Solar and wind account for a larger share of electricity generated in the territory of the nation’s largest grid operator.
Delaware Valley-based PJM Interconnection announced the successful purchase through its annual capacity auction of power supplies for the 65 million people in its region, including 13 states and Washington, D.C.
The PJM region that includes Delmarva Power has the second-highest power cost of electricity based on auction prices.
Bids were below those in a previous auction and triggered a decision to close Delaware’s only coal-fired power plant, the Indian River.
The lower electricity prices do not mean that electric bills will go down since utility companies charge customers for the cost of getting electricity to the home or business. Delmarva Power, the state’s largest utility, passes along the cost of electricity on a no-profit basis and earns profits off the cost of providing service.
Municipal power companies operate on a different model, with profits used to subsidize municipal services. Cooperatives, like Delaware Electric, pass along profits to members.
Renewables, nuclear and new natural gas generators saw the greatest increases in cleared capacity, while coal units saw the largest decrease. Delaware has one coal-fired plant in Sussex County.
Prices were significantly lower than in the previous auction.
Auctions are usually held three years before the delivery year to avoid disruptions from spikes or sharp reductions in prices. For example, the 2022/2023 auction was originally scheduled to be held in May 2019 but was postponed until this year as federal regulators considered new rules.
“PJM’s capacity market continues to support a competitive, diverse and reliable resource mix through the ongoing energy transition,” said PJM CEO Manu Asthana. “We look forward to returning to a regular auction schedule while we continue to work with our stakeholders to reform the market to ensure its success into the future.”
Prices in this year’s auction were significantly lower than prices in the previous auction for reasons that included:
- A lower load forecast and reserve requirement, which in turn decreases the amount of capacity PJM needs to procure
- A 19% drop in the net cost of new entry – an estimate of the cost of a new generator that enters the market
- Overall lower offer prices from resources participating in the auction
The auction continues to attract more renewable resources into the capacity market. Solar and wind resources significantly increased their capacity contribution, according to PJM.
A total of 1,728 megawatts (MW) of wind cleared in the auction, representing an increase of 312 MW over the previous capacity auction. The new supply is nearly four times the generation capacity of the Indian River coal unit that is now headed for retirement.
Solar increased by 942 MW over the previous capacity auction, with 1,512 MW clearing. These capacity values represent the total capacity of these resources to provide as much as 11,761 megawatts into the PJM system.
Newer, more efficient combined-cycle natural gas plants also saw a significant increase, adding more than 3,414 MW of capacity. In addition, energy Efficiency programs were up by 1,979 MW.
Nuclear generators cleared an additional 4,460 MW when compared to the last auction. By contrast, coal generators accounted for 8,175 fewer megawatts than in the previous auction.
The total procured capacity in the auction represents a 19.9% reserve margin, compared to a 14.5% required to reserve for the 2022/2023 delivery year.
In five areas, ComEd, Duke Energy Ohio & Kentucky, the Mid-Atlantic Area Council (MAAC) region, Eastern MAAC region, and Baltimore Gas & Electric (BGE), capacity prices are higher than the overall PJM price.
The MAAC region consists of Atlantic City Electric, BGE, Delmarva Power, Jersey Central Power & Light, Met-Ed, PECO, Penelec, Pepco, PPL, PSE&G, PPL, and Rockland Electric. BGE and the Eastern MAAC region have a different price than the rest of the MAAC region. The Eastern MAAC region comprises Atlantic City Electric, Delmarva Power, Jersey Central Power & Light, PECO, PSE&G, and Rockland Electric.
PJM has compressed its auction calendar to return to a three-year-forward basis gradually. As a result, the next annual Base Residual Auction for the 2023/2024 delivery year will be held in December.
A detailed report of the results is available on PJM’scapacity market web page.