1 Jul 2011

Demand response and cleaner energy outbidding some coal-fired generation in PJM

Written by Jim Pierobon

Almost like a tree falling in the forest, the recent auction for wholesale power supplies from utilities and competitive generators produced a relatively quiet but telling shift in the PJM power grid which stretches from the Mid-Atlantic states into parts of the Midwest:

Several aging coal-fired power plants were outbid by cleaner sources, including demand-response initiatives.

Demand response programs pay end-users who agree to curtail their energy use and are continue to grow as market innovations and smart grid applications make more of a difference in wholesale power markets.

The auction was for the year June 2014 to May 2015. These auctions occur annually for the three out-years to give the market enough time to build a new natural gas-fired power plant, if needed. At this rate, it may be a long time before ANY new capacity running on fossil fuels will be needed.

The power grid operated by PJM Interconnection encompasses about 167 gigawatts of generating capacity in all or parts of 13 states and the District of Columbia. Credit: PJM

Compared to the auction for 2013-2014, owners of 1,850 megawatts (MW) of coal-fired generation declined to bid and almost certainly will be retired. By the auction’s conclusion, owners of an additional 6,900 MW of coal-fired generation that DID bid didn’t price their supply low enough to make the cut. That capacity is facing the same fate.

The uptake: coal-fired plants that cannot afford to clean up their act will play a lesser role not only in PJM but in other regional power grids in the U.S. Why? Emissions limits and other environmental regulations  that are part of the Clean Air Transport rule of June 2010 and the National Emissions Standards for Hazardous Air Pollution rule of March 2011 are two big reasons.

According to Ade Dosunmu, Senior Director of Strategic Markets for energy management solutions provider Comverge, the construction of west-to-east transmission facilities and the impact of the economic downturn on demand in the constrained eastern region also were factors.

“As coal plants’ costs rose due to EPA-mandated retrofits, the new resources replacing them — including other traditional generation, wind and solar, and most significantly, demand response — held market prices in check,” Dosunmu said. “Demand response contributed an additional 4,800 MW of cleared capacity above the prior auction year.”

‘Negawatts’ Instead of More Megawatts

“Operating under market constructs that introduce variable demand into energy markets, Dosunmu wrote in this week’s issue of Public Utility Reports’ SPARK ezine, “demand response providers search for the most economic megawatts available for curtailment.” He said networks of sites utilize intelligent energy management systems to generate “negawatts,” which represent the ability of end users to reduce or eliminate energy consumption in response to signals.

“By making negawatts available at costs that are generally below those required to build and maintain generation plants, demand response lowers capacity costs in energy markets and offsets new build capacity,” Dosunmu wrote.

Demand response providers are projected to pay back more than $300 million to end-use customers in the PJM region in the 2014-2015 operating year. This is in addition to the $1.2 billion already saved by consumers.

According to the Federal Energy Regulatory Commission (FERC), there are currently about 37,000 MW of demand response capacity available in the United States. This capacity could grow to more than 100,000 MW by 2030, eliminating the need to build power plants to serve that demand. according to FERC. PJM is the nation’s largest demand response market.

1 Comment to Demand response and cleaner energy outbidding some coal-fired generation in PJM

  1. Roy McMann's GravatarRoy McMann
    July 7, 2011 at 2:32 pm | Permalink

    Great article, the NYT has a piece on EPA ruling tightening up coal emissions today, this sort of market innovation will surely make the transition to cleaner fuels all the more feasible, and faster, faster …

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