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PJM Capacity Prices Fall 32% With More Nuclear, Solar Capacity Clearing at Recent Auction

Dive Brief:

  • PJM Interconnection’s high capacity prices are down 32% from $ 50 / MW-day to $ 34.13 / MW-day at $ 34.13 / MW-day, reflecting the latest rule changes, the grid operator said Tuesday.

  • According to the grid operator, PJM purchased 144,871 MW of capacity for $ 2.2 billion in the year of capacity beginning June 1, 2023, down from $ 4 billion at the last auction. The auction yielded approximately 160,874 MW, a decrease of about 11,333 MW from last year’s auction.

  • According to Scott Naiman, director of consulting firm ESAI Power, there has been a decline in coal production, a surge in cleared nuclear and new gas-fired products.

Dive Insight:

“Basically, a lot of supply is coming and with no significant change in demand, prices are going to fall,” Neyman said Wednesday. “And to prevent prices from falling further, the excess capacity cleared in ’22 / ’23 must have remained unsold at this auction, and it appears that much of it came from coal.”

Low capacity prices are often in line with analysts’ forecasts.

“We expect a relatively low clearing price for this auction (as well as the next auction in December) compared to the last few years, which makes sense given the energy market conditions,” Of the Dominion [fixed resource requirement] DecisionAnd for how long the PJM market remains relatively stable, Bill DuganThe Director of Optimization for Customized Energy Solutions Wholesale Services said in an email Tuesday.

Retrieved June 22, 2022 from PJM Interconnection

According to the grid operator, the auction results, coupled with an increase in the ability to win emissions-free resources, are a sign that the energy transition is underway at PJM.

“We are experiencing a constant transition to low carbon emission resources and we see that trend continuing in this auction,” Stu Bressler, senior vice president of marketing services at PJM, said in a conference call with reporters.

PJM Typically there are annual capacity auctions known as base residual auctions to secure capacity up to three years in advance. Failure to win capacity responsibilities is one of the factors that power plant owners decide to retire from those generating units.

Nuclear capacity of all 16,175 MW Constellation Energy in PJM cleared the auction, up from 9,900 MW last year, when the company’s Byron, Dresden and Quad Cities nuclear plants failed to meet capacity obligations, the company said in the Securities and Exchange Commission. Submission on Tuesday.

The Byron and Dresden plants are backed by new Illinois subsidies; Neyman noted that the Quad Cities plant near Cordova, Illinois, failed to clear because it was loosened at the last auction due to the strict minimum offer price rule.

Also, about 1,870 MW of solar capacity cleared the auction, about 1,510 MW The last auction, according to PJM, operates power systems and wholesale power markets in 13 Mid-Atlantic and Midwestern states and the District of Columbia.

According to Bressler, the amount of wind resources cleared from 1,730 megawatts to 1,295 megawatts in the last auction is partially offset by lower contributions.

Importantly, coal-fired cleared steam resources fell by 21%, from 34,870 MW to about 27,680 MW. According to PJM, the recession reflects the retirement of coal-fired power plants.

In total, approximately 21.6 GW of coal capacity has been cleared at the auction, down from 27.4 GW and 39 GW in the previous two auctions, according to Neiman. Looking ahead, the coal ash and ozone regulations could shut down additional coal units this decade, he said.

Combined-cycle units have cleared 48,030 MW, an increase of about 8% from the last auction, and combustion-turbine units have cleared 19,080 MW, down 5%. Typically, combined-cycle units are more efficient than combustion turbines, Bressler noted.

Cleared energy efficiency resources increased from 660 MW to 5,471 MW, but were offset by a 716 MW decrease in demand response to 8,096 MW, according to PJM. The decline in demand response resources may have been driven by the narrow schedule of auctions, which, according to Bressler, give demand response companies less time to line up customers.

The auction has cleared about 3,735 megawatts of new production, including about 405 megawatts of apparel. The new generation is developing Jackson and three reverse gas-fired power plants in Illinois, according to Nyman.

It appears that no battery storage has been cleared at the auction, possibly reflecting delays in PJM’s interconnection queue and supply chain issues, Niemann noted.

Bresler said the two rule changes – the use of the “narrow” MOPR and the “effective carrying capacity” approach to determining the value of the capacity of wind, solar and storage resources – could affect the auction results.

The MOPR is applied to 79 MW, which limits how few resources can bid at auction, contributing to lower overall capacity prices, according to Bressler.

When combined with capacity utilities stored outside the auction, PJM expects to have a reserve margin of 20.3% – a capacity buffer higher than the forecast maximum load for handling unexpected events compared to the 14.8% target margin.

Higher efficiency prices Mid-Atlantic Area Council rEgion, which covers most of New Jersey, parts of Pennsylvania and parts of Maryland, fell from $ 95 / MW-day to $ 49.50 / MW-day at the last auction. According to Bressler, higher prices are driven by diffusion restrictions compared to the rest of PJM.

Meanwhile, prices in the Baltimore Gas & Electric Zone and Delmarva Power South were up at $ 69.95 / MW-day at $ 126.50 / MW-day and $ 50 / MW-day respectively.

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