Power auction goes smoothly for 2020-2021

NEW ENGLAND POWER GRID OFFICIALS said on Thursday that they easily secured enough electricity to meet the region’s energy needs three years from now.

ISO-New England, the region’s power grid operator, said an auction on Monday secured commitments from generators to deliver 35,835 megawatts of electricity between June 1, 2020, and May 30, 2021. The commitments will cost electric ratepayers across the region $2.4 billion, which is about $600 million less than last year’s auction and the lowest price since 2013.

The so-called forward capacity auction sets the price generators receive for having their plants ready to produce power when needed three years from now. The generators will also collect a wholesale price for the energy they actually deliver.

Robert Ethier, vice president of market operations at the ISO, said the grid operator estimated it needed 34,075 megawatts of electricity to meet demand across the six-state region from June 2020 through the end of May 2021. An additional 1,760 megawatts was secured to provide a cushion.

Approximately 88 percent of the generating capacity came from existing or new power generation, 9 percent from reductions in electricity demand, and 3 percent from imports from New York and Canada. New power generation represented 264 megawatts, or less than 1 percent of the total capacity, and came from increased generating capability at existing plants, Ethier said.

Last year’s auction, for the year ending May 30, 2020, yielded 1,459 megawatts of new power generation, including three new plants in Rhode Island, Connecticut, and Massachusetts that will operate using natural gas or oil.

Although the closings of the Brayton Point power plant in Somerset this year and the Pilgrim Nuclear Power Station in Plymouth in 2019 have raised concerns about whether the region, and particularly southeastern Massachusetts, has adequate generating capacity, the forward-capacity auction suggests the market has filled the hole left by those plant retirements fairly easily.

“All of those retirements have already been replaced in the market,” said Dan Dolan, president of the New England Power Generators Association.

Most of the plants coming on line to fill the gap left by retiring facilities run on natural gas, which raises reliability concerns in the winter when supplies of gas coming into the region sometimes become constrained. ISO officials are pushing for more pipeline capacity into the region, but so far no mechanism to pay for that added capacity has been found.

Overall, Dolan said, the power generation market in New England is working well, delivering electricity reliably and at reasonable prices. He said the wholesale price of electricity in 2016 was the lowest in the history of the competitive marketplace.

“These competitive market benefits can continue but must not be taken for granted as states move to carve out and subsidize individual technologies and resources, which would undermine the investments being made today,” Dolan said.

Dolan was referring to the Baker administration’s plan to bypass the competitive marketplace and directly seek bids for new hydroelectricity supplies from Quebec in April and offshore wind suppliers in June. As this week’s auction showed, neither the hydroelectric or offshore wind projects will come on line by the end of May 2021, which means they will play no role in helping the state reaching its carbon emissions targets for 2020. (CLARIFICATION: The projects did not seek forward capacity payments for 2020-2021, but that does not mean they won’t be online by then. Northern Pass, a project to bring hydroelectricity from Quebec, is scheduled to come online in 2019.)

ISO officials said 137 megawatts of wind and 66 megawatts of solar were included in this week’s forward capacity auction. Another 720 megawatts of solar is produced behind customer meters, meaning it doesn’t participate in the forward capacity auction but does help to reduce overall power demand.