What is PJM?

PJM Interconnection is a regional transmission organization (RTO) that coordinates the movement of wholesale electricity in all or parts of 13 states and the District of ¹ Columbia. PJM operates a capacity market, known as the Reliability Pricing Model (RPM), to ensure long-term resource adequacy.  

1. www.bakerinstitute.org

www.bakerinstitute.org

Within the context of PJM's capacity market and reserve requirements, "Tier 1 resources" historically referred to a specific category of synchronized reserves. However, PJM has undergone changes to its reserve market structure.

Historical Context of Tier 1 Reserves:

• Synchronized Reserves: These are reserves that can respond quickly to system disturbances and are synchronized with the grid frequency.
• Tier 1 and Tier 2: PJM used to differentiate between two tiers of synchronized reserves based on their response time and other characteristics. Tier 1 generally represented the faster-responding synchronized reserves.
• Market Changes: As of October 1, 2022, PJM implemented new reserve price formation rules that consolidated Tier 1 and Tier 2 Synchronized Reserve products into a single 10-minute Synchronized Reserve product in both the Day-Ahead and Real-Time markets. This change aimed to align reserve procurement and provide consistent compensation for all resources providing the same service.

Current Understanding in Resource Adequacy:

While the specific "Tier 1" designation for reserves has been removed, the concept of different tiers or classifications can still exist in other contexts within PJM, particularly concerning renewable energy resources and state Renewable Portfolio Standards (RPS).

• Renewable Portfolio Standards (RPS): Some states within the PJM footprint have RPS that include different tiers of renewable energy sources with varying eligibility and credit values. For example, Maryland has Tier 1 and Tier 2 renewable sources, with Tier 1 including resources like solar, wind, and qualifying biomass. These tiers often relate to the type and vintage of the renewable energy credits (RECs) generated.
• Generation Interconnection Queue: PJM also uses a tier system (Tier 1 and Tier 2) in its generation interconnection queue to prioritize and study new generation projects. Tier 1 projects are typically further along in development.

Key Takeaways:

• The specific term "PJM Tier 1 resources" is less relevant in the context of synchronized reserves due to market design changes in 2022.
• The concept of "Tier 1" may still be encountered when discussing state Renewable Portfolio Standards within the PJM region, where it often refers to a specific category of eligible renewable energy sources.
• PJM also uses "Tier 1" to classify projects within its generation interconnection queue.

Therefore, to understand "PJM Tier 1 resources," it's crucial to consider the specific context in which the term is used, whether it relates to historical reserve market structures, state renewable energy policies, or the generation interconnection process.