PJM to Analyze Long-Term Grid Resilience
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8 responses to “PJM to Analyze Long-Term Grid Resilience”
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I assume the vulnerability assessment is a modeling exercise. If so, good. Banks do this all the time (at least since they came within a whisker of taking down the world economy in 2008). The run stress tests, liquidity analyses and many other risk management assessments. I’m kind of surprised to hear PJM talk about this like it’s something new.
So, let’s talk about the elephant on the table. PJM is analyzing its resilience while Dominion is keeping over-charges to improve its resilience. I can only assume that Dominion must have already done a comprehensive analysis of grid resilience in order to know that it needed improving.
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Yes, I’m surprised they are doing this without first coming to Congress or the General Assembly seeking permission to keep back rebates owed to customers or seeking to hamstring unrelated areas of regulatory oversight – following a million dollar multimedia ad campaign about how noble they are to be…..basically….doing their actual job.
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This type of planning has been going on for decades. However, it has taken on more importance and received more attention because of the demand by some utilities and the Department of Energy for subsidies for uneconomic coal and nuclear plants. Those asking for subsidies have claimed that they are needed to insure reliability.
PJM’s studies to date have shown the considerable surplus of generation in the system protects against the loss of uneconomic coal and nuclear plants from affecting reliability for at least the next 10-15 years.
The bigger issue for PJM is transmission congestion and whether all of the available generation can get to where it needs to go. This is especially important for wind energy from the Great Plains being able to serve markets on the east coast.
PJM is also concerned about over-reliance on natural gas. With flat growth in electricity demand, the push to develop pipelines and gas production for the export market, PJM needs to consider what this growing dependence on exports will do to gas prices and availability for electrical generation.
The 30% penetration for renewables is not a cap, but the level at which transmission and distribution investments would need to be made to seamlessly incorporate more renewables into the grid. Many of the transmission investments will be required regardless of the type of generation.
They are are basically saying we have plenty of generation for the foreseeable future. We can lose old uneconomic units without a problem, and won’t need many new ones for a long time. But they want to make sure that global events that might upset gas prices and supply don’t effect reliability as we increase the percentage contribution from gas-fired units.
It is not clear how they will deal with the contribution from energy efficiency. As I have proposed in previous posts, we could replace the contribution from Surry and North Anna by increasing energy efficiency at a much lower cost and an improvement in reliability. I don’t know if PJM will consider such scenarios. Some authoritative energy planner should examine it because it solves a lot of issues and saves customers money. But it does not feed the hungry maw of the energy companies as much.
I suspect PJM as well as FERC will also look more closely at cybersecurity issues. As we modernize the grid and we rely more heavily on digital controls and software, we are more exposed to cybersecurity threats.
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DJR, I expect this is a PJM modeling exercise, but combined with a first look at increasing the installed capacity reserve requirement for LSEs in PJM, which is PJM’s way of responding to any forecast increased risk of regional generation inadequacy — due to lack of generation diversity or otherwise.
Dominion talks about the need for new investment to increase the resilience of their part of the grid itself: the wires; specifically their distribution system, which is under State regulatory authority (along with retail rates). That’s different from PJM here, which is talking about generation — specifically, generation diversity. Although Dominion talks about the grid in general terms and it isn’t always clear what they mean.
Of course Dominion is actually spending a lot of cash on new generation. As we have discussed here, new Dominion generation should not be built risk-free and recovered through generation RACs and DVP’s rate base any longer; moreover new generation isn’t needed for DVP’s reliability but for PJM’s where there is no current shortage; moreover anyone in PJM can build it to compete in the PJM markets; moreover Dominion’s efforts to build or buy up utility-scale solar plants in VA and NC seem to ignore (if not be intended to suppress) the spread of competition from “distributed” (customer rooftop) solar generation in VA.
If there’s a study out there saying Dominion’s distribution system needs all that much more resilience, I’ve never seen it. Normally, distribution enhancements are small in nature and done in the ordinary course of business anyway, not through a special capital fundraiser like a dedicated over-earnings set-aside. Distribution under-grounding is something that is very expensive and generally not worth it when compared to the cost of maintaining the lines overhead on poles; but customers love the faster system restoration after storms — and why wouldn’t Dominion err on the side of gold-plating the distribution system, as it 1. makes the rate base grow, and 2. makes expenses decline, the path to regulated-utility rate Nirvana. That’s a very large elephant you’ve got, there.
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Almost afraid to ask this.
If Dominion gets approval to build a new gas plant and put that cost on ratepayers…. can they then ALSO use that plant to generate power that will be sold to PJM? When/If they do that – is part of their revenues required to help defray the cost to build that plant?
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Larry: Yes and yes. Excess capacity can be sold to PJM. The revenue from off-system sales in effect reduces the cost to the utility’s ratepayers. I think the economic benefit flows back to ratepayers through the fuel factor – it does not directly reduce the payments for the plant through the RACs. Tom and Acbar know the details better than I do….
In the 2007 legislation the formula was tweaked and as I recall the utility does get to keep some (25 %?) of the revenue from off system sales, returning 75 percent to ratepayers, which was included as yet another incentive for building more generation. Remember, the whole manufactured-panic meme in 2007 was “Virginia is importing too much power!” This time the manufactured-panic meme was “The Grid is Going to Fail!” In-between we had the manufactured-panic meme of “The Clean Power Plan is Coming!”
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SH, Your first paragraph is correct. Remember, Larry, the RACs in general cover capital costs, but DVP also has a fuel adjustment clause, which covers expenses — in this case the credits/expenses of Fuel and Interchange. All sales to, and purchases from, PJM are “interchange.”
Your second paragraph points out how complicated this can get. The “simple” way ratemaking used to work, back in the last century, you have base rates which have all test year operating expenses (including the average fuel & interchange for the test year) built in, and then you have the fuel clause, which has the fuel & interchange expense adjustment for that month — as a credit if lower than the test year, and as an added expense if higher. Base rates also used to contain the expense of carrying the investment in, and amortizing the depreciation associated with, all “plant in service”; and an additional amount for investment in plant that isn’t in service yet but will be soon, called “construction work in progress.”
By comparison, Dominion’s rates have become very complex, and opaque in the process. Instead of including a single number for construction work in progress based on a forecast average amount of investment in plant under construction, DVP has individual adjustment clauses (RACs) for each plant under construction that change continually. Then, when the plants are finished and should go into base rates and the RAC should expire, DVP has convinced the GA to forbid the SCC to update base rates — the RACs continue. But at the same time there are plants that are retired or fully amortized yet these stay in base rates also, because the SCC can’t update them. On the expenses side, the basic idea of an adjustment for fuel and interchange is fair enough, but DVP adopts the rationale that its plants were built solely to run for its own customers so any additional sales (e.g., to PJM) should go 3/4 to its customers and 1/4 direct to its parent company Dominion Energy. Once you understand how the PJM energy market works you see how outrageous this is! Dominion today has some low cost nuclear and new gas and solar plants and a bunch of higher cost generation; it avoids running the higher cost stuff most of the time because PJM doesn’t “dispatch” it; instead DVP is supplied from the grid and that automatically gets recorded as a purchase from the PJM energy market. When DVP does run its own units, it sells that energy 100% into the same PJM energy market, although DVP appears to “impute” the expense of operating its own units to its own customers for accounting purposes, rather than treating those expenses as what they are, a part of a net energy interchange with PJM. All those PJM sales and purchases should be netted out; and that’s the way just about every other utility treats its interchange with PJM.
Instead, it appears Dominion treats net interchange with PJM as a “foreign” sale and diverts some of that sales income outside DVP to its parent company. But none of the expense of PJM purchases gets diverted to the parent. This is fair to ratepayers? Moreover, DVP is rapidly constructing more of the cheaper-to-run efficient new gas and solar units, which will increase the amount PJM dispatches DVP’s generation, which will increase the amount of DVP’s sales relative to purchases in the PJM energy market, which apparently will increase the amount of income diverted to Dominion Energy. Wow, what a scam!
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You and Tom add so much to this discussion…
As I’ve said before, the 2007 deal involved us (the industrials) agreeing to swallow more than few toads – and I was getting kicks under the table as we agreed to them. There were compensating benefits for ratepayers, but sadly those started to be taken away soon thereafter and are all gone now. ‘Tis all history now, and I will never be allowed back to that table again. Cue the exit music.
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