Transmission planning for generation at risk due to environmental regulations and public policy initiatives

The decision for generators operating in wholesale power markets to remain in commercial operation or retire depends upon whether its expected stream of future revenues exceeds its expected future costs. Older, smaller, and therefore less efficient coal units generally have lower revenues and incur higher costs. These units could be at risk for retirement due to additional capital costs required to retrofit the unit to meet environment regulations and reduced revenues due to lower energy prices driven by lower natural gas prices, large penetration of low variable cost renewable resources to meet States´ Renewable Portfolio Standards (RPS), lower overall energy demand as a result of the economic downturn, and increasing penetration of demand response (DR) and energy efficiency (EE) resources. However, unless a generator formally announces its retirement, the retirement decision and timing is market sensitive information unknown even to the Regional Transmission Organization (RTO), the Transmission Planner (TP) of the region. The TP must consider these potential retirements and their uncertain timing in its planning process to maintain transmission reliability. The TP must also recognize the lead time to complete system upgrades to accommodate the retirements. This paper describes recent studies by the PJM Interconnection, in which projections of future revenues and costs of individual coal-fired generating units were used to estimate potential retirements. The results can be used to proactively identify potential transmission reliability problems and to formulate transmission reliability solutions. Currently, PJM and its Stakeholders are developing scenario analysis procedures that will consider at-risk generation and public policy initiatives as an integral part of the Regional Transmission Expansion Planning (RTEP) process. The goal is to produce a plan that could reduce, among meeting many other objectives, the impact of these retirements on the transmission sys- em reliability and the need for costly and contentious Reliability Must Run (RMR) agreements.