PJM Interconnection’s report on grid performance during the cold snap in late December and early January shows that the grid and the generation fleet performed well during one of the coldest stretches since the 2014 Polar Vortex.

Between Dec. 28, 2017, and Jan. 7, 2018, PJM experienced one of its top 10 winter peak demand days. On Jan. 5, 2018, demand reached 137,522 megawatts, the sixth highest overall winter peak demand.

During the cold snap, the grid and the generation fleet performed well, PJM says, with excess reserves and capacity available even during peak demand.

However, there was an 11-fold increase in uplift charges during the cold snap. The report says the spike in uplift charges during the cold snap shows the need to reform pricing for energy and reserves.

Uplift is paid to generators when locational marginal prices do not cover the costs of units needed to serve load. Over the last several years, uplift charges have been relatively low in PJM, averaging approximately $389,000 per day. By contrast, during the peak days of the cold snap, uplift charges averaged approximately $4.3 million per day.

“We must enhance market pricing so that prices accurately reflect the cost of serving load including the actions taken by dispatchers,” says PJM President and CEO Andrew L. Ott. “The need for out-of-market uplift payments is a symptom that pricing for reserves and energy is incorrect."

PJM Interconnection was founded in 1927 and oversees the high-voltage electric power system serving 65 million people 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. PJM coordinates and directs the operation of the region’s transmission grid, which includes over 82,000 miles of transmission lines; administers a competitive wholesale electricity market; and plans regional transmission expansion improvements to maintain grid reliability and relieve congestion.

Timely Reforms

The report calls on PJM and stakeholders to evaluate and implement reforms in a timely manner, including the manner in which reserves are procured and priced, enhancements to shortage pricing, and the calculation of locational marginal pricing.

PJM says that its current method of pricing energy was chosen because it was simple in both concept and implementation. But it says that there always have been circumstances under this method where prices could fail to reflect all elements relevant to sending the right market signals.

It says that when an inflexible unit that is scheduled to serve demand is precluded from setting prices, the price does not accurately reflect the true incremental cost to serve load.

According to the report, overall, there was a significant reduction of forced/unplanned generator outages compared to the winter of 2014 to 2015. The reduction in forced outages is partially attributed to the wind chill impact being lower during the cold snap than it was in 2014 and 2015.

While the grid performed well, the report says that there are always areas for additional improvement and indicated that fuel security and stressed operations should be areas of focus for PJM and its members. Additional fuel security measures could include enhanced gas-electric coordination and fuel-oil supply and transportation tracking. The report also calls for additional modeling and analysis of operations in extremely cold weather over an extended period.