Energy Policy

PJM Capacity Market Results 2020/21

The PJM Base Residual Auction (BRA) for the 2020/2021 Delivery Year was recently completed. The PJM capacity auction allocates the cost of the resource commitments to satisfy PJM’s unforced capacity obligation for the Delivery Year and allocates the cost of these commitments to load serving entities and ultimately retail customers. The forward capacity auction is conducted three years in advance of the actual Delivery Year. A Delivery Year runs from June-May annually. A customer’s overall cost for capacity is demand based. Capacity costs are determined by a customer’s peak usage from the previous summer season. This cost also considers the price that “cleared” in their zone during the planning year auction.

PJM’s capacity market is referred to as the Reliability Pricing Model (RPM). RPM ensures long-term grid reliability by procuring resources for the power supply they will provide in the future. This amount is based on a peak energy demand that is forecasted by PJM. The RPM represents a commitment by a generator to provide energy to the grid for a specific period of time.

Capacity market participants offer or “bid” power supply resources that will either increase energy supply or reduce demand. These resources include new generators, upgrades for existing generators, demand response (consumers reducing electricity use in exchange for payment), energy efficiency and transmission upgrades. The revenue from the auction is used to pay the supply resources for their commitment to supply electricity.

Starting in Delivery Year 2020/2021, consumers will have further protection against power supply interruptions and price spikes during system emergencies. These system emergencies are often caused by extreme weather. As a result of the Polar Vortex in the winter of 2013-2014, PJM instituted changes to its capacity construct. These changes make power supply resources more accountable for reliable delivery of electricity during emergency situations. The 2020/2021 BRA was the first auction where PJM procured 100% Capacity Performance Resources (CP).

Over the last two years, Capacity Performance required progressively higher percentages leading up to the latest auction. Going forward, all auctions will be 100% compliant to the current Capacity Performance standard. Capacity Performance Resources must be “capable of sustained, predictable operation” and able to perform when needed throughout the Delivery Year.

Details from the 2020/2021 RPM Base Residual Auction (BRA) are as follows:

  • The auction cleared 165,109 MW of unforced capacity representing a 23.3% reserve margin for the entire Regional Transmission Organization (RTO). This is 6.7% higher than the target reserve margin of 16.6%.
  • The total quantity of Demand Response (DR) that was procured in this year’s auction was 7,820 MW. This is a decrease of 2,528 MW from that procured in last year’s auction.
  • The total quantity of Energy Efficiency (EE) that was procured was 1,710 MW. This is an increase from last year of 195 MW.
  • Renewable resource participation included 888 MW of wind offered into the auction and 504 MW clearing while the solar resources that were offered-in and cleared totaled 125. The Resource Clearing Prices (RCP) are shown in the table and map below.
  • The RTO clearing price is $76.53/MW-day, while the congested zones of the MAAC region cleared at $86.04, EMAAC at $187.87, COMED at $188.12 and DEOK at $130.00.

The electricity supply situation in PJM continues to grow overall. This is resulting in downward trending capacity prices in most of the RTO. However, there are still congested zones. These zones continue to experience higher clearing prices. This congestion is due to various structural limitations that challenge the deliverability and reliability of supply into the regions in the near-term.

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Source: PJM

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