Capacity-Market Dependent PJM Issues "Third World" Plea for Electric Conservation

It's well-established that the ERCOT energy-only market, since the introduction of retail choice, has never been forced to shed firm load due to a lack of installed capacity compared to the reserve margin (with the two rotating outage events occurring at times ERCOT has had installed capacity in excess of the reserve margin).

This has obviously posed a problem for capacity market supporters, since it shows a lack of installed capacity is not a problem in ERCOT.

To combat this fatal flaw, capacity market supporters have responded with a campaign of fear and hyperbole. One of their preferred narratives is that, it doesn't matter that ERCOT has kept the lights on while saving customers billions of dollars in capacity payments -- the threat of resource inadequacy is enough to deter businesses from investing in Texas.

In particular, capacity market supporters have criticized ERCOT and PUC calls for conservation at times of grid stress as indicative of a "broken" system, that discourages businesses from locating in Texas, in favor of more "robust" grids in other states (ignoring the plain evidence to the contrary from numerous publications concerning best business locations). We have even heard the term "third world" to characterize these public pleas for conservation to keep the lights on. Texas Public Utility Commissioner Brandy Marty herself has said that the lights going out because the state doesn't have enough energy is a "third world" problem.

Well, if this narrative is true, PJM can now take its place among "third world" electric grids -- except it's coming despite the billions of dollars paid to capacity suppliers to ensure PJM has adequate capacity.

Specifically, PJM issued a public plea for electric conservation yesterday, in which PJM said that it is, "requesting the public to conserve electricity on Tuesday."

"The request is being made throughout the region served by PJM," indicating this was not some local constraint or issue prompting the call. "Sustained, extreme cold weather and high demand for electricity can tax generating equipment and could lead to natural gas curtailments to some gas-fired power plants," PJM said.

"Extreme cold temperatures tonight and tomorrow will challenge PJM and its members," PJM said. We understand the historic nature of current conditions, and that they will challenge any system -- but the whole point of buying costly "insurance" through the capacity market is so that customers don't have to worry about such extremes -- or so we're told. If such historic cold prompts public pleas for conservation from PJM, would a capacity market in Texas have made any difference during the much-hyped summer of 2011, when public pleas for conservation helped keep the lights on? Or would a Texas capacity market have produced the same result, including the need for reliance on public pleas for conservation (as PJM is doing now), just at a higher cost?

And lest capacity market sympathizers think we are harping too much on a single release, it's not the first time PJM has been forced to make public pleas for electricity conservation to keep the lights on -- similar pleas were made as recently as September when PJM was forced to shed firm load, due to, among other reasons, an inadequate supply of available generation.

We wish to stress that we, ourselves, are not calling PJM's grid third-world, or in any way think public pleas for conservation reflect an inadequate electric grid. Our point is: if the ERCOT market is going to be disparaged for such conservation pleas, the same characterization must be applied to PJM and its capacity market.