Dive Brief:
- In response to critical comments from stakeholders on its first capacity performance proposal, PJM has submitted a new, revised proposal that loosens restrictions and addresses the May ruling that overturned FERC Order 745.
- The revised proposal keeps the main products—Capacity Performance and Base Capacity—first mooted in the initial proposal, but aims to simplify eligibility and flexibility requirements for Capacity Performance resources, alter non-performance penalties, and allow for "a more gradual phase-in approach.”
- As part of the revised proposal, PJM seeks to transition demand response and energy efficiency to bid into Reliability Pricing Model (RPM) auctions on the demand-side instead of the supply-side. Under such a scenario, load serving entities would submit bids to reduce a certain amount of load at a certain price.
Dive Insight:
With the revised proposal, PJM is looking to address stakeholder concerns and mitigate the uncertainty surrounding demand response in wholesale markets.
"... it is critical for wholesale demand to indicate its preferences with respect to the price it is willing to pay for capacity, but above which it does not wish to purchase capacity and instead commits to limiting its consumption when PJM approaches emergency conditions," PJM said in the proposal.
In addition to the proposal, the grid operator has put out a white paper outlining the evolution of demand response in wholesale markets. Demand response provider EnerNOC voiced its concerns with the proposed alternative on a stakeholder call with PJM about the white paper.
"While we appreciate PJM floating what they themselves called a 'trial balloon,' we believe its approach is overly conservative with significant practical and legal hurdles," said Katie Guerry, senior director of regulatory affairs at EnerNOC. "Fundamentally, PJM’s proposal amounts to an arranged marriage between DR providers and Load Serving Entities. That's the antithesis of choice, which is the fundamental principle of healthy, competitive markets."
"PJM’s goal is noble, and we could not be more aligned that there is need to bring clarity and certainty in the market for all stakeholders," Guerry added, "but we do not believe this first option articulated in the PJM whitepaper preserves the significant economic and reliability benefits from DR in the PJM wholesale markets."