After a record-breaking winter in which it narrowly avoided load shedding, PJM says it is confident it can keep air conditioners running this summer. But forward prices suggest costs may be higher than last year.
“Our experience with extreme seasonal weather and conditions over the past couple of years has helped us to better prepare for hot summers [such as] the one we expect this year,” Mike Kormos, executive vice president for operations said in a press release last week.
PJM’s summer peak is forecast at 157,279 MW, a 1.3% increase over 2013’s forecast and virtually identical to last summer’s actual peak.
With 183,220 MW of installed generation capacity and 11,160 MW of demand response and energy efficiency, PJM says its reserve margin will exceed 25%, well above the required 16.2%. The RTO’s all-time peak was 165,492 MW in July 2011.
Transmission Upgrades
PJM said reliability will be enhanced by transmission upgrades completed since last summer, including two bulk electric system transformers and about 500 MVAR of shunt capacitors.
In its own summer assessment last week, the Federal Energy Regulatory Commission said congestion in PJM should be reduced thanks to two 500-kV projects scheduled to enter service in June, the Mount Storm-Doubs rebuild and the Hopatcong-Roseland segment of the Susquehanna-Roseland project.
National Outlook
FERC said forecast reserve margins are adequate across the country despite a net reduction of 10 GW in capacity since last summer, including a 2.5 GW cut in PJM. The commission said it is expecting a hotter than normal summer although some forecasters are predicting an El Nino, which could moderate temperatures.
The hurricane forecast is slightly below average, with 10-12 named storms expected, four or five of which are likely to become hurricanes.
Electric futures for the summer have jumped since November, with increases of 19% to 30% for the Mid-C, NYISO Hudson Valley and ISO-NE hubs. PJM-West is up by about 25%. [See chart]
FERC said the increases reflect the boost in natural gas futures resulting from winter demand, which left storage inventories below normal. Henry Hub summer futures averaged $4.81/MMBtu in early May, 84 cents above 2013. Prices in the Mid-Atlantic are up almost 20%. Prices in New York City are about equal to last summer, 58 cents below Henry Hub.
With gas futures more than $1/MMBtu higher than coal futures, coal generation is likely to exceed gas, FERC said. Some coal-fired generators had difficulties obtaining fuel deliveries during the winter due to ice on barge routes and congestion and equipment problems on the rails. Rail network congestion will continue in some areas this summer because of competing demand from oil shipments in the Dakotas and the Upper Midwest.
The North American Electric Reliability Corp.’s summer Reliability Assessment said that pipeline maintenance and storage refills during the summer could limit natural gas availability for generators lacking firm service.
NERC also forecast adequate reserve margins but warned of potential challenges in ERCOT and MISO.
Below is a snapshot of FERC’s and NERC’s regional assessments:
CAISO: Gas-fired generation is likely to increase to offset lower hydropower output due to a prolonged drought. This could result in pipeline congestion and high gas prices although increased solar generation may provide some relief.
ERCOT: ERCOT forecasts a 15% reserve margin, just above its 13.75% target, thanks to four new combined-cycle plants totaling 2 GW. The generation is expected to enter commercial service by August, when Texas load typically peaks. “However, an early season heat wave could stress the system before these new facilities are available,” FERC warned.
MISO, SPP: MISO and SPP should benefit from lower production costs this summer: MISO as a result of the addition of the MISO South region and SPP from the launch of new markets in March. SPP added a day-ahead market with transmission congestion rights, a real-time balancing market and a price-based operating reserve market. It also combined multiple areas into a single balancing authority.
MISO’s reserve margin is slightly above NERC’s 14.8% requirement but lower than last year’s 18.1% due to generation retirements and suspensions, and limits on transfers between MISO’s traditional footprint and MISO South.
NYISO, ISO-NE: Transmission improvements will help the Northeast. The Greater Springfield Reliability Project should reduce congestion in western Massachusetts and northern Connecticut while full service of the Neptune line will increase imports to Long Island. FERC expects increased interchange between PJM and NYISO following changes in congestion management on the Ramapo line. Demand response will also be important on peak days.
