Monday, February 18, 2019

Factors in New PJM VRR Curve Still in Question

By Rory D. Sweeney

VALLEY FORGE, Pa. — PJM has altered one of its recommended revisions to its capacity auction demand curve in response to stakeholder pressure, and a coalition of generators is pushing for other changes.

Staff have agreed with stakeholder requests to recommend moving the curve 1% left, negating a 1% shift to the right when the curve was last analyzed in 2014 and reducing excess capacity. The recommendations are part of PJM’s quadrennial review of the variable resource requirement (VRR) curve in its Reliability Pricing Model capacity market construct.

Bodell | © RTO Insider

The announcement came at a Friday meeting of stakeholders interested in revisions to the curve. Tanya Bodell of Energyzt also provided an analysis funded by the PJM Power Providers Group (P3) that argued for retaining the current model of combustion turbine as the curve’s reference resource. A reference resource is representative of a peaking unit in the energy market that derives a significant portion of its revenues from the capacity market.

PJM is recommending switching from the Frame F to the Frame H of a General Electric turbine based on an analysis it commissioned from the Brattle Group, but Bodell said Frame F allows for flexibility and modularity, which is currently favored over unit size by market participants. Characteristics of the Frame H units are “so 2000s,” she said, because they’re designed and being used for “large, baseload combined cycle applications.” She noted that no Frame H units are being installed as CTs in PJM’s territory, and there is no evidence they will be, while Frame F units are. The mismatch would result in an inappropriate demand curve, she said.

“Going solely for the least-costly estimated technology can really squeeze out a lot of innovation and a lot of long-term gains that you can get from new technologies that are coming in,” Bodell said.

PJM VRR curve frame h units

PJM had a special meeting of the Market Implementation Committee on July 6th | © RTO Insider

Erik Heinle of the D.C. Office of the People’s Counsel thanked Bodell for the presentation and said it’s “worth considering” proposals for the F and the H frames as either CTs or CCs.

PJM is targeting Oct. 12 to make its filing for FERC approval, and seeking endorsement votes by the Markets and Reliability Committee on Aug. 23 and the Members Committee during a Aug. 31 teleconference.