Mid-Atlantic electric grid operator plans $2.4 billion in upgrades due to fossil-fuel plant retirements

The operator of the mid-Atlantic electric grid has announced a need for $2.4 billion in grid upgrades to keep the lights on in the coming years, as fossil-fueled generators shut down.

PJM Interconnection LLC is the regional transmission organization that manages wholesale electricity markets and the transmission grid in all or parts of 13 states and the District of Columbia, covering about 60 million people. In that role, PJM works with electric utilities and merchant generators to identify upgrades needed to maintain reliable electric service throughout its territory. In 2012, PJM authorized more than 750 electric transmission improvement projects with a total cost of more than $5 billion.

PJM released its annual regional transmission expansion plan on March 7. In that plan, PJM identified three major trends driving the need for further grid upgrades: upcoming power plant retirements, the rapid switch to natural gas, and the growth of wind power to meet states’ renewable energy requirements.

Of these, the large-scale retirement of fossil-fueled power plants may pose the greatest challenge. Power plant operators must inform PJM if they plan to close their plants, and are doing so in droves. PJM received 104 retirement requests between November 2011 and December 2012. In all, these requests signal intents to shutter 13,868 megawatts of generation. Retirement requests continue to roll in; in January 2013 alone, an additional 1,697 megawatts of generation filed notices of intents to retire. This tide of closures is driven largely by relatively low electricity prices and increased costs for coal- and oil-fired generation due to environmental and emissions regulations.

At the same time, 2012 brought a record amount of new generation to the PJM market, primarily fueled by natural gas. Meanwhile, the addition of new renewable resources to the grid - such as wind-powered generators - adds another layer of challenge, as these renewable projects are often located in relatively remote areas far from consumers in urban centers.

PJM must ensure enough power to keep its customers' lights on, a task that requires both having enough operating generators and the right amount of transmission to connect generators to customers. As a result, PJM has identified 130 projects needed to maintain reliability. These projects include new transmission lines, line rebuilds, equipment upgrades, and new and expanded substations, and substation additions.

Much of PJM's analysis is based on assumptions about which generation plants will close, which new generation plants will be built and come online, and how much consumer demand for electricity will grow. Will PJM's predictions come true? If so, consumers will bear the cost of PJM's identified grid fixes.