Why Is PJM Is Talking Out of Both Sides of Its Mouth on Grid Reliability? Why Shouldn't We Retire These RTOs?

Surfing the net this morning, I visited the PJM site. PJM is one of the better positioned Regional Transmission Operators (RTOs) these days but do we really need them? I suggest not based on two news releases posted on their site on December 10 and December 23, less than two weeks apart. The contrasts between the two messages is quite remarkable. The first is titled as “PJM Board Supports Action in Support of Urgent Grid Reliability Needs” and the second as “Delaware Generator To Retire Ahead of Schedule.” Huh?

Provided below are excerpts from the two stories, contrasted to show how PJM is talking out of both sides of its mouth (emphasis added):

December 10:

The PJM Board of Managers has informed stakeholders of its support for undertaking immediate actions to provide for resource adequacy in light of the continuing and rapid tightening of grid power supplies versus growing demand for electricity.

A capacity shortage may affect the PJM system as early as the 2026/2027 Delivery Year, when the 2025 Long-Term Load Forecast is taken into account, PJM Board Chair Mark Takahashi noted in a Dec. 9 letter to stakeholders (PDF).

December 23:

PJM has announced that Indian River Unit 4, a coal-fired generator in Delaware owned by NRG, can retire nearly two years ahead of its currently scheduled deactivation without adverse impacts to reliability.

Delmarva Power, the transmission owner in this region, has completed the needed transmission additions that will enable Indian River 4, a 411 MW electrical generator located in southern Delaware, to retire 22 months before its scheduled deactivation date. PJM, in coordination with Delmarva Power, has made the determination that Indian River 4 is no longer needed for the reliability of the electricity grid.

Indian River Unit 4 - Source: Google Earth

December 10:

[T]his imbalance of future electricity supply and demand is being driven by the following trends:

• Electrification coupled with the proliferation of high-demand data centers resulting in material forecasted load growth for the foreseeable future

• Retirement of thermal generators at a rapid pace due to policy and economic pressures

• Slow new entry of replacement generation resources due to a combination of industry forces, including siting, permitting and supply chain constraints

• The significant volume of resources in the new services queue that are being processed pursuant to FERC’s order on PJM’s interconnection process reform, with a high proportion of intermittent resources that don’t have the same capacity value and operational characteristics as the retiring thermal generating fleet

To mitigate the risk of a capacity shortage, the letter states, “…the Board supports the efforts outlined here that are intended to (1) bring capacity online more expeditiously through the interconnection queue; and (2) make sure price signals accurately reflect current supply-demand fundamentals.”

December 23:

In June 2021, NRG notified PJM of its intention to retire Indian River 4 in 2022. Based on this notification, PJM conducted a reliability analysis, which indicated that the unit’s removal would lead to grid reliability issues and identified a series of transmission solutions to address those issues.

Based on the estimates for engineering, design, siting, permitting and construction, PJM estimated that the unit would be needed through the completion of necessary transmission upgrades in December 2026. PJM formally requested of NRG to continue to operate the unit during this time frame to provide critical energy, voltage and reactive power support under a Reliability Must-Run (RMR) arrangement. NRG agreed under a rate schedule approved by FERC…

The RMR arrangement will terminate officially in February 2025, approximately 22 months ahead of schedule. Terminating the RMR arrangement early will save consumers nearly two years of avoided RMR payments. The final determination of the total savings will depend on FERC’s approval of a proposed settlement rate.

None of this makes any sense unless one appreciates the Rube Goldberg contraption erected by FERC, state and PJM policies, not to mention entities such as RGGI and the special interests of those on the inside at PJM. It’s board, for example, consists almost entirely of electric utility industry representatives, Big Tech and Big Business. There is no one who could be thought of as standing for ordinary consumers. And, see if you can determine who the stakeholders are on this PJM Stakeholder Process Groups Diagram. Good luck! The insiders on all these committees are largely unknown, but we can be they’re looking out for member interests.

Yes, PJM, like most RTOs, has mushroomed into a monster Rube Golberg style bureaucracy where everything and everyone is mostly obscured by the organizational structure. Pleasing all these interests means creating one gimmick after another to make sure no one is too angry, pulls out or sues. Impacts on ratepayers and taxpayers is just collateral damage of a sort. Consider the following:

• The coal plant was no longer sufficiently remunerative for the owner. Subsidized solar and wind, no doubt, underbid in the various auctions designed to create a market facade. That is to say, the consumer, dressed as a taxpayer, subsidized the renewables, so the same consumer, this time dressed as a ratepayer, could get a phony lower rate, except that by beating out truly efficient coal, it made it less efficient and raised the overall cost of electricity to the consumer.

• We can surmise that because the totally reliable coal plant was rendered unable to compete, its owner decided to close it and was only enticed to keep it open somewhat longer with Reliability Must-Run (RMR) subsidies, demonstrating how one subsidy always leads to another in the RTO world.

• We also know NRG Energy is not only an active member of PJM, but has also decided it’s easier to generate subsidies than reliable energy. It, in fact, now developing renewables under the theme of “Powering modern life while protecting our planet.” It just won’t be RMRs. No, it will be one of numerous other direct or indirect green energy subsidies spawned by PJM, RGGI, FERC, one of the states or some other program designed to advance the BIg Green Grift. It’s policy, you know.

• Note the December 10 news release also refers to the long queue of intermittent energy projects that have to be accommodated even though they don’t have the same capacity value or reliability “as the retiring thermal generating fleet.” PJM, in other words, is simply caught in its own net, created with the unsolicited and counterproductive aid of politicians and their bureaucrats. Once again, the “experts” demonstrate how little expertise they possess. Reliability has been sacrificed to stupid policy and special interests.

Not one bit of this makes any sense. RTOs create nothing approaching a real market. They are trapped by the politicians, special interests, and their maneuvers and forced into employing one crazy gimmick after another to correct for the impact of the last gimmick. They have completely lost touch with purpose. The PJM leadership is politely trying to tell the world this can’t go on, just like some other RTOs, but polite remarks and hints aren’t going to do it. It merely comes off as double-talk.

That coal plant, which can store energy to ensure reliability, should not have been closed and cannot effectively be replaced by renewables. PJM shouldn’t be allowing either to happen. It’s time the PJM management either takes the bull by the horns or closes the shop and lets the system return to reliability and reality by retiring itself. Enough with the nonsensical game of news releases telling two different sides of one story. Tell it all; that renewables are going to gut our energy security unless we stop subsidizing them and playing games.

#PJM #Electricity #Grid #NRGenergy #Rates #Coal #Reliability #EnergySecurity

Hat Tip: R.K.