Electric Markets in the United States
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Electric Markets in the United States. W. Scott Miller, III Executive Director, Market Applications PJM Interconnection, L.L.C. EDF (France). 80,190 MW Peak 608 Generating Units. Tokyo Electric. 64,300 MW Peak 147 Generating Units. PJM. 63,726 MW Peak 594 Generating Units.

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Electric Markets in the United States

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Electric markets in the united states

Electric Markets in the United States

W. Scott Miller, III

Executive Director, Market Applications

PJM Interconnection, L.L.C.


Electric markets in the united states

EDF (France)

80,190 MW Peak608 Generating Units

Tokyo Electric

64,300 MW Peak147 Generating Units

PJM

63,726 MW Peak 594 Generating Units

60,157 MW Peak

555 Generating Units

54,430 MW Peak212 Generating Units

PJM / PJM West ISO Worldwide Comparison

ERCOT

National Grid(England)


Electric markets in the united states

AESO

7,800

IMO

25,269

ISONE

25,158

NYISO

30,983

PJM

63,726

CAISO

45,900

ERCOT

60,157

PJM is currently the largest centrally dispatched Control Area in North America


The law and the rules in the u s

The Law:

Title VII of Energy Policy Act of 1992

“to promote greater competition in bulk power markets...”

The Rules:

1996: Order 888

“put in place the foundation necessary for competitive wholesale power markets in this country - open access...”

1999: Order No. 2000

“ensure that customers have the benefit of competitively priced generation...”

The Law and The Rules in the U.S.


Electric markets in the united states

“…markets don’t always

operate efficiently because buyers and sellers don’t always have access to the information they need to make optimal choices.”

Akerlof, Spence, & StiglitzNobel prize winners for economics


Electric markets in the united states

PJM eData Services Main Screen


Creation of value from information technologies

Creation of Value From Information Technologies

Advancing Technologies

High

ACCESSIBILITY

ENABLERS

HardwareCPUSpeed

Smart

Products

Web

1991

2002

1991

2002

1991

2002

Portals

Bandwidth

MediaDigitalization

1991

2002

BUSINESS IMPACT

1991

1991

2002

2002

Network Architecture

Multimedia

Security

1991

2002

1991

2002

1991

2002

PRESENTATION

INFRASTRUCTURE

High

Low

Magnitude of Consumer Base Reached


Electric markets in the united states

Information Exchange

Market Participants

Local Control Centers

Generators

Load Serving Entities

  • 20,000+ Data Points Every

  • 2-10 Seconds:

  • Operational

    • Generation availability

    • Transfer capability

    • Telemetry

    • Generation control signals

    • Security recommendations

    • Pricing

  • Planning

    • Expected load forecasts

    • Constrained conditions

    • Congested areas

Public

Market Centers

Information Exchange

Regulators

Other


Energy costs in the gross domestic product

Energy Costs in the Gross Domestic Product

2001 Gross Domestic Product by Industry

(Dollars in Billions)

Energy Industry = $221 Billion Annually; 2% of Gross Domestic Product

Source: Bureau of Economic Analysis, Dept. of Commerce


Pjm market evolution

4/97 - Opened bid-based market based on Market Clearing Price

4/98 - Implemented LMP and FTRs (with overlying zones and trading hubs)

10/98 – Implemented capacity markets

1/99 - Implemented full customer choice in PA

– Implemented daily capacity market

4/99 - Market-based pricing authority granted

4/99 - PJM FTR Monthly Auction market

PJM Market Evolution


Pjm market evolution1

6/00 - PJM Day-Ahead Market and

Regulation Market

4/02 – PJM West implemented

12/02- PJM Spinning Reserve Market

PJM Market Evolution


Maturing energy market prices in pjm

Maturing Energy Market Prices in PJM

Average Day-Ahead and Real-Time LMPs

($ per megawatt hour)


Pjm capacity markets

PJM Capacity Markets

The fundamentals of supply and demand are reflected by the prices in the daily and monthly capacity markets.


Electric markets in the united states

PJM Regulation Market


Spinning reserve market opened december 1 2002

Spinning Reserve Market Opened December 1, 2002


Electric markets in the united states

PJM is the most liquid Trading Hub


Wholesale power purchases

Wholesale Power Purchases

Wholesale Power Purchases as a Percentage of Purchases and Self-Generation (1989 – 2001)

Source: Platts POWERDAT Database


Pjm prices are stable

Wholesale Energy Prices Reduced

Wholesale prices dropped to $35.33/MWH in 2002 from $43.63/MWH in 2001 – 25% hotter in 2002.

Nine all-time peaks in summer of 2002 – peak load served at an average of $150/MWH as compared to $900/MWH on peak days in 2001 (savings of about $10 million to wholesale energy customers).

PJM Prices are Stable


Markets improve generator performance

Markets Improve Generator Performance


Demand response growth

Demand Response Empowered

PJM’s demand response programs enabling customers to manage their own electricity costs grew 300 percent in 2002.

The most active 2002 demand side management hour lowered prices by more than 12%.

Demand Response Growth


Common market cost benefit analysis

“Creation of common MISO-PJM-SPP market results in …

Lower energy price for region as a whole – Effects estimated at up to $7 billion over ten years”

“As effective power markets mature, the spread between forward price and the ultimate spot price should diminish.”

Every $1 forward premium reduction from MISO-PJM-SPP common market is ultimate consumer savings of $1.7 billion per year.

ESAI July 11, 2002 Report to Standard Market Design Forum

Common Market Cost/Benefit Analysis


Queued capacity by in service date

Queued Capacity by In-Service Date

Over 35,000 megawatts scheduled will facilitate robust, competitive markets and may further reduce congestion.

In Service

Scheduled in Service

Megawatts of Generation Capacity

Scheduled In-Service Date


Value of large competitive wholesale markets

Value of Large, Competitive Wholesale Markets


Renewed futures market

Futures market necessary for hedging and assist in price discover

Lack of highly liquid futures market in the US

Failed COB/Palo Verde contract in Western US

New York Mercantile Exchange (NYMEX) recently launched renewed “PJM West” futures market

Open interest increasing and price dropping

Renewed Futures Market


Electric markets in the united states

“The future requires

a higher sophistication

in acknowledging

and dealing with

differences…”

Peter F. Drucker


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