RTO Insider reports that PJM Interconnection is placing a limit on the amount of capacity from generators outside the PJM region that can clear PJM’s RPM auction next May. This is bad news for Midwest transmission hustlers like Clean Line with all their talk of exporting wind power to the East Coast.
According to RTO Insider, the new limits will reduce the amount of imported capacity that clears next year’s RPM by 17% compared with the May 2013 auction.
The change will put upward pressure on capacity prices. How much it will help generators inside PJM, who have been hurt by the fall in capacity prices resulting from competition from both imports and demand response, is unclear.
In response to a question from Susan Bruce, representing the PJM Industrial Customer Coalition, PJM Executive Vice President for Markets Andy Ott said he believed the import limit will be “smaller magnitude in dollars” than a demand response proposal that members rejected yesterday. The DR proposal would add about $1 billion a year in capacity costs according to PJM’s simulations. (See related story PJM Wins One, Loses One on Capacity Market Changes)
In response to a later question from the Maryland Public Service Commission’s Walter Hall, Ott gave a response that seemed to undercut that certitude, saying “We do not have an estimate, nor could we get an estimate, as to the import limit” impact.
There are a number of variables that could affect future clearing prices, including the strength of the economy and the volume of demand response. DR offers dropped 27% in May from the 2012 auction. A rebound in DR offers next year could at least partially offset the import restriction.
It is good to see PJM taking steps that will help encourage new generation and demand resources in PJM instead of building new transmission capacity to handle more imported power.