In December 2019, the Federal Energy Regulatory Commission (FERC) ordered the PJM Interconnection, L.L.C. (PJM) to expand the application of its Minimum Offer Price Review (MOPR) in its forward capacity market. To help implement this order, PJM retained The Brattle Group (Brattle) and Sargent & Lundy (S&L) to analyze the gross avoidable costs rates (ACRs) for several types of existing generation and the net cost of new entry (Net CONE) for new energy efficiency (EE) in the 2022/2023 Base Residual Auction. PJM will use the values to inform default offer floor prices for each resource type in its auctions.
Existing generation resources vary considerably in their characteristics and costs, even for a given type of resource. To inform PJM’s determination of a single ACR for each resource type, we present a range of costs for the fleet of resources of each type operating in the PJM market. PJM can then determine the default offer floor price for each resource type at a value within the range that best fits its approach to complying with the order, trading off the risks of under-mitigation against the risks of over-mitigation and/or a burdensome amount of unit-specific reviews.
To do so, we reviewed the range of characteristics of resources installed in the PJM market and identified the primary cost drivers among those characteristics for each resource type. We then identified for each resource type the characteristics of a “representative plant” that is widely representative of most of the fleet as well as characteristics for “representative low-cost” and “representative high-cost” plants to inform the range of costs for each type of existing generation resource.