Policymakers and industry seek a formula to assure competitiveness and resource adequacy.
Ade Dosunmu is managing director at Capacity Markets Partners. Previously he held senior management positions at Utility Risk Management Corp., Comverge, and Booz & Co., and he co-founded energy efficiency service company GreenPrimate Inc. Email him at adosunmu@capacitymarkets.com
Recently, generator investment adequacy questions involving different independent system operators and regional transmission organizations (ISO-RTO) demonstrated challenges facing policy makers and market stakeholders in maintaining resource adequacy. These questions arise from market and regulatory dynamics, including low gas prices, new environmental regulations, high growth of variable renewable resource generators, and dissatisfaction by some regional stakeholders with market outcomes.
In May, PJM Interconnection conducted its annual auctions to secure electric capacity three years from now. As expected by most analysts, the Base Residual Auction (BRA) for delivery year 2015-’16 electric capacity cleared with moderately higher prices in most of PJM versus the prior year, due to retirements of coal plants. (See Figure 3)
However, prices in FirstEnergy’s American Transmission Systems Inc. (ATSI) zone in Northern Ohio weren’t just moderately higher, but through the roof, reaching $357 per megawatt-day, the highest zonal price ever recorded in PJM Reliability Pricing Model (RPM), and 183 percent above comparable zonal pricing in the prior annual auction.