VALLEY FORGE, Pa. — PJM has reduced its installed reserve margin (IRM), largely because of a drop in the equivalent forced outage rate (EFORd), stakeholders learned at last week’s Planning Committee meeting. (See “IRM Study Approved but Criticized for Lack of Winter Analysis,” PJM Markets and Reliability and Members Committees Briefs.)
The IRM dropped nearly 1 percentage point from 16.6% to 15.8% for delivery year 2021-2022, thanks to an anticipated fleet-wide EFORd reduction from 6.59% to 5.89%. PJM calculated EFORd — which measures the probability a generator will fail completely or in part when needed — for the existing generation fleet and the fleet expected in future study years.
PJM’s Tom Falin said the reduction is mostly because of the retirement of old coal and nuclear units, which have higher EFORds, and the increase in new gas-fired units, which have lower failure rates. The IRM is developed from the past five years of NERC’s Generating Availability Data System (GADS) data, so the 2011 data rolled off as the 2016 data was added.
However, the reductions will have little effect on prices, Falin said, because the updated forecast pool requirement (FPR), which impacts the Reliability Pricing Model, increased just .0006 to 1.0898. The FPR is calculated by multiplying 1 plus the IRM by 1 minus the average EFORd.
Cleared PRD Forces Manual Revisions
PJM’s John Reynolds presented proposed Manual 19 revisions that have become necessary, in part, because of price-responsive demand (PRD). The changes align the method to forecast PRD with the method for forecasting demand response.
“Some of these changes are predicated on the fact that, after being around for about eight years, we finally have some cleared price-responsive demand,” Reynolds said. “Because we haven’t had any price-responsive demand, we don’t have a history of the cleared [megawatts] becoming committed.”
While DR customers can receive payments for reducing their energy use, PRD customers save money by cutting or shifting their electricity use in response to dynamic prices.
The DR forecast is based on auction results, influenced by a historical analysis of how many megawatts that cleared were eventually committed in the delivery year. PJM will use limited historical data for the analysis until PRD has been around long enough to mirror the DR process. Reynolds said the forecast method was revised to reflect the observation that fewer resources were registering as DR in the delivery year than had cleared in the delivery year’s Base Residual Auction — the result of market participants buying out of the commitment in one of the three Incremental Auctions (IAs) between the BRA and the delivery year.
Esam Khadr of Public Service Electric and Gas questioned whether too much emphasis was being placed on an untested product at the expense of capital-intensive generation “you know that … is going to be here for 40 or 50 years.”
“We’re planning the system for many years to come on something that may or may not exist two or three years from now,” he said.
“I think it should also be recognized that the revenue requirements for those 40 or 50 years are also there, regardless of whether that capacity is needed by customers for 40 or 50 years or not,” responded John Farber of the Delaware Public Service Commission. “Whereas demand response having a much shorter planning horizon would not have that type of revenue requirement.”
In response to a question from Calpine’s David “Scarp” Scarpignato, Reynolds explained that PJM performed “due diligence” to determine that the PRD resources that cleared had transitioned from being DR resources. The distinction affects forecasting.
Budget Unveiled
PJM’s Jim Snow presented the RTO’s preliminary 2018 budget. The $42 million in planned capital expenditures is dominated by technology upgrades and replacements.
“Really what this is doing is allowing us to maintain those systems that we built during the AC2 era,” Snow said, referring the more than $50 million spent at the beginning of the decade to build a backup control room.
RTEP Window Results
PJM’s Mark Sims reviewed results from the first proposal window of the 2017 Regional Transmission Expansion Plan, which closed on Aug. 25. PJM, which had requested proposals to correct 40 reliability violation flowgates, received 51 proposals from 10 entities addressing nine target zones. The RTO defines a flowgate as an overloaded facility in its models paired with a contingency violation. There were 29 greenfield projects and 22 transmission owner upgrades.
PJM’s reliability analysis for 2022 identified five additional “immediate need” baseline upgrades that will be performed by incumbent TOs. Four of the upgrades are in PSE&G’s zone and one is Pennsylvania Electric. Another project was identified to address high-voltage issues at the Davis-Besse nuclear power plant in the ATSI zone.
Two other projects were included because they met Dominion’s “end of life” criteria. Additionally, two supplemental projects in the American Electric Power zone and three in Dominion were approved, along with a rebuild and upgrade of PSE&G’s Mason substation, which was damaged in Superstorm Sandy.
Sims said PJM plans to present all of the projects to the Board of Managers in October and recommended them for inclusion in the RTEP.
— Rory D. Sweeney