In December 2022, PJM was on the brink of issuing an emergency Flex Alert to all its energy users to voluntarily conserve electricity across the mid-Atlantic, Chicago, and Ohio. More than 7,470,000 power outages were caused by the winter storm “Elliott,” which caused a level of grid stress unseen by some regions in over 50 years. In many ways, Elliott was similar to the severe storms of February of 2021 when Texas experienced extreme cold that pushed the ERCOT grid to the brink of collapse.
There were many assumptions as to why the impacts of a similarly severe storm would never happen in PJM. The utility grids, for example, are more interconnected with other regions; there is a robust capacity market; and a plethora of reliable fossil fuel generation. However, power plants experienced unexpected outages across PJM during Elliott.
TVA Experienced Rolling Black Outs
Elliott also caused Tennessee Valley Authority (TVA), a federally owned electric utility corporation in the United States, its first blackout in its 90-year history and caused rolling blackouts in SERC – an area that covers approximately 630,000 square miles and serves a population of more than 91 million across 16 southeastern states. Both of these grids share borders with PJM and, in some instances, drew power from PJM generators to help keep their grids operational. TVA operated in a rolling blackout mode, meaning many customers experienced outages of 10 to 20 minutes every 1 to 2 hours.
LMP Customers Likely to See a Spike in Charges
Energy users in the PJM market will be looking at their utility bills from December 2022 to assess how their electricity rates were affected by Elliott, particularly those who pay the day-ahead Locational Marginal Pricing (LMP) as outlined by their supply contract. Most will see a painful spike in charges. However, many may not realize that it could have been much worse! The real-time market, which reflects actual grid conditions instead of expected conditions, cleared as high as 10x the day-ahead market price during certain times. Why? Because PJM was caught entirely by surprise with this storm and under forecasted the amount of energy they needed to purchase. In short, invoices for customers who pay based on the LMP would have been substantially higher had PJM accurately modeled its own grid.
Lessons to be Learned
For organizations and energy managers wondering how they will keep the lights on during increasing levels of grid volatility, some lessons can be learned from the experience of PJM, ERCOT, TVA, SERC, and others. Energy storage is an effective solution for short-duration blackouts wreaking havoc on operations for much longer than the outage. Energy storage provides resilience and additional benefits including:
- No vulnerability to fuel supply disruptions
- No air pollution that may exacerbate health issues or disaster fatalities
- Lower year-round electricity costs for end-users
- Lower GHG emissions
- Prevented outages during extreme weather via Demand Response programs
Severe weather events often cause end users to reconsider power purchasing strategies – like fixing their energy costs for all hours – leading them to switch to more consistent pricing strategies. This can lead to higher rates in the long term, as they pay for unnecessary “insurance.” Energy storage can also solve this problem by serving as a physical hedge, bidding directly into the wholesale power markets, and yielding an average positive economic return of 10-30% Internal Rate of Return (IRR). The energy storage system will often make more money if the amount owed on a utility bill increases, leaving the end user completely protected – this is in addition to being able to reduce capacity and transmission charges, take advantage of select state incentives, and provide sustainability benefits.
Stem’s Expertise in PJM
With new policies emerging in states and utilities across PJM, organizations with significant energy loads need a solution that can adapt and keep clean energy projects deriving value over their lifetime – whether that means participating in new demand response programs, maximizing wholesale market revenues, or co-optimizing multiple value streams. Stem is an energy storage leader that helps with all elements of adopting energy storage and participating in coincident peak (CP)-based wholesale markets like PJM. Stem experts will guide you through wholesale market participation, ancillary services, and frequency regulation programs and will help optimize your energy storage systems for the most efficient operation. We can do so within the context of local tariffs and ensure that you do not increase demand charges.
Why Add Stem’s Energy Storage?
To make the most of energy storage, you must optimize the economic and operational trade-offs necessary for successful market participation – it’s more than just installing batteries! Stem’s services include:
- Coincident peak forecasting and management
- Energy storage project design and modeling
- Energy storage procurement
- End-to-end installation & operation
- Co-optimization of multiple value streams: transmission & capacity CP reduction, demand response based wholesale market participation, and utility bill optimization
In the PJM territory, Stem’s experts understand the complexity of the value stack and CP mitigation, which requires the type of forecasting that only a leader like Stem can deliver.