Grid reliability and resilience call for an enhanced energy pricing formula, according to research by PJM Interconnection. The energy market has traditionally used locational marginal pricing (LMP), which considers load, generation and physical limits of transmission systems per location. The results of PJM’s study, Proposed Enhancements to Energy Price Formation, suggests LMP does not properly reflect today’s resource mix. PJM proposes an enhanced energy price formation, which refines shortage pricing and incents performance. The independent system operator warns that failure to adopt the pricing approach will stymie resource diversity and lead to a grid that is difficult to control.
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