Payouts to US power generators up 83% in PJM auction

Bloomberg

Generators that provide capacity to the largest US power grid are going to get paid a lot more for guaranteeing electricity when the market needs it.Suppliers to PJM Intercon nection LLC — which serves more than 65 million people from Chicago to Washington — will receive $140 a megawatt-day for the year starting in June 2021, up 83% from a year earlier, according to the results of a capacity auction earlier this month. Analyst estimates compiled by Bloomberg since April ranged from $75 to $118.
The auction provides an early metric on generators’ competitiveness in three years — when America’s power sector is expected to feel the impact of massive changes currently under way. After years of cheap wholesale power prices and flat demand, nuclear and coal-fired plant operators have announced a rash of closures that some argue could imperil the reliability of the nation’s grid. This year’s auction reflects, in part, whether a new generation of gas-fired power plants and renewables will be able to make up for at least 7GW of possible closures of coal and N-sites in PJM by 2021.
Generators with plant concentrations in particular parts of the grid — the Chicago area and portions of southeastern Pennsylvania and New Jersey — are expected to be most affected by the auction because supplies there are tighter. They include utility giants Exelon Corp. and Public Service Enterprise Group Inc., according to Goldman Sachs Group Inc. analysts in a May 14 note. The auction results showed that the capacity price for the Chicago-area zone, known as ComEd, was $195.55 compared with $188.12 a year earlier, and the price for the Pennsylvania and New Jersey zone, known as EMAAC, decreased to $165.73 percent to from $187.87 a year earlier.