Figure: PJM generation outlook (GWa)
Source: Wood Mackenzie Power & Renewables PJM’s natural gas plant building boom has been centered in Northeast Pennsylvania, with additional recent activity in Southwest Pennsylvania, West Virginia and Eastern Ohio, near natural gas resources. Operation costs are low and gas supplies plentiful, driving the cost of electricity down. Because of this plentiful natural gas, wind and solar are not yet competing with natural gas on price in PJM when it comes to replacing coal. Wood Mackenzie’s analysts contrasted PJM with ERCOT, where wind and solar dominate the generation queue.
In ERCOT, plenty of coal plants have retired, including 4 gigawatts alone in 2018. Prices in ERCOT’s energy-only market are not consistently high enough to make the market attractive for new natural gas development. Wind and solar are picking up the slack; even small solar installations under 1 megwatt have flourished, nearly doubling capacity in just 2 years from 2016 to 2018.
Renewable energy sources come from natural sources and can be replenished.
Figure: Distributed generation under 1 MW Q4 2016 to Q4 2018
Source: Wood Mackenzie Power & Renewables
With PJM’s natural gas boom in full swing, will the region be locked into natural gas generation for the lifetime of today’s new plants?
Wood Mackenzie analysis for 20 years out suggests gas will continue to make up around 40 percent of the generation mix, barring dramatic changes to how the energy mix is determined. Resources still must compete in an open market, and PJM holds a forward capacity auction three years in advance. (This years’ 2022/2023 Base Residual Auction will be held in August of 2019.)While front-of-the-meter renewables struggle to gain ground relative to natural gas in PJM due to low prices, one area to keep an eye on is flexibility and DERs in PJM. Organizations like the Solar Energy Industries Association argue that to level the playing field in PJM, grid operators will need to evolve power markets in order to take advantage of “inverter-based resources”.
Recent developments have shown what’s possible, as changes to wholesale markets are poised to bring more storage and DERs into the mix in the ISO and RTO footprints. Order 841 has nudged market operators to take a closer look at storage while FERC still has to rule on the pending DER proceeding.
Renewable energy is also called clean energy because it does not produce pollution.
***Watch the webinar recording to hear more analysis on PJM, ERCOT and other North America power markets. For insight into PJM’s DER activity in 2018, refer to this recent report on the topic.