The announcement yesterday of the results of the annual auction to secure energy for around a fifth of the U.S. population offer an interesting snapshot into the state of the nation's energy mix.
The amount of solar power commissioned by utility PJM Interconnection for the period from June 2021 to May 2022 rose fourfold to 570 MW, but that figure is only marginally higher than the rise – 500 MW – seen in coal-fired power as the Republican Party continues its attempt to roll back the all-of-the-above energy strategy of Donald Trump's predecessor as president Barack Obama, an approach GOP Party members label the War on Coal.
Perhaps the most startling insight offered by this year's capacity auction results – which will secure energy for 65 million PJM customers across 13 north-eastern U.S. states and the District of Columbia – was the huge leap in unit costs, as last year's $76.53/MW-day price rocketed to $140/MW-day, and as high as $204.29 for customers of the New Jersey based Public Service Electric & Gas Co.
In a press release announcing the results of the auction, PJM cited a fall in the amount of new capacity secured – thanks to lower forecast demand – and, curiously, the desire of generators to hedge against falling energy prices as reasons behind the hike facing consumers.
Another explanation stated by the utility for rising energy prices was the presence of fewer generators in this year's auction, perhaps as a result of the abandonment of Obama's intent to draw upon an array of power sources and almost certainly due to the ambivalent messages coming out of the White House regarding renewable energy and climate change.
Interestingly, the rise in solar generation in the PJM auction was dwarfed by the advance of demand response bids and energy efficiency-related bidders. Demand response rose 3,305 MW on last year's secured capacity to account for 11,126 MW in 2021-22 and energy efficiency measures rose 1,100 MW to 3,832 MW.
Wind generation rose 529 MW to 1,417 MW and gas-fired power rose 1,000 MW as nuclear fell a thumping 7,400 MW, but still accounts for 19,900 MW of power generation for consumers across an area from Illinois, Kentucky and Tennessee in the west to North Carolina in the south and New Jersey, Pennsylvania, Ohio and Michigan in the north.
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Can anyone help me with this question…
… I’m not fully following the reasoning for rising electricity costs. Is it due to less bidders due to Trump’s policies pushing renewable providers out of the bidding process, or is it too much solar/wind driving up costs?
Any clarity here is greatly appreciated.
Great topic, and well written. I’m just an idiot.
I would argue that is renewable providers being pushed out of the bidding process. Renewable installation that are distributed on residential and commercial rooftops are lowering peak demand and overall demand. The slow adoption of solar storage will expand that reduction in demand even as electricity use growth continues with the increase in EVs and adoption of pro solar policies like those in California.
New Jersey just passed a bill requiring the state to subsidize nuclear power plants by 300 million dollars annually. This will lead to higher electrical rates in a state that is one of the top five states in the country for solar power. If we as a country had shut down nuclear power as we have done with coal we would be in much better financial shape with much lower electrical rates.
It is complex but nuclear power is not only the costliest form of power generation it also shuts down other sources because it has to be run constantly whether it is needed or not. There recently was an auction in Virginia in which 2,000 megawatts of nuclear power was offered for free at nighttime only. Now who in that area would want to put up an offshore windfarm or solar plant when they have to compete with a nuclear plant giving away free electricity half the day?
It seems the author has no understanding of the PJM market. One can find a thorough analysis @ http://www.icf.com.
Here is the macro view. PJM has had excess capacity for several years. Excess capacity yields lower prices. Several coal and nuclear plants struggle to compete in the hourly energy markets. Many are asking for “help”. New Jersey and Illinois have granted subsidies, but others have not. In other states, several large coal and nuclear plants will leave the market. PJM has also increased penalties for capacity non-availability.
Gas continues to displace coal and nuclear. No new coal or nuclear is being built.
PJM is a transparent free market. One may quibble about the rules. The market works.
The occupant of the Oval Office did not cause the capacity price to increase. Likewise, the low prices in recent history were from fracking not the previous occupant.