Capacity marketsin PJM

Economics of Energy and Environmental Policy

Volumn 2, Issue 2, 2013, Pages 47-64

  Bowring, Joseph ^a  

^a Monitoring Analytics   (United States)

Author keywords

Capacity market; Minimum offer price rule; PJM interconnection; RPM

Indexed keywords

EID: 85015740280     PISSN: 21605882     EISSN: 21605890     Source Type: Journal    
DOI: 10.5547/2160-5890.2.2.3     Document Type: Conference Paper

References (29)

1. See 2004 State of the Market Report for PJM, Appendix E, p. 313.
2. 117 FERC § 61, 331 (2006).
3. See 2002 PAPUC investigation into PJM Installed Capacity Credit Market, Case No. I-00010090.
4. See the 2012 State of the Market Report for PJM, Volume II, Section 4: Capacity Market. Figure 4-3 History of capacity prices: Calendar year 1999 through 2015.
5. See the 2007 State of the Market Report for PJM, Volume II, Section 5: Net Revenue.
6. See "Settlement Agreement and Explanatory Statement of the Settling Parties Resolving all Issues," PJM Interconnection, L.L.C., Docket Nos. ER05-1410-000, -001 and EL05-148-000, -001 re RPM Effective June 1, 2007 (September 29, 2006).
7. These papers provide theoretical approaches to market design issues and capacity markets: Cramton/Stoft (2006): "The Convergence of Market Designs for Adequate Generating Capacity with Special Attention to the CAISO's Resource Adequacy Problem", available at http://stoft.com/
8. Cramton/Stoft (2005): "A Capacity Market that Makes Sense." Electricity Journal, 18: 43-54
9. Joskow/Tirole (2007): "Reliability and Competitive Electricity Markets," Rand Journal of Economics, 38(1): 60-84
10. Hogan (2005): "On an 'Energy-Only' Electricity Market Design for Resource Adequacy"
11. Joskow (2008): "Capacity Payments in Imperfect Electricity Markets: Need and Design." Utilities Policy, 16(3): 159-170.
12. This paper draws on related work of the author and on the work of Monitoring Analytics, LLC. In particular, this chapter draws on analysis by Alexandra Salaneck, the principal capacity market analyst at Monitoring Analytics. All Monitoring Analytics reports may be found at www.monitoringanalytics.com.
13. PJM Manual 20: PJM Resource Adequacy Analysis Rev. 4 (June 1, 2011).
14. See the "2007 State of the Market Report for PJM," Volume II, Section 3, Energy Markey, Part 2, Net Revenue.
15. See 2008 State of the Market Report for PJM, Volume II, Section 5: Capacity Market.
16. There are other market design approaches to addressing these issues, including various forms of administrative scarcity pricing. See, for example: Protest and Compliance Proposal of the Independent Market Monitor for PJM, Docket No. ER09-1063-004 (July 19, 2010)
17. Answer and Motion for Leave to Answer of the Independent Market Monitor for PJM, Docket No. ER09-1063-004 (August 26, 2010)
18. Answer and Motion for Leave to Answer of the Independent Market Monitor for PJM, Docket No. ER09-1063-004, (September 7, 2010).
19. The prices are all adjusted to be on an unforced capacity basis. Unforced capacity is installed capacity or gross capacity adjusted for the relevant forced outage rate. See PJM Interconnection, L.L.C., "Manual 18: PJM Capacity Markets," Revision 15 (June 28, 2012), p. 98.
20. For the detailed rules, see the 2012 State of the Market Report for PJM, Volume II, Section 4-Capacity Market, p. 143.
21. See 126 FERC § 61,275 (2009) at p. 86. Effective January 31, 2010, First, Second, and Third Incremental Auctions are conducted 20, 10, and three months prior to the delivery year. See PJM Interconnection, L.L.C., Letter Order in Docket No. ER10-366-000 (January 22, 2010). Effective for the 2012/2013 Delivery Year, the purpose of IAs also includes release or additional procurement of capacity by PJM due to reliability requirement adjustments and the deferment of the STRPT. Also effective for the 2012/2013 Delivery Year, a conditional incremental auction may be held if there is a need to procure additional capacity resulting from a delay in a planned large transmission upgrade that was modeled in the BRA for the relevant delivery year. See 126 FERC § 61,275 (2009) at p. 88.
22. See 2012 State of the Market Report for PJM, Volume II, Section 4: Capacity Market, Table 4-21 Capacity prices: 2007/2008 through 2015/2016 RPM Auctions. Prices in the ATSI LDA, in the western part of PJM, exceeded prices in all other LDAs in the 2015/2016 BRA.
23. See Monitoring Analytics, LLC and PJM Interconnection, LLC, "Capacity in the PJM Market" (August 20, 2012.)
24. PJM Interconnection, L.L.C., "Manual 18: PJM Capacity Market," Revision 15 (June 28, 2012) p. 119. The rationale for this treatment of hydro, wind and solar capacity is unclear.
25. For a more complete discussion of this issue, see the IMM's White Paper included in: Monitoring Analytics, LLC and PJM Interconnection, LLC, "Capacity in the PJM Market" (August 20, 2012).
26. See PJM Interconnection, L.L.C., "Manual 18: PJM Capacity Market," p. 18.
27. See the "PJM Response to the 2012 State of the Market Report," PJM Interconnection, L.L.C., (May 10, 2013).
28. Testimony of Joseph Bowring before the New Jersey Board of Public Utilities regarding the Board's Investigation of Capacity Procurement and Transmission Planning, Docket No. EO 11050309, June 17, 2011, October 14, 2011 and November 1, 2011. Testimony of Joseph Bowring before the Maryland Public Utility Commission regarding New Generating Facilities Needed to Meet Long-Term Demand, Case No. 9214, January 28, 2011.
29. See the "PJM-MMU Letter to NJ BPU," re LCAPP.