Gas Now Tops Coal in PJM, but Nuclear Still No. 1

A report from an independent market monitor for PJM Interconnection shows that natural gas-fired power generation topped coal-fired output in PJM in 2018, the first time that gas has topped coal in the history of the largest U.S. grid operator.

The "2018 State of the Market" report from Monitoring Analytics LLC, which includes Volume 1 and Volume 2, was released March 14. It showed that while nuclear power continues to lead PJM electricity production, at 34.2%, natural gas-fired generation accounted for 30.6% of PJM's power mix last year, while coal-fired units provided 28.6% of the region's power.

The report showed that gas-fired generation in PJM rose by more than 18% in 2018. Coal generation dropped by 6.6%, and nuclear generation fell by 0.5%.

PJM serves 65 million people in all or parts of 13 states and the District of Columbia.

"This winter confirms what we have been seeing in PJM recently," said PJM President and CEO Andrew L. Ott in a March 18 news release. "The grid is strong, diverse and reliable, and even major fuel supply disruptions can be absorbed. We will continue to analyze the dependability of the fuel-supply system to make sure we're reliable under extreme conditions, and craft appropriate market reforms to offer proper incentives to generators providing critical reserves."

PJM in 2018 conducted its own study on its fuel delivery systems, concluding there was no immediate threat to grid reliability across its network. The grid operator in April 2018 said its system would remain reliable even with significant retirements of generation resources, including more than 3,600 MW last year.

Renewables' Share Small, but Growing

Generation from renewable resources accounts for about 5% of generation in PJM, though solar and wind output continue to rise. The Monitoring Analytics report noted that wind power accounted for 2.6% of generation in the region, up 4.4% year-over-year, with solar power responsible for just 0.3%-though solar generation in PJM rose 43.7% year-over-year. Hydropower accounted for 2.3% of the system's generation in 2018.

The report showed energy prices in PJM, which have been at record low levels in recent years, rose in 2018 to their highest level since 2014, with location marginal prices (LMPs) up 23.4% year-over-year. The report noted that merchant generators have faced strong competition in the open market, and competition has intensified with a more diverse portfolio of resources.

As renewable resources become more competitive and with low-cost natural gas abundant in the PJM, thanks to the Marcellus and Utica shales, coal and nuclear plants in the region have faced economic challenges. That in part has led to legislative maneuvering to support coal and nuclear power plants. Critics of those subsidies have said that would put natural gas and renewables at a disadvantage in wholesale markets.

The Monitoring Analytics report, though, signaled subsidies are not necessary. "There is no evidence to support the need for a significant change to the level of energy market revenues," the report noted. "The objective of efficient short run price signals in the energy market is to minimize system production costs, not to minimize uplift or to ensure a predefined level of revenues in the energy market."

The market monitor in 2017 joined a lawsuit against an Illinois measure that props up economically challenged nuclear power plants with subsidies.

Revenues Higher for PJM Coal, Nuclear Plants

The report showed net revenues for coal and nuclear plants in PJM rose in 2018 due to higher LMPs. The report acknowledged that while some coal and nuclear units are not economic at expected levels of energy and capacity market clearing prices, "the decisions on how to proceed belong to the owners of those plants " [the] fact that some plants are uneconomic does not call into question the fundamentals of PJM markets."

PJM on March 18 said that power reliability and fuel supplies across the region have been good this winter, two items frequently cited by those concerned about the retirement of coal and nuclear plants. The PJM statement said market improvements have continued to be made since extreme cold weather-the so-called polar vortex-in the winter of 2013-2014 caused power outages, and led to questions about whether the region was too reliant on gas-fired generation.

"This improvement was driven by a number of factors, including generators 'firming up' gas supply contracts, pipeline expansion projects, improved gas/electric coordination and the relatively short duration of the cold weather," PJM said in a statement. "During the short but intense cold snap that impacted PJM's footprint between Jan. 28-31, forced outages were slightly higher than normal winter operations, which is typical for extreme cold periods. But overall generator performance was good, and continued to show marked improvement over the polar vortex winter of 2013-2014."

PJM said that on Jan. 31, its peak demand day this winter and estimated to be the fourth-highest winter peak the grid operator has ever seen, gas supply outages totaled 2,930 MW. A similar cold period in 2018 experienced 5,913 MW of gas supply-related outages. PJM said all fuel supply-related outages this winter have dropped by more than 50% from a year ago. It also said most outages this winter were due to mechanical issues at power plants, not gas supply issues.

PJM in its March 18 statement noted that wind generation in the region hit an all-time high of 7,808 MW on Jan. 9.

-Darrell Proctor is a POWER associate editor (@DarrellProctor1, @POWERmagazine).

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