Released June 09, 2021 | SUGAR LAND
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Researched by Industrial Info Resources (Sugar Land, Texas)--On June 2, 2021, PJM Interconnection announced the results of the 2022-2023 Base Residual Auction (BRA). The capacity auction procures power supply resources in advance of their delivery year in order to meet electricity needs of the 65 million customers across 13 states and the District of Columbia.
Auctions typically are held three years prior to the delivery year. The 2022-2023 auction had been scheduled for 2019, but was postponed until this year while the Federal Energy Regulatory Commission (FERC) considered approval of new capacity market rules.
PJM said the 2022-2023 auction cleared 144,477.3 megawatts (MW) of unforced capacity for the delivery year June 1, 2022, through May 31, 2023. Prices declined roughly 64% from $140/MW-day to $50/MW-day, when compared with the 2021-2022 BRA. There will be regions of the area where prices could be higher due to transmission constraints and other factors. The lower overall pricing can be attributed to lower load forecasts and load-margin requirements, as well as a 19% decrease in cost of new entry (CONE), which represents the cost of building and bringing online new capacity.
The big winners in terms of energy sources/fuel types in the auction were wind, solar, natural gas and nuclear power plants. On the renewables side, 1,728.1 MW of wind resources cleared the 2022-2023 BRA, which is 312 MW more than the amount that cleared the 2021-2022 auction. Solar's 1,511.6 MW that cleared the 2022/2023 BRA compares with 569.9 MW during the 2021-2022 auction. Together, wind and solar have the potential to supply more than 11,761 MW of nameplate capacity into the PJM system. This indicates renewables are here to stay, and likely to play an even larger role moving forward.
Electricity from natural gas-fired, combined-cycle plants experienced a significant increase of 3,414 MW compared with the last auction, while nuclear cleared an additional 4,460 MW. Although nuclear saw an increase, there were still three plants in Illinois (Dresden, Byron and Quad Cities) that failed to clear the auction. Two of these plants are scheduled for retirement later this year. Although Braidwood and LaSalle cleared the auction, Exelon has indicated they remain at risk for early retirement unless measures are taken to subsidize the nuclear sector in Illinois. Presently, there is legislation proposed that would provide more than $540 million to keep three of the six nuclear plants in Illinois operational.
The capacity auction did not cast a positive outlook for coal-fired generation. Overall, coal generators cleared 8,175 fewer MW than did the 2021/2022 BRA in 2018. The vast majority of the coal generators in the PJM system are too expensive to operate, and the writing on the wall for the coal sector is becoming astonishingly clear for a region that has depended on the fuel for decades. In fact, coal was the only fuel source that experienced a decline this year when compared with the previous auction.
The next Base Residual Auction for the 2023-2024 delivery year is scheduled for December 2021.
Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, six offices in North America and 12 international offices, is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. Industrial Info's quality-assurance philosophy, the Living Forward Reporting Principle, provides up-to-the-minute intelligence on what's happening now, while constantly keeping track of future opportunities. Follow IIR on: Facebook - Twitter - LinkedIn.
Auctions typically are held three years prior to the delivery year. The 2022-2023 auction had been scheduled for 2019, but was postponed until this year while the Federal Energy Regulatory Commission (FERC) considered approval of new capacity market rules.
PJM said the 2022-2023 auction cleared 144,477.3 megawatts (MW) of unforced capacity for the delivery year June 1, 2022, through May 31, 2023. Prices declined roughly 64% from $140/MW-day to $50/MW-day, when compared with the 2021-2022 BRA. There will be regions of the area where prices could be higher due to transmission constraints and other factors. The lower overall pricing can be attributed to lower load forecasts and load-margin requirements, as well as a 19% decrease in cost of new entry (CONE), which represents the cost of building and bringing online new capacity.
The big winners in terms of energy sources/fuel types in the auction were wind, solar, natural gas and nuclear power plants. On the renewables side, 1,728.1 MW of wind resources cleared the 2022-2023 BRA, which is 312 MW more than the amount that cleared the 2021-2022 auction. Solar's 1,511.6 MW that cleared the 2022/2023 BRA compares with 569.9 MW during the 2021-2022 auction. Together, wind and solar have the potential to supply more than 11,761 MW of nameplate capacity into the PJM system. This indicates renewables are here to stay, and likely to play an even larger role moving forward.
Electricity from natural gas-fired, combined-cycle plants experienced a significant increase of 3,414 MW compared with the last auction, while nuclear cleared an additional 4,460 MW. Although nuclear saw an increase, there were still three plants in Illinois (Dresden, Byron and Quad Cities) that failed to clear the auction. Two of these plants are scheduled for retirement later this year. Although Braidwood and LaSalle cleared the auction, Exelon has indicated they remain at risk for early retirement unless measures are taken to subsidize the nuclear sector in Illinois. Presently, there is legislation proposed that would provide more than $540 million to keep three of the six nuclear plants in Illinois operational.
The capacity auction did not cast a positive outlook for coal-fired generation. Overall, coal generators cleared 8,175 fewer MW than did the 2021/2022 BRA in 2018. The vast majority of the coal generators in the PJM system are too expensive to operate, and the writing on the wall for the coal sector is becoming astonishingly clear for a region that has depended on the fuel for decades. In fact, coal was the only fuel source that experienced a decline this year when compared with the previous auction.
The next Base Residual Auction for the 2023-2024 delivery year is scheduled for December 2021.
Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, six offices in North America and 12 international offices, is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. Industrial Info's quality-assurance philosophy, the Living Forward Reporting Principle, provides up-to-the-minute intelligence on what's happening now, while constantly keeping track of future opportunities. Follow IIR on: Facebook - Twitter - LinkedIn.
