The Bottom Line: EPSA SVP Nancy Bagot spoke at PJM Interconnection’s Annual Meeting last week, where she expressed the continued need for competitive wholesale markets and outlined approaches to increase reliability and advance the grid of the future.
Panelists discuss power system reliability at PJM Interconnection Annual Meeting. L-R: Jim Robb, President and CEO, NERC; Brian George, U.S. Federal Lead, Global Energy Market Development and Policy, Google; Bobby Jeffers, Program Manager, National Renewable Energy Laboratory; Peter Brandien, Vice President, System Operations and Market Administration, ISO-NE; Jeff Craigo, Senior Vice President, Reliability and Risk, ReliabilityFirst; Nancy Bagot, SVP, EPSA. Credit: PJM Interconnection
Wholesale electricity market designs that value both reliability and decarbonization were key topics of discussion at PJM Interconnection’s Annual Meeting, which was held September 25-26 in Cambridge, MD. With intermittent renewable power generation technologies such as wind and solar contributing more to grid capacity, it will be even more important to design markets that factor reliability into the equation.
Speaking on a panel about maintaining reliability and efficient markets through the energy transition, EPSA Senior Vice President Nancy Bagot said it’s time to double down on competition – explaining the role that markets and competition have played in advancing the energy transition in the PJM region and making suggestions for building on these successes in the future.
Cost Savings and Emissions Reductions Through Competition
Bagot joined four other industry experts including representatives from Google, the National Renewable Energy Laboratory, ISO New England, and ReliabilityFirst. She explained that markets have been an effective tool to reduce emissions at the lowest cost to customers. PJM currently saves between $3.2 and $4 billion annually for its nearly 65 million customers, and emissions have declined since its inception. But looking ahead, it is important that increased integration of renewables doesn’t threaten system reliability.
“As of last year, emissions in PJM had declined by 35% since 2005,” Bagot said. “We all know we need to cut emissions further, but this has to take place while keeping the lights on – which PJM has done and can continue to do with market reforms that acknowledge today’s realities and provide opportunity to all viable resource development.”
Capacity Market Enhances Reliability
So far, PJM’s robust capacity reserve margins have helped the RTO avoid the sort of large-scale outages that other regions of the country have experienced in recent years while allowing market competition to thrive. These numbers are strong evidence that markets are effective but designing markets to meet the challenges of the grid of the future may require some changes.
“With all that PJM has delivered, the challenges we are looking at over the next 5 – 20 years may mean we need to redefine what we are asking the market to do for us,” Bagot said. “We need to recognize that, for some time, we will need generating resources that can balance and back up an increasingly intermittent system.”
Competitive Electricity Markets for the Future
Bagot presented a few suggestions for changes that could be made to design markets that can meet the challenges posed by the energy transition. Some of these ideas included adjusting reliability planning criteria to account for more extreme weather conditions and the changing resource mix, updating accrediting parameters to better reflect the role particular resources play in providing installed capacity, and developing additional real-time products to provide needed services like flexibility, ramping, quick-start load following, and regulation when needed.
What these solutions could look like is still a matter of discussion, but as the energy transition advances it will become increasingly necessary to consider these issues holistically. For one thing, polling shows that reliability is consistently a top priority for energy customers. As intermittent resources like wind and solar come to play a larger role in the generation mix, additional dispatchable generation resources will be needed to support the integration of renewables.
Thankfully, planners and policymakers have years of evidence showing that markets are a good way to lower emissions without sacrificing reliability, and that markets can provide the flexibility to plan and build the grid of the future.
As Bagot said in the panel, “Some have questioned whether markets and RTOs can meet the many challenges faced by America’s power system. There is no question that they can – and that they will in fact be essential. Retreating from competition or the benefits of regional markets will only send us backward – increasing costs, slowing innovation, and hampering reliability.”
Bagot reiterated this message and shared similar insights on future market design on another panel on “Market Design, FERC Updates, and Regulatory Evolution” at the S&P Commodity Insights Nodal Trader Conference later that week. She joined Teoman Guler, head of U.S. Power Trading at DRW and Mary Wierzbicki, director of FERC’s Office of Energy Market Assessments in a discussion moderated by Maria Faconti, a partner at K&L Gates LLP.
As RTOs and ISOs nationwide address changing system needs and potential reforms as directed by FERC, EPSA will continue to engage in the conversation and advocate for solutions that deliver reliable power generation through competition.