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When it comes to energy markets, understanding the nuances of firm and non-firm transfer capacity is crucial. These terms define how electricity is transmitted across the grid and the reliability of that transmission. In this blog post, we’ll explore what firm and non-firm transfer capacity mean, how they’re used, and provide examples from major ISO/RTO markets like MISO, CAISO, SPP, and PJM.
You’ll learn the key differences between firm and non-firm transfer capacity, how these capacities are managed in different markets, and why they matter for both energy providers and consumers.
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What is firm transfer capacity?
Firm transfer capacity refers to the guaranteed availability of transmission service. When a transmission customer reserves firm capacity, they have a high level of assurance that their electricity will be delivered as scheduled, barring any extreme circumstances like system emergencies. This type of capacity is essential for long-term planning and reliability.
For example, in MISO, firm transfer capacity is prioritized to ensure that native load customers and network customers receive reliable service. This capacity is reserved and scheduled in advance, and it’s not subject to curtailment except under severe conditions 4.
What is non-firm transfer capacity?
Non-firm transfer capacity, on the other hand, is more flexible but less reliable. It’s available on an as-needed basis and can be interrupted or curtailed if the grid faces congestion or other issues. This type of capacity is often used for short-term transactions and can be a cost-effective option for those who don’t need guaranteed delivery.
In PJM, non-firm transfer capacity is available for periods ranging from one hour to one month and is subject to curtailment or interruption. This flexibility allows for more dynamic management of the grid but comes with the trade-off of lower reliability.
How these capacities are used in major ISO/RTO markets
MISO
In MISO, firm transfer capacity is crucial for ensuring that native load customers and network customers receive reliable service. Non-firm capacity is used for more flexible, short-term needs and is subject to curtailment during periods of congestion. For instance, non-firm GTL flows are considered non-firm use and are curtailed proportionally with other non-firm uses during periods of non-firm curtailments.
CAISO
CAISO manages its transfer capacity by categorizing it into firm and non-firm uses. Firm capacity is reserved for existing rights and new firm uses, ensuring reliability for critical loads. Non-firm capacity, meanwhile, is allocated for more flexible uses, such as non-priority wheeling through transactions, which can be curtailed based on prevailing conditions.
SPP
In SPP, firm transfer capacity is reserved for long-term and short-term firm point-to-point transmission services. Non-firm capacity is used for more flexible, short-term transactions and is subject to curtailment during congestion. This approach allows SPP to balance reliability with flexibility, ensuring that firm commitments are met while still accommodating dynamic grid conditions.
PJM
PJM offers firm transfer capacity for long-term reliability and planning, ensuring that critical loads are served without interruption. Non-firm capacity is available for shorter durations and is subject to curtailment, providing a flexible option for market participants who can tolerate some level of risk. This balance allows PJM to manage its grid effectively while meeting the diverse needs of its customers.
Why understanding transfer capacity matters
Understanding the differences between firm and non-firm transfer capacity is essential for anyone involved in the energy markets. Firm capacity provides the reliability needed for long-term planning, while non-firm capacity offers the flexibility required for short-term transactions. By knowing how these capacities are managed in different ISO/RTO markets, you can make more informed decisions and better navigate the complexities of the energy grid.
Whether you’re an energy provider, a consumer, or just someone interested in how electricity is transmitted, grasping these concepts will help you understand the broader picture of energy reliability and flexibility.
