The operator of New England's transmission grid and wholesale electricity markets has proposed major reforms to its market for capacity. For 18 years, ISO New England has administered a "Forward Capacity Market", featuring annual auctions to procure commitments from energy resources, for a capacity commitment period three years in the future. ISO-NE has now proposed to shift to a "prompt/seasonal" model. If adopted, the reforms will change important elements of New England's electric market systems.
According to ISO-NE, its Forward Capacity Market "ensures that the New England power system will have sufficient resources to meet the future demand for electricity." The grid operator adopted a capacity market 18 years ago, to provide a revenue stream to support the development and sustained availability of enough power plants (and eventually other resources like storage and demand response). Under the present construct, ISO-NE holds annual Forward Capacity Auctions (FCA), in which resources compete to obtain a capacity supply obligation (a commitment to supply capacity) in exchange for a capacity payment determined by the auction price.
But now the grid operator has proposed to shift away from a forward market design, to a "prompt/seasonal" design:
“Prompt” means the capacity auction would take place much closer to the delivery period. As a result, the auctions would be based on more accurate information about the expected demand for electricity and resources’ ability to meet that demand during the most stressed system conditions. A prompt auction would better accommodate the development timelines of diverse resources, and reduce risk of resources securing capacity supply obligations but being unable to deliver.
The “seasonal” element involves procuring capacity in a way that better addresses the distinct reliability challenges of winter and summer, as well as variations in resource performance from season to season. Winter risks are expected to increase as weather becomes more extreme and unpredictable, and as public policies guide the region toward wider adoption of weather-dependent clean energy resources and the electrification of heating and transportation.
According to ISO-NE's proposal, the reforms would take effect beginning with the 2028/2029 capacity commitment period. Absent reform, that period would be the subject of the 19th Forward Capacity Auction (FCA 19). FCA 19 was originally scheduled for 2025, but the auction timeline was extended by the Federal Energy Regulatory Commission at ISO-NE's request to allow time for a separate, lesser reform to how it accredits capacity to resources. The grid operator says it will pursue a further FERC approval to delay the auction until 2028, so it can develop rules for the prompt/seasonal market, and hold the first prompt capacity auction in early 2028.
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