Constellation Notes PJM Customers Paid $58 Billion Since Capacity Performance Started; PJM Had Only 3% Reserve During Elliott Due To Non-performance, Greater Level Of Outages Vs. 2014

Constellation noted in a news release today that, "PJM customers have paid generators approximately $58 billion in capacity performance payments intended to spur generators to invest in reliability measures to prevent outages during extreme weather events," since the introduction of the capacity performance mechanism into the capacity market in 2016 (previously, PJM capacity suppliers were paid for capacity without a performance requirement)

Constellation said of Winter Storm Elliott, "The storm was the first major test of the capacity performance policies implemented by PJM starting in 2016 in response to the Polar Vortex, which similarly caused 22 percent of PJM’s generation to go offline in 2014. Since that time, PJM customers have paid generators approximately $58 billion in capacity performance payments intended to spur generators to invest in reliability measures to prevent outages during extreme weather events. Despite those payments, the grid experienced an even greater level of outages during Elliott."

"PJM came within about 5,000 megawatts of experiencing rolling blackouts on Christmas Eve in a grid with a load of 160,000 megawatts, leaving a margin of just 3 percent," Constellation said

Constellation said, "The grid operator [PJM] reported that 90 percent of the outages were among fossil power plants, which experienced equipment failures and fuel shortages during Winter Storm Elliott. PJM issued conservation alerts and exhausted its available emergency procedures, coming perilously close to resorting to rolling brownouts and blackouts to keep the grid up."

Constellation made the observations in stating, "these unacceptable grid-wide failures are clear evidence that PJM still has work to do to keep the grid clean and reliable as climate risks increase," and arguing that, "Electricity markets severely undervalue the unmatched reliability and carbon-free benefits of nuclear energy."

Constellation said that all 16 of its nuclear reactors in PJM ran at 100 percent power during Elliott

While Constellation cited the data as supporting its sought support for nuclear power, the PJM experience is once again instructive as Texas considers a potential ERCOT market re-design, whether it be a traditional capacity market as recommended by a consultant, or a novel "performance credit" market favored by the PUC.

PJM's capacity market includes both bonuses for performance and penalties for non-performance ($2 billion in penalties during Elliott), but as intimated by Constellation, performance mechanisms alone did not appear to achieve the desired outcome, although firm load shed was avoided.