Electric System Operator (IESO), which serves Ontario.
