Ohio and Pennsylvania lawmakers met in Columbus for a hearing on the future reliability of the PJM grid, quizzing RTO and industry insiders on the role states can have in maintaining resource adequacy.

Much of the Feb. 1 discussion centered around the concerns PJM expounded on a year ago in its so-called “4R’s” report (“Resource Retirements, Replacements & Risks”), which laid out a scenario in which a significant number of thermal generators deactivate and take their capacity offline faster than renewables can replace it. (See “PJM White Paper Expounds Reliability Concerns,” PJM Board Initiates Fast-track Process to Address Reliability.)

PJM Senior Vice President of Governmental and Member Services Asim Haque — a former chair of the Public Utilities Commission of Ohio — said the RTO has made strides in improving generator performance since December 2022’s Winter Storm Elliott, when 46,124 MW were unable to perform. He pointed to a 16,119-MW peak forced outage rate during the winter storm of mid-January.

Two proposals PJM filed with FERC last year following the Critical Issue Fast Path (CIFP) process aim to further incentivize capacity resources to take the steps necessary to perform during extreme weather and to rework components of the Reliability Pricing Model (RPM) to send the market signals the RTO sees as necessary to address the longer-term resource adequacy concerns at the heart of the 4R’s report. One of those filings (ER24-99) was approved by the commission last week, while an order on the other (ER24-98) is expected Feb. 6. (See related story, FERC Approves 1st PJM Proposal out of CIFP.)

While PJM is adjusting its markets to address the possible imbalance between retirements and new entries, Haque said the majority of the anticipated deactivations through 2030 are because of state and federal policies.

“Part of the reason we’ve been doing this sort of road tour is this concept of avoiding policies that push resources off of the grid until a replacement quantity has been added to the grid. So this is something that we’ve been trying to tout and explain to policymakers across the footprint,” he said, adding that the other side of the coin is finding ways of working with states to speed development of new generation.

ReliabilityFirst President Tim Gallagher said its latest reliability study identified policy decisions as a top risk to the grid for the first time and urged legislators to ensure that changes are designed to leave time for analysis to understand potential ramifications.

“Right now it looks to me like the effort to remove conventional resources from the grid is outpacing our ability to keep up with it. … None of the problems associated with transitioning to a greener grid are unsolvable or insurmountable; they just take time, and they take money. So I think the single biggest thing you can do as policymakers is ask the right questions,” Gallagher said.

Public Utilities Commission of Ohio Chair Jenifer French said PJM’s focus should be on maintaining reliability and a diverse portfolio of generation types to avoid overdependence.

“We must refocus PJM’s capacity market on its basic purpose — resource adequacy and reliability — rather than the promotion of state or federal policy initiatives that undermine that purpose,” she said.

NERC President James Robb said the 1-in-10 reliability target long used in the electric industry is on its way to becoming antiquated as growing electrification decreases consumers’ tolerance for grid outages that may disrupt home heating or electric vehicle charging. As those changes in consumer demand drive load growth not seen in decades, Robb said new risk vectors demand the attention of grid operators and regulators.

The inverter-based resources substituting for coal, gas and nuclear generators raise questions about their ability to provide essential reliability services, such as frequency control, Robb continued. Significant load growth is also occurring rapidly and in regions that have historically had flat load profiles, both because of electrification and energy-intensive industries like data centers. Threats from bad actors also are manifesting, with hackers targeting utilities in ransomware attacks and extremist groups damaging physical infrastructure.

One of the largest obstacles to addressing those risks is constructing new transmission and gas pipelines, Robb said. He noted that the only major interstate power line built in the past 20 years, the 500-kV SunZia line between Arizona and New Mexico, took 17 years to get final construction permits.

“That’s completely out of whack with the pace of change that we’re dealing with. … It’s due to issues such as cost allocation; it’s due to issues such as siting; and it’s due to a range of policy issues that are making it very, very hard to legitimize projects to attract investment,” he said.

Ohio state Sen. Kent Smith (D) said PJM is sounding the alarm on resource adequacy and reliability, but he noted that in its December 2023 Long-term Reliability Assessment, NERC rated the RTO as being at normal risk.

Robb said the level of risk it has seen across the U.S. has been steadily growing to now include elevated concerns with PJM’s neighboring balancing authorities, raising the possibility that those regions will lean on the RTO during emergencies. He added that the 4R’s report looked at a longer horizon than NERC’s annual analysis and predicted that the risks it presented will manifest in assessments released over the next few years.

Pennsylvania state Sen. Gene Yaw (R), chair of the Senate Environmental Resources and Energy Committee, asked what obstacles there are to new resources coming online to meet the growing imbalance between supply and demand.

“PJM has had to get its house in order to ensure that our markets appropriately reflect what we are seeing in this energy transition and incent reliability,” Haque said. “So we’ve done capacity market reform; there’s one more filing that’s outstanding, and it relates to market power mitigation, and in our opinion, the market is being over-mitigated right now.” He added that additional changes are being made to the reserve and regulation markets.

Speaking on the hearing’s second panel of the day, Glen Thomas, president of GT Power Group, said there are also numerous market structures at PJM that are discouraging investment in the RTO’s capacity market. He pointed to FERC’s 2021 approval of a tightened minimum offer price (MOPR) that allowed resources receiving state subsidies to avoid being mitigated to their cost-based offers, a stringent market seller offer cap (MSOC) and Capacity Performance (CP) penalties exceeding $1 billion following Winter Storm Elliott. (See 3rd Circuit Rejects Challenges to PJM MOPR, Affirms Authority over FERC Deadlocks.)

Thomas said comments submitted by the Pennsylvania and Ohio utility commissions were instrumental in supporting the CIFP proposal the commission approved in January and encouraged the states to remain engaged at the federal level, both with FERC and on EPA rule proposals.

Ohio Manufacturers’ Rebuttal

The Ohio Manufacturers’ Association (OMA) questioned PJM’s message that long-term reliability is at risk in a Jan. 31 briefing, raising commissioned analysis of the 4R’s report that suggested that the RTO had not adequately accounted for shifting market signals if resource deactivations accelerate and intermittents fail to keep up.

Go Sustainable Energy CEO John Seryak, who drafted OMA’s rebuttal to PJM’s study, said in such a scenario the capacity market would automatically produce market signals that would incentivize developers to speed up or make investments that allow existing resources to comply with the environmental regulations the RTO predicts may cause their deactivation.

OMA President Ryan Augsburger argued that PJM is overstating reliability risks in a manner that will lead to higher rates for consumers and said repeat tinkering with the capacity market design has led to delays in running Base Residual Auctions, depriving investors of market signals and confidence in the markets.

“While Ohio manufacturers agree that future shortfall risks should be taken seriously, we believe that PJM’s ‘Resource Retirements, Replacement & Risks,’ or 4R’s report, overstates this situation and only caters to the desires of its utility company members to justify expensive new investments that they will pass on to ratepayers, thus exposing manufacturers and others customers to significant new costs,” Augsburger said.

Brad Belden, president of Belden Brick and chair of the OMA Energy Commission, said PJM needs to balance reliability with customer affordability to avoid onerous electric rates that discourage economic growth.

“The OMA-commissioned review of the grid operator, PJM, raises a lot of questions that remain unanswered by PJM,” Belden said. “Their own report showed that new gas and renewable power, along with much of our existing generation, could meet the meets through 2030, even with any plant retirements, but PJM is seeking changes to its markets that could be costly. With plenty of natural gas and renewable energy waiting in line to provide power, we’re not sure why PJM is making costly changes.”

Ohio Consumers’ Counsel Maureen Willis said her office protested the CIFP filings, arguing that they should not be made prior to the next capacity auction and that further understanding is needed to understand the costs they could pose for ratepayers.

“There’s this push by PJM and others to scare lawmakers and other regulatory authorities into acting immediately without actually considering the consequences of their actions or without knowing the costs to consumers,” she said.