Renewable Advocates Target ISO New England

by Ed Burke and Kelly Burke, Dennis K. Burke Inc.

Trade groups claim the grid operator unfairly favors natural gas

For years, state and local governments have been hounding grid operators for more clean energy resources to help meet their climate goals. A recent auction to secure electric generating capacity for New England steered over $1 billion to power plants in the region, including 15% toward clean energy resources like solar, wind and battery storage.

After the capacity auction, renewable industry groups said the grid operator’s market rules are biased toward natural gas and blocking renewables from taking on a larger share of generating capacity.

In March, RENEW Northeast and the American Clean Power Association (ACPA) filed a complaint with the Federal Energy Regulatory Commission (FERC). They asked the federal regulator to find that ISO New England (ISO-NE) market rules “provide undue preference to natural gas-only resources,” and to order the grid operator to fix its rules to end that preference.
    

Undue Preferences

ACPA and RENEW Northeast said in their complaint that ISO New England’s “undue preferences” give some natural gas-fired power plants an unfair advantage in its capacity and operating reserves markets. They fail to account for the possibility they may be unable to run at times because of a lack of fuel supplies.

When qualifying resources for its capacity auctions, ISO-NE assumes gas-fired resources will always have 100% reliable fuel supplies and be able to operate.

Now, if you remember back in December, ISO-NE warned that New England has limited natural gas pipeline capacity. Gas plants could lose access to fuel during long cold snaps, which could lead to blackouts. That’s not 100% reliable, the renewable groups argue.

About 9,200 megawatts (MW) of pipeline-supplied gas-fired capacity in New England lacks a backup fuel source, according to ACPA and RENEW. That’s about 28% of the capacity that cleared ISO-NE’s just-held capacity auction.

ISO-NE recently estimated that under extreme winter peak conditions, up to 4,546 MW of gas resources with a capacity obligation may be unable to obtain natural gas.

ISO-NE’s failure to properly account for how much capacity some gas-fired power plants can reliably deliver is distorting New England’s capacity market, according to the trade groups. They claim the actual supply capacity is overstated, which incentivizes gas-only resources not to make investments necessary to assure they’re backed by firm gas supply. In turn, that leads to capacity clearing prices below competitive levels.

ACPA and RENEW say ISO-NE also improperly treats pipeline-dependent gas plants as operating reserves. Operating reserves provide backup power if there are sudden changes in real-time supply or demand. Operating reserves must be able to provide electricity within 30 minutes when called.

The need for reliable operating reserves is especially acute as New England adds more intermittent resources to its power system, according to the complaint.

“A diverse array of clean energy resources can supply reliable capacity to New England, but wind, solar, and storage are clearly disadvantaged by current market rules favoring gas generators,” ACPA counsel Gabe Tabak said in a statement. “We are seeking a level playing field.”

Capacity Accreditation

ISO New England’s annual forward capacity auction is meant to ensure there are enough power plants to meet the region’s energy demand three years in advance. Each auction, ISO-NE sets a number of megawatts it needs to ensure it can meet demand and assigns each power producer who enters the auction a “capacity accreditation” (the number of megawatts the region can count on that producer to generate).

Francis Pullaro, RENEW executive director, pointed out the contrast in how the grid operator assesses how much capacity other resource types can reliably deliver, leading renewable resources to have accredited capacity well below their nameplate capacity. ISO New England discounts “intermittent” renewable resources to account for times they won’t be producing power – when the sun isn’t shining or the wind isn’t blowing.

Having a lower capacity accreditation makes the renewable projects less competitive in the auction. “If FERC approves the complaint, pipeline-dependent generators would get a haircut on how much capacity they could qualify for in ISO-NE’s capacity auctions,” Pullaro said.

Stephen Rourke, advisor with Daymark Energy Advisors and former vice president of system planning at ISO-NE, said in an affidavit supporting the groups’ complaint that the grid operator assigns lower summer ratings to wind power because there is less wind in the summer than winter, solar is rated at 0 megawatts in the winter because peak demand time is after sunset, and hydro has lower summer ratings because of lower water flows. “But there is no discount for natural gas plants that might not be able to get fuel in a harsh winter,” Rourke added.

ISO-NE is starting a stakeholder review to consider changes to its capacity accreditation process by using an “effective load carrying capability” methodology. That could address concerns raised in the complaint, the renewable groups said. However, a new accreditation process wouldn’t be in place until June 2028 at the earliest. The groups asked FERC to require ISO-NE to change its capacity accreditation rules by mid-2027.

Ed and Kelly Burke are respectively, Chairman of the Board and Senior Marketing Manager at fuel distributor Dennis K. Burke Inc. They can be reached at 617-884-7800 or ed.burke@burkeoil.com and kelly.burke@burkeoil.com.

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