Report on 2011 New England electricity market

Friday, June 29, 2012

New England electricity markets operated competitively and relatively efficiently in 2011, according to a report filed with federal regulators earlier this week.  The 2011 Assessment of the ISO New England Electricity Markets (184-page PDF), prepared by New England's external market monitor, reports on how the market performed last year, with a focus on evaluating efficiency and competitiveness.

ISO New England Inc. is the regional transmission organization covering most of New England.  In this role, ISO New England performs three major functions: overseeing operation of New England's bulk power generation and transmission system, administering the region's wholesale electricity markets, and managing regional planning processes. ISO New England is regulated by the Federal Energy Regulatory Commission, and has both internal and external market monitors who review its performance.  The internal market monitor is a unit within ISO New England Inc., while the external market monitor is an independent outside consultant.  Potomac Economics currently serves as the external market monitor.

Potomac's report found that "the markets performed competitively in 2011".  One piece of evidence Potomac used to support this finding is that average energy prices fell 7 percent from 2010 to 2011 (from approximately $53 per MWh in 2010 to $49 in 2011).  According to the report, this is due in large part to a decrease in the average price of natural gas.  In Potomac's view, lower fuel costs translate to lower prices in a well-functioning, competitive market because fuel costs constitute the vast majority of the marginal costs of most generation.  Natural gas pricing decreases were not the only contributor to lower energy prices, according to the report; Potomac also noted that prices fell due to a weather-driven decrease in demand for electricity, stating that, "Average load decreased 1 percent from 2010 to 2011 and 2.5 percent from the summer of 2010 to the summer of 2011, primarily due to milder weather."

Potomac also found that "both the day-ahead and real-time markets operated relatively efficiently in 2011 as prices appropriately reflected the effects of lower fuel prices and load levels."  However, the external market monitor found that "real-time prices often do not fully reflect the cost of satisfying demand and maintaining reliability during tight market conditions, particularly when fast-start resources or demand response resources are deployed in the real-time market."  As a result, the report recommended a series of changes to the New England markets, including developing pricing changes to allow the actual costs of demand response and fast-start resources to be reflected in prices.

The report was filed with the Federal Energy Regulatory Commission on June 25.  It complements the 2011 Annual Markets Report (121-page PDF), released this May by ISO New England's internal market monitor.  The internal market monitor's report similarly found that the markets operated competitively in 2011.

Solar-powered highway in Colorado

Thursday, June 28, 2012

Facilities along a 17-mile segment of a Colorado toll highway are now powered by solar-generated electricity.  The project, which involved the construction of 22 solar installation sites along the route, was financed through a long-term power purchase agreement that allows the highway authority to avoid direct exposure to the capital costs of construction.

Solar photovoltaic panels at Goblin Valley State Park, Utah.

Colorado E-470 is a beltway that loops around the east side of the Denver metropolitan area.  The road is administered by the E-470 Public Highway Authority, a political subdivision of the State of Colorado.  Much of the authority's expenses center on road maintenance, but electricity costs are one component of its operational budget.  For example, electricity is used to power streetlights, signs, toll collection equipment, toll plazas, maintenance facilities and the authority's administrative headquarters.

Looking to reduce its operational costs, the highway authority focused on the development of solar photovoltaic facilities.  Rather than developing the project itself, or purchasing a turnkey project, the authority entered into a deal with Adamas Energy Investments to develop the project.  Under that deal, Adamas and solar developer Martifer Solar USA constructed solar PV electric generation facilities along part of E-470 at no direct cost to the authority.  Instead, the authority entered into a 20-year solar power purchase agreement with Adamas to purchase the project's output. 

According to EVStudio, the designer of the piers for the installations, the project is anticipated to produce 975,436 kWh in its first year of operation.  The exact pricing terms of the deal are not readily available to the public, but the authority has stated that it anticipates paying Adamas less per kilowatt-hour than it would to incumbent utility Xcel Energy.  According to the authority, the first six years' pricing is fixed, followed by a fixed annual increase for the 14 remaining years of the PPA.

NH renewable thermal energy standard

Tuesday, June 26, 2012

New Hampshire Governor John Lynch has signed a new law expanding the Granite State's renewable portfolio standard to cover thermal energy.

Avalanche Falls in the Flume Gorge, New Hampshire.

Since 2007, New Hampshire has required most electricity providers to source 23.8% of their electricity from renewable resources by 2025.  The state legislature recognized four classes of renewable resources, and prescribed gradual increases in each class's share of the total electricity served in the state.  Class I resources cover most new renewable electricity generating facilities installed after January 1, 2006.  Class II covers solar-generated electricity from facilities that began operation in 2006 or later.  Class III covers existing biomass systems up to 25 megawatts, and methane gas, predating 2006.  Class IV covers power produced by existing small hydroelectric facilities up to 5 MW that meet environmental protection standards.

Some of these electricity generating technologies, such as the combustion of biomass to power steam turbines, also produce significant amounts of heat.  Other technologies like solar hot water, wood pellet boilers, or geothermal heat pumps may not generate electricity, but can displace the use of fossil fuels that would otherwise be used for heating.  This useful thermal energy has not previously been covered by New Hampshire's renewable portfolio standard.  This means that people and businesses have not been able to create renewable energy certificates (RECs) by putting this thermal energy to productive use.  As a result, the efficient use of this thermal energy has not been incentivized as has the production of electricity from renewable resources.

Enacted by the New Hampshire Senate and House earlier this month, and signed by the governor yesterday, Senate Bill 218 (text available via the New Hampshire General Court website) expands New Hampshire's renewable portfolio standard to cover heat or thermal energy.  As of January 1, 2013, the useful heat produced by renewable power technologies can qualify to produce RECs which can be used to satisfy the renewables requirement.  While Class I thermal energy RECs have a lower price cap than Class I electrical RECs - $25 instead of $55 - the ability to produce and sell thermal RECs will enhance business opportunities to use steam or heat produced from renewable resources.

California solar project may change hands

Monday, June 25, 2012

Solar energy developer BrightSource Energy Inc. has announced that it submitted the winning bid to acquire a proposed 500 megawatt solar thermal project from bankrupt developer Solar Trust of America LLC.

Solar Trust, a joint venture of German companies Solar Millennium AG and Ferrostaal Inc., had proposed several large solar projects in the California desert, including the 1,000 MW Blythe project and the 500 MW Palen Solar Project.  Both were proposed as solar thermal projects, although the developer had expressed some interest in converting them to solar photovoltaic technology.  But Solar Trust's operations hit a series of roadblocks, including the bankruptcy of its parent Solar Millennium AG in March 2012; after Solar Trust was unsuccessful in selling its portfolio of projects this past spring, Solar Trust filed for bankruptcy itself.

Now, BrightSource has confirmed that it won an auction for rights to the Palen project.  The sale is subject to approval by the bankruptcy court, but filings in Solar Trust's bankruptcy case suggest BrightSource agreed to pay at least $10 million for the project, plus a reimbursement to Solar Trust for the project's interconnection costs.  If the project is up and running before the end of 2014, BrightSource would pay up to $20 million more. 

BrightSource is also developing the Ivanpah solar project in California's Mojave Desert.  As at Ivanpah, for the Palen project BrightSource reportedly intends to stick to a concentrated solar thermal project design, using BrightSource's "power tower" technology.

EnergyOcean 2012 conference

Wednesday, June 20, 2012

Today is the second day of the Energy Ocean International 2012 conference.  The technical program for today includes panels on advances in wave and tidal energy projects, offshore winds, permitting and project finance.

Today's sessions follow many of the themes discussed in yesterday's technical program.  What new technologies are being developed that may enhance the cost-effectiveness of converting energy from the ocean realm into something humans can use?

For technology innovators, what does it take to test and demonstrate a new device, and ultimately convince a project developer that this technology is appropriate for their project?  

For project developers, what are the processes needed to develop a successful project, including securing regulatory approvals, minimizing environmental impacts, and putting together a commercially viable financing package?

Fundamentally, what does the future hold for ocean energy development? How and when can ocean energy projects be environmentally responsible and cost-effective?

By bringing together the broad spectrum of stakeholders interested in ocean energy, perhaps these questions can be answered sooner rather than later.

EnergyOcean International 2012

Tuesday, June 19, 2012

This week I am attending EnergyOcean International 2012, the ninth annual conference for the offshore renewable energy sector.

This morning's keynote address was delivered by Tommy Beaudreau, Director of the Bureau of Ocean Energy Management. Director Beaudreau gave an overview of BOEM and how its Office of Renewable Energy Programs fits in with other responsibilities like offshore oil and gas leasing and regulation.

Upcoming presentations include a discussion of global offshore renewable energy development, marine spatial planning, best practices for managing interactions between wildlife and offshore projects, an update on what's happening with wave and tidal energy, and a review of successful project finance strategies.

Maine lighthouses and offshore wind

Monday, June 18, 2012

The federal government is trying to give away two historic lighthouses on offshore Maine islands, one of which lies near a designated offshore wind testing site.  The two lighthouses - Halfway Rock Light Station and Boon Island Light Station - are located on islands offshore of southern Maine.  To qualify to take either lighthouse for free, applicants must commit to preserving the structures' historical integrity and promoting public access to their islands.

Cuckolds Fog Signal and Light Station off Boothbay Harbor, Maine.  This lighthouse was privatized in 2006 through the same program now seeking to convey two other Maine lighthouses.

Halfway Rock is a 2-acre rock ledge about 10 miles east of Portland Head Light on a 2-acre rock ledge.  The rock is named for its position half way between the two ends of Casco Bay, formed by Cape Elizabeth and Cape Small.

Boon Island Light lies 6 miles off the coast of York.  It is the tallest lighthouse on the Maine coast, standing 123 feet tall.  The waters off Boon Island were designated as an offshore wind energy test site in December 2009, along with sites near Damariscove Island and Monhegan.  To date, no commercial developer has publicly announced plans to develop the Boon Island offshore wind site.

If no entities qualify for a free transfer of the lighthouses, the U.S. General Services Administration will auction them off.  (In 2010, Ram Island Ledge Light near Cape Elizabeth was sold at auction for $190,000.)  The government's plans to sell or give away the lighthouses may not directly affect the proposed offshore wind plans, but whoever gets the Boon Island site would have a commanding view of any wind turbines sited nearby.