WTF is ELCC with the man who predicted the PJM capacity price spikes, Nic Freschi
Aug 16, 2024
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In this engaging discussion, Nic Freschi, a Senior Associate at Gable Associates and PJM capacity expert, unveils the secrets behind his predictions of the significant spike in PJM capacity prices. He demystifies key concepts like ELCC and ORDC while analyzing the challenges renewable energy faces in capacity markets. The conversation takes an intriguing turn as they explore the contrasting roles of traders and bureaucrats in energy regulation. Comparisons between PJM and ERCOT add depth, along with forecasts about the future dynamics of energy pricing.
Nic Freschi highlights the role of ELCC in understanding capacity markets and predicting fluctuations in PJM capacity prices.
The conversation stresses the impact of severe weather events on energy demand and the need for reliable capacity assessments.
Freschi discusses the trend towards distributed energy resources (DERs) as a response to rising capacity prices and market dynamics.
The podcast explores the potential for political shifts towards coordinated energy policies in light of increasing public awareness of supply issues.
Deep dives
The Evolution of Energy Consulting
The episode features Nick Fresci, a senior consultant at Gables Associates, an energy public utility consulting firm. He emphasizes the company's focus on renewable energy project development and market intelligence for regional transmission organizations (RTOs). The conversation outlines the firm's transformative approach to energy consulting and how it aims to influence and guide energy policy through expert testimony and strategic insights. Over the years, Gables Associates has developed a reputation for being highly knowledgeable and influential within the energy market.
Innovative Solar Concepts and Learning Experiences
Nick discusses a solar panel design concept he developed during college, which involved using concentrated solar power technology to enhance efficiency. Although the innovation was ultimately deemed impractical due to the principles of light diffusion, it illustrates the creativity and ambition of young minds entering the energy sector. He shares his journey through the world of physics and philosophy, leading him to discover his interests in energy and consulting. This journey reflects both the challenges and opportunities faced by aspiring professionals in the energy landscape.
Challenges and Developments in PJM Capacity Auctions
The episode delves into the intricacies of the PJM capacity auctions, which are essential for ensuring a reliable energy supply. Fresci emphasizes the importance of understanding the capacity market's dynamics, including how resource availability is assessed through benchmarks. The discussion includes the implications of recent changes to expected capacity values for different energy sources, illustrating how capacity auctions can influence long-term energy strategies. This segment reveals the complex relationship between market design, economic incentives, and energy reliability.
The Impact of Weather on Energy Systems
Fresci highlights severe weather events, such as the polar vortex and winter storms, as critical factors that influence energy demand and supply. These incidents have prompted a reevaluation of how capacity values are calculated and affect reliability across different energy sources. They bring to light the fragility of energy systems in extreme conditions, prompting discussions about capacity penalties for unreliable sources. The challenges posed by such weather-related failures have led PJM to reassess its models and parameters, showcasing the interconnectedness of climate factors and energy policies.
The Rise of Distributed Energy Resources
The conversation touches upon the growing trend of distributed energy resources (DERs) as a response to evolving market dynamics. Fresci discusses how capacity prices rising due to recent auction results could incentivize both private and public investments in DERs over centralized solutions. As energy prices rise, it becomes increasingly viable for consumers and businesses to pursue their own energy production strategies. This shift toward more localized energy solutions reflects a broader trend of decentralization in the energy sector.
Political Implications of Energy Markets
The podcast explores the potential for a political shift towards central planning in response to rising energy costs and reliability concerns. Fresci suggests that as public awareness grows regarding energy supply issues, especially during extreme weather events, there may be increased demand for more coordinated energy policies. The dynamics between political ideologies and energy solutions play a significant role in shaping the future energy landscape. This segment prompts audiences to consider how political choices will ultimately affect energy strategies and market structures.
Long-Term Capacity and Reliability Considerations
The dialogue emphasizes the significance of technological advancements and their integration into modern energy markets. Fresci explains how solid operational frameworks and regulations can lead to a dependable energy supply that meets future demands. The episode stresses the importance of appropriately scaling up capacity while balancing evolving climate-related expectations and market demands. This interplay highlights the pressing need to transition toward sustainable energy practices while ensuring reliability.
We’re back! This time with Nic Freschi, Senior Associate at Gable Associates and all around PJM wizard. Nic is a friend and OG member of the DERTF. Almost a year ago, Nic’s models began predicting the ~10x increase in PJM capacity prices we saw in the recent auction. How did he know?
In this ep, we go deep on every acronym you could ever imagine: ELCC, ORDC, PCM, LSERO, UCAP, ICAP, and so much more. Tune in to learn how ELCCs work, how prices clear in the PJM auction, if renewables can ever proliferate in capacity markets, the future of PJM, whether private traders or public bureaucrats should have their hands on the “ELCC dials”, comparing and contrasting ERCOT to PJM, James getting PJM-pilled, and so much more!
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