ISO-NE exec: Generation retirements will require more interconnection of gas plants

ISO New England is working with transmission owners to develop solutions that address reliability issues as generation retires, COO Vamsi Chadalavada said.

“Depending on the pace of retirement over the next decade, New England could be facing a large loss of capacity,” he said during ISO New England’s Strategic Planning Initiative webinar Oct. 6.

Over the past five years, New England has seen more than 730 MW of generation retire, said the COO. 

Dominion (NYSE:D) in May announced that it will retire all four units of its 745 MW Salem Harbor station, which serves northeastern Massachusetts, by June 1, 2014. Two of the units will cease operation by the end of this year, Chadalavada noted.

The future of Entergy’s (NYSE:ETR) Vermont Yankee nuclear plant, which produces about 600 MW of capacity, is unclear, the COO also said. 

“We are working with transmission owners in Vermont and New Hampshire to develop short-term and long-term solutions to reliability issues if Vermont Yankee is unable to operate beyond March 2012,” he said.

New England faces generation retirements as oil- and coal-fired plants over the next decade face challenges to sustainability posed by environmental regulations and increasing reliance on natural gas-fired capacity, he said.

The ISO has identified between 3,300 MW and 5,300 MW of oil- and coal-fired generation may be affected by environmental laws, the COO said. These generators could make capital investments in their plants to comply with emissions standards, delist from capacity markets on a temporary basis, or retire altogether, he said.

“Replacing capacity would likely mean the construction and interconnection of more natural gas plants, which would further the region’s dependence on natural gas as a source of electricity production,” Chadalavada said.

Furthering the likelihood of retirement for oil-fired plants is the fact that natural gas sets market electricity prices, rendering oil generators less competitive, he said. Coal generators face expensive compliance investments, making it harder to compete in the New England market, he said.

In 10 years, oil-fired generation fell from 15% to 0.5% last year. Chadalavada noted, however, that while oil-fired generation produced 0.5% of electricity, it provided New England with 21% of capacity. “Having that capacity available when the system is peaking has been essential to maintaining reliability,” he said.

However, most of that generation is not flexible and has long lead times before it is available to produce electricity, he said.

Today’s energy landscape is dramatically different from the when generation was constructed, the COO said. Plants were built to run on a daily basis as baseload capacity. Now, we rely on many older units to carry us through short periods of heavy demand, he said. “This is not the most cost-effective or cost-efficient use of resources,” he said.

Generation retirements comprise one of five key challenges that ISO New England is facing. The others are dependence on natural gas, resource performance and flexibility, the integration of variable resources and the alignment of planning and markets.

About Rosy Lum 525 Articles
Rosy Lum, Analyst for TransmissionHub, has been covering the U.S. energy industry since 2007. She began her career in energy journalism at SNL Financial, for which she established a New York news desk. She covered topics ranging from energy finance and renewable policies and incentives, to master limited partnerships and ETFs. Thereafter, she honed her energy and utility focus at the Financial Times' dealReporter, where she covered and broke oil and gas and utility mergers and acquisitions.