What Was Learned From the 2015
Transition and Base Residual
Auction Results?
October 13, 2015
OPSI Annual Meeting
CP Auction results – A DR perspective
Bruce Campbell - EnergyConnect
CP results – A DR perspective
• Perspective on clearing prices
• What about summer peaking Demand
Resources?
• Does the Aggregate Resource idea work?
• Does CP deliver reliability at least cost?
Auction Clearing
CP represents a shift in key clearing drivers:
• Old – Bids of new resources
• New - Administrative Net Cone in the form
of the default offer cap.
BRA and Transition Auction results indicate
that generators can strategically bid relative to
the default offer cap to maintain high clearing
prices
Auction Clearing - BRA
Auction results suggest that strategic bidding
can sustain higher prices.
– Prices would have been higher but for excess
supply from prior high forecasts.
• The 18-19 3 year forward forecast was 1.8 % less than
the 17-18 forecast.
Delivery Year
Cleared MW
2017-18
167,003.7
2018-19
166,836.9
Excess supply due to high
forecasts
Declining Load Forecasts
170000
165000
160000
155000
BRA
150000
1st
145000
2nd
3rd
140000
135000
130000
125000
120000
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
Incremental Auction
Given prior history with comparable amounts
of excess supply by PJM offered, the 2017-18
1st IA results were significantly higher than
similar auctions in the past.
• This suggests there is value for withholding
capacity in order to hedge non-performance
of CP resources and maintain eligibility for
“bonus” revenues
Future
• The BRA prices were moderated by excess
supply from prior delivery years
– The forecasts for the BRA have declined for the
last 2 years
• BRA Prices are moderated by Base Capacity
– Base Capacity is slated for elimination in 2020-21
Conclusion - BRA prices should increase
substantially in 2020 and beyond.
Summer Resources
62% of Demand Resources did not offer as CP.
This represents about 4.5% of overall supply.
• 27% of DR is derived from HVAC
• These resources may only be available in
Summer
PSC mandated residential DR programs are at
risk.
Why Isn’t DR moving to
CP?
PJM loads are summer peaking – Load simply isn’t
there to curtail in winter.
• CP rules credit demand resources with only the
lesser of summer or winter curtailment.
• Summer peaking Demand Resources must
either curtail to less than their summer
commitment in winter or reduce their summer
commitment.
• Winter M&V rules for Demand Resources result
in unpredictable performance outcomes.
Economic Impact
• Many State Commission’s mandated and
ratepayer funded demand response programs
relied on the PJM capacity market to pass their
cost/benefit tests.
• These programs will by-and-large no longer be
considered by PJM as contributing to reliability
• Investments in summer peak management and
AMI will be stranded
Economic Impact
Estimated impact of eliminating
summer DR option will most likely
cost ratepayers:
$1 - $3 billion per year in
unnecessary capacity charges
Aggregated Resources
PJM’s “fix” for summer only DR (Aggregated
Resources) is challenging at best - and possibly
unworkable.
• Zero Aggregated Resources made offers.
• Issue – how to share capacity revenues and
performance risk?
• Base-CP price spreads may be necessary to
enable rational Aggregation contracts
Least Cost Result?
• BRA Base Resource clearing prices were within
10% of CP price.
– Low spread between Base and CP may suggest that
spread bids rather than coupled bids should be
allowed.
• Relatively high Base Resource clearing prices
may reflect the value of uncleared resources for
use as performance hedges for co-owned CP
resources.
• Uncleared Generation resources may be
providing an additional 7% IRM – 12,000MW.
Least Cost Result?
• Auction algorithm does not solve for least
cost solution with Base Resources
– Anomalous results in BGE, Pepco and PPL
– Low Cost, uncleared Base resources in BGE,
PEPCO, and PPL can meet MAAC and RTO Base
requirements.
– Why were these lower cost resources not
cleared, thereby reducing MAAC and RTO
costs?
Auction Clearing Issues
Questions
• Does the CP approach encourage
withholding?
• If providers are encouraged to consider
“bonus” revenue potential from uncleared
resources, how should PJM account for
installed capacity these uncleared resources?
• Should the 1% adder for point B of the VRR
be eliminated?
Questions?
To learn more about Demand Response and
the Advanced Energy Management Alliance,
visit our website.
www.aem-alliance.org
Or
Bruce Campbell – [email protected]