Scribd
Upload
69 views2 pages

Understanding The Difference Between Pjms Markets Fact Sheet

PJM operates several competitive wholesale electricity markets including: 1) The Energy Market which makes up 63% of costs and includes day-ahead and real-time markets to match electricity supply and demand. 2) The Capacity Market which ensures future power supply availability three years in advance, making up 20% of costs. 3) Ancillary Services Markets which help balance the electricity system in real-time through regulation and reserve markets making up less than 1% of costs.

Uploaded by

Elena Danila
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
69 views2 pages

Understanding The Difference Between Pjms Markets Fact Sheet

PJM operates several competitive wholesale electricity markets including: 1) The Energy Market which makes up 63% of costs and includes day-ahead and real-time markets to match electricity supply and demand. 2) The Capacity Market which ensures future power supply availability three years in advance, making up 20% of costs. 3) Ancillary Services Markets which help balance the electricity system in real-time through regulation and reserve markets making up less than 1% of costs.

Uploaded by

Elena Danila
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
You are on page 1/ 2

Understanding the Differences

Between PJM’s Markets

Markets at a Glance
PJM Interconnection operates several types of competitive wholesale markets
through which large volumes of electricity are bought and sold across 13 states
and the District of Columbia. The markets underpin PJM’s mission of reliability at
the lowest-possible cost by giving financial incentives and encouraging
competition to provide electricity when it’s needed to the 65 million people that
PJM serves. Each market serves a separate function, but they work in tandem.

Energy Market
The largest of the PJM markets is the Energy Market, making up the majority of
wholesale electricity costs (about 63 percent). The Energy Market operates much
PJM Energy Market
like a stock exchange. PJM matches the demand for electricity with offers to  Function: Secures electricity to meet
provide it. As the market operator, PJM’s role is to balance the needs of buyers, consumer demand in real time and
sellers and other market participants and monitor market activities to ensure open, near-term
fair and equitable access.  Includes: Real-Time and Day-Ahead
markets
The Energy Market is divided into the Day-Ahead and Real-Time Markets. Both  Portion of wholesale electricity cost:
markets match offers from power suppliers with bids from power consumers to 63 percent (2018)
ensure that suppliers are ready to deliver at the right time and place.
PJM Capacity Market
Relative Size of Components of Wholesale Cost (2018)
 Function: Ensures the future
availability of power supplies three
years in advance
 Portion of wholesale electricity cost:
20 percent (2018)

PJM Ancillary Services Markets


 Function: Helps balance the system as
it moves electricity from generating
resources to consumers
 Includes: Regulation, Reserve Markets
 Portion of wholesale electricity
price: Less than 1 percent (2018)

Day-Ahead Market
The Day-Ahead Market is a “forward” market, which means prices are set for energy that will be delivered in the future – in this
case, the next day. Hourly prices are calculated based on generator offers, bids from power consumers such as utility companies
and market-related financial transactions.

PJM matches offers (called “clearing” the market) from the lowest- to highest-priced seller until it meets the bid-in demand for
electricity, plus some reserves. All cleared bids and offers establish a financial position in the Day-Ahead Market. Any deviations
from cleared quantities in the Day-Ahead Market are settled in the Real-Time Market.
Real-Time Market
The Real-Time Market serves electricity needs in real time (which will always differ at least a little from the day-ahead
forecast).The Real-Time Market is a spot market, meaning electricity is procured for immediate delivery. Supply and demand are
paired and prices are calculated every five minutes for more than 10,000 different pricing points based on actual grid operating
conditions.

PJM continually follows fluctuations in generation, demand and transmission, sending an electronic signal every five minutes to
let suppliers know what their electricity output should be. If a supplier is committed to run by PJM and follows dispatch
instructions, it will be compensated. Suppliers are paid the day-ahead price for whatever they were scheduled for, and the real-
time price for any generation that exceeds the scheduled amount. If a supplier deviates from PJM’s instructions, it may be
charged a penalty.

Capacity Market
A much smaller portion of the wholesale cost – about 20 percent – is represented by PJM’s capacity market (also called the
Reliability Pricing Model or RPM). While the Energy Market addresses near-term need, the capacity market prepares for the
future. PJM’s capacity market was implemented to secure enough power supplies three years down the road to ensure sufficient
supply will be available to meet peak demand.

Each year, PJM holds a competitive auction to obtain these future power supplies at the lowest reasonable price. Capacity is the
commitment of resources to deliver electricity or limit electricity demand when they are needed, particularly in an emergency.

Market participants whose future capacity is sold at the auction are said to “clear” the auction. Cleared generation resources are
required to offer power into the Energy Market for the year for which they are committed. But more importantly, they also commit
to serve PJM’s emergency needs whenever called upon – even in the most extreme conditions.

In the capacity market, this exchange provides the consumers that PJM ultimately serves the assurance of reliable power in the
future. In return, power resources receive a dependable flow of income to help maintain their existing capability, attract
investment in new resources and to encourage companies to develop new technologies and sources of electric power.

Ancillary Services Markets


Because electricity must be produced and consumed the Reserves are generation
instant it is needed, PJM dispatchers must continually match resources that can quickly come
the electricity flowing on the grid with customers’ demand online – or end-consumers that
for it. can reduce consumption – within
10 or 30 minutes in the event of
Key elements of this delicate balancing act are regulation an unexpected loss in generation.
resources and reserves, which are called ancillary services –
a small but vital part of the energy markets. These operating reserves also
help balance the system in
Regulation is a reliability product that corrects short-term, emergency situations.
unforeseen fluctuations in electricity use and supply that
could affect the stability of the power system. Regulation 3/6/2019
providers are resources that have the ability to adjust output
or consumption in response to an automated signal.

You might also like