PJM fuel security study could lead to market changes

Source: Sam Mintz, E&E News reporter • Posted: Tuesday, May 1, 2018

The country’s largest electric grid operator, PJM Interconnection, is kicking off a study of fuel security that could lead to changes in the way its capacity market operates.

The process announced today is a response to shifts in how the grid gets its electricity, spurred by a steadily advancing wave of retirements of coal and nuclear plants and a marked increase in the use of natural gas-powered generation.

“While the grid remains fuel secure given these changes, the potential for continued evolution of the fuel mix underscores concerns … about the need to examine the long-term resilience of the grid,” PJM said in a release.

The grid operator will establish criteria to value and price fuel security in a study to be completed in the next six months.

“Looking into this for the future is important,” PJM CEO Andrew Ott told reporters today.

After the study is complete, PJM will incorporate any changes that are found necessary into its markets, potentially as soon as next year.

Specific vulnerabilities in PJM’s system will be modeled as “constraints” in its capacity market, the same way the grid operator currently models transmission issues. The capacity market allows utilities and other electricity suppliers to purchase power to meet demand three years in advance.

The modeling will take geography into account.

“Recognizing that the PJM region is large and diverse, generation located, for example, on top of a Marcellus shale field does not face the same fuel security issues as a generator more distant from supply and connected to a lateral pipeline served by a single natural gas distribution company,” PJM wrote in a summary of the study.

The specific, locational fuel security vulnerabilities would be modeled in the capacity market to “ensure that each zone and sub-zone in PJM is able to maintain reliable service during a disruptive event that could last several days,” PJM wrote.

One of the potential attributes that PJM said it could decide to value in a new way is on-site fuel supply, the same metric that was the basis behind a doomed bid by the Department of Energy to prop up coal and nuclear plants last year.

PJM has opposed another potential pathway for the federal government to help specific plants, in the form of a request from embattled utility FirstEnergy to the Department of Energy to issue an emergency order under Section 202(c) of the Federal Power Act. That request remains under review by DOE, but it has the attention of President Trump (E&E News PM, April 5).

In its response to FirstEnergy’s request, PJM said the federal agency should turn it down because the grid operator is examining these issues on its own and there is no imminent crisis.

“We do believe, and certainly our analysis shows, that we are both reliable and fuel secure,” Ott told reporters today. “We do not have a vulnerability we feel today, but that’s the point; we have to do the analysis to make sure we’re not going to have one in the future.”

Ott said the timing of the fuel security study announcement is not tied to the ongoing consideration of the 202(c) request.

“The timing is driven by a combination of factors, including the focus on a national level on resilience, the focus at FERC, the growing concerns of an attack on infrastructure,” he said.