ISO-NE to file preliminary results of forward capacity market auction with FERC

ISO New England (ISO-NE) will file the preliminary results of its tenth forward capacity market (FCM) auction with FERC by the end of the month, Robert Ethier, vice president, market operations at ISO-NE, said during a Feb. 11 media briefing.

ISO-NE on Feb. 11 said that its annual capacity auction concluded with sufficient resources to meet demand in 2019-2020, at a lower price, and with more than 1,400 MW of new generating capacity that will help replace recently retired and retiring generators.

Following the FERC filing, there will then be opportunity for comments “and our expectation is that FERC will then approve those results,” Ethier said, noting that the auction went smoothly and that there was robust competition.

“We had a tremendous amount of new interest from new resources in the auction,” he said.

ISO-NE said that the tenth FCM auction (FCA #10) attracted significant competition among resources to provide reliability services in the region. Before the auction, a total of 40,131 MW of resources, including 6,700 MW of new resources, qualified to compete in the auction to provide the 34,151 MW installed capacity requirement (ICR) for 2019-2020, ISO-NE said.

“The high participation in the auction demonstrates the interest in the New England marketplace and bodes well for meeting future resource adequacy requirements,” ISO-NE President and CEO Gordon van Welie said in the statement.

Recent and pending retirements of coal, oil and nuclear power plants expected to shut down by 2019 total more than 4,200 MW, including the 680 MW Pilgrim nuclear power station that announced its retirement before the auction, ISO-NE said.

Discussing preliminary results of FCA #10, ISO-NE said that 35,567 MW of capacity cleared the auction: 31,371 MW of generation, including 1,459 MW of new generation; 2,746 MW of demand side resources, including 371 MW that is new; and 1,450 MW of imports from New York and Canada.

Of the preliminary clearing price, ISO-NE said that the auction closed for resources within New England after four rounds of competitive bidding at $7.03 per kW-month, at the point on the demand curve where there were still sufficient resources to meet demand. The clearing price will be paid to all resources in both capacity zones in the region, ISO-NE said, adding that imports from Quebec over Phase II and Highgate also cleared at $7.03 per kW-month.

ISO-NE also noted that the clearing price was more than 25% lower than last year’s $9.55 per kW-month for most resources. The lower clearing price demonstrates strong competition among resources and illustrates that the capacity market is continuing to work, ISO-NE said.

At $7.03 per kW-month, the total value of the capacity market in 2019-2020 will be about $3bn, compared to the estimated $4bn for 2018-2019, ISO-NE said, adding that the price of $7.03 per kW-month is less than the pre-auction estimate of the cost of building a new natural gas-fired power plant in New England, at $10.81 per kW-month.

The auction continued for a fifth round for 181 MW of New Brunswick imports, which will receive $4 per kW-month, ISO-NE said, adding that New York imports totaling 1,044 MW, which cleared in the fourth round, will receive a price of $6.26 per kW-month.

Three large, new dual-fuel power plants totaling 1,302 MW cleared the auction, ISO-NE said, noting that the proposed plants are near the region’s largest population centers, and two are in the former Southeast Massachusetts/Rhode Island zone, where a capacity shortfall materialized before last year’s auction for 2018-2019. ISO-NE said that all of these plants will burn natural gas as their primary fuel, with oil as their secondary fuel:

  • About 485 MW of the Burrillville Energy Center 3 in Burrillville, R.I.
  • 484 MW at Bridgeport Harbor 6 in Bridgeport, Ct.
  • 333 MW at Canal 3 in Sandwich, Mass.

“Each of those three generators is a dual fuel generator and will be able to switch between natural gas and oil, depending on which fuel is more economic or available,” Ethier said.

ISO-NE noted that 27 MW of new wind and 44 MW of new solar cleared the auction, and in all, 135 MW of wind and 65 MW of solar facilities cleared FCA #10.

Noting that there were several firsts, ISO-NE said that 6.8 MW from the first offshore wind farm under construction in the United States cleared the auction: Deepwater Wind’s 34 MW facility off of Block Island, R.I.

Also, ISO-NE said that with the development of the first, multi-state, long-term forecast of solar growth in the country, small-scale solar facilities around the region were incorporated into the calculation of how much capacity will be required; forecast demand reductions from solar reduced the ICR in 2019-2020 by 390 MW.

Two large fuel cell facilities, providing 2.5 MW each, cleared the auction, ISO-NE said.

For FCA #10, the region was divided into two zones: Rest of Pool (ROP), which includes Connecticut, western and central Massachusetts, Vermont, New Hampshire, and Maine; and Southeastern New England (SENE), which includes Northeast Massachusetts/Greater Boston and Southeast Massachusetts/Rhode Island.

Among other things, ISO-NE noted that several significant FCM enhancements went into effect with last year’s auction, including Pay for Performance incentives. The market redesign work by ISO-NE, market participants, policy makers and regulators, and others, is helping remove risks from the market and providing developers with the financial stability needed to invest in new resources, ISO-NE said.

During the question and answer portion of the media briefing, Ethier said that ISO-NE recently “strengthened those requirements and those financial incentives and that is what we rely on to make sure that folks are delivering power when it’s necessary to the system. I think that’s one of the reasons you’re seeing … the large majority [of] new gas-fired units that are entering the system over the last few years [are] dual-fuel capable is because they know that they’re on the financial hook if they fail to deliver energy when we need it.”

In response to a question on what the likelihood is of FERC approving all of the projects, Ethier noted that “all of the new resources have always been approved in each of [ISO-NE’s] preceding auctions,” and that based on that, the risk of FERC disapproving the projects “strikes me as really low.”

Another ISO-NE official noted during the briefing that there are other factors that could have an impact on resources going forward, including siting and permitting requirements as well as financing.

Responding to a question on the natural gas pipeline infrastructure needs in the region, Ethier said that ISO-NE continues to see the need for new gas infrastructure of some sort to ensure reliability as the region’s gas dependence continues to grow.

On which resources have broken ground already, Ethier said that it is typical for resources to clear in the auction without having broken ground. A primary reason why ISO-NE runs the auction almost 3.5 years in advance of the need, he said, “is to allow resources to do … the upfront development work and get the project all ready to roll, but not have to invest large sums of money in actually building a plant that we may not need or that may not clear the auction because it’s not economic."

About Corina Rivera-Linares 3277 Articles
Corina Rivera-Linares, chief editor for TransmissionHub, has covered the U.S. power industry for the past 16 years. Before joining TransmissionHub, Corina covered renewable energy and environmental issues, as well as transmission, generation, regulation, legislation and ISO/RTO matters at SNL Financial. She has also covered such topics as health, politics, and education for weekly newspapers and national magazines. She can be reached at clinares@endeavorb2b.com.