PJM Demand Resources Putting Nails in PATH Coffin

Here is the latest news from PJM’s Reliability Pricing Model (RPM) auction.

Renewable resources, including demand response and energy efficiency, made up nearly 68 percent of the new capacity available and about 10 percent of the resources clearing PJM Interconnection’s recently completed capacity auction.

PJM today announced the results of its Reliability Pricing Model (RPM) capacity auction for resources to meet customers’ electric power demand in the June 1, 2014 to May 31, 2015 delivery year.  RPM commits resources three years in advance to be made available to preserve reliability.

“The increase in demand resources follows the introduction of two new demand resource products in addition to the existing product — one available throughout the year and another available for an extended summer period,” said Andrew Ott, PJM senior vice president-Markets. “There was more than a 50 percent increase in the amount of demand resources that cleared this year over last year.

And:

In PJM’s MAAC area the price of capacity will be $136.50 MW-day, a decrease of about $100 from last year.  (The MAAC price applies to the transmission zones of Baltimore Gas and Electric Company, Metropolitan Edison Company, Pennsylvania Electric Company, and PPL Electric Utilities, Atlantic City Electric, Delmarva Power, Jersey Central Power and Light Company, PECO, Public Service Electric and Gas Company, and Rockland Electric Company.) The non-MAAC region, will pay the RTO price of $125.99, an increase of about $100. This region includes western Pennsylvania, western Maryland, Ohio, Indiana, Michigan, Kentucky and Virginia.

“The convergence of prices between the eastern and western regions of the market is primarily driven by the significant reduction in forecasted load growth through 2014/2015,” Ott said.

The difference in power prices between western PJM and the Mid-Atlantic region of PJM (the MAAC referred to above) was supposed to be why Project Mountaineer and PATH were such great ideas back in 2005.  Now PJM has discovered that developing ways for electrical utilities to actually make money from demand reduction and increasing efficiency is a much cheaper solution to this “problem.”  It is happening, just as we predicted.

Prices between eastern and western PJM, at least in the RPM capacity markets are “converging” rapidly.  Why?  Because if demand management “products” that PJM has introduced and small, but steadily growing renewable electricity generation in the Mid-Atlantic region.  Intervenors in the TrAIL case in both WV and East Virginia predicted this, and all of us who have beaten the PATH project have repeated this fact for the last three years.

Don’t believe all the power company talk about declining demand being caused by the “recession.”  Just look at what is actually happening in the electricity markets in PJM.