Stakeholders split last week over a PJM proposal to change how the RTO captures the cost of deploying additional reserves during extreme weather.
PJM’s Lisa Morelli presented a first read of the proposal — which is intended to capture operators’ reliability actions in Locational Marginal Prices rather than uplift — at last week’s Markets and Reliability Committee meeting.
Stakeholders representing generation expressed support for the proposal while those representing load said they feared it could lead to unduly conservative operations and higher overall costs.
It would increase day-ahead and real-time reserve requirements when hot- or cold-weather alerts or max emergency generation alerts are issued for the RTO or for either the Mid-Atlantic-Dominion or Mid-Atlantic regions.
“On a day like this there’s a ton of uncertainty,” said PJM Executive Vice President for Operations Mike Kormos, citing generator performance and forecasts for weather, load and interchange. “We can’t roll the dice and hope things go away.”
The adder for day-ahead reserves would be set at 3% of forecasted load, boosting reserves from 6.27% to 9.27%. The real-time reserve adder would be equal to the default Mid-Atlantic-Dominion (MAD) synchronized reserve requirement of 1,300 MW.
The increases would be implemented only if operators believe the additional resources can be scheduled without causing operational problems. The real-time adder would be reduced to 50% of the MAD synchronized reserve requirement or lower if the higher amount becomes problematic.
The increased reserves would be reflected in market clearing engines, ensuring that the costs go into LMPs and not uplift.
It is the first proposal to result from a problem statement approved by members in November. (See MIC to Consider Real-Time Pricing Changes.)
“This has been a long time coming,” said PJM Vice President for Market Operations Stu Bresler. “… This is very important to us.” Bresler said the best solution — changing reserves in real time — would be more complex and less transparent.
Ed Tatum, of Old Dominion Electric Cooperative, called the proposal “reactionary.”
“Sixteen years and 24 days into this LMP business … we keep on doing non-market things,” he said. “… We are moving further and further away from the concept of a market. We’re taking it more into an administrative construct.”
David “Scarp” Scarpignato, of Direct Energy, said the proposal could lead to overly conservative operations and increase costs to load. PJM already carries reserves equal to 150% of the largest single contingency, while other regions use only 100%, he said.
“We have very big problems with this,” he said. “PJM already has more conservative synchronized and primary reserve targets than other areas.”
Jason Barker, of Exelon, said Scarp had mischaracterized the PJM proposal. Last July, Barker said, PJM dispatched demand response at $1,800/MWh and Exelon’s peaking generators at “hundreds of dollars” at a time when LMPs were only about $60/MWh. “All of these [costs] were paid through uplift,” he said.
PJM, which wants to implement the changes in time for this summer, will bring the proposal to votes at the MRC and Market Implementation Committee next month. It was developed during meetings of an MIC subgroup on Energy/Reserve Pricing & Interchange Volatility.
At a meeting of the subgroup yesterday, PJM officials said that logistical problems prevented them from producing simulations to gauge the impact of the changes.
