Electricity Markets

PJM says grid stress points possible starting in 2023

An analysis of a series of extreme scenarios shows that under certain assumptions the PJM Interconnection could face stress points, starting in 2023, which could result in material levels of generation unavailability and load shedding, the grid operator said on Nov. 1 in releasing a summary of a fuel security analysis.

The grid operator reported that the current system is reliable and will continue to be under a range of scenarios but plans to explore “proactive measures to value fuel security attributes,” which could entail market rule changes to encourage investment in fuel secure resources. As part of the analysis, PJM looked five years into the future, using a 2023/2024 system model, to analyze more than 300 different scenarios ranging from typical operations to extreme scenarios, considering elements like generation retirements, customer demand, fuel delivery and fuel disruptions.

PJM noted that although it consistently sees its highest customer demand during the summer, the greatest strain on fuel supply and delivery occurs in the winter. This is primarily because during the winter, the needs of commercial and residential heating are competing with natural gas-fired and dual-fuel generators (which generate more than 30 percent of the energy produced in PJM) for natural gas, oil, pipeline transportation and oil deliveries.

“As in any stress test, the analysis was intended to discover the tipping point when the PJM system begins to be impacted,” PJM said. “Looking five years into the future, under escalated retirement scenarios combined with extreme winter load, the system may be at risk for emergency procedures and load loss.”

PJM studied more than 300 different scenarios that could occur during an extended period of cold weather, varying elements such as customer demand, fuel availability, oil refueling frequency, generator forced outage rates, retirements and natural gas pipeline disruptions.

PJM said it analyzed historical weather data spanning more than 45 years, researched previously completed studies, issued supplemental surveys to PJM generation owners, and met extensively with industry groups, generation owners, various companies in the fuel supply chain in the PJM region, government agencies and other system operators.

In the analysis, PJM simulated typical winter load on the system, looking five years into the future and taking into account the announced retirements, new generation slated to be in operation by 2023 and interstate pipeline buildout.

This allowed PJM to analyze the assumptions against what it would experience in a typical winter, the grid operator noted.

PJM then layered in additional assumptions to stress-test the system under more extreme conditions, such as much greater winter peak load and the possibility of a pipeline break at a critical location.

The key inputs that were varied to create the different scenarios in the analysis were: Availability of non-firm gas service; ability of the fuel-oil delivery system to replenish oil supplies during an extended period of extreme cold weather; disruptions to the natural gas pipeline system; winter customer demand (load); generator retirements and replacements; whether there is a typical economic dispatch or a maximum emergency dispatch in place; and  generator forced outage rates.

PJM said that the analysis showed no issues on the system in a prolonged period of cold weather with typical winter load, accounting for announced retirements and new generation slated to be in operation by 2023. For example, PJM said that in a 14-day period of cold weather with typical winter load and generation retirements announced as of Oct. 1, 2018, PJM’s system can withstand an extended period of stress while remaining reliable.

“Even in an extreme scenario, such as an extended period of severe weather combined with high customer demand and a fuel supply disruption, the PJM system would still remain reliable,” the mid-Atlantic grid operator said. Under scenarios with high levels of retirements, no availability of non-firm natural gas for electric generators, and “extreme” winter load levels, PJM could see reserve shortages, voltage reductions or require load shedding. “While there could be reserve shortages in the extreme winter load scenarios, the grid would remain reliable and able to continue to deliver electricity reliably under these extreme conditions,” the grid operator said.

Generation retirement scenarios

For the more extreme scenarios, PJM analyzed two separate generation retirement scenarios, “Escalated 1” and “Escalated 2.”

Both Escalated 1 and Escalated 2 included securing enough capacity to meet PJM’s installed reserve margin reliability requirement.

In the Escalated 1 scenario, 32,216 MW of generation was projected to retire by 2023 with16,788 MW of replacement resources added to meet the 15.8% installed reserve margin reliability requirement. In the Escalated 2 scenario, a level of retirements (15,618 MW) was assumed that resulted in meeting the 15.8% installed reserve margin reliability requirement and therefore no replacement resources were added.

 “Recognizing that as units retire, market signals could slow the rate of further retirements, Escalated 2 modeled generation retirements of 15,618 MW by 2023 with no capacity replacement,” PJM said.

When combined with extreme winter load, PJM’s analysis indicates that the two escalated retirement scenarios have similar results that indicate the system may be at risk for emergency procedures and load loss.

PJM acknowledged that its reserves have historically exceeded the installed reserve margin reliability requirement. The escalated retirements are, by design, a stress analysis, it noted.

The goal was to simulate the retirement of different levels of resources that are financially at risk while maintaining the current installed reserve margin reliability requirement of 15.8 percent.

Next steps

PJM in December will publish a paper on the analysis detailing the background, method, approach, analysis results, conclusions and next steps.

Results from the analysis were also reported in PJM’s Nov. 1, 2018, Special Markets and Reliability Committee meeting.

PJM said that based on these results, it will begin a stakeholder process to discuss potential solutions.

PJM said it will do the following:

  • Host a follow-up Special Markets and Reliability conference call on Nov. 26, 2018, to address additional questions that may arise as stakeholders review the study results;
  • Host a Special Markets and Reliability meeting on Dec. 20, 2018, to discuss the additional detail provided in the paper; and
  • Introduce a Problem Statement and Issue Charge for stakeholder consideration in the first quarter of 2019 with any potential market rule changes targeted for filing with the Federal Energy Regulatory Commission in early 2020.

PJM said it will also “continue to engage FERC in the national consideration of fuel security issues” addressed in FERC’s resilience docket.

PJM CEO Andrew Ott stated that PJM itself is fuel neutral and the goal of any market rule changes would be to define the needed attributes for the system, determine how those attributes can be valued in the markets and allow competition to drive investment.

Study stems from 2017 report

The fuel security study stems from the March 2017 report, PJM’s Evolving Resource Mix and System Reliability, which analyzed how the combination of public policies, lower fuel prices, generating plant deactivations and technology improvements has altered the traditional mix of resources serving customers.

That report concluded that the PJM system can remain reliable with the addition of more natural gas and renewable resources, but that heavy reliance on any one resource type raises legitimate questions about electric system resilience.