In late May, PJM released the results of their recent capacity auction for the June 1, 2019-May 31, 2020 delivery year. The 2019-2020 capacity auction was the second to include the more stringent Capacity Performance standard approved by the Federal Energy Regulatory Commission (FERC) prior to last year’s 2018/2019 auction. In these two capacity auctions, 80% was allocated to the new Capacity Performance product and 20% to Base Capacity. Next year’s 2020/2021 auction transitions to 100% Capacity Performance.
The key difference between the Capacity Performance resources and Base Capacity resources, in addition to harsher penalties and higher prices, is that Capacity Performance resources must be capable of being online year-round, whereas Base Capacity only has to be available during the summer months.
The clearing price for Capacity Performance resources was $100/MW-day for the majority of the region, substantially lower than $165/MW-day seen in the last auction for the 2018/2019 delivery year. The highest prices came in for Com-Ed’s service area, at more than $200/MW-day. This was down from $215/MW-day in last year’s 2018/2019 auction. The clearing price for Base Capacity resources was $80/MW-day.
“Prices were lower than some analysts had expected and lower than the last year’s auction results simply because of market fundamentals of changes in supply and demand,” said Stu Bresler, PJM senior vice president – Markets. “The load forecast is lower, and there was a large amount of new gas-fired combined-cycle generation clearing for the first time in the auction.”
The lower prices may translate into savings for consumers in PJM, yet could force some less-competitive power plants to close. Exelon announced that three of their PJM nuclear plants did not clear the capacity auction, and it may retire them earlier than planned.
PJM is the regional transmission organization that ensures reliable electricity supply, and coordinates and directs the operation of the transmission grid in all or parts of Delaware, Illinois, Indiana, Kentucky, Maryland, Michigan, New Jersey, North Carolina, Ohio, Pennsylvania, Tennessee, Virginia, West Virginia and the District of Columbia.