Well said Ron, thanks for the thoughtful commentary.
Previously, I have posted about our long view that capacity value will be increasing while energy value will be decreasing as we move through the #energytransition. As energy storage developers, we watched with interest the recent PJM capacity auction last week, where prices jumped 10X for the 2025/26 delivery year. Unfortunately the record-high prices (see graphic below) are a decade in the making and signal an unhealthy market more than anything. And the resource mix that cleared is old school: 48% of gas, 21% of nuclear, 18%of coal, 1% of #solar, 1% of #windenergy, 4% of hydro, 5% of demand response and 2% from other (including #energystorage) resources. Market operator PJM seems to take no responsibility for the 10X cost jump, which will likely result in double digit increases for ratepayers. In a press release, PJM says: “Auction prices were significantly higher across the RTO due to decreased electricity supply caused primarily by a large number of generator retirements, combined with increased electricity demand and implementation of FERC-approved market reforms.” There is no mention of PJM’s broken interconnection process that has jammed up gigawatts of capacity that could have addressed the capacity shortfall. PJM stopped accepting new applications in February 2023 due to a massive backlog of projects and the inefficiency of its old IX process. Time will tell if their new cluster process has fixed anything. PJM is the biggest wholesale market in the US - is the market too big to be efficiently managed? This is a question that state Public Utility Commissions will be asking when adjusted #energy prices hit consumers, whom the commissions are supposed to protect. Jeff St. John of Canary Media has a good article on this and points out “PJM has pushed back against critics of its interconnection processes. In an April blog post, Paul McGlynn, its vice president of planning, noted that roughly 40 GWs of generation that PJM has cleared for interconnection have yet to move to construction due to “continued challenges with supply chain, financing, and local siting issues.”” As if somehow the price spike is the fault of project developers. Instead, perhaps review why the market has been undervaluing resources (and not sending appropriate price signals) for years. Retirements and demand do not appear overnight. No easy answers here, but we are well past the days of project developers submitting speculative projects into IX queues – it’s just too expensive to do so. PJM’s 21% completion rate (15% capacity-weighted) must improve. Same for all RTO’s/ISO’s. FERC 2023 and FERC 1920 should help. We advocate for forward-looking solutions, but it’s difficult to see how this capacity auction drives toward a solution. From Tom Rutigliano in the Canary article, “This is not a price signal,” Instead, “it’s a windfall” for the fossil fuel and nuclear power plant owners that reap the lion’s share of higher capacity payments. References in comments.