Jenner & Block: More Wind Power Into PJM Region Could Save $7B Annually

Jenner & Block: More Wind Power Into PJM Region Could Save $7B Annually

A new report completed by Synapse Energy Economics on behalf of Americans for a Clean Energy Grid (ACEG) concludes adding more wind power to the PJM region can lower gas and coal consumption and reduce regional wholesale energy market prices saving nearly $7B per year by the mid-2020s. The new report, issued May 9, 2013, is titled The Net Benefits of Increased Wind Power in PJM.

Key findings are

  1. Increased installation of wind power resources in the PJM region at roughly double the levels specified by existing RPS statutes lead to annual production cost reductions that range from $14.5 to $14.9 billion per year. This result, arising from the use of the ProSym production cost modeling tool, is based on a set of reasonable assumptions concerning future carbon costs in the electric sector, load, coal retirement levels, natural gas resource additions, improved transmission system infrastructure, and natural gas prices.
  2. Consumers see significantly improved emission profiles in the wind scenarios. Carbon, SO2 and NOx emissions are all reduced.
  3. The incremental costs to achieve these production cost gains ranges from $7.6 to $8.0 billion per year by 2026. This indicates that in general a planned expansion of wind power in the region will lead to net benefits for consumers.
  4. The energy market price impact of a high wind case is seen to be relative high in non-summer months, and market prices in the summer period are high in the wind cases. PJM consumers could be exposed to these market prices, but to the extent that PJM consumers pay for the incremental wind power assumed for the wind scenarios, consumers are hedged against those market prices. We assume that all production cost efficiency gains seen in this analysis flow to consumers, and all required investments are borne by consumers. We also note that the Eastern interconnection-wide nature of the energy modeling leads to a relative increase in exports from PJM in the wind cases, compared to the base case (with PJM net imports).

The report suggests the following next steps to achieve these proposed cost savings through increased reliance on wind power:

  1. Assume large scale retirements of coal plant resources throughout the Eastern Interconnection, not just in the PJM region. A rebalancing of capacity requirements in each major area would be necessary to ensure resource adequacy.
  2. Conduct iterative runs of the production cost modeling by incrementally stepping up transmission system transfer capacities, and simultaneously reducing the overall planning reserve margin, to optimize the tradeoffs between building more transmission and building sufficient balancing capacity with new gas-fired resources.
  3. Continue to test production cost effects on different combinations of increased demand-side resources, including energy efficiency and demand response. Given the relatively high summer period prices and transmission congestion during those periods, it appears that non-wind related constraints can lead to increasing production costs, since summer wind output is relatively low in the model.
  4. Test the effects of multiple combinations of increasing wind, solar and energy efficiency resources.
  5. Test varying potential cost profiles for offshore wind and solar resources.
  6. Examining PJM boundary interactions, and assess the extent to which different import/export flow patterns are influenced by resource decisions within and outside of PJM.

PJM Interconnections is a regional transmission organization that coordinates movement of wholesale electric in all or parts of DC, IL, IN, KY, MD, MI, NJ, NC, OH, PA, TN, VA and WV.

Synapse Energy Economics, Inc. is a research and consulting firm that specializes in energy, economic and environmental topics.

Americans for a Clean Energy Grid supports policies that will modernize the U.S. electric power network. The new report is available on ACEG's website at http://cleanenergytransmission.org.

Read more at Corporate Environmental Lawyer Blog by Jenner & Block LLP.

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