Seasons Matter for Electricity Generation
It goes without saying that seasons matter. We buy different clothes for winter than for summer. We invest in different gear for outdoor activities in January than June.
It turns out that seasons also matter a lot for electricity generation, which is why it’s time for grid operator PJM Interconnection to update the way it buys electricity capacity to get in sync with seasons. The year-round one-size-fits-all approach that PJM has used for years has been costly for consumers and not as good for reliability.
What’s seasonal variation when it comes to electricity? One aspect is simply the amount of electricity needed. In the PJM region, much more generation is needed to meet demand levels in the summer when air conditioners are running than in the winter when they’re not. So when PJM pays generators for their commitments to be available to produce power, the grid operator could save residents money by buying less capacity for winter – instead of paying year-round for the higher capacity needed for summer, as is the case now.
Another aspect is the different performance of generators in different seasons. For example, onshore wind frequently performs best in winter, and solar is at its best in summer, making each the lowest-cost resource during its respective peak season. So PJM could save consumers money on electric bills if solar could sell to its full potential in summer and wind in winter. Instead, with the current year-round approach to buying capacity, solar can only sell into the market for what it can guarantee in winter (and wind in summer). That leaves lowest-cost renewable energy capacity on the table, forcing residents to pay for more expensive capacity from fossil fuel generators instead.
Fossil fuels also perform unevenly based on the season. For example, coal-fired power plants have lower output in the summer heat because of decreased efficiencies when operating in high temperatures and the limited availability of cooling water. Gas plants struggle in extreme cold and need to be held accountable for their inability to perform in deep freezes, as we saw during Winter Storm Elliott. Demand response programs — optional programs that give consumers the opportunity to reduce their electricity use during specific times in exchange for payment — also have a strongly seasonal nature. Consumers forgoing extra cooling by a few degrees can be a significant tool to balance the grid in hot weather. During a cold spell in winter, a different demand-response strategy will be needed.
What all this means is that in addition to cost-inefficiencies for consumers, there are also reliability problems with buying electricity capacity from generators with a simplistic year-round approach that fails to properly assess and value performance by season. Thankfully, PJM has now signaled that it’s ready to make a move toward seasonal procurement of electricity capacity. In its seasonal approach the grid operator needs to take into account seasonal variabilities in matching generation supply and consumer demand, as well as seasonal performance differences across generation resources.
Here’s a quick recap of why seasonal rather than year-round procurement of electricity capacity in PJM makes so much sense:
It allows for more accurate calculations of each resource type’s capacity value in different seasons, and can also send price signals that are specific to system needs during each season. There’s no need to pay summer prices for winter resources, and vice versa.
It saves consumers money by buying less during low-demand seasons. A 2019 study of the PJM system found that a two-season capacity market could yield hundreds of millions in cost benefits compared to the current year-round model.
With climate change, the “shoulder” seasons of spring and fall are no longer necessarily mild and free of the threat of high demand, but that is historically when fossil fuel power plant maintenance is scheduled. A more granular seasonal approach to paying for capacity aims to prevent resources from getting credit for promising generation availability during seasons when they are taking lengthy outages for maintenance.
Grid operators like PJM need to move to seasonal procurement quickly: Consumers deserve all the bill relief they can get now.
Consumers for a Better Grid would like to thank Casey Roberts of Sierra Club for her well-reasoned and plain writing, which helped make this explainer possible.