PJM Market Monitor Transmogrification

I just had to click that link on my facebook feed yesterday.  After months of trying to ignore the PJM Market Monitor's State of the Market Reports because it's like being sucked into an alternative universe and it makes my brain hurt, I saw a link to this:

DOH!  It’s worth it just for this sentence:

"Markets do not automatically provide competitive and efficient outcomes."

Here it is, with the full all-in-one option or separate sections:

3Q PJM State of the Market Report Page

Here’s the full version: 2013 3Q PJM State of the Market Report

And the short version, oh, how I love it when this happens:

"The market design should permit market prices to reflect underlying supply and demand fundamentals. Significant factors that result in capacity market prices failing to reflect fundamentals should be addressed, including better LDA definitions, the effectiveness of the transmission interconnection queueprocess, the 2.5 percent reduction in demand that suppresses market prices, the continued inclusion of inferior demand side products that also suppress market prices and the role of imports."

Got that: … the 2.5 percent reduction in demand that suppresses market prices…

- 2.5%

Gee, sounds like we ought to pay to build some more power plants and transmission lines…

Okay, you got me, Carol.  I clicked.... and soon found myself poking through the entire multi-volume set and reaching for my Magic 8 Ball translator.

Here's where I went first:  Section 12, Planning

Blah, blah, generation queue, backbone transmission, blah, blah  *screech*

The goal of PJM market design should be to enhance competition and to ensure that competition is the driver for all the key elements of PJM markets. But transmission investments have not been fully incorporated into competitive markets. The construction of new transmission facilities has significant impacts on energy and capacity markets. But when generating units retire, there is no market mechanism in place that would require direct competition between transmission and generation to meet loads in that area. In addition, despite Order No. 1000, there is not yet a robust mechanism to permit competition among transmission developers to build transmission projects.4 The addition of a planned transmission project changes the parameters of the capacity auction for the area, changes the amount of capacity needed in the area, changes the capacity market supply and demand fundamentals in the area and effectively forestalls the ability of generation to compete. There is no mechanism to permit a direct comparison, let alone competition, between transmission and generation alternatives. There is no evaluation of whether the generation or transmission alternative is less costly or who bears the risks associated with each alternative. Creating such a mechanism should be a goal of PJM market design.

Well, hot damn!  Someone's been paying attention!  But wait... the following paragraph indicates that the MMU's "solution" may just tip the scales toward imported transmission:

The PJM queue evaluation process needs to be enhanced to ensure that barriers to competition are not created. There appears to be a substantial amount of non-viable MW in the queues, which increase interconnection costs for projects behind them. The MMU recommends the establishment of a PJM review process to ensure that projects are removed from the queue, if they are not viable.

Perhaps this plan is intended to clear the way for viable generation in the queue to come online, but maybe its actually clearing the way for merchant transmission from other regions, which acts as a generator at the interconnection point.

Big, mean frowny face!  And he's serious, after helping to kill new generation in Maryland and New Jersey?  So, let's go back to Carol's favorite quote:  "Markets do not automatically provide competitive and efficient outcomes."  That's right!  Because we need a "market monitor" to artificially adjust the markets to fit a pre-determined pecuniary outcome.

And the next little point to ponder comes here:  Section 8, Environmental and Renewables.

Most interesting are the graphs near the end showing real time wind and solar generation by month.  The graphs show that wind generation peaks late at night in winter months, when we don't need it.  Solar, on the other hand, peaks in the middle of the day during the hottest months of the year.

I'm not even going to bother to search for the MMU's recommendation on that because it probably urges us to build more transmission lines to import wind for summer peak, instead of what would be logically obvious to a normal person -- to take advantage of on-site solar resources to reduce peak usage.  How many roofs could we cover with solar panels for the cost of just one of these "clean" transmission line monsters?  And why are the people who are supposedly served by all this market monitoring mumbo-jumbo disenfranchised from having any say in their own energy future?