Ohio Energy. Workshop O. PJM 201 A Deeper Dive Into the Regional Electricity Market Operated by PJM and How Electricity Prices Are Impacted

Transcription

1 Ohio Energy Workshop O PJM 201 A Deeper Dive Into the Regional Electricity Market Operated by PJM and How Electricity Prices Are Impacted Tuesday, February 21, :15 p.m. to 4:30 p.m.

2 Biographical Information Frederick S. Stu Bresler, Senior Vice President Operations and Markets PJM Interconnection LLC, 2750 Monroe Blvd., Audubon, PA Frederick S. Stu Bresler, senior vice president Operations and Markets, PJM Interconnection, is responsible for all aspects of PJM s operations and market functions. Mr. Bresler s responsibilities cover 24x7 operation of dual, redundant control centers utilized for the conduct of real time transmission and generation and dispatch, reliability coordination, and training as well as the engineering analysis required to conduct these functions and support the critical energy management systems. Frederick Mr. Bresler s responsibilities also include the conduct of all the markets operated by PJM including those for Capacity, Day-Ahead and Real-Time Energy, Ancillary Services, and Financial Transmission Rights. He is responsible for Demand Response operations, and the market efficiency component of the Regional Transmission Expansion Planning process. Mr. Bresler is responsible for the continued evolution of PJM s markets, including the integration of renewable resources, and the development of analytics around the performance of those markets. Mr. Bresler has been involved with bulk power system operations and the development and implementation of electricity markets for capacity, energy, transmission rights and ancillary services for over 20 years. Mr. Bresler spent the first seven years of his career at PJM in System Operations, directly supporting dispatch through day-to-day transmission and generation analysis. He then was also responsible for the development and implementation of PJM s demand response programs, as well as the systems and market design development necessary to support the expansion of the PJM markets. He lead the development of mechanisms by which PJM s operations and markets are coordinated with those of surrounding balancing authorities and regional transmission organizations. Mr. Bresler earned a Bachelor of Science in Electrical Engineering and an Master of Management in Business Administration from The Pennsylvania State University. He is a licensed professional engineer in the state of Pennsylvania. Mr. Bresler is chair of the Board of PJM Technologies, Inc., a PJM subsidiary. Mr. Bresler is also chair of the Board of APEx (the Association of Power Exchanges), an international organization formed to facilitate development and communication of ideas and practices in the operation of global competitive electricity markets. PJM Interconnection, founded in 1927, ensures the reliability of the high-voltage electric power system serving 61 million people in all or parts of Delaware, Illinois, Indiana, Kentucky, Maryland, Michigan, New Jersey, North Carolina, Ohio, Pennsylvania, Tennessee, Virginia, West Virginia and the District of Columbia. PJM coordinates and directs the operation of the region s transmission grid, which includes over 81,000 miles of transmission lines; administers a competitive wholesale electricity market; and plans regional transmission expansion improvements to maintain grid reliability and relieve congestion. Visit PJM at Frederick

3 Biographical Information Kevin Murray, Executive Director, Industrial Energy Users-Ohio 21 East State Street 17th Floor, Columbus, Ohio Kevin Murray is the Executive Director of the Industrial Energy Users-Ohio and a Technical Specialist in the Columbus, Ohio office of McNees Wallace & Nurick LLC. He has worked with customers addressing matters that affect the pricing, availability and reliability of natural gas, electricity and other utility services. His experience includes evaluating regulatory proceedings at the Federal Energy Regulatory Commission and various state agencies; providing analysis of proposed tariff or rate offerings; assisting in the development of regulatory and commercial strategies; and providing clients assistance in utility contract negotiations, utility and site selections for new facilities, and performing competitor analysis and analysis of customer usage patterns. He has assisted customers on committing energy efficiency projects towards electric distribution company portfolio obligations to comply with recent legislative requirements. He has been extensively involved in activities related to the creation and start up of regional transmission organizations and energy markets in the Midwest. He is a sector representative for end use customers on the Midcontinent ISO Advisory Committee and previously served as committee chairman. Prior to joining McNees Wallace & Nurick LLC, Mr. Murray spent twelve years with a large industrial corporation where his duties including managing a 20,000 DTH per day natural gas portfolio for the company s Midwest facilities and participating in natural gas, pipeline and electric utility contract negotiation. He also was a company representative at the Electricity Consumers Resource Council (ELCON) and Process Gas Consumers (PGC), where he participated in the development of regulatory advocacy positions and worked with outside counsel representing the company in regulatory proceedings. Mr. Murray also spent several years in supervisory positions in manufacturing operations. Mr. Murray received a Bachelor of Science degree in Metallurgical Engineering from the University of Cincinnati.

4 PJM 201: A Deeper Dive 21 st Annual Ohio Energy Management Conference February 21, 2017 Stu Bresler SVP, Operations and Markets PJM Interconnection PJM 2016

5 $/MW-Day 20 0 Capacity Market Clearing Prices (2007/ /2020) RTO Average Trend $ / / / / / / / PJM 2016

6 Energy Market Price (LMP) Trend 3 PJM 2016

7 Declining Electricity Demand Growth 4 PJM 2016

8 Declining Electricity Demand Growth Total Energy Consumption in PJM 5 PJM 2016

9 Distributed Energy Resources 6 PJM 2016

10 Impact of Increasing Variable Energy Resource Penetration Regional markets reduce Variable Energy Resource integration costs: Characteristic Impact to Integration Cost Larger balancing areas Reduces overall increase in variability Less regulation and ramping service required Faster markets, i.e., shorter scheduling intervals (5-15 minutes) Less regulation required to accommodate intra-hour variations Larger geographic area Increases weather diversity and reduces overall variability Centralized wind power forecasting Regional / Interregional Transmission Planning Cost-effective approach to reduce scheduling impacts Cost-effective upgrades to ensure grid reliability and mitigate congestion 7 PJM 2016

11 Installed Capacity by Fuel Source 8 PJM 2016

12 Cumulative Generator Capacity Additions 80% Gas Total=36,000 MW Since PJM 2016

13 Gas/Electric Coordination Evolution Coordination 2015 Capacity Performance approved EIPC Study Complete Protocol for information sharing with PJM Pipelines MOU with PJM Pipelines FERC Order 809 Modify timing of the Day- Ahead Market FERC Order Hourly Gen Offers LDC transparency & information sharing Capacity Performance Phase In 2016 Capacity Performance Implemented Increased coordination with pipelines and LDCs Improved fuel cost policy approval process Shortened the DA market clearing time to < 3 hours Awaiting a FERC Order on Hourly Gen Offers LDC transparency & information sharing 2017 Fuel Security Study Further development of pipeline flexibility initiatives 10 PJM 2016

14 PJM Focus Areas Environmental Policy Impacts of governmental actions Impacts of Shale Gas Distributed Resource Integration Targeted Evolution Markets Evolution Planning Evolution/Order 1000 Gas/Electric Coordination Positioning for Opportunities Security and Resilience Physical Security and Substation Criticality Grid Resilience and Cyber Security Fuel security / fuel mix analysis 11 PJM 2016

15 PJM 201: A Deeper Introduction Into PJM s Regional Electricity Markets What is on the Horizon? 21st Annual Ohio Energy Management Conference February 21 22, 2017 Kevin Murray McNees Wallace & Nurick LLC 21 East State Street 17th Floor Columbus, OH Direct Dial: murraykm@mcneeslaw.com

16 PJM What is on the Horizon? Since PJM Interconnection ( PJM ) began operating a regional electricity market in 2016, the market has been constantly evolving The presentation identifies known future market changes, as well as changes that may be in the works PJM market responds to internally and externally driven markets 13

17 Today s Topics Seasonal aggregation of capacity resources Five minute settlements Shortage pricing Notice of proposed rulemaking on fast start resources Growing transmission charges State actions that may affect PJM markets 14

18 Seasonal Aggregation of Capacity Resources Under current capacity performance rules, aggregation of capacity resources is permitted subject to conditions: Limited to Capacity Storage Resources, Intermittent Resources, Demand Response ( DR ), Energy Efficiency ( EE ) or Environmentally Limited Resources Bilateral pairing of resources Same local delivery area Paired summer and winter resources 15

19 Stakeholder Feedback on Seasonal Aggregation Locational deliverability area ( LDA ) restriction blocks logical pairs (wind in West, solar in East) New rules needed for winter measurement of DR Bilateral contracting a challenge 16

20 PJM Proposal on Seasonal Aggregation 17 On November 17, 2016, PJM sought Federal Energy Regulatory Commission ( FERC ) approval to modify its tariff to allow: Cross LDA aggregation New measurement and verification for winter demand response Matched pairing through auction rather than bilateral contracts Winter interconnection rights Requested effective date of January 19, 2017

21 Order 825 On June 16, 2016, FERC issued a final rule 1 requiring organized power markets to: Align settlement and dispatch intervals by settling real time energy, operating reserves and intertie transactions financially at the same time interval that it dispatches energy, prices, operating reserves and schedules intertie transactions Trigger shortage pricing for any dispatch interval during which a shortage of energy or operating reserves occurs RM ; Order No. 825

22 PJM Compliance Order 825 On January 11, 2017, PJM submitted proposed tariff revision to comply with Order 825 Five minute settlements No changes to day ahead settlements Most real time settlements moving to five minutes for generators Most settlements for load proposed to continue to use hourly integration 19

23 PJM Compliance Order 825 Scarcity pricing Triggered by a real time shortage of primary reserve or synchronized reserves Two step demand curve when scarcity triggered $300 per MWH penalty factor when scarcity triggered Additional $850 MWH penalty factor if scarcity persists Requested effective date of 2/1/18 for five minute settlements and revised scarcity pricing 20

24 FERC NOPR on Fast Start Resources On December 15, 2016, FERC issued a Notice of Proposed Rulemaking ( NOPR ) (RM17 3) proposing minimum pricing for fast start resources Comments due 60 days after publication in the Federal Register No guarantee of final rule or that final rule will match proposed rule 21

25 FERC NOPR on Fast Start Resources Must apply fast start pricing to any resource committed that can start up within 10 minutes or less, has a minimum run time of one hour or less, and submits economic energy offers to the market Should incorporate commitment costs, such as start up and no load costs, of a fast start resource in energy and operating reserve prices during the resource s minimum run time 22

26 FERC NOPR on Fast Start Resources 23 Must modify its fast start pricing to relax the economic minimum operating limits of fast start resources and treat them as dispatchable from zero to the economic maximum operating limits for the purpose of calculating prices May allow an offline fast start resource to set prices, but only if the resource is feasible and economic for addressing certain system needs Must incorporate fast start pricing in both the day ahead and real time markets

27 What Is Transmission? Bulk transfer of energy over long distances at high voltages via interconnected lines that form a network or grid Wholesale service regulated by FERC Transmission assets owned by Transmission Owners ( TOs ) Ohio TOs: ATSI (FirstEnergy), Dayton Power & Light, Duke Energy Ohio, Ohio Power Company PJM serves as Transmission Provider Opportunity for competitive entry under FERC Order

28 Increasing Transmission Charges In recent years, transmission revenues (and the resulting rates to retail customers) have increased significantly, in some cases exponentially The need for transmission has increased as older fossil fired units retire and newer units enter service Renewables also require transmission to get to market Utilities shifting to more regulated investments in order to grow/stabilize earnings For insights on what is driving transmission rate increases and steps customers can undertake to manage them, attend Workshop EE at 11:15 a.m. Wednesday 25

29 Transmission: Growing Component of Energy Bills 26

30 Transmission: Growing Component of Energy Bills (component 8 above) 27

31 State Actions that May Impact RTO Markets Recently, both state commissions and state legislatures 1 have taken actions that some have argued favor particular generation resources and/or technologies The New York Public Service Commission issued an order adopting a zero emission credits program that will result in payments of $17.54 per MWH for the output associated with certain in state nuclear facilities Currently challenged in federal district court FERC also requested to act in response Public Utilities Commission of Ohio ( PUCO ) considers actions to assist utility financial performance FERC requested to act in response No final PUCO orders 1. I would be remiss if I did not recognize actions by the federal government such as the PTC and ITC. 28

32 State Actions (continued) The Illinois General Assembly passed legislation signed into law that provides $238 M annually for up to 10 years to help ensure operation of Clinton and Quad Cities nuclear plants The legislation also expands Illinois renewable portfolio plan FERC requested to act in response Legislation scheduled to take effect June 1, 2017 The Connecticut Senate passed legislation in its last session to assist the Milestone nuclear generating facility House did not enact legislation Legislation expected to be reintroduced this session Michigan enacted comprehensive legislation that allows the state Public Service Commission ( PSC ) to set a state compensation mechanism for capacity under certain circumstances PSC being contested at FERC in MISO related proceeding 29

33 Takeaways Regulatory churn continues to be more of the norm rather than the exception at both the state and federal levels No sign of this condition abating; it may be getting worse The good news is we have lots of low cost and abundant natural gas much of it proximate to Ohio Customers need to be proactive at the state and federal level to protect their interests and ensure reasonable outcomes Proactive rather than reactive Knowledge = Power 30

34 Questions? 31