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PJM, IMM Estimate Capacity Performance Transition Costs To Be Up To $4 Billion Annually
Incremental capacity costs to load serving entities from a transition to PJM's proposed capacity performance product in the three years for which a base residual auction has already been held are estimated to be as high as $4 billion annually, PJM and the Independent Market Monitor said in a joint report.
PJM and the IMM claimed that net costs would be, at most, $2 billion annually, due to lower energy market prices and reduced uplift associated with implementing the capacity performance mechanism.
PJM and the IMM estimated the incremental capacity costs, and energy/uplift offsets, as follows:
For 2018/19, where the capacity performance product is proposed to be included in the BRA, "the estimated incremental capacity cost of the Capacity Performance proposal in this year is between $1.9 billion and $ 5.0 billion."
"The offsetting energy market benefits are conservatively estimated to be approximately $3.0 billion as resource performance, availability and flexibility continue to improve. Therefore the net cost of the Capacity Performance proposal in this year is estimated as between -$1.1 billion and $2.0 billion," PJM and the IMM said.
Link to Report
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October 24, 2014
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Copyright 2010-14 EnergyChoiceMatters.com
Reporting by Paul Ring • ring@energychoicematters.com
Year Incremental Capacity Energy Market
Cost Range Reduction
2015/16 $200-$600 Million ---
2016/17 $2.5-$3.6 Billion $2.2 Billion
2017/18 $3.1-$4.2 Billion $2.2 Billion
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