PJM capacity auction secures new generation, demand response, energy efficiency

Valley Forge, Pa., May 18, 2012 — With an unprecedented amount of electric generation retiring within the next three years, PJM Interconnection’s capacity market secured record amounts of new generation, demand resources and energy efficiency to keep the grid reliable.

PJM announced the results of its capacity market, the annual Reliability Pricing Model auction, for resources to meet power supply needs between June 1, 2015, and May 31, 2016. The RPM auction procured a record amount of new generation in one year, 4,900 MW. In addition, capacity imported from west of PJM increased about 8 percent from last year to 4,335 MW.

The RPM establishes contracts with power producers who commit to make their facilities available to provide electricity for the PJM system for a year. Prices are established through competitive bidding. PJM’s auction also includes demand response and energy efficiency providers.

This year, the auction procured 164,561 MW of capacity resources at a base price of $136 per MW. A megawatt is enough electricity to power 800 to 1,000 homes. PJM’s all-time peak demand is 158,448 MW. Prices were higher in northern Ohio and the Mid-Atlantic region.

In addition to new generation, most of it natural gas-fired, the capacity auction also procured 14,833 MW of demand response, a 5 percent increase over last year, and energy efficiency, a 12 percent increase. The amount of demand response was also a record for PJM, as well as for renewable generation. Solar increased to 56 MW of solar — a 22 percent increase over last year — and wind increased to 796 MW — a 15 percent increase.

In northern Ohio served by FirstEnergy, the price will be $357 per MW.

The price of capacity in much of the Mid-Atlantic area will be $167 per MW. The area includes the regions served by Atlantic City Electric, Baltimore Gas and Electric Co., Delmarva Power, Jersey Central Power and Light Co., Metropolitan Edison Co., PECO, Pennsylvania Electric Co., Pepco, PPL Electric Utilities, Public Service Electric and Gas Co. and Rockland Electric Co.

Concurrent with the capacity auction, PJM’s planning process is ensuring that electric transmission improvements are built to deliver power where it is needed. May 20, the PJM board approved $2 billion in electric transmission system upgrades to strengthen the transmission grid in response to the announced retirements of nearly 14,000 MW of coal-fired generation because of environmental regulations.

Although the RPM auction procured sufficient resources to meet the projected demand, some generating units may need to remain available beyond their proposed retirement dates until transmission upgrades are completed. These units would be operated under “reliability must run” agreements.

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