PJM’s Grid of the Future Includes Renewables and Lucrative Ancillary Services

In late February 2022, PJM’s Vice President of Planning, Ken Seller, gave an interview detailing the RTO’s new interconnection process for energy projects. The process aims to establish a better, faster, and more efficient system that will help individual states in the PJM region reach their climate goals. 

Just over two months later on April 27, 2022, PJM released a twelve-page perspective for its grid of the future, a vision for how that more evolved system will take shape in the nation’s largest energy market.

By examining the two items published by PJM, we begin to see how the RTO plans to ready its grid for the future. Looking at the current state of PJM’s energy market, it seems clear that ancillary services will play a big role in getting there.     

Wind, solar, and storage resources are growing in PJM.

To say there are a lot of renewable energy projects knocking at PJM’s door would be an understatement.  

According to Mr. Seller, PJM is currently reviewing more than 2,500 projects with a total of 225,000 MW of capacity, 95% of which is renewable.  

To put that in perspective, the roughly 213,000 MW of renewable capacity that PJM currently has under review is more than the current capacity of the entire PJM grid.   

In order to achieve the public policy goals of the states in the region, PJM estimates that more than 100,000 MW of renewable generation will need to be interconnected to the grid. 

Those estimates break down by resource as follows:

Wind: 18-35,000 MW
Solar: 25-55,000 MW
Storage: 2-7,000 MW

In describing PJM’s energy transition plan, Mr. Seller indicates that the RTO is prioritizing more than 1,200 new projects, most of which are renewable in nature and represent 100,000 MW of nameplate capacity. 

Solar has been the most dominant resource in the PJM queue, with projects in the works in all of the RTO’s zones. The recent growth of solar in PJM has led to the subsequent growth of energy storage projects in PJM.

Onshore wind development continues along the Allegheny Mountains. PJM has stated that its initial studies of offshore wind indicate transmission grid enhancements will be needed to accommodate the interconnection of renewable resources.

With renewable penetration comes the intermittency issues inherently associated with key resources such as wind and solar which are dependent on Mother Nature.

Just as Mother Nature giveth with the wind and sun, she can taketh away by not blowing or shining. She can also unleash damaging storms with grid-threatening conditions as PJM dealt with during the Polar Vortex of 2014 when 22% of the grid’s capacity was forced offline. 

Devastating storms (Texas 2021) and heatwaves (California 2020) have wreaked havoc on grids throughout the country. PJM’s ancillary services may just serve as a hedge against calamity should Mother Nature throw a major storm the region’s way in 2022 or 2023. 

Synchronous Reserves to the Rescue

Synchronous Reserves are load resources that can quickly come online if generated or offline if reduced via demand response within 10 minutes and help PJM balance the electrical grid in the event of an unexpected loss in power generation.   

Right now, PJM’s Synchronous Reserves Program is paying considerably more than it has in years to organizations that can quickly reduce their electric loads when the grid is stressed or electricity prices are high.

As of March 2022, PJM’s Synchronous Reserve Market Clearing Price (SRMCP)  boasts a monthly average that is more than $1,200 per MW than it was a year ago and nearly $3000 MW higher than it was in 2020. 

The upward trending prices in the Synchronous Reserve market come at a time when prices in PJM’s capacity market (the Reliability Pricing Model) are trending in the opposite direction. 

The 2022/2023 PJM capacity auction, called the Base Residual Auction, produced a price of $50/MW-day for much of the PJM footprint, a price that was roughly 64% lower than it was following the previous year’s auction. 

PJM can’t control the prices in the synchronous or capacity markets, but the grid operator certainly benefits from the currently high SRMCP as it is bound to attract commercial and industrial participants who can quickly shed electric loads when called to help balance the grid and will receive significant revenue for doing so.   

The extra load by way of demand response is sure to come in handy on the road to the future grid whether PJM is rocked by a storm or not since there will certainly be cloudy, windless days that affect the output of the region’s solar and wind resources on days when demand on the grid is high. 

Looking Forward to Sustainable Reliability

Based on the current work plan, the effective date of PJM’s transition would be, according to VP of Planning Ken Seller, the fourth quarter of 2022 or the first quarter of 2023. 

There is plenty of work to be done on PJM’s part until then. 

The road to a greener, cleaner, more reliable, and efficient future grid in PJM is sure to be paved with studies, proposals, hearings, submissions, and process enhancements. 

If that road to tomorrow includes a few bad (or worse) weather days along the way, PJM can take comfort in knowing their rainy day fund is flush with synchronous reserves resources from organizations that stand to be well-rewarded for helping the grid when called.