AUSenergy News Update 12/12/2013
Dec 12, 2013

In today’s AUSenergy News Update: PJM seeks changes to the way demand response clears in capacity auctions, gas furnace efficiency standards remain challenged, and a study indicates that retiring coal plants may raise PJM on-peak energy prices.

PJM Seeks Changes to The Way Demand Response Clears In Capacity Auctions

Summary: PJM has asked FERC to approve a change to the capacity market that would reduce the maximum amount of limited and extended summer demand response. The proposal has failed to win support from various PJM Committees even though PJM claims the existing rules challenge the reliability of the grid.
AUS Comment: Clients can enroll in PJM’s 2014 emergency curtailment demand response programs up until the end of February. Capacity payments look good for the next 2 plan years, then drop slightly in 2016- as dictated by the RPM base residual auction results released this May. We question exactly how demand response can threaten grid reliability. In any case, the proposed rule changes could potentially affect revenues earned through demand response. AUS can offer you assistance in pursuing a demand response program.

Gas furnace efficiency standards remain challenged

Summary: About 40% of the energy delivered to the residential sector is attributed to space heating, and natural gas- and propane-fired furnaces account for almost half of that. A Department of Energy (DOE) standard that would have updated minimum gas furnace efficiency standards for the first time since 1992 has been challenged in court and delayed many times. As a result, the minimum efficiency standard for one of the highest energy-consuming residential appliance types may remain unchanged for almost three decades.
AUS Comment: The more efficient condensing furnaces can take the byproducts of combustion and convert them into usable heat. Condensing furnaces typically have their own exhaust system that isn’t shared with any other appliance. The energy savings will eventually pay for the upgrade over the lifetime of the furnace.

Study Indicates Coal plant retirements will boost PJM on-peak energy prices

Summary: A study conducted by The Brattle Group indicates that the on-peak cost of electricity in PJM’s Mid-Atlantic region could increase significantly (between $3 – $11 / MWh) with the impending retirement of much of the regions coal capacity by 2015. These increases could further increase should the price of natural gas begin to rise. Capacity prices in the long term will fall though because of the increased profitability to operated power plants under higher prices.
AUS Comment: AUS cautions that studies like these make a lot of assumptions and often times don’t end up completely accurate.But with new regulation pushing coal power plant retirements across the nation, energy customers should begin preparing for higher electric prices in the coming years.

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