Experiences of PJM and Other US Markets in a Deregulated Environment What has worked and what are the challenges? Andrew Ott Executive Vice President, Markets, PJM May 27, 2014 PJM©2014 Market Evolution • • • • • Ancillary Services Markets • Regulation • Synchronized Reserves • Day-Ahead Scheduling Reserves • Black Start Services • Reactive Services Day-Ahead Energy Market Real-Time Energy Market Capacity Market Financial Transmission Rights Auctions Gas/Electric Market Coordination 2 PJM©2014 What has worked and what are the challenges? • • • • • • Successes Increased Operational Efficiency / Congestion Management Increased Competition Efficient Entry and Exit Promoting Innovation Capacity Market (PJM) Demand Response / Alternative Resources www.pjm.com • • • • 3 Challenges Transmission Cost Allocation Resource Adequacy Gas/Electric Market Coordination Market Boundary Issues PJM©2014 PJM Market Expansion – A Case Study AEP / Dayton / Commonwealth Edison Integration into the PJM Market Change in Transmission Interconnector flows Key Study Conclusions: • Bilateral Trading could only achieve 40% of the efficiency gains of LMPbased market • Incremental benefit of LMP Market Integration = $180 Million annually, Net Present Value over 20 yrs is $1.5 Billion Referenced with Permission: Source: Erin T. Mansur and Matthew W. White, “Market Organization and Efficiency in Electricity Markets,” March 31, 2009, Figure 2,pg 50, discussion draft. 4 PJM©2014 Managing a Sea-Change 6/1/2013 5 PJM©2014 Transitioning from Coal to Gas 2009 to Date: 28,000 MW in Retirement Notices 6 PJM©2014 PJM Forward Capacity Market, 2007-2015 Demand Resource Additions Cumulative Generator Capacity Additions 7 PJM©2014 PJM Market – Average Power Generation Emissions Pounds Per MWh of Electricity Produced PJM Average Emissions (lbs/MWh) 1,350 9 Carbon Dioxide Sulfur Dioxides Nitrogen Oxides 1,250 8 7 6 CO2 1,200 5 1,150 4 1,100 3 1,050 SO2 and NOx 1,300 2 1,000 1 950 0 2005 2006 2007 2008 2009 8 2010 2011 2012 2013 PJM©2014 Natural Gas System & Resources in Eastern Interconnection 9 PJM©2014 Coordination Issues 1 and 2: Timing of Offers and Nominations and Clearing Issue: Timely gas nominations are due at 12:30pm EPT the day before (Day 1). Electric “awards” are made at 4pm EPT the day before (Day 1) 3.5 hours later; actual gas flow occurs starting at 10am EPT on Day 2 Source: NERC report on Gas Electric Interdependency 10 PJM©2014 PJM LMP vs. Henry Hub Natural Gas Price Coefficient of Correlation = 0.83 11 PJM©2014 Fuel Cost Adjusted LMP (referenced to 1999 fuel prices through September 2013) 12 PJM©2014 Industry Evolution Evolution of Supply Evolution of Demand Market Evolution • Traditional resources • Technology enabled flexibility • Improvement in optimization and control systems Less flexible • Alternative resource growth • Renewable resources • Enhanced capability to provide grid services Intermittent •Development of Forward Demand Response Control Signals • Less capability to provide power grid services www.pjm.com • More real-time markets to reward consumer flexibility 13 PJM©2014 Advanced Market Systems •Industry Leadership •Customer Focused eLoad Response •Technology Resource Control Application Time-coupled Optimization •Business Resiliency •Security •Dual Control Centers www.pjm.com 14 PJM©2014 Evolution of Demand • Trends – Increase in customer commitment to curtail demand during high price periods – Smart Grid Technology deployment – Retail rate innovation • Operational Implications – Increase in customer response to price – Aggregated demand resources providing high quality grid services – Increasing operational confidence in DR performance www.pjm.com 15 PJM©2014 Evolution of Alternative Resources • Storage – Stationary Battery • Ancillary Service supply • Integration with intermittent resources – Water Heaters – Compressed Air – Electric Vehicles • Integrated renewable resource and building management systems • Integrated distributed resources www.pjm.com 16 PJM©2014 Demand Response Evolving Revenue Streams • Nearly 25% of synchronous reserves are provide by DR • DR revenues grew from around $1.4 million in 2002 to over $1 Billion annually www.pjm.com 17 PJM©2014 Demand Response Impact Probable Load Curve without DR Load Drop from Emergency DR Resources www.pjm.com 18 PJM©2014 Grid-Scale Energy Storage System – 32 MW Battery Laurel Mountain Wind Farm 98 MW 61 turbines Battery Storage Lithium-ion (A123) Power 32 MW, Energy 8 MWh 40 30 10 0 -10 www.pjm.com 19 04:00 03:50 03:40 03:00 02:50 02:40 02:30 02:20 02:10 02:00 01:50 01:40 01:30 01:20 01:10 01:00 00:50 00:40 00:30 00:20 00:10 -40 03:30 -30 03:20 -20 03:10 TREG Dynamic Signal GENMW -TREG 00:00 MWs of Regulation 20 PJM©2014 Aggregated Demand Resource Response to Synchronized Reserve Event Aggregation 13,078 Residential Customers Wireless Integrated Control Platform Curtailed Load Event graph www.pjm.com 20 PJM©2014
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