United States

United States

Significant structural barrier removed -- Recognising reliability of wind

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A major policy change that will help put wind power on an even footing with other generating resources is being implemented by an electricity transmission organisation that serves much of the populous east coast of the United States. PJM Interconnection is recognising that wind power can replace other generation on its network by allowing wind generators to claim and sell capacity credits within its six-state operating area. As a result, wind plant operators have a new revenue source that today amounts to nearly $0.01/kWh.

Wind advocates hope the new policy will be adopted nationwide where capacity markets exist. In the region served by PJM (once known as the Pennsylvania, New Jersey and Maryland reliability area) a retail utility buying energy from a generator must now also buy capacity credits representing power that can be called on during the system's peak demand periods. Until now, a utility could buy wind power, but had to go elsewhere for the capacity credits to cover wind's intermittency.

The change, which goes into effect this month, is a boon to wind generation on the east coast, says Jim Caldwell, policy director for the American Wind Energy Association (AWEA). "For the load-serving entity (such as a utility), that means it's easier for them to sign up more wind generation and not have to worry about also going out and buying additional capacity," says Caldwell. "And, the system will have more capacity resources and lower capacity prices."

Fair and practical

There is not a lot of money involved, but the policy is important because it acknowledges that wind really is reliable, can compete and has value, he adds. PJM agrees with that assessment. "Encouraging renewable resources through appropriate rules benefits the grid because having more and diverse sources of generation improves reliability and makes the market even more robust," says Steven R Herling of PJM. "We're applying a fair and practical method to allow wind turbines to provide generating capacity to the wholesale market."

The capacity is based on a three year rolling average of a wind project's actual performance during PJM's peak hours. Until that three year average can be established, PJM defines a "class average," which is 20% of a wind turbine's nameplate rating. No generating plant on the PJM system is given a capacity rating equal to its nameplate rating because all plants are subject to both planned and emergency outages.

The New York and New England independent system operators (ISOs) have similar markets that allow wind generators to sell the credits. Under pressure from wind advocates such as AWEA, PJM is the latest regional transmission organisation to allow wind into the capacity market. The PJM grid, with a capacity of 74,000 MW, serves a region of 25 million people in all or parts of Delaware, Maryland, New Jersey, Ohio, Pennsylvania, Virginia, West Virginia and the District of Columbia.

Not all areas of the US have explicit capacity markets. The West Coast does not, although California considers capacity for planning purposes and the rulemaking now in progress for the California renewables portfolio standard will likely require wind generators to calculate capacity when bidding projects. Caldwell hopes the Midwest ISO will be next to adopt the policy.

A capacity market that includes wind resources was initially proposed by the Federal Energy Regulatory Commission (FERC) in its proposed Standard Market Design (SMD) rules. SMD had the potential to force nationwide the equal consideration of wind power in capacity markets, but FERC has been under considerable pressure from Congress and utilities to make many of its proposed new rules voluntary.

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