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PJM: States Should Create Climate Benefit Markets If They Want To Subsidize Nuclear Plants

Representatives of the PJM Interconnection made a presentation before the Senate-House Nuclear Energy Caucus Wednesday showing how electricity generation fuel sources have become more diverse and the competitive market for power run by PJM has resulted in significant benefits to reliability and in costs for consumers.

In Pennsylvania, the operational efficiencies of the competitive market have resulted in the equivalent of adding an additional nuclear power plant in generation capacity.

At the same time, PJM noted at least one power plant-- Three Mile Island-- is in danger of closing because it has not cleared PJM’s generation capacity auctions. A recent PJM study on reliability of the grid did not include a look at the issue of losing nuclear generating capacity.

A PJM official suggested if states wanted to subsidize nuclear power plants they should work together to form a market for climate benefits, like carbon, separate from PJM’s capacity auctions.

Nuclear Energy Caucus co-chairs Senators Ryan Aument (R-Lancaster) and John Yudichak (D-Luzerne) and Rep. Rob Matzie (D-Allegheny) led the meeting. In addition, Rep. John Maher (R-Allegheny), Majority Chair of the House Environmental Resources and Energy Committee, also attended.

Frederick Bresler, Senior Vice President for Operations and Markets at PJM, presented on three major points to Caucus members--

-- Electricity supply is reliable in the PJM region. PJM’s responsibility is to maintain reliable electricity supplies and does that by auctioning power capacity three years in advance. In May, for example, PJM will hold auction for capacity in 2020-21 covering the expected peak load in the PJM region, plus a reserve margin of about 15 percent. It also has an additional 6 percent reserve as a safety margin.

Bresler pointed out the PJM auction market has been extremely competitive.

-- Fuel mix is becoming more diverse and balanced than it has been historically. There has been a dramatic shift between coal and natural gas resources, beginning in 2014 when the wave of investment in natural gas-fueled power plants began and new regulations on coal plants were adopted.

In 2005, coal and nuclear resources generated 91 percent of the electricity on the PJM system. PJM’s installed capacity in 2016 consisted of 33 percent coal, 33 percent natural gas, 18 percent nuclear, and 6 percent renewables (including hydro).

A March study released by PJM showed there was no upper bound to the growth of natural gas in the fuel mix that would impact grid reliability.

In response to a question about the 2013 polar vortex, Bresler said 75 percent of outages during 2013 polar vortex were not related to fuel supply, but a significant part of the remaining outages were the result of natural gas fuel outages.

He noted PJM does not allow generators to be a capacity generator in its auction if they cannot deliver the capacity when needed. One of the changes PJM has made internally is to judge the ability of generators to produce electricity during a supply emergency like the polar vortex. It also increased penalties for nonperformance during these times.

Bresler said PJM will be doing additional work on the issue of grid resiliency and what the trigger situations are to assure resiliency and reliability. He said work on those issues will be done through the PJM stakeholder process which should show some results before the winter heating season this year.

Bresler said state subsidies for existing power resources means energy buyers have to buy capacity twice under the current system, first through the PJM price at the auctions and second through the state subsidy.

PJM is considering how to incorporate any state subsidies into a competitive market without losing the ability of the market to send clear signals to investors as they make decisions on creating generation capacity.

As an alternative, Bresler said states could come together and form a market for climate benefits, for example, to handle the issue of subsidies separately from the PJM power capacity auctions.

In response to a question, Bresler said the Three Mile Island nuclear power plant has not cleared recent PJM capacity auctions and is the only nuclear plant he is aware of today that may be in some danger of closing in Pennsylvania.

In response to a question from Rep. Maher, Bresler said the scope of the March study on reliability did not look at the issue of losing nuclear power plant capacity.

Bresler noted since 2007 there has been 30,000 megawatts of coal-fired power plants retired across its system and PJM managed those issues through its planning processes to maintain reliability. He said, for example, they have changed transmission line resources to adjust to plant closures.

-- Moving from regulated electric markets to a transparent and competitive electricity market has had significant benefits. Competitive markets resulted in increased operational efficiencies resulting in more generation being available more of the time. These efficiencies have resulted in adding the equivalent of another nuclear power plant in Pennsylvania.

Bresler said 11,600 megawatts of new natural gas-fueled capacity has come online in Pennsylvania, 7,000 megawatts more are under construction and 7,900 megawatts are under study.

This represents more new capacity than the next two states combined. As a result, Pennsylvania continues to be a net exporter of electricity.

The other major benefit of competition has been to consumers. He pointed to a study done by the Kleinman Center for Energy Policy at the University of Pennsylvania which found consumers saved $818 million in 2016 over inflation-adjusted pre-1996 regulated generation and transmission costs.

Click Here for a copy of the handouts from the meeting.

A video of the meeting will be posted on Sen. Aument’s website.

NewsClips:

Swift: Nuclear Bailout Debate Heats Up

Cusick: PA Lawmakers Mull Support For Nuclear Power Plants

Grid Operator Urges Cooperation If States Want To Preserve Nuclear Plants

Crable: Three Mile Island Could Close As Soon As 2019

Oil-Gas Lobby Opposes State Subsidies For Nuclear Power Producers

FirstEnergy Looks To Feds For Help With Coal, Nuclear Plants

Senate, House Lawmakers Announce Formation Of First Nuclear Energy Caucus

Op-Ed: Nuclear Energy - A Keystone For Pennsylvania’s Economy And Environment

PJM Study: Electric System Reliable Even With Much More Natural Gas, Renewables