The winter of 2013-14 offered up a perfect storm of natural gas price spikes and threats to electric reliability. Expect more of the same.
Retirement is Coming
Preparing for New England’s capacity transition.
capacity, with natural gas and wind resources playing a major role in taking up the slack.
Investment cycles in the electric industry are notoriously lumpy, and the duration of integrated resource planning efforts (in regulated regions) and market cycles for transmission system planning (in competitive regions) aren’t necessarily well suited to a rapid turnover in existing infrastructure. As the industry faces a period of perhaps unprecedented change over the next three to five years, investors, utilities, developers, and policymakers will need to rapidly improve their understanding of the revenue, price, cost, emission, and portfolio diversity tradeoffs that come with power system resource options. Now is the time to consider such tradeoffs, and ensure that planning processes and market structures are sufficient to produce reliable, efficient and policy-appropriate outcomes.
1. North American Electric Reliability Council, 2010 Special Reliability Scenario Assessment: Resource Adequacy Impacts of Potential U.S. Environmental Regulations (NERC Report), October 2010, p. 24.
2. NERC Report, p. 24.
3. ISO New England Inc., Motion for Leave to Respond and Response of ISO New England Inc ., filing in FERC Docket ER10-2477-001 (ISO Motion), p. 1.
4. Kyle Alspach, “Natural Gas Seen As Cleaner, Cheaper,” Boston Business Journal , March 4, 2011.
5. Modeling exercise reported in an Analysis Group whitepaper: Generation Fleet Turnover in New England: A Modeling of Energy Market Impacts , April 2011, by Todd Shatzki, Paul Hibbard, Pavel Darling and Ben Clinton. ISO-NE has also conducted scenario analyses related to changes in the New England power system at the request of the New England States Committee on Electricity and the New England Conference of Public Utility Commissioners.
6. In consideration of strategic challenges facing the region, ISO-NE has provided related data on system operations and independent analyses, and has drafted a problem statement with the goal of reaching consensus among states and stakeholders on the scope of the issues, and in evaluating implications for the New England bulk power system. See, for example, “ Memo to New England Power Pool Participants Committee from Gordon van Welie ,” Strategic Planning Discussions at March 4 Participants Committee Meeting , March 2, 2011.
7. For example, over the past two capacity market cycles, ISO-NE has been forced to reject Salem Harbor’s “delist” bids for a portion of the plant’s capacity on the basis that the units are needed to continue to meet NERC reliability standards. See “Forward Capacity Auction Results Filing with the Federal Energy Regulatory Commission,” ISO New England Inc., Aug. 30, 2010, p. 3. In the New England Forward Capacity Market (FCM), a “delist” bid is effectively a request to remove the unit(s) from having an obligation to be available as capacity for a single year. A request to permanently delist units at a facility initiates a process that could lead to a cost-of-service reliability contract for some or all of the facility’s capacity, depending on ISO’s determination of need for reliability.
8. The purpose of this analysis is to take a first cut at reviewing aspects of energy price and emission impacts assuming the resources reviewed have