Abstract
This investigation analyzes the characteristics of the largest US wholesale electricity market’s production cost curve and supply curve during the most extreme winter weather event in modern meteorological history. The experience of this event demonstrates that the annual-summer-peak-centric nature of the Northeast US’ PJM capacity planning process does not address the adequacy of supply during the winter. The production cost curve is estimated and compared across recent winter season peak months to understand how large the price responsiveness to load changes can be during extreme winter weather events and how winter weather events can reduce system reliability for a summer-capacity-planning-centric power market. Therefore, PJM and other power pool markets have not considered secondary peak seasons in capacity planning. The shape of the production cost curve discussed herein is a critical component of the structural model and determinant of spot and forward market electricity prices.
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