WASHINGTON — PJM needs to slow the pace of generation retirements to avoid reliability problems by the end of the decade, CEO Manu Asthana told the Electric Power Supply Association last week.
In a keynote address to EPSA’s Competitive Power Summit on March 21, Asthana said PJM faces increasing loads from electrification and data center growth and that new supply resources have not kept pace with retirements because of clogged interconnection queues, siting obstacles and supply chain constraints.
“I think the math is pretty straightforward,” Asthana said. “I think we need to add [supply resources] faster … but I also think we need to subtract slower and subtract generation only when the replacement generation is here at scale. I really think that’s critical.”
In February, PJM’s Board of Managers invoked an accelerated stakeholder process to address the potential generation shortfall, which the RTO outlined in a staff white paper.
PJM currently has 190 GW of installed capacity to serve its 150-GW peak load, “a very healthy reserve margin,” Asthana said.
But by 2030, PJM expects its data center load could rise to 10 to 15 GW in addition to increasing loads from electrification of heating and transportation.
The RTO forecasts at least 40 GW of generation is at risk of retirement by 2030. “So … suddenly, that 150-GW/190-GW reserve margin starts to look really not enough by 2030,” Asthana said.
Most of the retirements are expected because of state and federal environmental and climate policies.
“Policy reasons are harder to reverse. It’s not that you can send a market price signal that will necessarily override policy signals,” Asthana said. “It is worth noting, though, that several of our states have worked with us to put reliability offramps in place for their policies.”
New Jersey will allow generators to seek an extension of CO2 compliance deadlines if a unit shutdown would impact grid reliability. Illinois officials will allow generators to seek limited, temporary exceptions to the emissions ceiling in the Climate & Equitable Jobs Act “if they are deemed necessary to maintain the reliability of the Bulk Electric System.”
Asthana said PJM is attempting to solve the challenge by streamlining its interconnection process, fine-tuning capacity accreditations of resources and considering changes to the capacity market.
Having won FERC approval for its revised queue procedures, Asthana said PJM is working “feverishly” to hire additional staff and consultants and automating processes to increase its interconnection throughput. “I’m not sure that’s going to be enough,” he said, citing “supply chain pressure” and siting issues.
Although the RTO has 260 GW of proposed resources in its queue, last year less than 2 GW was added to the system. “When you do the math — when you look at the rate of retirements, you look at the rate of growth, and you add in the current rate of throughput for our queue — we are headed for some trouble. And that trouble is likely to find us later in this decade,” Asthana said.
Increasing Winter Risks
Asthana said the stakeholder process is focused on the capacity market, including modeling the RTO’s increasing reliability risks in winter and whether changes are needed to the Capacity Performance (CP) construct.
The week before, PJM had presented the Resource Adequacy Senior Task Force a preliminary proposal to overhaul its capacity market. The RTO said its proposal would improve modeling, resource accreditation, testing and market power mitigation rules. (See PJM, Stakeholders Present Initial Capacity Market Proposals to RASTF.)
CP, which increased performance bonuses and nonperformance penalties, was initiated in response to widespread outages during the 2014 polar vortex. Yet during the bitter cold over the Christmas weekend last year, one-third of gas-fired generation in the RTO’s Northeast was unable to operate because of inadequate winterization, Asthana said.
“We had actually asked this question of the gas industry after Winter Storm Uri in Texas around our vulnerability in our region to that sort of freeze-off. And I think we and the gas industry believed that actually we were adequately weatherized up in the Northeast. And it turns out, we encountered a condition for which we were not ready,” he said.
PJM expects to issue at least $1 billion in CP penalties over the generation outages. (See PJM Weighs Options for Winter Storm Elliott Follow-up.)
“I think it’s appropriate for us to ask ourselves is that [CP] penalty structure correct [for] the future? Did it achieve what it needed to achieve? Do we need to make modifications to it? And also, I think it’s appropriate to ask, is the risk that capacity suppliers are taking on as a result of their capacity commitment and that capacity penalty structure — are they able to pass that through in their offers?”
Asthana dismissed suggestions that PJM’s challenges require abandoning competitive markets. “I know there are voices out there that are using this opportunity to say, ‘Hey, are markets actually the right tool to do this? And I think that drumbeat is going to just continue, because there are a lot of people that have entrenched positions against markets,” he said.
“I would submit to you [that] every grid operator in the world is struggling with these questions, whether they are markets-based, whether they are not markets-based. And in fact, within PJM, we have vertically integrated utilities; we’ve got restructured utilities; we’ve got a whole mix of participants, who have all benefited from our market structure that we have collectively put in place and nurtured over the last 25 years. And the evidence is strong that there are billions of dollars of efficiency [obtained] through the power of competitive markets. And so, I encourage everyone to remember that as we think about the future and think about designing the changes to our markets. They’re complex, but very, very necessary, and very, very worth it.”
EPSA CEO Todd Snitchler, who led a question-and-answer session after Asthana’s speech, said PJM’s challenges are “a five-day-a-year problem. It’s not a 365-day-a-year problem. But it’s mission-critical when it happens.”
Snitchler noted that PJM’s 13-state footprint includes states such as Maryland and New Jersey, which have adopted aggressive climate policies, and fossil fuel-producing states such as Ohio and Pennsylvania. Does PJM tailor its message based on the audience, he asked?
No, said Asthana, describing the RTO as “the interested truth teller.”
“We’re interested in reliability; we’re interested in helping our states achieve their decarbonization objectives as well, but doing it reliably,” he said. “So we try to say the same thing … regardless of who we’re talking to.
“We don’t have different messages for different audiences. That would not work, because they talk to each other.”
