Scaling Clean: Assessing Market Options for Clean Energy and Capacity in PJM
Executive Summary
In response to state decarbonization policies, customer demand, and technological advancements, carbon-free energy is increasingly integrated into the PJM Interconnection, the largest US wholesale electricity market. However, the pace of decarbonization in PJM is insufficient to avoid severe climate impacts. This report evaluates two proposed clean energy market designs and offers recommendations for accelerating decarbonization while maintaining reliability and affordability.
Key Findings:
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Market Dynamics: The analysis considers how market participants, technology carve-outs, and varying clean energy demands influence outcomes in decentralized clean energy procurement, a Forward Clean Energy Market (FCEM), and an Integrated Clean Capacity Market (ICCM).
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Cost and Emissions Reduction: Incorporating the capacity value of clean energy resources into PJM markets leads to reduced system-wide costs and carbon emissions.
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State Influence: State carve-out policies significantly impact costs and emissions, requiring careful consideration alongside their benefits.
Recommendations:
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Maintain Focus on Clean Procurement: Continue discussions on reforms that enhance clean energy resource participation in the capacity market.
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Standardize Clean Energy Products: Collaboratively define a standardized clean energy product for competitive regional procurement, streamlining transactions and potentially lowering costs.
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Expand Participation: Foster demand from voluntary buyers like corporate customers and municipalities to accelerate clean energy deployment and emissions reduction.
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Prioritize Feasible Approaches: Focus on strategies that quickly decarbonize the grid, adapt to a more deeply decarbonized future, and are politically viable.
Introduction
The Resource Adequacy Senior Task Force (RASTF) of the PJM Interconnection is considering significant changes to its capacity market, which could either support or hinder decarbonization efforts in the region. As the largest RTO in terms of peak load and the second-largest in terms of carbon emissions, the decisions made by the RASTF have significant implications for the broader US energy transition. The urgency of mitigating climate change necessitates RTOs' consideration of decarbonization alongside traditional objectives of affordability and reliability.
PJM CEO Manu Asthana has emphasized the necessity of enabling decarbonization efforts through market-based solutions. This report explores whether a centralized clean energy market could aid in scaling clean energy deployment, support reliability, and manage costs in the PJM region. Over the past year, research has focused on understanding the pivotal aspects of market design and its impact on achieving these objectives.
