VALLEY FORGE, Pa. — Recognizing stakeholder concerns, PJM postponed a planned vote at last week’s Planning Committee meeting on its proposal to adjust the analysis process for market efficiency transmission projects. (See “PJM Seeks Changes to Market Efficiency Process,” PJM Planning and Transmission Expansion Advisory Committee Briefs: Nov. 9, 2017.)
PJM’s Asanga Perera acknowledged questions about the proposed problem statement and issue charge, which would reconsider the timing of market efficiency windows, how projects are selected, modeling and benefit calculation and how rejected projects are reevaluated.
During the meeting, stakeholders posed questions related to their specific interests.
Greg Poulos, executive director of the Consumer Advocates of the PJM States (CAPS), asked whether resiliency would be factored into project evaluation.
“Any project that we would put into the [Regional Transmission Expansion Plan], we would look at it for resilience as well,” PJM’s Paul McGlynn assured him.
LS Power’s Sharon Segner asked how cost-containment would factor into evaluations. PJM’s Sue Glatz said it’s being discussed.
Ryan Dolan with American Municipal Power asked about treatment of supplemental transmission projects.
“All we’re trying to do is point to issues we’re concerned about,” he said.
The special interest inquiries drove PJM’s Steve Herling to discuss level setting.
“We have to keep some of these things separate in the problem statement,” he said.
Cost-containment in Proposals
PJM unveiled proposed revisions to its Operating Agreement and Manual 14 to include cost-containment provisions and redaction requirements discussed at recent special sessions of the committee. (See PJM Stakeholders Battle over Cost Cap Rules.)
Terms and conditions relative to a cost cap commitment will be public information, though specific supporting information may be eligible for confidential treatment with appropriate explanation. PJM said it plans to limit cost cap evaluation to construction costs because they are the largest and most enforceable component of the overall cost.
Segner noted that other grid operators allow other cost-containment factors, such as annual revenue requirements and return on equity, and asked Poulos what the process would be to propose that PJM evaluate their inclusion in any evaluation.
“As you know, competition is something the [state consumer] advocates have wanted in this process — and even more competition,” Poulos said.
Other market issues requiring attention are piling up quickly, he said, so there has been nothing but discussions among advocates on the idea.
“The ratemaking process is where we feel is the appropriate place to take any additional challenges,” Glatz said, effectively punting the issue to FERC.
Alex Stern with Public Service Electric and Gas praised PJM for keeping conversation on the issue constructive.
“A number of [transmission owners] were concerned about the entire process as it went, but PJM ensured it remained … a challenging but collaborative process,” he said. It produced a “negotiated resolution, which I think is a fair direction for how to handle this at this juncture.”
Segner said she wouldn’t “necessarily agree on” Stern’s characterization because the result is a “significant deviation from what every other organized market in the country is doing relative to cost containment.”
One stakeholder chimed in from the phone to ask that because “cost containment is voluntary to start with, why would we put a limit on … that if they offer it?”
Glatz reiterated that PJM’s role doesn’t involve ratemaking and that construction costs are a “firm number,” while “the financing and ratemaking tends to have a lesser impact overall.”
Resilience in Planning
PJM’s Mark Sims told stakeholders to anticipate proposed rule changes in January to address planning for resiliency. Stakeholders requested that the topic be split off into a separate task force to facilitate additional discussion. PJM acknowledged the request. (See “Resilience in Planning,” PJM Planning/TEAC Briefs Oct. 12, 2017.)
Competitive Proposal Fees
The past two years have produced a deficit of $58,119 on evaluating Order 1000 competitive projects, PJM’s Michael Herman said. The numbers aren’t final, he said, but they represent a very good estimate.
Given that the evaluations cost $1.688 million and PJM collected $1.63 million, Herman said, “We think we did a pretty good job estimating the amount of money we would need to perform these analyses.”
With only two years of data to consider, PJM staff see refining the process as a “moving target.”
“Based on that, we feel it isn’t appropriate to make any changes to the process at this point,” Herman said.
The analysis showed this year’s deficit was offset by surplus collections last year. The costs include internal hours spent on evaluations, along with external costs for consulting on constructability and other analyses.
Herman said he’d have to follow up on Segner’s request for a breakdown of internal versus external spending. “While we do have some level of detail as to what variation on what was analyzed … I think it’s a little premature to jump to conclusions about trends,” Glatz said.
Herling acknowledged that “anything that’s outside of our wheelhouse gets expensive” and that “as a general matter, some of the external consultants are the bigger dollar” expenses.
PJM plans to return next year with additional data and draw more conclusions. If a change is needed, the plan would be to file it with FERC in early 2019.
Segner and Dolan expressed concern about supplemental projects being submitted by TOs that compete with projects submitted through competitive bidding.
“There’s no question that the supplemental projects as they’re submitted the way it works right now is problematic,” Segner said.
“People lob in a supplemental project at the 11th hour,” Dolan said. “Something is wrong with the process.” He also asked why a proposal fee shouldn’t also be required for supplemental projects.
2018 Preliminary Load Forecast
The RTO’s preliminary forecast for 2018 is more optimistic about demand than in previous years, PJM’s John Reynolds explained.
The forecast compares predictions for 2021 and 2023 with last year’s forecast. Summer demand during those years decreased slightly from last year’s forecast, but winter demand held steady or increased. The forecast for summer 2021 fell 0.7%, but the forecast for summer 2023 was down 0.1%.
Demand in winter 2020-21 was the same as last year’s forecast but increased 0.4% for 2022-23. Increases in the equipment index, which measures demand for heating, cooling and other uses, was the biggest factor.
Reynolds said that non-retail behind-the-meter generation transitioning to demand response was expected to be a major factor in the forecasts but ended up causing “very small changes” after some generators backed out after learning what would be required to make the transition and others learned they were already treated as DR.
Renewables Can Increase CIRs Through Hybrid
A PJM study found that renewable resources can increase their capacity factors upward of 33% by combining wind and solar into a hybrid generator.
The analysis provides a pathway for increasing capacity injection rights (CIRs), which indicate the threshold at which the RTO can curtail renewable resources injecting power onto the grid. By increasing their CIRs, renewable generators can essentially ensure they can produce more power more often.
PJM’s Jerry Bell said the analysis found that the generating capabilities of wind and solar units are often underutilized because they are operating at different times. Combining them creates a higher capacity factor.
The analysis focused on a 2.5-MW wind turbine combined with a 1-MW solar array, and Bell noted the 2017 results might be higher than normal because it was an above-average wind year.
“It’s feasible that we could … get a reasonably better capacity factor for the hybrid product,” he said.
The hybrid may be more attractive for PJM’s Reliability Pricing Model because it’s “less volatile” than the resources individually.
Gabel Associates’ Travis Stewart asked about studies combining renewables and storage. Bell said some proposals exist.
“I think it comes down to the metering and what’s going on,” Bell said.
— Rory D. Sweeney
