By Shelly Lyser and Joel Yu

Summer resources in PJM’s market are approaching a tipping point. After April 2017, resources such as demand response and solar generation will effectively no longer be able to participate in PJM’s capacity market. As a result, they will no longer be able to earn the revenues that many rely on to stay in operation and to remain available during periods of peak customer demand.

This outcome is precipitated by PJM’s requirements that all resources meet strict winter performance requirements, or otherwise partner with winter-performing resources like wind generation, in order to bid into its next three-year forward capacity auction.

PJM has recognized this problem regarding retention of seasonal resources, and they have made moves to prevent the undesirable outcome. (See PJM to Seek FERC OK for Seasonal Capacity Proposal.) Under a recent proposal pending before FERC, PJM would make certain modifications to its summer-winter resource aggregation approach (ER17-367). However, past auctions have not yielded any viable participants in its resource aggregation program.

Musical Chairs

Even if all seasonal resources participated, aggregation can never fully solve the problem: Nearly 10,000 MW of summer-only DR and approximately 300 MW solar generation currently participate, in contrast to the 2,300 MW of available wind generation.[1] In the best-case scenario, with perfect aggregation, up to 8,000 MW of summer-performing resources are left with no winter aggregation partner. Like a game of musical chairs, when the music stops, some participants have no place to land. A mismatch exists, and the issue cannot be fully solved by aggregation.

The loss of summer resources will likely result in a significant cost impact to customers. PJM’s Independent Market Monitor estimated that without seasonal resources, costs could increase between $1 billion to $5 billion across PJM.  Besides the customer impacts, the market will also lose some of its cleanest sources of generation. Unlike year-round DR resources that typically have backup generators, summer-only DR often relies on reductions in onsite consumption, such as by lowering air conditioning. Solar generators previously allowed to participate based on their higher summer output also will be excluded, absent pairing with scarce winter resources.

These cross-cutting issues motivated Rockland Electric to join environmental groups, including the Natural Resources Defense Council and the DR industry group Advanced Energy Management Alliance, in a joint protest at FERC. In separate responses, state agencies and other energy companies also expressed displeasure with PJM’s proposal and the loss of summer resources.

FERC Support Should not Waver

FERC has historically supported demand-side resource and renewable generation participation in wholesale markets.   FERC proposed a rule in November that would open up access for smaller resources like batteries, which often have limited runtimes, to wholesale market revenues. In Orders 719 (2008) and 745 (2011), FERC enabled market participation by DR, while recognizing its benefits for creating just and reasonable rates. Through Order 764, FERC encouraged promulgation of market rules to better include variable energy resources. Allowing PJM to block access to these summer-only resources would undermine past efforts and effectively dismantle one of the country’s largest DR markets. Instead of allowing PJM’s untested approach, FERC should direct PJM to return to their summer, winter and annual resource comparability standards.

Shelly Lyser and Joel Yu are senior energy policy advisors for Rockland Electric. Rockland Electric, a wholly owned subsidiary of Orange and Rockland Utilities, which in turn is owned by Consolidated Edison Inc., is a transmission owner within PJM.

[1] PJM aggregation filing, pg. 21. https://elibrary.ferc.gov/IDMWS/common/opennat.asp?fileID=14400145