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PJM Interconnection Hears Testimony On Making Electricity Market Reforms To Address Nonperformance Of Natural Gas And Other Generators During Winter Storm Elliot; Transition To Clean Energy

On August 23, the PJM Interconnection Critical Issue Fast Path Resource Adequacy stakeholder group heard testimony and suggestions on the issue of making electricity market changes to address nonperformance of natural gas and other generators during emergencies and events like Winter Storm Elliot in December.

PJM’s final report on the nonperformance of electric generators during Winter Storm Elliot found forced outages of natural gas-fired electric generation accounted for 70% of the total outages, coal 16% and the remainder were oil, nuclear, hydro, wind and solar. Read more here.

A key recommendation in the report would change the assumptions of generation capacities for natural gas-fired electric generation from 95% in the summer to from 63% to 76% in the winter to match the actual performance of these units.

The report follows similar findings from other groups that have independently assessed the performance of natural gas generation in both winter and extreme summer conditions.

Commissioner Stephen DeFrank, Vice Chairman of the Public Utility Commission, told the House Consumer Protection, Technology and Utilities Committee in June--

“I think that Winter Storm Elliot, over the Christmas holiday, showed some vulnerabilities in our grid and in our system. Particularly from the amount of generators that did not show, we had over 40,000 megawatts not respond, with little to no notice to the grid operator." Read more here.

"But we also learned over the Christmas holiday that natural gas resources can also be intermittent, whenever we have those drastic drops of temperatures like we experienced. The issues were actually at the wellhead.

“It was not at capacity agreements, we had hard commitments for natural gas at generators that simply did not show." Read more here.

During a Senate Environmental Resources and Energy Committee hearing in May, natural gas and other industry representatives said the PJM wholesale market prices for electricity are clearing at historically low levels that are not high enough to support baseload power plants like coal, natural gas and nuclear. Read more here.

At the same time, retirements of thermal power generation plants are happening faster than anticipated-- PJM projects 20% of its existing capacity will retire between now and 2030. Read more here.

This generation capacity is not being replaced fast enough by renewable and other generation that is not of the same quality and quantity of the natural gas, coal and nuclear plants that are retiring, presenters said in May. Read more here.

At the same time, PJM reported it has approved at least 35,000 MW of renewable energy generation that have not yet been connected to the electric grid throughout its operating region. Read more here.

PJM said in July 95% of the 260,000 MW of electricity projects in its project queue are renewable energy generation, battery storage or a hybrid of both. Read more here.

The Natural Resources Defense Council issued a report in May outlining how the slow PJM Interconnection project queue process threatens the development of renewable energy in the PJM region. Read more here.

Pennsylvania is now overly dependent on natural gas to generate electricity as was illustrated in December by the impact of when many of those plants failed to perform.

At a February Senate hearing, the Public Utility Commission said in 2021 (the latest figures available), natural gas provided 53% of Pennsylvania's electric generation, which is double what it was five years before-- nuclear power 33% and coal 12%. Read more here.

Interestingly, Vistra Corp, which owns 36 natural gas-fired power plants, said in 2021 it was not going to build any more and instead intends to invest in solar farms and battery storage units because they are more cost-effective [even more so now with new federal incentives]. As the CEO said, “I’m hellbent on not becoming the next Blockbuster Video.” Read more here.

The key to lower energy prices and real energy freedom is diversifying electricity generation with more renewable energy that is not subject to wild price swings driven by international energy markets. Read more here. Read more here.

In addition, the US Energy Information Administration reported increasing electricity generation from renewable sources contributed to lower power prices so far in 2023. Read more here.

On August 8, PJM Interconnection and other regional electric grid operators submitted comments on a proposed EPA regulation to cut greenhouse gas emissions from power plants expressing concerns the rule will accelerate retirements of fossil fuel plants without reliable renewable and electric storage technologies to replace them. Read more here.

PJM Stakeholder Discussion

The PJM stakeholder agenda and discussion included comments from over 30 energy, public interest and legislators from the PJM 13-state region.

Among the presenters were Sen. Gene Yaw (R-Lycoming), Majority Chair of the Senate Environmental Resources and Energy Committee, Tom Rutiglano, Natural Resources Defense Council and Nick Lawton, Earthjustice, and Casey Roberts of the Sierra Club.

Natural Resources Defense Council

Tom Rutiglano, Natural Resources Defense Council, focused his comments on dealing with the nonperformance of generators and improving generation reliability.

“Failure to properly account for the risks created by poor generator performance during emergencies is the most pressing reliability concern in PJM and has the potential for catastrophic consequences if unaddressed.

“Proper resource accreditation is vital to the energy transition. Accurate accreditation allows clean resources to replace fossil resources to the maximum extent consistent with reliability, but no more.

“In conjunction with good market design, it helps send price signals that retain and attract power plants as needed for reliability, but not in excess.”

“As [Winter Storm] Elliott and the [2013-14] Polar Vortex demonstrated, RPM has not kept pace with the risks introduced by the transition to natural gas as a dominant fuel.

“All analysis presented during the CIFP shows that PJM faces significant winter risk not currently addressed in RPM, and that fossil plants, especially gas-fired ones, are given capacity values well in excess of their actual reliability contribution.

“This over-accreditation of gas units endangers reliability both directly and through the long-term effects of distorting market outcomes.

“PJM’s proposal to improve modeling and move to ELCC [Effective Load Carrying Capacity] based accreditation for all resource types corrects this problem, and the Board should endorse this approach.”

Click Here for a copy of NRDC’s written comments.

Earthjustice/Sierra Club

Nick Lawton, Earthjustice, and Casey Roberts of the Sierra Club also focused their comments on dealing with the nonperformance of generators and improving generation reliability.

“PJM should include robust winterization and site inspection requirements as part of its capacity market reforms. Mechanical failures at thermal generators—especially gas plants—were the chief driver of outages during Winter Storm Elliott and the 2014 Polar Vortex.

“Many such mechanical failures are preventable, and PJM’s decision to defer the modest winterization requirements it had proposed is a step in the wrong direction.”

“PJM is correct to retain a strong Capacity Performance construct that features significant penalties for underperforming resources.

“Winter Storm Elliott demonstrated that too many capacity resources—especially gas and coal plants—fail to perform when called.

“It is not appropriate for generators to retain their earnings from the capacity market when they fail to provide their promised contributions to reliability.

“Instead, generators that fail to perform as promised should return their capacity payments to the consumers that the generators failed to serve. For most generators, this system would serve as a strong, rational incentive to take the necessary measures to perform when needed.”

“PJM’s proposal to accredit all resources using an Effective Load Carrying Capacity (“ELCC”) methodology will improve reliability by accounting for correlated outages of thermal generators, which Winter Storm Elliott demonstrated are one of the chief threats to reliability. Applying an ELCC methodology even-handedly to all resources will reduce the potential for undue discrimination.”

Click Here for a copy of the Sierra Club/Earthjustice written comments.

Sen. Gene Yaw

Sen. Gene Yaw (R-Lycoming), Majority Chair of the Senate Environmental Resources and Energy Committee, focused his comments on the impact of closing coal-fired power plants, uncertainty caused by DEP’s Regional Greenhouse Gas Initiative.

“Policy changes have already had a significant impact on electricity generation in Pennsylvania. Over the last two decades more than 60 coal fired power plants have closed nationally.”

[Note: Due to competition from natural gas over the past two decades. Read more here. See PA Coal Alliance comments.]

“Homer City Generating Station, the largest coal-fired thermal plant in the state, closed taking 2,000 MW capacity off the grid.

“Keystone Generating Station and Conemaugh Generating Station, representing another 3,400 MW, are scheduled to close by 2028, but spokesmen have said if the Regional Greenhouse Gas Initiative tax is implemented in Pennsylvania closure will be moved up.

“The result of uncertainties in the generation market have resulted in virtually zero, that is zero, investment in new thermal generation capacity in the state since 2019.”

“The plain fact is we are retiring thermal generation capacity and have no plan to replace the loss.”

[Note: PJM has approved 35,000 MW of renewable energy generation and 95% of the 260,000 MW of electricity projects in its project queue are also renewable energy generation, battery storage or a hybrid of both. Read more here.]

“It is a fact that solar and wind electricity production is intermittent, weather dependent, and of limited duration. Thermal energy, on the other hand, is available 24 hours a day. 365 days a year, and is not dependent on weather.

[Note: Commissioner Stephen DeFrank, Vice Chairman of the Public Utility Commission, told the House Consumer Protection, Technology and Utilities Committee in June-- “I think that Winter Storm Elliot, over the Christmas holiday, showed some vulnerabilities in our grid and in our system. Particularly from the amount of generators that did not show, we had over 40,000 megawatts not respond, with little to no notice to the grid operator."

["But we also learned over the Christmas holiday that natural gas resources can also be intermittent, whenever we have those drastic drops of temperatures like we experienced. The issues were actually at the wellhead. Read more here.]

“[Grid] Reliability, as we know it, cannot be achieved without addressing the issue of what is the source of 3:00 AM electricity.

“The answer lies in addressing the rapid, and often premature, closing of thermal generation facilities with replacement by intermittent, weather dependent. and limited duration sources.

“In the rush to so-called clean energy. there is little, if any. planning as to how this is to be accomplished without use restrictions of some sort.”

Click Here for a copy of Sen. Yaw’s written comments.

Visit PJM Interconnection’s Critical Issue Fast Path Resource Adequacy stakeholder webpage for copies of all written remarks presented on August 23.

NewsClips - PJM:

-- CBS21 - Face The State: Sen. Yaw Talks About PJM Testimony, Issues

-- PA Business Report: Sen. Yaw Testifies Before PJM Board Of Managers

-- Sen. Yaw: Legislators From PA, Ohio Testify Before PJM Board Of Managers

Related Articles - PJM Generator Nonperformance:

-- PUC Vice Chairman: During Winter Storm Elliot We Learned Natural Gas Can Be An Intermittent Generator Of Electricity Just Like Renewables [PaEN]

-- PJM Interconnection Reports Higher Percentage Of Natural Gas-Fired Electric Generation Outages Than Originally Thought During Winter Storm Elliott - 70% [PaEN]

-- S&P Global: Federal Inquiry Finds Same 3 Causes Driving U.S. Electric Generation Outages In Extreme Cold - Reliability Of Natural Gas System Remains A Concern [PaEN]

-- Senate Hearing: Wholesale Electricity Prices Too Low To Support Coal, Natural Gas Power Plants In Market; Natural Gas Reliability Issues Will Continue [PaEN]

-- Senate Hearing On Electric Grid Reliability: Natural Gas Continues To Have Reliability Problems; Renewables Aren’t Coming Online Fast Enough; Energy Office To Be Proposed [PaEN]