PJM Capacity Market: Inputs from resource adequacy and transmission planning studies

PJM uses a Loss of Load Expectation criterion for determining the Installed Reserve Margin for the PJM region and Capacity Emergency Transfer Objective for the sub-regions. Power flow analysis is used to determine Capacity Emergency Transfer Limits for the sub-regions. These parameters form key inputs to the PJM Capacity Market. After reviewing several capacity market models with the stakeholders, PJM initiated Reliability Pricing Model (RPM) effective 2007/08. RPM has a three year forward Base Residual Auction that clears resources using a “demand curve” modeled in the PJM region and in the constrained sub-regions. Generation, Demand Resources, Energy Efficiency, and Transmission may compete with each other in the auction. Resources receive revenues in the Delivery Year and are charged penalties for shortfalls due to lack of performance. Load Serving Entities serving load in PJM pay Locational Reliability Charges that meet the resource revenues.