PJM eyes valuing fuel security for extreme winters

The operator of largest US electric grid says it does not face any "imminent threat" to reliability but should consider new payments to support power plants with secure fuel supplies.

The PJM Interconnection, which covers 13 states primarily in the mid-Atlantic, released that finding today in a report that comes as federal regulators consider a controversial plan to prop up struggling coal and nuclear plants. The report offers no support for that approach but suggests the grid should try to retain plants with secure fuel supplies to ensure reliability beyond 2023.

"In order to enhance the fuel security of the grid into the future, PJM believes market-based mechanisms for retaining or procuring resources with the necessary attributes should be explored," it said.

PJM, in the report, modeled electric grid reliability during more than 300 scenarios such as the outage of critical natural gas pipelines coinciding with extremely high electricity loads in winter. Those conditions are expected to strain the grid but not cause any blackouts.

But the grid would not perform as well if there is an unexpected wave of power plant retirements and nothing fills their place. PJM modeled the same worst-case conditions but with the loss of 15.5GW of generating capacity, or 10pc of peak winter demand, and found it was possible that some areas could lose power for more than three days.

Those conditions are unlikely but underscore a need for PJM to study market-based mechanisms to value fuel security, the report says.

"While there is no imminent threat, fuel security is an important component of ensuring reliability — especially if multiple risks come to fruition," it said.

US energy secretary Rick Perry, who has proposed the federal intervention into power markets, has argued coal and nuclear plants are the most secure because their fuel is stored on-site. But power industry officials say that a mix of fuel types are needed. Most of the industry has strongly resisted any type of bailout for struggling plants.

Renewable industry officials lauded PJM for its conclusion that there is no emergency related to reliability. But they cautioned the grid operator against setting any type of requirement to have fuel supplies.

"They should not presuppose a fuel supply solution when other options such as transmission enhancements exist," American Wind Energy Association senior vice president Amy Farrell said.