A WSJ article posted here a couple of days ago mentioned PJM, a regional organization to which Virginia’s electricity providers belong. WSJ made the point that Texas opted for a slightly different regulated market model for wholesale electricity than PJM’s. As WSJ noted, the main difference is PJM’s creation of a “capacity market,” a slightly more costly model that Texas chose not to pursue. BR explains how the capacity market in Virginia functions.
BR’s renewables discussion is of special interest:
“All this works pretty well for regular, fossil-fueled and nuclear generators. How can a solar or windmill unit deliver on a capacity commitment when there’s no sun or wind, or a hydro unit when there’s no water? They can’t. They are non-dispatchable. So, originally, they were excluded from capacity markets. These generator owners, however, argued successfully to FERC that they did have some value for reliability as there was a measurable probability, if not certainty, that they would be there when needed. To make a long, complicated story short, PJM now credits commitments from such units with a partial capacity value if the total commitment is not in excess of certain percentages of an LSE’s [Load-Serving Entity] total generating capacity. It’s not much, and there’s no way under current rules that an LSE could present only renewables capacity to meet its total capacity requirement, but it’s something.”
In effect, PJM’s capacity market discourages wind and solar to maintain reliability standards.