transmission investment. However, these collaborations are limited to interconnections and do
not attempt to optimise the national transmission
network as a whole.
(3) Level of locational pricing
Following FERC’s order and standard market
design, the liberalised electricity markets have
adopted locational pricing at varying levels of
granularity and apply different approaches to address
disadvantages of nodal pricing. As an example, PJM
adopted a highly granular nodal pricing mechanism,
but it averages nodal prices into hub prices to provide
liquidity to parties involved in long-term contracts.
CAISO followed a less granular nodal pricing
mechanism than PJM. It argues that high level
granularity increases costs and system complexity,
while not providing significant benefits to compensate for these drawbacks.
(4) Summary of arrangements
See Table 4.
(3) PJM
PJM is a regional transmission organisation in
the USA. PJM (originally named after the
Pennsylvania, New Jersey, Maryland Power
Pool), operates part of the Eastern Interconnection grid, serving all or parts of Delaware, Illinois, Indiana, Kentucky, Maryland, Michigan,
New Jersey, North Carolina, Ohio, Pennsylvania,
Tennessee, Virginia, West Virginia and the District of Columbia. PJM operates more than
82,000 miles (132,000 km) of transmission lines
and coordinates 1,373 generating sources with
176,569 MW of generation capacity. Around 65
million people live in the PJM area. There are 20
transmission owners serving their respective
transmission zones in PJM.
(1) Institutional arrangements
In 1927, three vertically integrated utilities interconnected their systems to exploit benefits and
efficiencies from sharing their generation resources.
In doing so they founded the world’s first power
pool, PJM. The pool carried out least-cost constrained dispatch to reduce costs for pool members.
Later, other utilities joined the pool and extended its
area of coverage. Until the beginning of the 1990s,
member utilities took turns to operate PJM.
In the 1990s, following the liberalisation of
the US electricity market and FERC’s orders
promoting a standard market design, PJM started
its transition from a power pool to an ISO. In
Fig. 39 Structure of FERC’s standard market design. Source Vivid Economics
Special Report 1: A Study of China’s Energy Supply Revolution
109
not attempt to optimise the national transmission
network as a whole.
(3) Level of locational pricing
Following FERC’s order and standard market
design, the liberalised electricity markets have
adopted locational pricing at varying levels of
granularity and apply different approaches to address
disadvantages of nodal pricing. As an example, PJM
adopted a highly granular nodal pricing mechanism,
but it averages nodal prices into hub prices to provide
liquidity to parties involved in long-term contracts.
CAISO followed a less granular nodal pricing
mechanism than PJM. It argues that high level
granularity increases costs and system complexity,
while not providing significant benefits to compensate for these drawbacks.
(4) Summary of arrangements
See Table 4.
(3) PJM
PJM is a regional transmission organisation in
the USA. PJM (originally named after the
Pennsylvania, New Jersey, Maryland Power
Pool), operates part of the Eastern Interconnection grid, serving all or parts of Delaware, Illinois, Indiana, Kentucky, Maryland, Michigan,
New Jersey, North Carolina, Ohio, Pennsylvania,
Tennessee, Virginia, West Virginia and the District of Columbia. PJM operates more than
82,000 miles (132,000 km) of transmission lines
and coordinates 1,373 generating sources with
176,569 MW of generation capacity. Around 65
million people live in the PJM area. There are 20
transmission owners serving their respective
transmission zones in PJM.
(1) Institutional arrangements
In 1927, three vertically integrated utilities interconnected their systems to exploit benefits and
efficiencies from sharing their generation resources.
In doing so they founded the world’s first power
pool, PJM. The pool carried out least-cost constrained dispatch to reduce costs for pool members.
Later, other utilities joined the pool and extended its
area of coverage. Until the beginning of the 1990s,
member utilities took turns to operate PJM.
In the 1990s, following the liberalisation of
the US electricity market and FERC’s orders
promoting a standard market design, PJM started
its transition from a power pool to an ISO. In
Fig. 39 Structure of FERC’s standard market design. Source Vivid Economics
Special Report 1: A Study of China’s Energy Supply Revolution
109