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One Fine Reliability Mess

Infrastructure isn't keeping pace. So how to "help" the market without killing it?

Fortnightly Magazine - August 2005

to different locations on the grid. They employ complicated "demand curves" to plot a market price for capacity that varies over time as a function of regional supply needs. In similar fashion, PJM would attempt a four-year time horizon to plan capacity and would seek to put generation, transmission, and the demand sides on equal footing. But opponents of the RPM plan remain concerned that the plan will guarantee much higher capacity prices without an offsetting guarantee of improved reliability. Those opponents also voice grave concerns with the idea that PJM would assume or displace the role of the market participants by setting capacity prices administratively.

"Consumers in PJM should pay for their desired level of reliability consistent with national and regional standards," these opponents say. "They should not be required to pay windfall profits to generation owners or guarantee revenue streams for investors."

Of course, if we really could pay for our desired level of reliability, as economist Lynne Kiesling noted at the PJM conference, there would be no need for complicated "demand curves" and any other algorithmic contrivances. Such is the continued trouble with capacity market development.