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PJM Calls First CP Transition Auction ‘Competitive’

September 2, 2015 By Cheryl Kaften

PJM Interconnection reported on August 31 that its first Capacity Performance (CP) Transition Incremental Auction – opened on August 27 for the 2016/2017 delivery years – came in “well below the cap,” validating the competitiveness of the bidding.

CP Transition Auctions for the 2016/2017 and 2017/2018 delivery years are part of a five-year transition to a single capacity product type beginning with the auctions for the 2020/2021 delivery year. The five-year conversion, PJM said, “provides opportunity for resources to invest in, and sufficient time to build and make improvements … necessary to meet the operational and performance requirements expected of Capacity Performance Resources.”

The target procurement quantity for this first CP Transition Auction was 95,096.6 megawatts (MW) – and PJM states that the auction procured the entire quantity of 95,096.6 MW of CP resources at a clearing price of $134.00/MW-day (MWd). The auction clearing price cap was $165.27/MWd.

 “The results of the auction were consistent with expectations, and the fact that the clearing price was below the offer cap indicates resources were efficiently valued,” said Stu Bresler, PJM senior vice president- Markets. “Prices were consistent with requirements to keep generating units and the system reliable.”

Capacity Performance requires that resources – generation, demand response, and energy efficiency – produce electricity called upon regardless of weather conditions or extreme system conditions. Committed Capacity Performance resources that do not perform when called upon will face significant non-performance charges.

“We see evidence that Capacity Performance is incenting improvements such as increases in maintenance and investment in dual-fuel capability,” Bresler said. “Customers can be assured that power supplies will be available when most needed because resources have the incentive needed to make investments in performance.”

The transition auction procured 619 MW of demand response – 392 MW from the previous commitment for the delivery year and 227 MW of new demand response. The auction also procured 950 MW of energy efficiency – 527 MW from the previous commitment and 423 MW of new energy efficiency new resources.

Bresler noted that the demand response participating as Capacity Performance has even greater value than in base capacity demand response because of its capability to be called upon at any time of the year, at any time.

The second and final transitional auction will be held September 3-4 to procure Capacity Performance resources for 2017/2018.

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