Black Start Units to See More Green?

Feb 4, 2014

PJM‘s spending on black start generators will increase by at least $3 million — and perhaps as much as $21.6 million — under proposals outlined Thursday.

PJM’s spending on black start generators will increase by at least $3.4 million — and perhaps as much as $21.6 million — under proposals outlined to the Markets and Reliability Committee Thursday.

The proposed changes, developed by the System Restoration Strategy Senior Task Force, are intended to increase the incentives for existing black start resources to continue providing the service, PJM’s Chantal Hendrzak said. PJM initiated the changes over concern that it will lose much of its existing capacity by 2015 due to coal plant retirements.

Minimum Incentive Proposal

Almost two-thirds of the task force voting supported a “minimum incentive” proposal that would set annual compensation for a 20 MW combustion turbine at $71,609, a 40% boost from the current $51,270.

The proposal, which will be the main motion when the MRC votes on the issue Feb. 27, would increase PJM’s annual black start costs to $24.4 million from the $21 million revenue requirement as of last Sept. 1.

Proxy Proposal

Annual Revenue Comparison for 20 MW CT (Source: PJM Interconnection, LLC) — (Source: PJM Interconnection, LLC)

A second “proxy” proposal, which won 63% support from the task force, would increase compensation for a 20 MW CT five-fold to $312,486 while more than doubling annual black start costs to $42.7 million (see charts). It may be considered by MRC if the minimum incentive proposal fails to win support.

The mininum incentive proposal would:

Change the incentive factor from 10% to the greater of 10% or $25,000;
Allow non-ICAP (energy-only) units to receive compensation based on the offered black start MW;
Permit automatic load rejection units (ALR) to recover NERC Compliance costs as documented to the Market Monitor;
Allow compensation for storage of fuels other than oil;
Provide for a 5-year PJM internal review of formula.

The proxy proposal would replace the base formula rate, variable operations and maintenance costs, fuel storage and training costs with a formulation based on the average of responses to PJM’s recent solicitation for black start resources.

No Change to Capital Recovery

Neither proposal changes the capital recovery rate for units requiring capital investments to become black start-capable.

Hendrzak said PJM expects to issue awards to the winners of the solicitation by April 1. The task force also is working on changes to the “back stop” compensation in zones that did not receive bids.

Black Start Costs by Zone - Curent vs. Proposed (Source: PJM Interconnection, LLC) — (Source: PJM Interconnection, LLC)

The impact of the proposed changes vary dramatically by region. For example, the minimum incentive proposal would increase costs less than 10% in 10 zones while seven zones would see costs jump by more than a third, with PPL’s doubling (see chart).

Token Incentive

John Horstmann, of Dayton Power & Light Co., said increasing incentives for existing units will be cheaper than paying for new ones, which could cost $250,000 or more annually. The $20,000 increase a 40-year-old 20 MW CT would receive under the minimum incentive is “at least a token effort to keep some of the older units around.”

Black start units must be capable of starting without an outside electrical supply, maintaining frequency and voltage under varying load, and maintaining rated output for a specified time, typically 16 hours.

In September, the Federal Energy Regulatory Commission approved Tariff revisions that PJM said will increase the pool of potential black start generators by 64,000 MW (ER13-1911).

PJM Markets and Reliability Committee (MRC)