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`UNITED STATES OF AMERICA
`BEFORE THE
`FEDERAL ENERGY REGULATORY COMMISSION
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`)
`)
`
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`Docket Nos. ER24-98-000
` ER24-99-000
`(Not Consolidated)
`
`PJM Interconnection, L.L.C.
`PJM Interconnection, L.L.C.
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`
`
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`COMMENTS OF PINE GATE RENEWABLES, LLC
`ON PJM CRITICAL ISSUE FAST PATH FILINGS
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`Pursuant to Rule 213 of the Rules of Practice and Procedure of the Federal Energy
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`Regulatory Commission (“Commission”),1 Pine Gate Renewables, LLC (“Pine Gate”) submits
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`these comments in the above captioned proceedings on PJM Interconnection, L.L.C.’s (“PJM”)
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`October 13, 2024 filings regarding the Market Seller Offer Cap (“MSOC”)2 and other capacity
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`market reforms3 (collectively, “October 13 Filings”). As discussed further below, Pine Gate is
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`largely supportive of the October 13 Filings and believes they are a just and reasonable
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`improvement over PJM’s current capacity market rules. However, Pine Gate urges the
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`Commission to reject, as PJM concedes would be permissible under NRG Power Mktg., LLC v.
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`FERC,4 PJM’s proposed revisions regarding the eligibility of Performance Payments. In addition,
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`Pine Gate urges the Commission to require PJM to provide greater clarity regarding PJM’s
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`18 C.F.R. § 385.213 (2022).
`Proposed Enhancements to PJM’s Capacity Market Rules - Market Seller Offer Cap, Performance Payment
`Eligibility, and Forward Energy and Ancillary Service Revenues, Docket No. ER24-98-000 (Oct. 13, 2023)
`(“MSOC Filing”).
`Capacity Market Reforms to Accommodate the Energy Transition While Maintaining Resource Adequacy,
`Docket No. ER24-99-000 (Oct. 13, 2023) (“ELCC Filing”).
`MSOC Filing at 4 (citing NRG Power Mktg., LLC v. FERC, 862 F.3d 108, 114-15 (D.C. Cir. 2017) (“NRG”)).
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`1
`2
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`3
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`4
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`proposed Binding Notice of Intent to participate in the capacity market.5 To the extent the
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`Commission finds PJM must make further changes to its capacity market in light of the record in
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`this proceeding and elsewhere,6 Pine Gate encourages the Commission to consider granular
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`capacity market designs such as those that were presented, but not ultimately adopted, in the PJM
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`Critical Issue Fast Path (“CIFP”) stakeholder process that culminated in the October 13 Filings.7
`BACKGROUND
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`I.
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`Headquartered in Asheville, North Carolina, Pine Gate originates, develops, finances, and
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`operates utility-scale solar and energy storage projects that generate clean renewable power. Pine
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`Gate works with energy buyers, corporations, utilities, local communities, and capital partners to
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`develop and operate these projects across the country, with a particular emphasis on projects in the
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`PJM region.
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`Relevant to the October 13 Filings, Pine Gate was an active participant in the CIFP
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`stakeholder process and sponsored a package advocating for a granular capacity market.8
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`Specifically, Pine Gate and its co-sponsors put forward an interval pricing concept that would
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`procure capacity for four intervals of the operating day. Other stakeholders also proposed packages
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`that included a sub-annual capacity market design. For example, PJM proposed a two-season
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`capacity market, but also expressed concern that its scope and complexity would make
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`5
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`6
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`7
`8
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`Capitalized terms not defined herein, have the meaning defined or used in the PJM Open Access
`Transmission Tariff (“Tariff”), the Reliability Assurance Agreement (“RAA”), or in the MSOC Filing or
`ELCC Filing.
`See, e.g., PJM Capacity Market Forum, Notice of Forum, Docket No. AD23-7-000 (Apr. 19, 2023);
`American Clean Power Association, Petition for a Technical Conference on Capacity Accreditation, Docket
`No. AD23-10-000 (Aug. 22, 2023).
`See infra § II.D.
`Capacity Coalition, Long-Term Capacity Market Changes, 2 (Aug. 1, 2023), available at 20230807-item-
`02d---leeward---long-term-capacity-market-final.ashx (pjm.com).
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`implementation difficult for the truncated CIFP timeline.9 The Independent Market Monitor of
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`PJM (“IMM”) also proposed a sub-annual capacity market that would that would replace Capacity
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`Performance and ELCC accreditation with an hourly capacity market.10 Stakeholders noted that
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`the Midcontinent Independent System Operator, Inc. (“MISO”) recently implemented a four-
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`season capacity market11 while California Independent System Operator (“CAISO”) is developing
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`a granular resource adequacy program using a “slice of day” concept.
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`Despite the robust stakeholder discussion regarding sub-annual capacity market design,
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`PJM staff and stakeholders ultimately could not fully develop any of the sub-annual proposals in
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`time for the CIFP deadline. At the conclusion of the CIFP process, Pine Gate along with several
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`other renewable energy companies submitted written comments to the PJM Board of Managers
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`(“Board”).12 The comments explained that while the companies supported a sub-annual capacity
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`market, none of the proposed packages were yet ready to be adopted and implemented. Given that
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`PJM’s annual market has proven inadequate in meeting PJM’s future reliability needs, the letter
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`urged the Board to direct PJM to initiate a second CIFP process aimed at adopting a more granular
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`market structure. While the PJM Board has expressed public support for exploring sub-annual
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`market designs, it has yet to commit to a firm timeline for developing and implementing these
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`reforms.
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`9
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`10
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`11
`12
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`Capacity Market Reform: PJM’s Initial Proposal – CIFP Resource Adequacy, PJM Interconnection, L.L.C.
`https://www.pjm.com/-/media/committees-groups/cifp-
`(Mar.
`29,
`2023),
`at:
`available
`ra/2023/20230329/20230329-item-04---pjm-cifp-ra-initial-proposal---stage-1-posting.ashx.
`Monitoring Analytics, LLC, Executive Summary of IMM Capacity Market Design Proposal: Sustainable
`Capacity Market (SCM) (Aug. 16, 2023), available at 20230823-item-01g---imm-cifp-executive-
`summary.ashx (pjm.com).
`Midcontinent Indep. Sys. Operator, Inc, 180 FERC ¶ 61,141 (2022).
`Pine Gate Renewables, LLC, et. al, Stakeholder Written Comments – Clean Energy Companies CIFP
`Resource Adequacy (Aug. 18, 2023), available at 20230823-stakeholder-written-comments---clean-energy-
`companies-cifp-resource-adequacy.ashx (pjm.com).
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`II.
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`COMMENTS
`A. With the Exception of Certain Items Discussed Below, the Proposed Revisions
`in the October 13 Filings are Just and Reasonable.
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`Earlier this year, the PJM Board acknowledged that reserve margins in PJM will likely
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`decline due to increased retirements of conventional resources, demand growth, and changes to
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`the generation mix.13 Winter Storm Elliot also emphasized the need to address emerging reliability
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`threats like weather-correlated outages of thermal units during extreme cold weather events. Pine
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`Gate applauds PJM’s leadership in proactively addressing these issues through the CIFP process.
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`Pine Gate also commends PJM staff for crafting, under a constrained timeline, a proposal that on
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`the whole strikes a reasonable balance among stakeholder interests. Below, Pine Gate expresses
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`support for several specific aspects of the October 13 Filings.
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`1.
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`PJM’s proposed MSOC reforms are just and reasonable and should be
`accepted.
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`PJM mitigates the exercise of seller-side market power—i.e., using economic withholding
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`or inflated capacity offers to raise prices in order to benefit capacity market sellers—via two
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`primary tools: (1) capping market seller offers to prevent sellers from inappropriately raising prices
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`and (2) requiring certain existing market generators to offer their capacity in the market to prevent
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`economic withholding. In PJM, the first of these tools is referred to as the MSOC and the second
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`is often called the “must offer rule” or “must offer requirement.” Together, these tools help PJM
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`ensure competitive outcomes in the capacity market.
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`Renewable resources in PJM are currently exempted from the must offer rule—and for
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`good reason. Under PJM’s Capacity Performance construct, capacity resources face substantial
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`13
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`M. Takahashi, Letter to PJM Stakeholders, PJM Interconnection, L.L.C. (Feb. 24, 2023), available at:
`https://www.pjm.com/-/media/about-pjm/who-we-are/public-disclosures/20230224-board-letter-re-
`initiation-of-the-critical-issue-fast-path-process-to-address-resource-adequacy-issues.ashx.
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`financial risks for failure to deliver capacity when called upon. While weather patterns can be
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`forecast with increasing levels of sophistication, renewable generation cannot operate when called
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`on at certain times of day for reasons entirely outside of the resource owners’ control. The must
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`offer exemption for renewables allows these resources to reduce their risk of non-performance by
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`not requiring them to offer their full accreditation into the market. In turn, this improves reliability
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`by decreasing PJM’s reliance on megawatts to perform during times they cannot feasibly provide
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`capacity and prevents load from paying for capacity that may not exist when they need it. Granular
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`capacity market designs, as discussed below, would obviate the need for the must offer exemption
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`as they would commit capacity only for those time intervals when the capacity would be available.
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`However, as PJM has opted to maintain its annual capacity market design, along with the Capacity
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`Performance construct, it is therefore appropriate that PJM has not proposed any changes to the
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`must offer exemption for renewables in the October 13 Filings.
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`While leaving the must offer exemption intact, the October 13 Filings would make much-
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`needed improvements to the MSOC that would allow all resources to appropriately include
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`Capacity Performance penalty risk in their offers. As PJM explains, the MSOC includes all the
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`costs that a resource might incur by participating in the capacity market.14 The Commission has
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`clearly indicated that these costs should include the risk of non-performance penalties that a
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`resource may incur during a Performance Assessment interval (“PAI”), otherwise known as
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`Capacity Performance Quantifiable Risk (“CPQR”).15 PJM correctly points out that, despite the
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`Commission’s assurances, the unit-specific MSOC review process has become unduly contentious
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`14
`15
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`MSOC Filing at 7-9.
`Id. at 8 (citing Indep. Market Monitor for PJM v. PJM Interconnection, L.L.C., 176 FERC ¶ 61,137 (2021),
`order on reh’g, 178 FERC ¶ 61,121, at P 16 (2022), aff’d sub nom. Vistra Corp. v. FERC, 80 F.4th 302 (D.C.
`Cir. 2023)).
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`because of a lack of clarity regarding how CPQR can be reflected in offers.16 As a result, many
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`resources are forced to offer into the capacity market at $0.00/MW-day despite the known risk of
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`potentially substantial non-performance penalties. Pine Gate notes that this situation applies to
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`renewable resources as well as many non-renewable resources that do not have an exemption to
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`the must offer requirement.
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`Resource owners know and understand the risk facing their own investments better than
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`PJM or the IMM. Resource owners may also have varying degrees of risk tolerance. The Tariff
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`should allow some level of latitude to resource owners to price and reflect risk in their offers so
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`long as they can demonstrate that their assessments are reasonable. The MSOC Filing will permit
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`this type of behavior by more clearly delineating what constitutes acceptable support for a
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`resource’s risk assessment and by allowing the CPQR to act as a “floor” preventing capacity
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`market offers from being mitigated down to zero despite substantial risk of non-performance
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`penalties. For these reasons, Pine Gate strongly supports PJM’s proposed revisions to the MSOC
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`and urges the Commission to find they are just and reasonable as proposed by PJM.
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`2.
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`PJM’s proposal to extend its capacity accreditation methodology to all
`resources rather than unduly singling out renewable resources is just and
`reasonable and should be accepted.
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`During the two most recent extreme winter weather events, Winter Storm Elliot and Winter
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`Storm Uri, common mode failures among thermal generators had a significant impact on reliability
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`of the bulk power system. While correlated weather-related output of renewables has long been
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`recognized as an operational challenge, correlated weather-related outages among the thermal fleet
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`have been largely ignored when it comes to capacity accreditation. Recent evidence strongly
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`16
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`MSOC Filing at 9.
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`suggests that the correlation of these types of outages needs to be recognized and planned for, as
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`PJM is proposing to do in the instant filing, in order to reliably operate the system.
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`In the ELCC Filing, PJM proposes to extend its ELCC accreditation approach to all
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`capacity resources. PJM explains that this proposal represents a break from its previous
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`accreditation paradigm, which accredited thermal generators using historical forced outage rates.17
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`Accreditation methods should be applied to all resources without unduly singling out renewable
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`resources for common mode outages. For these reasons, Pine Gate strongly supports PJM’s
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`proposal to apply a single capacity accreditation methodology to all capacity resources.
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`3.
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`PJM’s proposal to allow more granular PAI obligation transfers is just and
`reasonable and should be accepted.
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`The current Tariff allows market participants to engage in some bilateral capacity
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`transactions that include the transfer of performance obligations and associated penalty risk.18 In
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`the MSOC Filing, PJM proposes to allow market participants to transfer capacity on an interval
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`basis, which is not allowed under the current rules.19 Thus, as PJM explains, the proposed Tariff
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`revisions would allow resources to manage penalty exposure risk through bilateral transactions
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`that reduce obligations for certain times of day.20 The enhanced flexibility afforded to capacity
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`suppliers under this proposal would improve reliability and market efficiency by allowing, for
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`example, solar resources to transfer obligations to provide capacity at night. As PJM continues to
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`operate an annual capacity market with no distinctions between different times of day or seasons,
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`this flexibility would help ensure that financial capacity commitments are physically backed by
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`ELCC Filing at 34.
`See Tariff, Attachment DD § 4.6(f)(iv).
`MSOC Filing at 40.
`Id. at 43.
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`17
`18
`19
`20
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`capacity resources. Pine Gate strongly supports PJM’s proposal. At the same time, Pine Gate notes
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`that this is a new type of bilateral transaction and it remains unclear whether the market will be
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`sufficiently liquid to achieve its intended effect. For this reason, it is crucial that the Commission
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`reject PJM’s proposal to eliminate eligibility for bonuses for energy-only resources, as discussed
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`further below.
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`B.
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`The Commission Should Sever and Reject PJM’s Proposal to Limit Eligibility
`for Bonus Payments to Resource That Participate in the Capacity Market.
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`In the MSOC Filing, PJM proposes changes to the eligibility requirements for Performance
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`Payments to be paid to those resources that provide capacity during a PAI.21 PJM states the
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`Commission should consider this element severable from the rest of the MSOC Filing.22 Therefore,
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`the Commission may reject this portion of PJM’s filing without violating the requirements of NRG
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`and still accept the rest of the MSOC Filing under section 205 of the Federal Power Act (“FPA”).23
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`Pine Gate urges the Commission to exercise this option for the reasons discussed below.
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`As PJM explains, under existing rules, any resource is eligible for bonus payments under
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`Capacity Performance if its actual output exceeds its committed capacity during a PAI.24 In
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`practice, this means that a resource that does not have a capacity commitment is eligible for bonus
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`payments for any output subject to some adjustments for certain ancillary service commitments.
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`In the MSOC Filing, PJM proposes to preclude entirely resources without capacity commitments,
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`i.e. energy-only resources, from eligibility for bonus payments. For resources with capacity
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`commitments, PJM proposes to limit their eligibility to their installed capacity commitment
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`21
`22
`23
`24
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`Id. at 4, 43.
`Id.
`16 U.S.C. § 824d.
`MSOC Filing at 43.
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`equivalent of their committed capacity, i.e. if a resource clears half of its eligible, accredited
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`capacity in the auction, it would only be eligible for bonus payments for half of its total installed
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`capacity.25 PJM also proposes to effectively exclude demand-side resources from eligibility for
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`bonus payments.26
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`PJM provides three reasons in support of this change. First, PJM claims that this will create
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`a stronger economic incentive for resources to participate in the capacity market.27 Second, PJM
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`explains that its energy and ancillary services markets are the proper venue for providing payments
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`to resources that do not have capacity commitments.28 Last, PJM states that this proposed change
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`aligns with its current formulation of the MSOC, which does not permit opportunity costs to be
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`included.29
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`Pine Gate believes PJM’s efforts to encourage resources to participate in the capacity
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`market are well-intentioned, but ultimately misguided. It is understandable for PJM to seek for its
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`capacity market to capture all the capacity necessary to maintain system reliability and for all the
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`resources in the capacity market to be subject to the same qualifications and operating
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`requirements. For this reason, PJM should continue its efforts to design a more granular capacity
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`market that does not impose obligations that are physically impossible to satisfy such as requiring
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`solar resources to be available at night. In the absence of such a market, the status quo eligibility
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`criteria for bonus payments is just and reasonable whereas PJM’s proposed revisions are not.
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`
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`25
`26
`27
`28
`29
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`Id. at 45.
`Id. at 50-54.
`Id. at 46-47.
`Id. at 47-49.
`Id. at 49-50.
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`The purpose of allowing all resources to receive bonus payments is to facilitate real-time
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`liquidity in meeting PJM’s physical needs during tight grid conditions—not to incentivize
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`participation in the capacity market per se. When PJM faces scarce conditions, PJM needs all
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`available resources to provide output in real-time. Some resources with capacity commitments
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`may be unavailable. Yet it will be too late for those resources to buy-out of their obligations. The
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`current Capacity Performance construct facilitates the replacement of unavailable capacity
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`resources by transferring the dollars PJM collects from penalties to those resources that satisfy
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`PJM’s needs for capacity during a PAI. In attempting to encourage participation in PJM’s annual
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`capacity market, restricting eligibility for bonus payments would inadvertently blunt the signal
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`that Capacity Performance was designed to send to available resources during scarce conditions.
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`Second, PJM argues that the energy market is the proper avenue for providing an incentive
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`to perform for non-capacity resources during tight conditions. PJM relies on the capacity market
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`rather than scarcity pricing in the energy market to send investment signals. As such, energy prices
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`during PAIs do not provide generators sufficient revenue to cover the cost of investment in
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`resources that are capable of providing energy when it is needed most. Indeed, if energy and
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`ancillary service market revenues were sufficient to incentivize this performance, PJM would not
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`need a capacity market in the first place. During Winter Storm Elliot, PJM relied on resources that
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`did not have capacity commitments to keep the lights on. Many renewable resources performed
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`well-beyond their capacity supply obligations.30 While it would be preferrable to count these
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`resources as committed capacity, it is far too risky for some of these resources to participate in the
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`capacity market as it is currently designed for the reasons discussed above. Pine Gate believes it
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`30
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`See PJM Interconnection, L.L.C., Winter Storm Elliot Generator Performance, 8-9 (Feb. 9, 2023), available
`at: https://www.pjm.com/-/media/committees-groups/committees/oc/2023/20230209/20230209-item-04---
`winter-storm-elliott-generator-performance.ashx.
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`would threaten reliability to exclude them from bonus payment eligibility given the way PJM’s
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`capacity market is currently designed. To the extent PJM is concerned about eligibility of imported
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`resources because these resources do not meet certain qualifications,31 PJM should propose a
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`narrow exclusion from bonus payments for these resources. However, as proposed, PJM’s
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`proposed revisions are unjust and unreasonable and should be rejected.
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`Last, regarding making bonus eligibility consistent with PJM’s MSOC calculation, PJM
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`has not explained the benefit of making these two aspects of its Tariff consistent. PJM did not raise
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`this issue during the CIFP stakeholder process and its justification in the transmittal letter for the
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`MSOC filing is difficult to follow. PJM states:
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`Under the existing rules, opportunity cost in the form of Performance Payments are the
`potential revenues that an uncommitted resource could receive if it performs during a
`Performance Assessment Interval. However, neither the default Market Seller Offer Cap
`nor the unit-specific Market Seller Offer Cap provisions currently allow Capacity Market
`Sellers to include this the [sic] lost opportunity cost of taking on a capacity obligation in
`their capacity offers.32
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`PJM appears to be stating that while uncommitted resources can receive bonus payments,
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`committed resources cannot include the lost opportunity of these bonus payments in their offers
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`under the MSOC rules. If Pine Gate’s understanding is correct, then PJM’s conclusion that bonus
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`payment eligibility should be restricted to committed resources does not logically follow. An
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`uncommitted resource does not lose an opportunity to earn bonus payments if it becomes a
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`committed resource. On the contrary, both are eligible for bonus payments under the current rules.
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`While a committed resource may not be allowed to include the foregone revenue from bonus
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`payments in its capacity offer, that committed resource is nevertheless eligible for the same bonus
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`payments as an uncommitted one. Therefore, it is unclear what issue PJM is attempting to address.
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`31
`32
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`MSOC Filing at 46.
`Id. at 49-50.
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`To the extent the Commission shares PJM’s concern about whatever inconsistency PJM is
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`attempting to identify, it should require PJM to explain its rationale further before accepting the
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`MSOC Filing, including why PJM did not propose to modify the MSOC rules (as it is already
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`doing elsewhere in the instant filing) instead of the bonus eligibility rules to address this issue.
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`C.
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`The Commission Should Seek Greater Clarity From PJM on its Proposed
`Binding Notice of Intent.
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`PJM proposes changes to its capacity auction procedures that PJM argues will better enable
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`it to account for planned generation resources in PJM’s modeling that precedes the auction.33 In
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`particular, PJM faces a challenge with modeling planned generation resources when setting what
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`is known as the Capacity Emergency Transfer Objective (“CETO”). The CETO determines the
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`amount of capacity that needs to be imported in a particular geographic area given the amount of
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`native, internal capacity in that area. Prior to the auction, this internal amount of capacity is not
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`known because planned resources have not yet offered into the auction. Thus, PJM must use a
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`projection.34 Pine Gate notes that projecting internal capacity for a given delivery year can be
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`especially challenging in PJM because, unlike some neighboring regions, PJM does not use a
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`prompt auction and instead conducts an auction three years in advance of the delivery year. To
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`make its projection, PJM currently models any planned generation resource that has an executed
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`Interconnection Service Agreement (“ISA”) as if it would be available in the auction for the
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`purpose of determining the CETO. At the time of the actual auction, some of those resources that
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`PJM previously modeled because they had executed an ISA may not show up. This mismatch
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`between capacity modeled in setting the CETO and capacity offered in the auction can create
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`significant discrepancies as happened in PJM’s most recent capacity auction. For this reason,
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`
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`ELCC Filing at 72-77.
`See RAA Schedule 10.1, § B.
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`33
`34
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`earlier this year, the Commission accepted revisions to PJM’s auction rules that allow PJM to
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`exclude planned resources with ISAs from its modeling if those resources do not offer in the
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`auction and if a certain threshold is reached.35
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`In the instant filing, PJM proposes to modify this approach and instead require planned
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`resources to submit a binding notice of intent to offer prior to the auction.36 Under its proposal,
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`every resource seeking to offer in a capacity auction must submit a notice of intent to offer capacity
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`or be precluded from participating in the auction. PJM proposes a deadline of December 1 for each
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`Baseline Residual Auction and 90 days prior to the conduct of each Incremental Auction.
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`
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`PJM’s proposed approach is reasonable in principle and preferrable to the approach PJM
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`adopted in the CETO Filing. However, several critical questions remain regarding implementation
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`details. First, it is not clear what process will exist to address issues that may arise beyond a market
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`participant’s control. In the roughly six-month period between when a resource submits a notice
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`of intent to offer and the auction, many issues could arise that could delay a project and thus
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`prevent it from participating in the capacity auction. These include interconnection delays from
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`the interconnecting utility, delays in commissioning a project, procurement or supply chain issues,
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`and labor shortages. It is unclear what recourse, if any, a market participant would have if any of
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`these issues arose. Second, it is not clear if a resource would need to indicate a precise quantity of
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`capacity or what denomination of capacity, i.e. accredited capacity, nameplate, or installed
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`capacity, PJM will require. Resources would be especially challenged to provide precise
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`information in the notice of intent because ELCC values would be unknown at the time the notice
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`See PJM Interconnection, L.L.C. 182 FERC ¶ 61,109 (2023) (“CETO Filing”).
`ELCC Filing at 74.
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`35
`36
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`is submitted. Third, PJM has not formally committed to publishing indicative ELCC values, which
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`are an essential factor in a resource’s decision on whether or not to offer capacity.
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`Pine Gate notes that PJM held a one-hour training workshop with stakeholders on
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`November 8, 2023 to address the “Process for Planned Generation Offer Notification.” In that
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`workshop, PJM provided helpful clarifications verbally that address some of the issues raised
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`above. However, PJM has not yet publicly posted the materials for this workshop. Pine Gate
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`emphasizes that it believes PJM is acting in good faith to address these issues and respond to the
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`concerns raised by stakeholders. Nevertheless, it is clear that many important details have not yet
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`been finalized. For this reason, the Commission cannot yet determine whether PJM’s proposal is
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`just and reasonable without further clarification from PJM.
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`D.
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`If the Commission Directs Further Capacity Market Reform, it Should
`Require PJM to Consider Interval or Hourly Capacity Market Designs.
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`As discussed above, PJM’s proposed revisions in the October 13 Filings overall represent
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`an improvement over the status quo and should be accepted as just and reasonable with the
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`exceptions described above. Pine Gate commends PJM staff for its willingness to incorporate
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`stakeholder feedback under a demanding timeline during the CIFP process. Pine Gate has every
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`reason to believe that PJM will continue to work constructively with its stakeholders to seek
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`reasonable solutions to the reliability challenges PJM faces in the future. Therefore, Pine Gate is
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`not requesting that the Commission take further action under FPA section 206 to direct additional
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`capacity market reforms.
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`Many of the reforms in the October 13 Filings take steps towards a capacity market that
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`will better maintain reliability in light of PJM’s rapidly changing resource mix. PJM’s proposed
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`new accreditation method for thermal generators will now account for so-called common mode
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`outages—when many resources go offline for the same reason—such as natural gas supply
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`shortfalls. Such outages, like those experienced during recent extreme winter storms, are one of
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`the greatest reliability threats facing PJM. In addition, PJM has made several other changes that
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`appropriately shift the focus of its resource adequacy planning and operations from meeting
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`summer peak load to addressing winter reliability challenges and the duration of such outages, i.e.,
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`using Expected Unserved Energy (“EUE”). These are essential features of a well-designed market
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`that the Board should maintain going forward. As evidence of PJM’s willingness to incorporate
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`stakeholder feedback, several companies withdrew their own packages from consideration with
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`confidence that PJM’s filing would include these design features.
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`At the same time, the revisions proposed in the October 13 Filings do not go nearly far
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`enough in addressing the reliability challenges that PJM will face in the coming years. As
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`resources retire and are replaced by more intermittent and limited-duration resources, PJM will
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`increasingly face challenges to ensure it has sufficient capacity available in particular hours of the
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`day that will differ from one season to the next. Designing a capacity market that facilitates
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`participation of all resources will also pose a challenge. Intermittent resources face a different risk
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`profile than conventional generators because of their operating characteristics. While coupling
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`battery storage with renewable generators can close some of this gap, PJM’s markets currently do
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`not adequately value the reliability benefits that storage can provide. At the same time, the October
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`13 Filings retain the Capacity Performance penalty regime that can expose these market
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`participants to undue financial harm during events like Winter Storm Elliott. The must offer
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`exemption for renewables allows resources not technically capable of operating during all hours
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`of the day to reduce their risk of non-performance by not requiring them to offer their full
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`accreditation into the market. In turn, this improves reliability by decreasing PJM’s reliance on
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`megawatts to perform during times they cannot feasibly provide capacity and prevents load from
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`paying for capacity that may not exist when they need it. Time-of-day markets, as discussed below,
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`obviate the need for the must offer as they only commit resources for times they are technically
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`capable of performing.
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`Pine Gate understands that in light of these outstanding issues and others, the Commission
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`may opt to take additional action such as requiring PJM to file an informational report, propose
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`additional Tariff revisions, or explain why its Tariff remains just and reasonable without further
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`reform. If the Commission takes one of these actions, Pine Gate strongly encourages the
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`Commission to consider sub-annual capacity market designs in its assessment of potential options
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`for additional reform.
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`Creating a market that builds upon the foundation of PJM’s existing capacity market and
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`incorporates granular time-of-day prices can attract new resources, add cutting-edge technologies,
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`and send a price signal to develop innovative future solutions that can provide capacity during the
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`intervals when the market needs it most. With more granular price signals, investors and
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`technology developers can effectively make informed decisions about what technology attributes
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`are needed and when. Of critical importance, a more granular capacity market (including intra-day
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`and seasonal price shapes) will also g