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CIGRE Workshop Market Structures and Institutions PJM North American - Mature Meshed Market

CIGRE Workshop Market Structures and Institutions PJM North American - Mature Meshed Market. Kenneth W. Laughlin Vice President, Markets PJM, USA. CIGRE / Brazil Regulatory Agency, ANEEL / Brazilian National Committee September 21 -23, 2003 Brasilia, Brazil. AESO 7,800. IMO

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CIGRE Workshop Market Structures and Institutions PJM North American - Mature Meshed Market

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  1. CIGRE Workshop Market Structures and Institutions PJM North American - Mature Meshed Market Kenneth W. Laughlin Vice President, Markets PJM, USA CIGRE / Brazil Regulatory Agency, ANEEL / Brazilian National Committee September 21 -23, 2003 Brasilia, Brazil

  2. AESO 7,800 IMO 25,269 ISONE 25,158 NYISO 30,983 PJM 63,726 CAISO 45,900 ERCOT 60,157 PJM is currently the largest centrally dispatched Control Area in North America

  3. The Law: Title VII of Energy Policy Act of 1992 “to promote greater competition in bulk power markets...” The Rules: 1996: Order 888 “put in place the foundation necessary for competitive wholesale power markets in this country - open access...” 1999: Order No. 2000 “ensure that customers have the benefit of competitively priced generation...” The Law and The Rules in the U.S.

  4. Competitive Wholesale Markets

  5. “…markets don’t always operate efficiently because buyers and sellers don’t always have access to the information they need to make optimal choices.” Akerlof, Spence, & StiglitzNobel prize winners for economics

  6. Data to Information >>>>>>>>>>>>> 5 minute data flow >>>>>>>>>>> Private Data Silos Private RTO Data Silo Key User selected Data Transformation Data to Information Public information Aggregated Prices Specific Prices ATCs Transmission limits Forecasts Loads Markets Prices ATCs Transmission Limits & Flows Forecasts Data Trends Models ITC Fore casts Gen TO Actual Muni Gridco Markets Public Power Tx Ind Gen. 5 minute data volume 10 items 3,000 items 600,000 items

  7. PJM eData Services Main Screen

  8. Creation of Value From Information Technologies Advancing Technologies High ACCESSIBILITY ENABLERS HardwareCPUSpeed Smart Products Web 1991 2002 1991 2002 1991 2002 Portals Bandwidth MediaDigitalization 1991 2002 BUSINESS IMPACT 1991 1991 2002 2002 Network Architecture Multimedia Security 1991 2002 1991 2002 1991 2002 PRESENTATION INFRASTRUCTURE High Low Magnitude of Consumer Base Reached

  9. Information Exchange Market Participants Local Control Centers Generators Load Serving Entities • 20,000+ Data Points Every • 2-10 Seconds: • Operational • Generation availability • Transfer capability • Telemetry • Generation control signals • Security recommendations • Pricing • Planning • Expected load forecasts • Constrained conditions • Congested areas Public Market Centers Information Exchange Regulators Other

  10. Energy Costs in the Gross Domestic Product 2001 Gross Domestic Product by Industry (Dollars in Billions) Energy Industry = $221 Billion Annually; 2% of Gross Domestic Product Source: Bureau of Economic Analysis, Dept. of Commerce

  11. 4/1/97 - Opened bid-based market based on Market Clearing Price 4/1/98 - Implemented LMP and FTRs (with overlying zones and trading hubs) 10/15/98 – Implemented capacity markets 1/1/99 - Implemented full customer choice in PA – Implemented daily capacity market 4/1/99 - Market-based pricing authority granted 4/15/99 - PJM FTR Monthly Auction market PJM Market Evolution

  12. 6/1/00 - PJM Day-Ahead Market and Regulation Market 4/1/02 – PJM West implemented (68,600 MW) 12/1/02- PJM Spinning Reserve Market PJM Market Evolution

  13. Maturing Energy Market Prices in PJM Average Day-Ahead and Real-Time LMPs ($ per megawatt hour)

  14. PJM Capacity Markets The fundamentals of supply and demand are reflected the prices in the daily and monthly capacity markets.

  15. PJM Regulation Market Market Implemented

  16. Spinning Reserve Market Opened December 1, 2002

  17. Liquidity in the U.S.

  18. Wholesale Power Purchases Wholesale Power Purchases as a Percentage of Purchases and Self-Generation (1989 – 2001) Source: Platts POWERDAT Database

  19. Wholesale Energy Prices Reduced Wholesale prices dropped to $35.33/MWH in 2002 from $43.63/MWH in 2001 – 25% hotter in 2002. Nine all-time peaks in summer of 2002 – peak load served at an average of $150/MWH as compared to $900/MWH on peak days in 2001 (savings of about $10 million to wholesale energy customers). PJM Results

  20. Forced Outage Rates

  21. $726 million of planned transmission upgrades $200 million => baseline reliability upgrades $536 million => upgrades associated with direct connection facilities and network upgrades to accommodate new generation interconnection Value of Large, Transparent Regional Planning Process

  22. Demand Response Empowered PJM’s demand response programs enabling customers to manage their own electricity costs grew 300 percent in 2002. The most active 2002 demand side management hour lowered prices by more than 12%. PJM Results

  23. “Creation of common MISO-PJM-SPP market results in … Lower energy price for region as a whole – Effects estimated at up to $7 billion over ten years” “As effective power markets mature, the spread between forward price and the ultimate spot price should diminish.” Every $1 forward premium reduction from MISO-PJM-SPP common market is ultimate consumer savings of $1.7 billion per year. ESAI July 11, 2002 Report to Standard Market Design Forum Common Market Cost/Benefit Analysis

  24. New Power Supply Attracted Regional transmission planning process creates proper incentives to attract future generation. More than 7,500 MW on line 7,500 MW under construction 26,000 MW under evaluation New generation results in $535 million of associated transmission system upgrades. PJM Results

  25. Queued Capacity by In-Service Date Over 35,000 megawatts scheduled will facilitate robust, competitive markets and may further reduce congestion. In Service Scheduled in Service Megawatts of Generation Capacity Scheduled In-Service Date

  26. Demand side of the wholesale energy market is much less developed than supply side responses. One of the basic reasons for maintaining an offer cap in PJM and other wholesale power markets. 2002 PJM Region demand-side resources: 1,569 MW of Active Load Management, 548 MW of Emergency DSM and 343 MW of Economic DSM. 2,460 MW total DSM resources were almost 4% of 2002 peak demand. The most active 2002 DSM hour lowered LMP by more than 12%. Demand Side Management Program

  27. Value of Large, Competitive Wholesale Markets

  28. “The future requires a higher sophistication in acknowledging and dealing with differences…” Peter F. Drucker

  29. Real Information Government Physics Earn Trust Real Relationships Real Time Real Markets Local Practices

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