Yesterday, PJM Interconnection released the results of its Reliability Pricing Model auctions for capacity for 2017-2018. This time, you can believe me.
In the 2014 auctions, the overall capacity price doubled from about $59 per megawatt day to $120 per megawatt day. This year’s results continue the year to year seesaw of capacity price trends. It appears that while demand remains flat (and PJM’s optimistic demand projects have been revised downward continuously for years), three factors have contributed to reductions in supply of capacity offered in the auction: obsolete, expensive coal plant closures, new restrictions on demand resources offered in the market and limits on imported capacity allowed on the market.
Diversity of supply continues as renewable capacity and natural gas-fired power offered continued its steady rise. Although demand resources declined from last year’s high, energy efficiency resources offered on this year’s market showed a continued increase. The increase in diversity, both in source types and in location within PJM resulted in far fewer geographic disparities in capacity prices across PJM, as evidenced by this kind of smudgy graph from the report showing past price trends:
Summary of Results
The 2017/2018 Reliability Pricing Model (RPM) Base Residual Auction (BRA) cleared 167,003.7 MW of unforced capacity in the RTO representing a 20.1% reserve margin. When the Fixed Resource Requirement (FRR) load and resources are considered the reserve margin for the entire RTO is 19.7%.
Resource Clearing Prices (RCPs) for the 2017/2018 BRA are shown in Table 4. The RCP for Annual Capacity Resources (Generation, Annual DR and EE Resources) is $120/MW-day across the entire RTO except for the PSEG LDA where the Annual RCP is $215.00/MW-day. The PSEG is only locational constrained LDA in the 2017/2018 BRA as the capacity import levels are below the capacity import limit for all other modeled LDAs. The Annual RCP in the rest of RTO Region increased from $59.37/MW-day in the 2016/2017 BRA to $120.00/MW-day in 2017/2018 BRA. The Annual RCP in the MAAC region increased slightly from $119.13/MW-day in the 2016/2017 BRA to $120.00/MW-day in the 2017/2018 BRA; and the Annual RCP in the PSEG LDA decreased slightly from $219.00/MW-day in the 2016/2017 BRA to $215.00/MW-day in the 2017/2018 BRA.
The Maximum Limited DR Constraint for the overall RTO is a binding constraint in the auction resulting in a price decrement for Limited DR of $13.98/MW-day relative to the RCP of Extended Summer DR for resources located in the same LDA; and, additionally, the Maximum Sub-Annual DR Constraint for the PPL LDA is a binding constraint resulting in a price decrement for Extended Summer DR of $66.02/MW-day relative to the RCP of Annual Resources located in the PPL LDA.
The RCP for Limited DR, Extended Summer DR and Annual Resources located throughout the RTO except for the PSEG LDA and the PPL LDA is $106.02/MW-day, $120.00/MW-day and $120.00/MW-day, respectively. In the PSEG LDA, the RCP for Limited DR, Extended Summer DR and Annual Resources is $201.02/MW-day, $215.00/MW-day and $215.00/MW-day, respectively. In the PPL LDA, the RCP for Limited DR, Extended Summer DR and Annual Resources is $40.00/MW-day, $53.98/MW-day and $120/MW-day, respectively.
The total quantity of new generation capacity resources offered into the auction was 6,587.3 MW (UCAP) comprised of 6,128.1 MW of new generation units and 459.2 MW of uprates to existing generation units. The new generation includes facilities that were previously slated for deactivation, but were reactivated and are switching fuel types. The quantity of new generation capacity resources cleared was 6,267.3 MW (UCAP) comprised of 5,927.4 MW (UCAP) from new generation units and 339.9 MW from uprates to existing generation units.