PJM manages an electric grid in the NE, mid-Atlantic and midwestern USA, delivering power to over 60 million people. Power is purchased based upon auctions of various types, and the system includes payments for capacity -- providers are paid in exchange for having available capacity to supply power as and when needed. These capacity payments are significant -- perhaps 20% of total compensation -- and they reduce the risk for a generator who might be shut out of the market, say, upon a spike in the price for a particular type of fuel. The auction last year, for capacity commitments over June 2018-May 2019 cleared with payments of $11 billion.
This year, the auction whose results were announced in late May 2016, for commitments from June 2019 to May 2020, cleared with payments of only $6.9 billion, down 39%.
Why were capacity payments lower? For a start, the forecast demand was lower -- due to efficiency and demand response initiatives. And there is a lot of new combined cycle gas generation which cleared the auction -- a result of the glut of natural gas now in North America. All in all, over 10GW of "demand resources" cleared the auction, as well as 1.5GW of "energy efficiency", 5GW of added natural gas combined cycle, 969MW of wind generation capacity, and double the amount of solar in the previous year, at 335MW, according to PJM.
Two major Exelon nuclear plants failed to clear the auction, and will probably be shut down as a result. An operator of ageing coal plants refused comment on whether its plants had cleared the auction. Wow.
It seems like only last year that Japan's 2030 "energy mix" forecast was suggesting a major role for coal and nuclear generation. (Okay, it WAS only last year -- June 2015 -- when Japan rolled out that "energy mix" forecast!) Meanwhile, in the smooth functioning, market-based system run by PJM, coal and nuclear are being squeezed dramatically.
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