My inspiration for this week’s post comes from a February 4 Wall Street Journal editorial, Josh Shapiro’s Climate Self-Protection, Josh Shapiro’s Climate Self-Protection - WSJ. Josh Shapiro is the governor of Pennsylvania, and the editorial addressed a recent news release in which he announced a settlement Pennsylvania reached with the operator of the 13-state PJM Regional Transmission Organization (RTO). The settlement will lower the cap on the price of offers that can be submitted into PJM’s annual capacity auctions. This is kind of a wonky issue, and I am doing this post at least in part to see if I can write about it in an understandable way that also is interesting.
Please do write your book! I am one of the pro-nuclear people and I have a difficult time explaining the need for baseload power to people I am trying to convince.
I'm working on it! At the risk of ruining a future book sale, here is a simple way I explain to people the need for baseload capacity. A 100 MW baseload plant can generate 100 megawatt-hours 24 hours a day, which is a total of 2,400 megawatt-hours of energy. Solar power doesn't work at night, and its output is reduced when it is cloudy or in the winter when it is cold, like it is right now. If you want to generate 100 megawatt-hours of electricity every hour of the day solely with solar panels, then you would need not only 100 MW of solar panels, which produce 100 megawatt-hours of electricity only when the sun is bright and hot, but also additional panels to generate enough electricity in sub-optimal conditions. I think that panels might produce only 2% of their capacity on cold cloudy days, which means you would need 5,000 MW of solar panels to produce 100 megawatt-hours of electricity on those days in daylight hours. Plus you would need enough batteries to supply you at night and when snow covers your panels and other sub-optimal conditions, plus enough additional panels to charge those batteries. At the end of the day you would need a huge amount of panels and batteries to replicate what that 100 MW baseload unit can produce. It is much more efficient if you combine baseload generation with renewable resources or other types of generation that can't operate 24/7.
That's basically the argument that I have made. It usually takes me many back-and-forths to get there, and then people confuse battery storage with baseload power and we start again.... It would be great to be able to hand them a book instead! Meredith Angwin's book is really good and I have used some excerpts from there. You explain complex topics well, so I'm looking forward to it. I am totally in favor of using as many renewables as we can, but I need to convince a lot of people that they can't do it by themselves. And as you pointed out, one issue with an unreliable grid will set renewables back by decades.
Excellent article. I have been reading the Utility Dive articles, but I don't have enough background in the industry to be able to understand all of what they're saying, and this helped a lot. Because I work with a group called the NJ 50x30 Building Electrification Committee, I'm trying to put together a simple statement explaining the latest price hikes to consumers who ask us. The comments from the other people here also made good points - the low capacity factor of renewables, and the siting/construction issues with other baseload plants. Do you think that the recent PJM rule changes to prioritize shovel-ready projects will help or hurt?
I assume you are talking about the PJM rules regarding the order in which they will process requests to interconnect with the transmission system. Interconnections are a big issue on the grid and I intend to do a post on them in the near future. In short, there are two problems with interconnections. The first is that so many requests are submitted that it clogs up the system as PJM (and other RTOs and utilities) try to process them. The new rules will help with that, because it allows projects that are ready to go forward to cut in line ahead of people who haven't done the necessary development. There are some interconnection trolls who have no intention of ever building a project but submit multiple interconnection requests in the hope of being able to sell their request position to someone further behind them in line. The new rules should make it harder for the trolls to do this.
But there is a second problem with the large number of interconnection requests. The transmission system doesn't have unlimited capacity. And if an interconnection request can be granted only if new facilities need to be constructed, the project making the request is required to pay the costs of the upgrades. Sometimes the new facilities required can cost in the hundreds of millions of dollars. Not surprisingly, the more requests there are, the more quickly interconnection capacity gets used up, and the more likely that expensive upgrades will be required for new projects seeking to interconnect.
Yes, that was my question. Interesting....so I guess the question of who pays for the upgrades is going to be one of the key issues for the next couple of years. Thank you for the responses.
Nice analysis and I appreciate your level of detail here. However, I think you are probably discounting the ultimate price impact of the fact that the PJM cue currently consists of almost all solar, storage and wind projects with a very thin veneer of natural gas. Given PJM's own ELCC Class Ratings (i.e. capacity factor) estimates of only 9% (nine percent!!) for solar and 35% for onshore wind, the cost and reliability chickens will soon come home to roost in a big way. If you can tell me a way to attach pictures in the comments section, I'll send you screen shots of the two PJM slides from two months ago that show the figures.
I agree that capacity costs will continue to be high, or at least should be. The only question is whether the $325 cap PJM agreed to in his settlement will fail to incentivize the retention of existing capacity and construction of new capacity that would be retained/constructed under the $400 cap that would have existed under the proposal PJM proposed before Pennsylvania filed its complaint. I have done no analysis but it seems unlikely to me.
I was able to read your article rather than watching Kendrick Lamar in the Super Bowl halftime. It was a a welcome diversion from what appears to be a slaughter on the grid iron.
The PJM Board of Managers has informed stakeholders of its support for undertaking immediate actions to provide for resource adequacy in light of the continuing and rapid tightening of grid power supplies versus growing demand for electricity.
A capacity shortage may affect the PJM system as early as the 2026/2027 Delivery Year, when the 2025 Long-Term Load Forecast is taken into account, PJM Board Chair Mark Takahashi noted in a Dec. 9 letter to stakeholders (PDF). As outlined in the letter, this imbalance of future electricity supply and demand is being driven by the following trends:
* Electrification coupled with the proliferation of high-demand data centers resulting in material forecasted load growth for the foreseeable future
* Retirement of thermal generators at a rapid pace due to policy and economic pressures
* Slow new entry of replacement generation resources due to a combination of industry forces, including siting, permitting and supply chain constraints
* The significant volume of resources in the new services queue that are being processed pursuant to FERC’s order on PJM’s interconnection process reform, with a high proportion of intermittent resources that don’t have the same capacity value and operational characteristics as the retiring thermal generating fleet
*
* My note: they are neglecting to mention the huge demand that will be created by all electric cars. I guess you could lump that in with the electrification bullet
Maintaining reliability is a real challenge these days for PJM and the other RTOs a well. MISO has the biggest problems of all. Keeping capacity market prices high is essential for ensuring there will be adequate capacity in place
Please do write your book! I am one of the pro-nuclear people and I have a difficult time explaining the need for baseload power to people I am trying to convince.
I'm working on it! At the risk of ruining a future book sale, here is a simple way I explain to people the need for baseload capacity. A 100 MW baseload plant can generate 100 megawatt-hours 24 hours a day, which is a total of 2,400 megawatt-hours of energy. Solar power doesn't work at night, and its output is reduced when it is cloudy or in the winter when it is cold, like it is right now. If you want to generate 100 megawatt-hours of electricity every hour of the day solely with solar panels, then you would need not only 100 MW of solar panels, which produce 100 megawatt-hours of electricity only when the sun is bright and hot, but also additional panels to generate enough electricity in sub-optimal conditions. I think that panels might produce only 2% of their capacity on cold cloudy days, which means you would need 5,000 MW of solar panels to produce 100 megawatt-hours of electricity on those days in daylight hours. Plus you would need enough batteries to supply you at night and when snow covers your panels and other sub-optimal conditions, plus enough additional panels to charge those batteries. At the end of the day you would need a huge amount of panels and batteries to replicate what that 100 MW baseload unit can produce. It is much more efficient if you combine baseload generation with renewable resources or other types of generation that can't operate 24/7.
That's basically the argument that I have made. It usually takes me many back-and-forths to get there, and then people confuse battery storage with baseload power and we start again.... It would be great to be able to hand them a book instead! Meredith Angwin's book is really good and I have used some excerpts from there. You explain complex topics well, so I'm looking forward to it. I am totally in favor of using as many renewables as we can, but I need to convince a lot of people that they can't do it by themselves. And as you pointed out, one issue with an unreliable grid will set renewables back by decades.
Excellent article. I have been reading the Utility Dive articles, but I don't have enough background in the industry to be able to understand all of what they're saying, and this helped a lot. Because I work with a group called the NJ 50x30 Building Electrification Committee, I'm trying to put together a simple statement explaining the latest price hikes to consumers who ask us. The comments from the other people here also made good points - the low capacity factor of renewables, and the siting/construction issues with other baseload plants. Do you think that the recent PJM rule changes to prioritize shovel-ready projects will help or hurt?
I assume you are talking about the PJM rules regarding the order in which they will process requests to interconnect with the transmission system. Interconnections are a big issue on the grid and I intend to do a post on them in the near future. In short, there are two problems with interconnections. The first is that so many requests are submitted that it clogs up the system as PJM (and other RTOs and utilities) try to process them. The new rules will help with that, because it allows projects that are ready to go forward to cut in line ahead of people who haven't done the necessary development. There are some interconnection trolls who have no intention of ever building a project but submit multiple interconnection requests in the hope of being able to sell their request position to someone further behind them in line. The new rules should make it harder for the trolls to do this.
But there is a second problem with the large number of interconnection requests. The transmission system doesn't have unlimited capacity. And if an interconnection request can be granted only if new facilities need to be constructed, the project making the request is required to pay the costs of the upgrades. Sometimes the new facilities required can cost in the hundreds of millions of dollars. Not surprisingly, the more requests there are, the more quickly interconnection capacity gets used up, and the more likely that expensive upgrades will be required for new projects seeking to interconnect.
Yes, that was my question. Interesting....so I guess the question of who pays for the upgrades is going to be one of the key issues for the next couple of years. Thank you for the responses.
Nice analysis and I appreciate your level of detail here. However, I think you are probably discounting the ultimate price impact of the fact that the PJM cue currently consists of almost all solar, storage and wind projects with a very thin veneer of natural gas. Given PJM's own ELCC Class Ratings (i.e. capacity factor) estimates of only 9% (nine percent!!) for solar and 35% for onshore wind, the cost and reliability chickens will soon come home to roost in a big way. If you can tell me a way to attach pictures in the comments section, I'll send you screen shots of the two PJM slides from two months ago that show the figures.
I agree that capacity costs will continue to be high, or at least should be. The only question is whether the $325 cap PJM agreed to in his settlement will fail to incentivize the retention of existing capacity and construction of new capacity that would be retained/constructed under the $400 cap that would have existed under the proposal PJM proposed before Pennsylvania filed its complaint. I have done no analysis but it seems unlikely to me.
I was able to read your article rather than watching Kendrick Lamar in the Super Bowl halftime. It was a a welcome diversion from what appears to be a slaughter on the grid iron.
The PJM Board of Managers has informed stakeholders of its support for undertaking immediate actions to provide for resource adequacy in light of the continuing and rapid tightening of grid power supplies versus growing demand for electricity.
A capacity shortage may affect the PJM system as early as the 2026/2027 Delivery Year, when the 2025 Long-Term Load Forecast is taken into account, PJM Board Chair Mark Takahashi noted in a Dec. 9 letter to stakeholders (PDF). As outlined in the letter, this imbalance of future electricity supply and demand is being driven by the following trends:
* Electrification coupled with the proliferation of high-demand data centers resulting in material forecasted load growth for the foreseeable future
* Retirement of thermal generators at a rapid pace due to policy and economic pressures
* Slow new entry of replacement generation resources due to a combination of industry forces, including siting, permitting and supply chain constraints
* The significant volume of resources in the new services queue that are being processed pursuant to FERC’s order on PJM’s interconnection process reform, with a high proportion of intermittent resources that don’t have the same capacity value and operational characteristics as the retiring thermal generating fleet
*
* My note: they are neglecting to mention the huge demand that will be created by all electric cars. I guess you could lump that in with the electrification bullet
Maintaining reliability is a real challenge these days for PJM and the other RTOs a well. MISO has the biggest problems of all. Keeping capacity market prices high is essential for ensuring there will be adequate capacity in place