CHANGES IN PJM S DEMAND RESPONSE A GUIDE FOR CHARTING AN ENERGY MANAGEMENT COURSE

Transcription

1 CHANGES IN PJM S DEMAND RESPONSE A GUIDE FOR CHARTING AN ENERGY MANAGEMENT COURSE

2 In January 2014, the Polar Vortex brought extremely cold temperatures to the PJM region. The unusually frigid conditions caused generation outages and energy resources in the PJM region to become unavailable. PJM knew they had to take action. To ensure reliability, we re doing everything humanly possible. If the lights aren t on, nothing else matters. Terry Boston, PJM President and CEO 2014 PJM Annual Report

3 To guard against future outages like the ones experienced during the Polar Vortex, PJM proposed to the Federal Energy Regulatory Commission (FERC) a redesign of the region s Reliability Pricing Model (RPM). The proposals sought to eliminate existing or traditional capacity products in the market and replace them with two new products: Capacity Performance (CP) Base Capacity (BC) The redesign was approved by FERC, assuring that these new products would be introduced into PJM for the 2018/2019 Base Residual Auction (BRA) and transitioned in for the 2016/17 and 2017/18 delivery years via special transitional auctions. The current three product structure in PJM will be replaced for the 2018/2019 years by a two-product model. The new model takes what had previously provided three options of DR participation PJM and (starting in 2018) will offer two. Current: 2018/2019: Limited DR Base Capacity (BC) Summer Extended DR Capacity Performance (CP) Annual DR

4 To understand how these new changes in PJM will affect demand response in the market, we need to consider how the capacity program is currently structured in PJM. Right now, there are three types of demand response (DR) in PJM. Each is defined by the number of months during the year the participant is involved in DR and may be called by PJM to curtail their energy use. Each type of DR also has different compliance hours. Limited DR - runs from June through September. Compliance hours from 12pm-8pm Summer Extended DR - runs from June through October and the following May. Compliance hours 10am-10pm Annual DR - runs year round, from June through May. Compliance hours June through October and May 10am- 10pm, November through April 6am-9pm.

5 JAN FEB MAR APR MAY JUNE JULY AUG SEPT OCT NOV DEC On On On On SUMMER EXTENDED HOURS ANNUAL DR LIMITED DR PJM will allow current capacity resources to clear as Base Capacity for 2018/19 and 2019/20. At that time, all capacity resources in PJM must clear the BRA as Capacity Performance.

6 BASE CAPACITY DEMAND RESPONSE ( BC ) Base Capacity exists essentially as a transition for capacity resources that have difficulty being available beyond the summer months. The Base Capacity DR product is a hybrid between the Limited DR and Summer Extended DR products. To many DR customers currently enrolled in Summer Extended or Limited DR, this program is similar to the one they in which they are participating. The two big changes with BC are : 1) The event duration moving from 6 and 10 hours to 12 hours 2) The noncompliance penalty charge will be an hourly rate. CAPACITY PERFORMANCE DEMAND RESPONSE ( CP ) Capacity Performance was largely designed to provide higher capacity payments to CP generation resources as an incentive for their being available year round, especially in the winter. The 3 main changes with CP from traditional DR are: 1) The winter GLD (Guaranteed Load Drop) 2) The duration of events from 6 and 10 hours to 12 and 15 hours 3) The noncompliance penalty charge will be a hefty hourly rate.

7 NOW THAT YOU KNOW THE FACTS, WHICH IS THE RIGHT COURSE TO TAKE? When you re a CPower customer, you re never alone when it comes to energy management. Your CPower team will guide you every step of the way as your business works to attain its energy goals. Your CPower team includes a dedicated group of knowledgeable professionals committed to studying the PJM market and will explain to you and your colleagues every aspect of the market s changing regulations. Your CPower Energy Team is standing by and ready help you at a moment s notice with advice and guidance. And, of course, we re always a phone call away to answer any questions you may have. We understand that energy management is not a one-size-fits-all endeavor. That s why we spend the necessary time to learn about the intricacies of your business. We then take what we ve learned and work with you in creating an optimized energy management strategy that suits your specific needs. Contact us to receive your complimentary energy consultation from a CPower energy expert.

8 Energy is forever in motion. At CPower, we never stop moving in our pursuit to help your organization master its energy spend. Glenn Bogarde, VP & General Manager for PJM www.

9 GLOSSARY OF TERMS Base Residual Auction (BRA) The Base Residual Auction is conducted to allow for the procurement of resource commitments to satisfy the PJM region s unforced capacity obligation for the Delivery Year and allocates the cost of those commitments to Load Serving Entities (LSEs) through a Locational Reliability Charge. Capacity The amount of electric power delivered or required for which a generator, turbine, transformer, transmission circuit, station, or system is rated by the manufacturer delivery year. Federal Energy Regulatory Commission (FERC) The Federal Energy Regulatory Commission regulates the price, terms, and conditions of power sold in interstate commerce and regulate the price, terms and conditions of all transmission services. FERC is the federal counterpart to state utility regulatory commissions. For example, FERC sets and enforces the wholesale electric rates that investor-owned utilities charge rural electric cooperatives and other wholesale customers; also licenses hydroelectric projects. Hours Block of time when energy demand and price is low (off-peak) or high (on-peak). Reliability Pricing Model (RPM) PJM s capacity market, called the Reliability Pricing Model, ensures long-term grid reliability by securing the appropriate amount of power supply resources needed to meet predicted energy demand in the future.