To ensure the reliability of the Mid-Atlantic grid, earlier this year PJM instituted the Capacity Performance (CP) plan. This created a regime with higher capacity revenue expectations, accompanied by more rigorous plant performance criteria and greater penalty payments. Given the 2018/2019 Base Residual Auction (BRA) results, how well has the CP achieved its goals? Can similar results be expected in future auctions? What are the broader market implications from the CP program change? In the quiet between the storm of PJM auctions this summer and end of year EFOR-D assessments, Karbone’s Research Group and Power Market Brokerage Desk have taken the opportunity to explore these considerations below.
MISO Capacity pricing has rallied across the board in bilateral markets as a combination of coal retirements and ISO exports threaten capacity deficits by ~2016. In anticipation of these impending shortages, bilateral capacity forward pricing in select zones has already appreciated to levels at or near those in PJM. Karbone expects this trend to continue in the short and mid-term. The following research brief analyzes the primary drivers of this market behavior and outlines potential directional movements.
Texas is the nation’s leader for wind power installed capacity, having surpassed the 2025 target of 10 GW of renewable energy to reach over 12 GW of wind alone in 2012. The majority of this wind power capacity is in West Texas where wind efficiencies are higher and the population is sparser, improving the ease of site selection and permitting – note that siting has proven a major impediment to renewable build-out in other areas of the country, such as New England.