Ensuring a Reliable Energy Transition The PJM electrical grid, spanning 13 states and Washington, D.C., has been keeping the lights on for its customers for nearly a century, and its generation fleet is expecting to undergo a historic transformation to more renewable energy sources that rely on wind and sun to produce energy. PJM has embraced this transition through its five-year strategy, producing intensive research and analysis on the opportunities and challenges presented by such a seismic shift. PJM and its stakeholders from throughout the energy industry have been hard at work smoothing the way for the transition by evolving our market rules, streamlining the planning process for new generators and engaging with states to put their clean-energy policies into action. And that work will continue. Ensuring a Reliable Energy Transition describes PJM’s role as an independent regional transmission organization in identifying challenges to the nonstop delivery of electricity – a concept we refer to simply as “reliability” – and crafting solutions to those challenges amid the ongoing shift to solar, wind and other generators that increasingly rely on renewable energy sources. Through this initiative, PJM will clearly articulate its concerns and propose an initial set of actions to be taken to keep the power flowing through this energy transition. Development and implementation of these solutions can only be accomplished in concert with all stakeholders and government partners. Changes and Challenges Require Action PJM and its stakeholders have taken concrete actions to usher in the energy transition with the following actions, among others: Development of new rules to remove barriers to renewable resources participating in PJM’s capacity market Groundbreaking work with the state of New Jersey to advance the buildout of its ambitious offshore wind program Rewriting interconnection rules to speed the entry of thousands of renewable generators flooding our planning queue Collaboration with states on a way for them to buy clean energy through a regional and centralized procurement or market system At the same time, PJM has embarked on research to evaluate the anticipated changes to the system and any challenges they may present, and to begin to work with stakeholders on solutions. Building on a foundation of this research, analysis and stakeholder exchange over the past several years, and informed by lessons learned from Winter Storm Elliott in December 2022, PJM recently outlined a set of emerging risks to reliable electrical supply. Specifically, while electricity demand continues to rise with the proliferation of energy-intensive data centers and electric vehicles and heating systems, more than 20% of PJM’s generators (~40 GW) are expected to retire by 2030. At the same time, the new renewable generation resources expected to replace them are successfully completing the PJM interconnection process but are not being built. Ensuring a Reliable Energy Transition proposes an initial set of actions to support reliability that PJM can take independently and with its stakeholders, government and industry over the immediate, near-term and upcoming time frames to keep pace with these trends: PJM’s work internally and with stakeholders and state/federal policymakers includes the following critical-focus tasks that will maintain reliability by: Markets: Securing Reliability Through Competitive Markets Critical Action Immediate Resource Performance Near-term Resource Adequacy Upcoming Reliability Services Critical Action Regulation Market Design: Address regulation market design flaws and potential enhancements including regulation signal design, regulation performance scoring, regulation requirement, regulation market clearing and regulation market settlement. Regulation Market Design Senior Task Force (RMDSTF) Immediate Resource Performance Near-term Resource Adequacy Upcoming Reliability Services Reliability Risk Modeling: Ensure that the models used to determine the reliability procurement target accurately account for system risks, particularly winter risk. Critical Issue Fast Path (CIFP) - Resource Adequacy Pending at FERC Docket No. ER24-99-000 PDF Docket No. ER24-98-000 PDF Immediate Resource Performance Near-term Resource Adequacy Upcoming Reliability Services Performance Assessments and Testing: Seek to drive reliable performance during emergencies by updating generators’ financial performance incentives and by requiring physical demonstration of generators’ performance each season. Critical Issue Fast Path (CIFP) - Resource Adequacy Pending at FERC Docket No. ER24-99-000 PDF Docket No. ER24-98-000 PDF Immediate Resource Performance Near-term Resource Adequacy Upcoming Reliability Services Qualification and Accreditation: Seek to create basic requirements for market participation (e.g., winterization of generators, fuel security) and more accurately and granularly projecting availability of each resource type (e.g., wind, solar, gas) and how they align with high-risk operating conditions, such as extreme weather. Critical Issue Fast Path (CIFP) - Resource Adequacy Pending at FERC Docket No. ER24-99-000 PDF Docket No. ER24-98-000 PDF Immediate Resource Performance Near-term Resource Adequacy Upcoming Reliability Services Market Power Mitigation: Enable suppliers to accurately reflect their financial risks in the prices they offer to PJM. By getting this right, PJM will retain needed supply over the multiyear period, and capacity prices will reflect the total cost of providing the service. Critical Issue Fast Path (CIFP) - Resource Adequacy Pending at FERC Docket No. ER24-99-000 PDF Docket No. ER24-98-000 PDF Immediate Resource Performance Near-term Resource Adequacy Upcoming Reliability Services Locational Deliverability Area (LDA) Modeling: Ensure that locations with the greatest capacity needs can use locational financial incentives to attract supply. This enables PJM to improve reliability in jurisdictions and areas that need it most without over-incurring cost. Immediate Resource PerformanceComplete Near-term Resource AdequacyComplete Upcoming Reliability Services Operations: Evolving Operations for an Evolving Resource Mix Critical Action Immediate Resource Performance Near-term Resource Adequacy Upcoming Reliability Services Critical Action Reserve Certainty: PJM seeks to update its procurement and compensation structure for reserves and improve visibility into the availability of reserves and their fuel supply, especially as more intermittent resources join the system. Reserve Certainty and Resource Flexibility Incentives Immediate Resource Performance Near-term Resource Adequacy Upcoming Reliability Services Short-Term Forecasting: Improve short-term forecasting by increasing our real-time collection and analysis of data on both customer energy demand and energy supply from sources like wind and solar. Immediate Resource Performance Near-term Resource Adequacy Upcoming Reliability Services Load Following/Dispatchability: Work with stakeholders to strengthen financial incentives for suppliers to follow its precise dispatch instructions. Renewable Dispatch Operating Reserve Clarification for Resources Operating as Requested by PJM Immediate Resource Performance Near-term Resource Adequacy Upcoming Reliability Services Gas-Electric Coordination: Continue to advocate for federal and state policies that align with and recognize the need for improved coordination between the supply of natural gas and the operation of gas-fired electricity generators. Continue to make improvements in gas – electric coordination efforts identified in the wake of Winter Storm Elliott. Natural Gas and Electric Market Coordination Immediate Resource Performance Near-term Resource Adequacy Upcoming Reliability Services Winter Storm Elliott Findings: Take additional actions as necessary as a result of lessons learned from Winter Storm Elliott. Event Analysis and Recommendation Report PDF Winter Storm Elliott Immediate Resource Performance Near-term Resource Adequacy Upcoming Reliability Services Deactivation Rule Enhancements: Seek to improve the process through which generators are asked to delay deactivation to help preserve reliability. These are currently known as Reliability Must Run – or RMR – units. The Deactivation Rule Enhancements framework must evolve to better meet future system needs and provide greater value for consumers. Enhancements to Deactivation Rules Immediate Resource Performance Near-term Resource Adequacy Upcoming Reliability Services Planning: Queue Streamlining and Proactive Planning for the Grid of the Future Critical Action Immediate Resource Performance Near-term Resource Adequacy Upcoming Reliability Services Critical Action Continued Queue Improvements: Streamline the interconnection queue process with the implementation of FERC-approved reforms to ensure that new resources get online faster. Immediate Resource Performance Near-term Resource Adequacy Upcoming Reliability Services Long-Term Regional Transmission Planning Scenario Analysis: Partner with stakeholders to develop proactive, long-term reliability and policy-driven scenarios that may require transmission expansion for the energy transition. Planning Committee Immediate Resource Performance Near-term Resource Adequacy Upcoming Reliability Services Resilience: Identify transmission-planning criteria based on extreme events and risks identified to enhance grid resilience. Immediate Resource Performance Near-term Resource Adequacy Upcoming Reliability Services Interregional Integration: Work with the Eastern Interconnection Planning Collaborative (EIPC) to determine the appropriate transfer capability for tie lines with neighbors based on a changing fleet and future system needs. Immediate Resource Performance Near-term Resource Adequacy Upcoming Reliability Services Stakeholder Process Ensuring a Reliable Energy Transition will involve a cross section of stakeholder committees, task forces and groups. Initial work on improvements to the capacity market, risk modeling, accreditation and other items in development is happening as shown under the Markets, Operations and Planning sections above. Follow the reliability initiatives through Issue Tracking. Documents Winter Storm Elliott Event Analysis and Recommendation Report PDF PJM Value Proposition PDF Testimony of Manu Asthana to the U.S. Senate Committee on Energy & Natural Resources PDF Research & Analysis Energy Transition in PJM: Resource Retirements, Replacements & Risks PDF 2.24.2023 Phase 3 of PJM’s ongoing study of impacts associated with the energy transition explores the pace of resource retirements and replacements through 2030 and highlights potential reliability risks to meeting growing electricity demand. The analysis shows that 40 GW of existing generation are at risk of retirement. The study’s projections indicate that the current pace of new entry would be insufficient to keep up with expected retirements and demand growth by 2030. 2022 Illinois Generation Retirement Study PDF 8.3.2022 In PJM’s role as a NERC regional planning authority, and in response to the new Climate and Equitable Jobs Act in Illinois, PJM conducted a study to determine impacts to the transmission system resulting from anticipated generation retirements in Illinois through 2045. PJM identified several transmission upgrades that will be needed as Illinois generation retires or is phased out. For reliability reasons, PJM noted that it may need to request that certain units be permitted to operate beyond their desired deactivation dates. Energy Transition in PJM: Emerging Characteristics of a Decarbonizing Grid | Addendum PDF 5.17.2022 | 10.28.2022 Phase 2 of PJM’s ongoing study to explore potential system impacts of the evolving resource mix recommends five key focus areas to inform subsequent study: electrification shifts, retail rate design, market reforms, integration of renewable resources and energy storage. In conducting the study, PJM synthesized the diverse polices of the area it serves into three scenarios in which an increasing amount of annual energy is generated by renewables. Grid of the Future: PJM’s Regional Planning Perspective | Summary PDF 5.10.2022 | 6.23.2022 The goal of this study is to ensure that PJM’s future grid maintains the reliability and operational flexibility necessary to address key drivers that are changing the face of the industry − decarbonization, evolving load characteristics, public policy, a diverse resource mix and new technologies. Meeting future transmission needs will involve enhancing operational flexibility while ensuring that reliability and resilience of the grid remain paramount. Energy Transition in PJM: Frameworks for Analysis | Addendum PDF 12.15.2021 Phase 1 of PJM’s Energy Transition research reflects the initial results of a multiphase, multiyear effort to study the potential impacts of an evolving resource mix. It suggests five key focus areas for further study: accurately calculating generators’ reliability value, operational flexibility, the essential reliability services provided by thermal generators, the value of regional markets and the need to evolve reliability standards. Offshore Wind Transmission Study Phase 1 Results Report PDF 10.19.2021 The Offshore Wind Transmission Study is a PJM-wide reliability study to determine reinforcements to the onshore grid not only to reliably deliver the 14,268 MW of announced plans for offshore wind for the PJM region, but also to achieve all state renewable portfolio standard targets by determining the necessary renewable capacity by resource type and location. The effort reflects close interaction between PJM and states regarding the reliable integration of renewable resources onto the grid. Reliability in PJM: Today and Tomorrow PDF 3.11.2021 This paper details the numerous functions in system planning, operations and markets that PJM oversees to maintain grid reliability. It discusses the work underway to meet future challenges through the four building blocks required for system reliability: adequate supply, accurate forecasting, robust transmission and reliable operations.