The Bottom Line:
In comments to FERC, EPSA says electricity market reforms to value reliability can help solve New England winter power challenges in the long run.
Snowstorm in Boston. Frequent winter storms in New England put the grid at risk of failure. Credit: iStock/kudou
Winter in New England often brings challenges, and this year is no exception. In particular, stakeholders are concerned that the region does not have enough generation capacity to meet surges of power demand during cold snaps. Although winter energy capacity has been a concern in New England for years, there has not been enough of a focus on valuing reliability through electricity markets. In recent comments responding to FERC’s New England Winter Gas-Electric Forum, EPSA emphasized the benefits ISO New England has brought to the region while encouraging regulators to adopt needed reforms in the coming years.
“The myriad issues facing New England are not a failure of its electricity markets but rather are a clear signal that reforms are necessary to address the regional factors impacting system reliability in the winter seasons,” EPSA wrote in its submitted comments.
For the past 25 years, ISO-NE has operated a wholesale power market that has delivered important cost savings to ratepayers while incentivizing investment in new generation technologies to lower carbon emissions. These successes show that markets can be a powerful tool to spur the efficient entry and exit of generation resources.
However, New England continues to suffer from resource adequacy problems due in part to fuel supply constraints in the region which are then exacerbated by state policies that push for the replacement of dispatchable generation assets like natural gas with intermittent renewables. Not only does this harm grid reliability, it also increases costs for ratepayers because in times of surging demand, power must be brought in from outside the region at high costs.
“While New England’s winter issues have been well known and well documented, the region has continued to lean on a series of temporary, out-of-market measures that have cost the region’s ratepayers millions of dollars while not solving the underlying issues by developing and implementing useful, long-term market solutions,” EPSA’s comments continue.
Steps to Address Reliability Gaps
In order to address this issue, regulators need to first assess the most critical reliability gaps so that stakeholders in the region can begin working to develop the products needed to ensure reliability. It has been several years since ISO-NE last studied fuel security in the Northeast. Given the dramatic changes that have occurred in global energy markets in the past year, the region would greatly benefit from the ISO reexamining its situation.
“Importantly, by clearly stating and supporting the reliability objectives to be achieved, market participants can hold far more productive discussions about how to meet those objectives,” EPSA wrote. “Once the risk is identified, the market must be allowed to respond.”
Allowing markets to respond means taking a resource-neutral approach that leverages the inherent efficiencies of markets by bringing many different types of tools to bear to solve a challenge. By embracing market solutions, ISO-NE can promote reliability within its grid system.
“Competitive markets remain the best way to procure and preserve the resources New England needs, while providing flexible, long-term solutions to its reliability issues,” EPSA’s comments explain.
Although the comments did not push for any specific immediate market solution, EPSA did support making changes to expedite the process of obtaining waivers to the Section 202(c) emissions limits. These limitations represent an additional hurdle for power producers to quickly dispatch additional generation during times of soaring demand in New England. This is because individual generators are forced to coordinate with the ISO on very short notice – often over weekends or very late at night – to obtain such waivers. If changes were made to the waiver process to define trigger conditions under which power producers could run specific generation facilities in certain emergency conditions, the grid would be assured of needed flexibility during times of high demand.
What is key is for regulators to both specifically plan for reliability and to adopt a flexible and resource-neutral approach to achieving it. In the long run, this is the best way to ensure that both the lights stay on and costs remain low for consumers.