- PJM Interconnection will consider changes to how it prices power, possibly giving generators more flexibility to better reflect rapidly-changing fuel costs both in the real-time and day-ahead markets.
- PJM is the only major market to not allow hourly pricing, RTO Insider points out, though a proposal from Calpine aims to change that.
- The generation company said more rapid pricing changes will help the market flourish while also allowing generators to take advantage of economic opportunities and mitigate for risks from changes in natural gas prices.
In a "Problem/Opportunity Statement" filed with PJM on behalf of Calpine, the generator argued that the market's inability to provide hourly pricing puts it behind other major grids and ultimately stifles innovation, harming consumers.
"These limits on the ability of operators of physical resources to reflect hour by hour changes in the cost of fuel ... impact negatively on their ability to reflect offer price updates that could have a beneficial impact on market results," the company said.
ISO New England, New York ISO, Midcontinent ISO, California's market and the Electric Reliability Council of Texas all allow for hourly pricing, Calpine said.
Without hourly pricing, RTO Insider reports, natural gas generators must submit one price to sell power on day-ahead and real-time markets, even though gas prices vary thoughout the day.
Changing the system would "allow resource operators to change offer prices hour by hour during real time operations to reflect changing fuel prices or other operational flexibility opportunities," the company said. "PJM and stakeholders should undertake an effort to develop and implement similar capabilities for the PJM energy markets as already exist in other RTO markets in the US."
But perhaps PJM isn't too far behind — it was only in December that ISO-New England completed a multi-year transition to a new market system that allows hourly pricing.
“The hourly offers project represents a major step forward in the ISO’s ongoing efforts to address the key challenges to the continued reliability of New England’s power system,” Vamsi Chadalavada, executive vice president and chief operating officer, said in a statement.
Hourly pricing is also seen as an opportunity for energy storage applications and industrial customers, giving them more opportunity to cut their power demand based on changing prices.