Grid in the balance

Grid in the balance

Clean, reliable, competitively priced power — or suboptimal solutions?

ON THE FACE of it, New England’s power system is in good shape. Over nearly two decades, the region’s competitive wholesale electricity markets have attracted investment in the power plants and demand-side resources needed to meet consumer demand.

Upgrades to the region’s high-voltage transmission system have vastly improved reliability, allowing power to move freely around the six states, expanding access to electricity from the lowest-priced power plants, and enabling old, inefficient power plants to retire. The retirements of old coal- and oil-fired generators and the increasing use of natural gas to produce electricity have significantly lowered generator emissions over the past decade.

Because of the investment in power plants and transmission, New England has not experienced widespread blackouts or controlled outages since 1965. Near-record-low wholesale electricity prices have resulted from recent mild weather and extremely low natural gas prices, and a competitive market that selects the lowest-priced resources needed to meet demand.

However, the power industry is undergoing a profound transformation. A hybrid power system is starting to take shape in New England with three major elements: Renewable resources, distributed generation and demand resources at customer sites, and a fleet of fast, flexible natural-gas-fired power plants to back up wind and solar resources. The New England states’ environmental and clean energy goals are one driver of this transformation, producing immense growth in solar panels at customer sites, energy-efficiency measures, and proposals for wind farms.

ISO New England has a front row seat on this transformation. The ISO keeps the power flowing in New England by managing the power grid, administering competitive wholesale electricity markets, and conducting long-term planning. The ISO is independent, fuel- and technology-neutral, owns no generators or transmission lines, and makes no money in the electricity marketplace.

The ISO has been preparing for the new order, but looming challenges could derail the region’s progress toward a hybrid power system that provides competitively-priced, reliable, and clean electricity.

Gordon van Welie

Gordon van Welie

The first challenge is the lack of adequate fuel infrastructure in the region, particularly infrastructure to serve New England’s natural-gas-fired power plants. Over the past two decades, the number of power plants using natural gas has increased dramatically—nearly half of the region’s fleet uses natural gas as its primary fuel—while investment in the underlying fuel delivery infrastructure has not kept pace. During cold snaps, the region’s natural gas infrastructure can’t deliver sufficient fuel for both heating and power generation. Instead, the region relies on nuclear and coal- and oil-fired power plants to keep the lights on—but those generators are closing or at risk of retirement due to low wholesale electricity prices.

The region’s reliance on natural gas will only intensify. Natural-gas-fired generation makes up half of proposed power plants. While some argue that the region is too dependent on natural-gas-fired power plants, the future hybrid power system will require reliable, flexible back-up power—exactly what efficient natural-gas-fired generators provide.

To ensure power is available during the winter, ISO New England has incentivized generators to add dual-fuel capability—the ability to burn oil stored onsite if they can’t get delivery of natural gas. Having back-up fuel on hand is great insurance for power system reliability, yet oil produces higher emissions, and environmental and siting regulations are imposing greater limitations on existing and new oil generation. That will reduce the region’s ability to rely on oil as a back-up fuel.

Second, wind farms are a small and growing part of our fleet, but onshore wind facilities in northern New England also face a big infrastructure obstacle—the need for extensive and costly transmission expansion to deliver power from their remote locations to cities in southern New England. Bringing hydro energy from Canada will also require significant transmission expansion. Offshore wind farms are more costly than onshore wind, but require less transmission.

Third, the competitive wholesale marketplace has brought much-needed investment in power plants in New England. However, these markets are vulnerable as states seek to advance clean energy development using contracts and incentives outside of the wholesale marketplace. Depending on how they are structured, government subsidies for clean energy will have unintended consequences: market prices that are lowered by subsidies may not be sufficient to keep existing power plants in operation and investor uncertainty could dampen new development, ultimately undermining resource adequacy.

ISO New England is responsible for managing the power system affected by this changing landscape, but can’t require investment in fuel infrastructure. The ISO’s role is limited to developing market incentives to induce generator owners to ensure they have fuel.

The challenges outlined here, plus the ISO’s independent natural gas infrastructure studies, plus the ISO’s actual experiences operating the power grid in recent winters, lead to the unavoidable conclusion that New England needs more fuel infrastructure to ensure a reliable power system.

Additional fuel infrastructure could come in the form of greater pipeline capacity, liquefied natural gas (LNG) storage combined with forward contracts for LNG delivery or, alternately, dual-fuel power plant capability—with emissions permits that allow extended run times on oil. The high-voltage transmission network will also require expansion to reach clean energy sources. But given the difficulties in building infrastructure in New England, the ISO is not optimistic that sufficient infrastructure will materialize in time.

The key to long-term independence from natural gas and oil is renewable energy in combination with grid-scale electricity storage, but at a level that will not be economically or technically feasible for many years. This transition will take decades, it will be challenging and costly, and it will require regional collaboration. In the meantime, there is no alternative but to depend heavily on fossil fuels and the remaining nuclear plants.

To address the challenge to competitive markets, the states, the organization representing market participants (NEPOOL), and the ISO are mulling how to accommodate the states’ clean energy requirements in the competitive market structure, but those solutions also are probably several years away.

Until large transmission lines are built to reach hydro and wind resources, and unless additional fuel infrastructure is added to meet the ever-increasing demand for natural gas to heat homes and businesses and to generate the power that lights those homes and businesses, we see a future with challenges that may require the ISO to employ suboptimal solutions.

The time is fast approaching when the region’s fuel infrastructure constraints and continued non-gas power plant retirements may push the ISO to further strengthen market rules to incentivize generators to contract for fuel infrastructure. Other steps the ISO could take to ensure reliability during the winter could include—as a last resort—trying to stop some non-gas power plants from retiring. The measures required to ensure fuel security or induce generators to postpone retirement will be costly. Progress on lowering emissions may falter due to increased dependency on oil, and the region should expect significant energy market price volatility when natural gas pipelines are constrained.

Meet the Author
The ISO is supportive of the states’ environmental and clean energy goals, and has developed many operational and market solutions to accommodate renewable resources and emerging technologies. Additional solutions will be needed to ensure reliability through the wholesale markets. However, the region’s fuel infrastructure needs have the potential to seriously affect ongoing power system reliability and impede the efficiency of the wholesale markets that have brought the regional system this far. The ISO will continue to strive for a reliable power system through competitive markets, while seeking solutions that are compatible with state environmental requirements.

Gordon van Welie is president and CEO of ISO New England Inc. ISO New England operates the six-state power system and oversees the region’s wholesale electricity marketplace. 

  • Joel Gordes

    While I respect Gordon’s position, I have to disagree with him on a goodly portion of his solutions to the problems as some of them present serious energy security problems as we go forward. He still favors a centralized grid where large transmission is key but which is very costly but takes funds from decentralized sources placed closer to the point of use–what we call distributed resources.

    While shale gas, which has been presented to us as the panacea for all much of energy needs,is used we will build a ~$3+ Billion pipeline. According to some sources this euphoria about gas may be the driver for the next economic bubble as in “dot com bubble” and our more recent and even less enjoyable “housing bubble” which gave us the “great recession” as some have named it. Reports have actually been coming in for quite some time on the gas fields beginning to prematurely peter out. While I had been a proponent of residential gas for some time in the past, the leakage rates that are being investigated must give us all pause and we ought to be looking at how the $3+ Billion might be even better used for more energy efficiency and local renewable energy sources. On any given day we are already ~42% (average) to ~72% (summer) dependent on gas for electric power. Does it really make any economic or energy security sense to expand past that point?–or even maintain it at that level? How much do you really want to increase that figure when terrorists mamy be plotting to blow the gas lines in the middle of the next major blizzard or ice storm or hack into their control systems during similar events? Events in Ukraine about a year ago and more recently in the past few weeks makes this a real and growing possibility. Even gas pipeline control systems (ICS/SCADA) are potential targets.These possibilities should be studied in a holistic, all-hazards approach and not only by some state and regional officials who look primarily at “cheaper” and to a small degree at “cleaner” as the only metrics.

    Might more gas usage actually Increase greenhouse gas emissions? A primary energy strategy for the State of Connecticut engendered in the most recent Comprehensive Energy Strategy as well as the Integrated Resource Plan is the expansion of natural gas to bring fracked gas from the Marcellus Shale in Pennsylvania and New York. The reported cost of doing so runs into the billions of dollars where we may lock in huge amounts of capital for decades to obtain what may only currently be the least expensive option. While I have previously been enthusiastic about gas due to the high efficiency of the combined cycle gas turbine technology, the SOx-NOx cleanliness and its lower carbon footprint as ways to reduce climate change, new information indicates otherwise. The methane leakage rates have been called into question as being significantly more than originally thought as well as other multiplier effects and questions on the wisdom of hydraulic fracturing on several counts. So, this has personally become a conflict and question that, as economist John Maynard Keynes once put it, “When the facts change, I change my mind. What do you do, sir?”

    And so this is a major question we all must ponder even in the face of this pipeline being looked upon as a done deal. In fact, let me be so audacious as to suggest a moratorium on pipeline construction ought to be implemented until such time as there are ironclad assurances that its entire cradle-to-grave life-cycle, including actual extraction in Pennsylvania and New York, are not net GHG drivers instead of being a part of the solution.

  • He said time is running out on reliability. He’s looking at the wrong clock. Mr. Van Welie leads an organization that is not adapting fast enough to the greenhouse gas reduction imperative. I wish he gave more than a casual nod to energy efficiency, which is far cheaper, more reliable and less volatile than any of his masters’ proposed infrastructure projects. I will say, that of the solutions he offers, the most sensible is more forward contracts for LNG. Rather that than building long-term fossil infrastructure.

  • NortheasternEE

    For almost 10 years Gordon Van Welie has been politely warning that state and regional mandates for increasing levels of renewable energy on the grid is jeopardizing reliability and increasing cost. What is he saying now?

    1. The grid is increasingly becoming dependent on a single fuel (natural gas), which is in short supply, for reliability.

    2. New transmission lines to connect wind and hydro power will cost a lot of money, which translates into higher and higher rates.

    3. State and regional mandates for renewable energy, which bypass the competitive wholesale marketplace, are forcing the early retirement of needed coal and nuclear power, increasing the need for more natural gas and oil, and increasing GHG emissions.

    4. This condition will continue to exist in the foreseeable future until grid scale energy storage is developed.

    No one knows if or when economical grid scale energy storage will be developed. In the meantime Gordon Van Welie is telling us that when rates skyrocket, and blackouts become common, don’t blame me, blame New England’s gullible governors who believe that the grid can run on intermittent and variable wind and solar power without bad and unintended consequences.