Performance-based regulation model in PJM wholesale markets

To provide sufficient incentives to faster-ramping resources and ensure efficient economic dispatch of regulation resources, in 2011 the Federal Energy Regulatory Commission (FERC) issued Order 755-Frequency Regulation Compensation in the Organized Wholesale Power Markets. The order requires for an additional market-based payment for actual performance, which is separated from the existing payment for regulation capability. Prior to Order 755, frequency regulation compensation practices of Regional Transmission Organizations (RTOs) and Independent System Operators (ISOs) only considered a capacity payment which cannot provide the correct and sufficient incentive for regulation resources to respond to a frequency control signal timely, accurately and precisely. In early 2012, PJM and ALSTOM Grid launched a project to integrate the regulation performance model into the PJM RealTime (RT) markets. The technical software has been operating in the PJM production environment since October 1, 2012. This paper focuses on the integration of the performance based regulation model into the PJM RT business processes and the subsequent studies that demonstrate the effectiveness of market clearing and pricing with consideration of performance of regulation resources. The results indicate that with the model, regulation resources with better performance can be acknowledged and compensated reasonably.