By - Jim Vess

PJM capacity auction sees renewables, coal and natural gas rise while nuclear plummets

Energize Weekly, May 30, 2018

PJM Interconnection, the nation’s largest grid, saw prices jump more than 80 percent to $140 a megawatt-day across most of its grid in the annual capacity market auction. But even with the hike, many nuclear power plants couldn’t successfully bid.

The price increase was expected as a result of lower prices in energy markets, which bidders sought to make up for in the capacity market, and high entry costs for new generators to enter the market.

At the same time, the quantity of nuclear generation that cleared the auction decreased by 7,473 megawatts (MW), about a quarter of the grid’s total nuclear capacity.

PJM was able to secure a total of 163,627 MW of capacity, about 2 percent less than last year, giving the grid operator a reserve margin of 22 percent.

“If the results of PJM’s annual capacity auction showed anything it is that the markets are working as intended,” Adam Keech, PJM executive director of market operations, wrote in a blog.

PJM serves about 65 million customers in all or parts of 13 mid-Atlantic and Midwestern states and the District of Columbia. Regional prices varied in the grid and ranged as high at $204 a MW-day.

The auction saw the growth in renewable energy capacity, energy efficiency-linked capacity and aggregated or matched seasonal capacity. Natural gas and coal also saw increases.

“We are seeing an ever-increasing diversity of resources,” Stu Bresler, PJM senior vice president, operations and markets, said in a statement. “If you look at renewables, there was a significant increase in wind and solar.”

Wind capacity was up 60 percent from last year to 1,417 MW, and solar increased fourfold to 570 MW. A total of 2,832 MW of energy efficiency programs also cleared in the auction, an increase of 66 percent over the previous auction.

Aggregated capacity matches two seasonal resources to create an annual capacity, such as pairing a wind resource that can meet capacity in the winter with a solar resource for the summer. A total of 715 MW of aggregated capacity cleared the market, an 80 percent year-over-year increase.

“We’re pleased with the amount of renewable resources that were able to bid into our competitive auction,” Bresler said. “That diversity will serve our region well, giving PJM the resources with which to maintain reliability of the grid.”

The auction also saw a 500 MW increase in coal-fired capacity and a 1,000 MW increase in natural gas-fired capacity. The only resource that saw a decline was nuclear.

The reduction in nuclear wasn’t a surprise and was consistent with analysts forecast before the auction, Bresler said.

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