President and CEO of PJM Interconnection PJM

It may be useful to start with a brief description, from PJM’s point of view, of economic dispatch. We consider it the lifeblood of any transmission operator, whether a vertically integrated utility or an RTO like PJM. Security constrained economic dispatch involves the use of a mathematical formula, an algorithm, to match up the lowest-cost resources needed to reliably serve the load every hour of the day, 365 days of the year. Traditional utilities handle this responsibility by using a cost-based approach, taking into account fuel expenses and other factors. PJM and other ISO/RTOs employ a bid-based methodology over a regional footprint as part of a robust wholesale power market. The key to success is to bring as many resources to the table as possible — so the math can solve the equation. Through economies of scale, PJM can use new technology and methods to analyze and incorporate the benefits of diversity on both the generation side and the load side to further drive down costs.