VALLEY FORGE, Pa. — PJM presented the Markets and Reliability Committee with an expedited proposal to revise how it measures and verifies the capacity contribution of energy efficiency (EE) resources, drawing alarm bells from market participants that the RTO is moving too fast and making changes outside the stakeholder process.
The proposed changes shown during the Feb. 22 MRC meeting would focus on how a baseline estimate of energy consumption is determined to measure the load reduction provided by an EE installation. It would require that the providers use the most recent relevant Technical Reference Manual (TRM) published within the past three years when conducting studies of current baseline load or use meter data if standards are not available or applicable. It also would have to be demonstratable that the project was initiated with the goal of wholesale market participation and the equipment being replaced was fully operational and would have continued to be in use.
EE providers also would be required to demonstrate that the installation of the more efficient technology was completed and that they had exclusive rights with end users to enter the installation into the capacity market to prevent double counting.
Pete Langbein, PJM’s manager of demand side response operations, said staff saw value in seeking improvements to the EE measurement and verification processes prior to the next Base Residual Auction, scheduled for June 2024. The proposal was brought under an issue charge at the Market Implementation Committee to broadly look at EE participation in the capacity market and consider if any changes are needed ahead of the next auction. (See “Stakeholders Begin Review of Energy Efficiency Resources,” PJM MIC Briefs: Dec. 6, 2023.)
Equipment replacements that go beyond the standards outlined in TRMs would continue to qualify as EE, but the amount of compensation they receive might change under the proposal, Langbein said.
Several stakeholders argued PJM is bypassing the stakeholder process by introducing a proposal at the MRC without first going through the typical package formation and endorsement process at the MIC. PJM first presented the changes during a Feb. 21 MIC special session.
Luke Fishback, of Affirmed Energy, said the MIC issue charge was brought in part to ensure the definition of EE resources in the manuals reflects tariff language, an effort he does not believe would be advanced by PJM’s proposal. He argued the redlines are hasty and would introduce conflicts between the manuals and governing documents.
Requiring EE providers to enter into contracts with each end user to guarantee that installations are participating in only one program would add a substantial barrier to participation, Fishback said. He agreed with PJM that it’s critical that double counting be prevented, but he said more stakeholder deliberation is needed to find a workable solution, particularly given how little time there is because contracts need to be finalized ahead of the next capacity auction.
Several market participants and state regulators, plus Independent Market Monitor Joseph Bowring, argued the language requiring that installations be dependent on capacity market revenues is unverifiable and questioned what evidence PJM would find acceptable.
Angela Fox, Affirmed Energy’s chief markets officer, said requiring end-use customer information could conflict with privacy laws and obstruct program participation.
Exelon Director of RTO Relations Alex Stern said it’s important that states be informed of the changes being recommended and how they may impact any EE programs in their states. State-sponsored programs may find they are no longer eligible for capacity market revenues, which may impact the ability to continue to offer EE benefits to low-income consumers if those programs use wholesale market revenues to offset the cost to taxpayers.
Asim Haque, PJM senior vice president of governmental and member services, said staff are scheduling a briefing with the states to discuss the changes.
Without a full stakeholder process during the formation of the proposal, CPower Senior Vice President of Regulatory and Government Affairs Ken Schisler said the changes have not been vetted by members and they are not addressing a problem that has previously been articulated. He presented a proposal built off PJM’s redlines which he argued would resolve many of the issues stakeholders identified with the changes.
The CPower proposal would eliminate the requirement that projects be tied to capacity market participation, the end-use consumer data collection language and the three-year requirement for TRMs — instead using the most recent manual.
Highlighting the challenges with PJM’s proposal, Schisler gave the example of an EE project to replace insulation in the home of an individual with a respiratory illness. He argued the dual benefits of reducing electric heating load paired with reducing health risks that may be present could make it difficult to show the causal link between the project and capacity market revenues that PJM’s language would require.
He also stated many of the TRMs in use would be deemed ineligible due to the age of their last update, which would constrain the ability to administer EE programs in many states under PJM’s proposal.
