PJM’s Latest Report on Economic Congestion

Keryn, once again, has dug out a very interesting new report from PJM Interconnection’s Transmission Expansion (Expansion?  Why not Improvement?) Advisory Committee, or TEAC.  Go to her post here to see her great analysis of the report and, in particular, why the Susquehanna-Roseland transmission line is such a bad deal, for all of us.

Every so often, PJM’s TEAC does an assessment of economic congestion on its transmission system.  I use the term economic congestion, because PJM’s concept of “congestion” is not actual congestion of its transmission system, in the sense that electricity cannot get to certain areas.  In PJM’s definition, congestion means only that the “least expensive” generated electricity can’t reach all parts of the system at a given time, and power must be dispatched to that area from a more expensive generator.  I put “expensive” in quotes, because PJM considers coal-generated electricity to be among the cheapest on its system only because in the past, coal’s market price was low.  Now we have clear evidence that there are all kinds of costs that are not included in the market price of coal which make coal a very expensive fuel.

In any case, PJM’s congestion is only economic, so I use the phrase “economic congestion” to remind readers of its real meaning.  Because the electricity purchased from more expensive generators costs more than the optimal least expensive option, the extra money that utilities have to pay for that power is called “congestion cost” by PJM.

“Congestion” and “congestion costs” were cornerstones of the Cheney secret energy task force back in 2000.  The Cheney report‘s conclusions were incorporated into the 2005 Energy Policy Act.  The 2005 EPAct ordered the US Dept. of Energy to create congestion analyses and designate “congestion zones” where the federal government, mainly FERC, was given extraordinary powers to control and force the construction of new high voltage transmission lines.  Of course, this was all a smokescreen designed to hide new transmission profit centers from the public behind scary words like “congestion” and “reliability.”

Early in 2011, the US Ninth Circuit Court of Appeals voided the entire US DoE congestion study process and eliminated DoE’s designated congestion zones.  In fact, the whole shebang from secret Cheney task force to the Ninth Circuit appeal was entirely unnecessary.  Regional transmission organizations, such as PJM, regularly do assessments of where and why economic congestion occurs on their systems.

Which gets us back to the latest PJM report.  Most of the report is spreadsheets of all the nodes on the PJM system where economic congestion occurs or is predicted to occur.  But on the third slide, we see PJM’s account of why the economic congestion on their system has changed:

Significant drivers of congestion differences in 2011 and 2012 simulation results.

  • Gas prices relative to coal much lower resulting in less coal units committed and less west to east transfers.
  • Reactive upgrades on high voltage system led to significant increase in reactive transfer capability for future years.
  • Decreased load forecast relative to previous years.
  • Generation portfolio shifts to include more gas due to sustained lower gas prices, coal retirements and a net increase in natural gas generating capacity near load pockets.
  • Emissions policies impact unit commitment/dispatch and shift to higher commitment of natural gas burning generation.

We opponents of PATH cited all of these reasons in our opposition to the PATH project.  And now they have been confirmed by PJM’s own analysis.  Here is what we said, in our filings a the three state PSCs, as well as evidence presented by experts in East Virginia, and on our blogs:

  • Building natural gas generating plants in eastern load pockets (areas with high load, but not much local generation) would eliminate local economic congestion.
  • Hyde Merrill, expert witness in East Virginia, specifically pointed to reactive power upgrades as a much better and cheaper solution to PJM’s voltage regulation problems than building new transmission lines.
  • As we pointed out repeatedly on The Power Line, from the time PATH was conceived in 2005 as part of Project Mountaineer, electricity demand in the US and on the East Coast has been falling, for the first time in US history.
  • Relatively low emission gas-fired natural gas plants can be located in or near high population load centers on the East Coast.
  • From the beginning of The Power Line in 2008, I pointed to falling natural gas prices and rising coal prices as drivers of a major shift away from coal as a power generation fuel.

Take a look at what the Project Mountaineer cheerleaders (WV Gov. Manchin among them) were saying about moving “low priced” WV electricity to the East Coast at the Charleston Love Fest back in 2005 to see just how wrong FERC, PJM and AEP/Allegheny were.

Not only were we right about PATH and economic congestion, we were 100% right.

Can anyone seriously argue that PATH is needed now?  Certainly PJM won’t.

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