Wednesday, October 2, 2013

Capacity, Smart Grids, and DSM

A couple of articles, on securing appropriate generating capacity to meet demand at all times, caught my attention - in part due to some past comments I've encountered connecting capacity to demand management, and therefore the infrastructure and technical tools required to increase conservation and demand management (CDM) capabilities.

Federal Court Blocks Maryland Order to Build New CCPP | POWER Magazine
A federal court on Monday shot down Maryland’s drive to spur construction of a new combined cycle power plant outside of PJM’s capacity auctions.
Ruling in favor of various entities that had sued to block the plan, the U.S. District Court for the District of Maryland found that the state’s order last year for three Maryland utilities to enter into power purchase agreements with Commercial Power Ventures (CPV), which has been seeking to build a 661-MW plant near Washington, D.C., impermissibly invaded the Federal Energy Regulatory Commission’s (FERC’s) authority over wholesale power prices.
The case grew out of Maryland’s concern with meeting its future power needs, and with PJM’s ability to incentivize construction of new capacity within the state. Last April, after several years of study and hearings, the Public Service Commission (PSC) of Maryland ordered Baltimore Gas and Electric, Potomac Electric Power, and Delmarva Power & Light to execute contracts with CPV that would provide a guaranteed revenue stream to support construction of the plant.
The state has argued for several years that PJM’s Reliability Pricing Model (RPM) has failed to attract sufficient new generation capacity to Maryland and, as a result, the state is at risk of running short of power over the next few years. (continue reading)
 I'm a fan of PJM, so from my perspective this is a jurisdiction not trusting markets to provide capacity (which is, I think, an issue in Ontario regarding summer demand requirements).

Meanwhile, in the tight supply, "energy-only" market of Texas, talk of a capacity market will not go away

Battle over power capacity in Texas heats up | Reuters
Texas regulators are struggling to attract new power plants and other resources so the state's electric supply will keep pace with its growing economy.
Over the past two years, the Texas Public Utility Commission (PUC) and grid operator Electric Reliability Council of Texas (ERCOT have raised wholesale price caps and taken other steps to signal a shrinking supply of generation, but developers and others say more changes are needed.
The PUC directed the ERCOT last month to move forward with a proposal that would implement a demand curve that would allow wholesale prices to rise as power reserves tighten as a way to increase generator revenue.
The big question is whether Texas will follow other U.S. power markets to implement a "capacity" market. The existing Texas "energy-only" market only pays generators when they produce power...
A newly appointed third member of the PUC is expected to end the stalemate between two existing commissioners over whether a capacity market is a necessity, or a radical departure from the current market design. (continue reading)
Or neither.
Firm capacity has been cited, I think convincingly, to compete with conservation and demand management programs (CDM)... and in some parts of the world there is some excitement about utilizing new implementations of technology to create a "smart grid" where tools can be designed to increase CDM capabilities.
Coincidence is not causation, but it is worth noting that Maryland and Texas, along with another tight reserve jurisdiction in California, have been deemed the top 3 "smart grid" states.

That is not likely to be a coincidence, but a reminder the markets require scarcity; innovation probably does too.

I'd suggest there is an argument here for strategic reserves instead of, or supplementing, capacity markets.

The German Energy blog continues to report on capacity proposals there: this one for a temporary strategic reserve, and this one basically pricing capacity.

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