1. PJM: Managing Grid Evolution Through Markets
M. Gary Helm
Lead Market Strategist

2. PJM as Part of the Eastern Interconnection
Key Statistics
Member companies
940+
Millions of people served 61
Peak load in megawatts
165,492
MW of generating capacity
183,604
Miles of transmission lines
62,556
2014 GWh of annual energy
797,461
Generation sources
1,376
Square miles of territory
243,417
States served
13 + DC
21% of U.S. GDP produced in PJM
27% of generation in Eastern Interconnection
28% of load in Eastern Interconnection
20% of transmission assets in Eastern Interconnection
As of 09/2015

3. Main Driver: Natural Gas

4. Declining Electricity Demand Growth
Without EKPC

5. Many Environmental Regulations
Final
Compliance
Scope
2014
2015
2016
2017
2018
2019
2020 +
Mercury and Air Toxics Standards (MATS)
Cross State Air Pollution Rule (CSAPR)
Cooling Water Intake Structures 316(b)
 2022
Coal Combustion Residuals Rule (CCR)
Effluent Limitation Guidelines (ELG)
 2023
Clean Power Plan 111(d)
Carbon Pollution Standards 111(b)
SO2 NAAQS
2020+
Ozone NAAQS
PM2.5 NAAQS
Extended
Phase 1
Phase 2
*Mention cost cases here
MATS
heavy metals and toxics in flue gas
coal
CSAPR
interstate transport of SO2, annual NOx and ozone season NOx
all fossil fuel
Allowance trading program – currently purchasing allowance much cheaper than installing pollution controls
Update rule
More stringent NOx budgets
Could drive up allowance prices closer to costs of controls  keeping an eye on that
Cooling Water
Install control technologies to limit fish trapped against intakes (impingement) and fish getting sucked into cooling water system (entrainment)
Federal BTA for impingement
Entrainment based on site specific evaluations and state policy
Timeline depending on CWA permit renewal cycle
Compliance between 2018 and 2022
CCR
Sets minimum federal criteria for CCR landfills and surface impoundments
Coal or NG conversions with onsite facilities
RCRA Subtititle D
No EPA enforcement authority
Self implementing through citizen suits
A number of different requirements every few months
Inspections, monitoring, data disclosure began Oct 2015
will see facility closures
ELG
Regulates concentrations of heavy metals and nitrogen compounds in wastewater discharges
Fossil fuel steam fired
Timing dependent on permit renewal schedule (2018 – 2023)

6. Resulting Generation Retirements
24,000 retirements since May 2011 (MATS proposed), 2,600 pending.

7. Responsiveness of Capacity Market

8. Cumulative Generator Capacity Additions

9. Changing Energy Market Trends
2015 – 4th Quarter
* Source: Monitoring Analytics, LLC.  2015 State of the Market Report for PJM. March 10, 2016.

10. Declining Emission Rates
2015 – 4th Quarter
Subcategory rate for coal: 1,305 lbs/MWh, natural gas combined cycle 771 lbs/MWh

11. Improving the Capacity Market
Increased Performance Expectations
Performance expectations during emergencies
“No excuses”
Increased Non-Performance Charges
High non-performance charge rate
Can result in having to pay back more than all capacity revenues received
Increased Revenue Opportunities
High default offer cap
Opportunity for bonus payments
Relation to natural gas: Allows capital invests in natural gas infrastructure to be compensated in the capacity market.

12. Reflecting Costs in the Energy Market
Resources may offer in above $1,000/MWh
Cost-based offers may not go above $2,000/MWh
Resources may seek compensation of costs above price cap
Relation to natural gas: Enables in-market compensation of fuel price spikes

13. Revising Day-Ahead Energy Market Timing
Relation to natural gas: Enables gas-fired generators to know the electric market commitment prior to securing transportation for natural gas
Implement: March 31, 2016

14. Addressing New Realities in Operations
Monthly coordination of gas and generator planned maintenance between PJM and the pipelines
Weekly or as needed conference calls with interstate pipelines
Nov. 1 through Mar. 1
Weekly peak load forecast 
Projected gas usage
Forecasted electric grid conditions
Forecasted pipeline conditions 
Daily review of gas nominations by PJM scheduled generators Nov. 1 through Mar. 1 (and as needed)
Ongoing PJM, MMU, and Pipeline MOU discussions
Adjusting to increased role of gas-fired generation
Daily review of Gas Electronic Bulletin Boards (EBBs) for critical notices potentially impacting generation in PJM

15. Evolving PJM Planning
Simulate a generation capacity emergency and evaluate the performance of the transmission system
Target 3 results
Affected generation
Assume immediately offline
Conduct Load Deliverability Analysis into impacted area
Relation to natural gas: assume all impacted gas-fired generators were lost immediately, conducted load deliverability analysis, load forecast, incorporating public policy decisions