FERC approves plan for accommodating seasonal capacity resources in PJM market

The Federal Energy Regulatory Commission has signed off on changes to the PJM Interconnection's capacity market rules aimed at encouraging more eligible resources to participate in that market.

In doing so, the commission approved enhancements to the grid operator's aggregation rules to make satisfying the stringent requirements established for capacity performance resources — in particular, the mandate that they be capable of operating predictably year round — easier for storage, intermittent, demand response, energy efficiency and environmentally limited resources, collectively referred to as seasonal resources.

However, the commission in a separate concurrent order ruling on two complaints challenging the capacity performance rules acknowledged that the year-round requirement may be raising costs to consumers unnecessarily and that stand-alone market participation by certain seasonal resources may not harm reliability. FERC accordingly set a refund effective date for those complaints and directed staff to hold a technical conference to look into whether certain aspects of the capacity market construct are performing as well as expected.

Through its reliability pricing model market, PJM secures capacity resources three years in advance of when those resources are expected to be needed. In an effort to ensure that resources committed as capacity are available to meet the region's reliability needs, FERC in June 2015 largely signed off on PJM's proposal to recognize two capacity products with different performance requirements and gradually phase out the lower-performing "base capacity" product by 2020.

But anticipating that the year-round requirement for the "capacity performance" product would shut out some resources from its 2017 annual capacity auction, the first in which all resources procured would be for the higher performing product, PJM in November 2016 proposed tariff changes (FERC docket ER17-367) designed to facilitate the aggregation of seasonal resources.

The following December, several load-serving entities filed a complaint (EL17-32) asserting that PJM's proposal did not go far enough to rectify the problems the capacity performance scheme created for seasonal resources, and a similar complaint (EL17-36) was tendered to FERC soon thereafter by the Advanced Energy Management Alliance. In both cases, the complainants argued that year-round availability is not necessary for all resources since capacity needs in PJM traditionally have varied by season.

In accepting PJM's proposed tariff changes, FERC on Feb. 23 agreed with the grid operator that eliminating the requirement that aggregated resources be within the same locational deliverability area will improve seasonal resources' ability to participate in the markets without negatively impacting reliability or price signals.

FERC similarly accepted PJM's proposal to change the way it grants winter-period capacity interconnection rights to wind resources and environmentally limited resources in order to increase the amount of seasonal capacity eligible to aggregate. The commission agreed that those two resource types "are uniquely situated with respect to the disparity between their winter-period and summer-period capabilities, and that this distinction is significant enough to support an accommodation that facilitates their participation in the ... market."

Finally, FERC approved the grid operator's plan to modify its rules for measuring and verifying demand response performance in the winter, which PJM said will ensure that customers receive load-reduction credits because they actually reduce their load and not simply because they had no load in the first place.

As requested by PJM, FERC agreed to allow the revisions related to resource aggregation and winter-period interconnection rights to take effect retroactive to Jan. 19, 2017, and revisions related to demand resource measurements and verification retroactive to June 1, 2017.