This week the operator of New England's wholesale electricity markets made a series of filings with its federal regulator providing information on its upcoming thirteenth forward capacity auction, through which electric generators may commit to providing electric capacity during the period from June 1, 2022 through May 31, 2023.
ISO New England Inc. is the independent system operator and wholesale market-maker for most of New England's electricity grid. It is a private, not-for-profit entity, which operates pursuant to a tariff on file with the Federal Energy Regulatory Commission. As part of its planning for system operations, ISO-NE operates a forward capacity market through which it conducts annual auctions through which qualified generators and other resources may bid to obtain commitments to provide capacity in a future year, in exchange for which resources will be compensated. The next primary auction for capacity supply obligations will be Forward Capacity Auction 13 (or FCA 13), which will be held beginning on February 4, 2019, and will cover the 2022-2023 capacity commitment period.
In advance of each primary auction, ISO-NE calculates an "Installed Capacity Requirement," which it defines as a measure of the installed resources that are
projected to be necessary to meet reliability standards in light of total forecasted load
requirements for the New England Control Area and to maintain sufficient reserve capacity to
meet reliability standards. In computing the Installed Capacity Requirement, the grid operator considers parameters and assumptions including load forecast, resource capacity ratings, and resource availability. It also considers what relief
can be obtained during a capacity deficiency through measures including emergency assistance (tie benefits) from neighboring interconnected regions (New Brunswick, New York, and Quebec), load reduction by reducing system voltage by 5%, and running the system at a minimal level of operating reserve.
In its November 6 Installed Capacity Requirement filing, the grid operator told the Commission that it proposed a installed capacity requirement for FCA 13 of 33,750 megawatts, after taking into account 969 megawatts of credits over interconnection with Canadian utility Hydro-Quebec.
In a parallel Informational Filing for qualification in FCA 13, the grid operator noted that 31,432 megawatts of existing generating capacity resources qualified for the 2022-2023 capacity commitment period, as did 80 megawatts of existing import capacity resources, and 3,413 megawatts of existing demand capacity resources, totaling 34,925 megawatts of existing capacity. Some resources submitted bids to retire, and 3,223 megawatts of resources submitted bids to withdraw in part or in whole from the auction if it clears below a defined price. Additionally, ISO-NE qualified 238 new capacity resources, totaling 8,716 megawatts.
ISO-NE will conduct its thirteenth forward capacity auction starting on February 4, 2019.
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Showing posts with label bid. Show all posts
Showing posts with label bid. Show all posts
Polar vortex caused energy price spikes, says FERC staff
Monday, October 20, 2014
Why did energy prices rise during last winter's extremely cold "polar vortex" weather? A recent report by federal regulators suggests that inadequate infrastructure is largely to blame, while finding no evidence of widespread or sustained market manipulation.
The 2013 - 2014 winter season brought prolonged and unusually cold weather events in much of the United States. While the nation's major electric grids were generally able to maintain reliable operation, prices for natural gas and electricity spiked to unprecedented levels. Bottlenecks on interstate natural gas pipelines limited the amount of gas flowing into regions like the Northeast, while demand for gas for heating and electric power generation increased beyond the constrained pipelines' capacity. This imbalance of supply and demand for gas led to extremely high prices for gas as well as for electricity, because the price of natural gas often sets the price for power. Compounding the problem, some generators could not buy enough gas to operate, while others experienced outages due to equipment failure and frozen coal piles. In some regions, generators amounting to 30 percent of electric load faced forced outages.
As an immediate response, the Federal Energy Regulatory Commission took actions including changes to rules in the PJM, New York ISO and California ISO electricity markets, the Commission's first use of its emergency powers under the Interstate Commerce Act to direct Enterprise TE Products Pipeline to temporarily provide priority treatment to certain propane shipments, and approving a Winter Reliability Program in the ISO New England region.
According to a recently released report by the staff of the Federal Energy Regulatory Commission, the FERC Office of Enforcement also launched investigations into whether market participant behavior influenced regulated energy prices. In addition to the Commission's enforcement arm's regular surveillance of natural gas and electric markets for market manipulation and other improper conduct, the past winter's extreme price spikes prompted a closer look by the Office of Enforcement to determine if market manipulation was behind the historically high natural gas and electric prices.
On October 16, FERC’s enforcement staff reported that it found "no evidence of widespread or sustained market manipulation." Enforcement staff said it reached its conclusions after an extensive review and data analysis related to gas trading behavior, allegations received through the FERC hotline, generator offer behavior and outage behavior.
However, enforcement staff reported that three non-public investigations remain pending. At stake is whether any market participant was involved with the formation of a single monthly natural gas index to benefit its financial derivative positions, as well as whether certain generators improperly took advantage of constrained conditions in the electric markets by bidding in a way that increased their uplift payments.
Expect these enforcement investigations to continue, either to an informal resolution or a public enforcement process. With former Office of Enforcement head Norman Bay as the newest FERC Commissioner, FERC's enforcement arm appears to be growing in influence. Meanwhile, the coming winter may yet again test the nation's electricity and natural gas infrastructure. What will the 2014 - 2015 winter hold, in terms of energy reliability, pricing, and enforcement actions?
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| A recent winter in New England: cold ocean, cold snow. Must high energy prices follow? |
The 2013 - 2014 winter season brought prolonged and unusually cold weather events in much of the United States. While the nation's major electric grids were generally able to maintain reliable operation, prices for natural gas and electricity spiked to unprecedented levels. Bottlenecks on interstate natural gas pipelines limited the amount of gas flowing into regions like the Northeast, while demand for gas for heating and electric power generation increased beyond the constrained pipelines' capacity. This imbalance of supply and demand for gas led to extremely high prices for gas as well as for electricity, because the price of natural gas often sets the price for power. Compounding the problem, some generators could not buy enough gas to operate, while others experienced outages due to equipment failure and frozen coal piles. In some regions, generators amounting to 30 percent of electric load faced forced outages.
As an immediate response, the Federal Energy Regulatory Commission took actions including changes to rules in the PJM, New York ISO and California ISO electricity markets, the Commission's first use of its emergency powers under the Interstate Commerce Act to direct Enterprise TE Products Pipeline to temporarily provide priority treatment to certain propane shipments, and approving a Winter Reliability Program in the ISO New England region.
According to a recently released report by the staff of the Federal Energy Regulatory Commission, the FERC Office of Enforcement also launched investigations into whether market participant behavior influenced regulated energy prices. In addition to the Commission's enforcement arm's regular surveillance of natural gas and electric markets for market manipulation and other improper conduct, the past winter's extreme price spikes prompted a closer look by the Office of Enforcement to determine if market manipulation was behind the historically high natural gas and electric prices.
On October 16, FERC’s enforcement staff reported that it found "no evidence of widespread or sustained market manipulation." Enforcement staff said it reached its conclusions after an extensive review and data analysis related to gas trading behavior, allegations received through the FERC hotline, generator offer behavior and outage behavior.
However, enforcement staff reported that three non-public investigations remain pending. At stake is whether any market participant was involved with the formation of a single monthly natural gas index to benefit its financial derivative positions, as well as whether certain generators improperly took advantage of constrained conditions in the electric markets by bidding in a way that increased their uplift payments.
Expect these enforcement investigations to continue, either to an informal resolution or a public enforcement process. With former Office of Enforcement head Norman Bay as the newest FERC Commissioner, FERC's enforcement arm appears to be growing in influence. Meanwhile, the coming winter may yet again test the nation's electricity and natural gas infrastructure. What will the 2014 - 2015 winter hold, in terms of energy reliability, pricing, and enforcement actions?
Feds to auction North Carolina offshore wind sites
Friday, August 15, 2014
The U.S. Department of the Interior's Bureau of Ocean
Energy Management has announced plans to auction the rights to lease sites off the
North Carolina coast for offshore wind projects.
Under the Bureau of Ocean Energy Management's "Smart from the Start" competitive program for leasing sites on the outer continental shelf (OCS) for commercial wind energy development, BOEM conducts a series of stakeholder and environmental review processes. Through these processes, BOEM identifies areas that are attractive for commercial offshore wind development, while also protecting important viewsheds, sensitive habitats and resources and minimizing space use conflicts with activities such as military operations, shipping and fishing.
For North Carolina, the process began in December 2012 when BOEM published in the Federal Register a Call for Information and Nominations and a Notice of Intent to Prepare an Environmental Assessment. After considering the public comments and responses, BOEM defined three Wind Energy Areas off North Carolina:
The North Carolina auction will follow a series of similar auctions for East Coast offshore wind sites in federal waters over the past year, including sites off Massachusetts and Rhode Island and Virginia, and will come after the scheduled August 19 auction for sites off Maryland. To date, BOEM has awarded five commercial wind energy leases off the Atlantic
coast: two non-competitive leases (for the proposed Cape Wind project in
Nantucket Sound and an area off Delaware) and three competitive leases
(two offshore Massachusetts-Rhode Island and another offshore Virginia).
Altogether, the competitive lease sales have generated more than $5 million in high bids
for more than 277,500 acres in federal waters. BOEM
expects to hold additional competitive auctions for wind energy areas
offshore Massachusetts and New Jersey in the coming year.
When will North Carolina offshore wind sites be auctioned? Who will bid? Who will win -- and what will the high bid be? Perhaps most fundamentally, will the BOEM leasing process lead to anyone developing a offshore wind project off North Carolina?
Under the Bureau of Ocean Energy Management's "Smart from the Start" competitive program for leasing sites on the outer continental shelf (OCS) for commercial wind energy development, BOEM conducts a series of stakeholder and environmental review processes. Through these processes, BOEM identifies areas that are attractive for commercial offshore wind development, while also protecting important viewsheds, sensitive habitats and resources and minimizing space use conflicts with activities such as military operations, shipping and fishing.
For North Carolina, the process began in December 2012 when BOEM published in the Federal Register a Call for Information and Nominations and a Notice of Intent to Prepare an Environmental Assessment. After considering the public comments and responses, BOEM defined three Wind Energy Areas off North Carolina:
- The Kitty Hawk Wind Energy Area begins about 24 nautical miles (nm) from shore and extends approximately 25.7 nm in a general southeast direction at its widest point. Its seaward extent ranges from 13.5 nm in the north to .6 nm in the south. It contains approximately 21.5 OCS blocks (122,405 acres).
- The Wilmington West Wind Energy Area begins about 10 nm from shore and extends approximately 12.3 nm in an east - west direction at its widest point. It contains just over 9 OCS blocks (approximately 51,595 acres).
- The Wilmington East Wind Energy Area begins about 15 nm from Bald Head Island at its closest point and extends approximately 18 nm in the southeast direction at its widest point. It contains approximately 25 OCS blocks (133,590 acres).
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| Map of North Carolina Wind Energy Areas, courtesy of BOEM. |
When will North Carolina offshore wind sites be auctioned? Who will bid? Who will win -- and what will the high bid be? Perhaps most fundamentally, will the BOEM leasing process lead to anyone developing a offshore wind project off North Carolina?
Feds to auction Maryland offshore wind sites
Monday, August 11, 2014
On August 19, the U.S. Department of the Interior's Bureau of Ocean Energy Management will auction off rights to lease sites off the Maryland coast for offshore wind. Through the auction, which will represent the third auction for offshore wind sites in federal waters since July 2013, the Bureau hopes it will award leases to two areas covering approximately 80,000 acres about
10 nautical miles east of the Ocean City coastline.
Last year, the Department of the Interior held its first offshore wind site auction for sites off Massachusetts and Rhode Island; Deepwater Wind won that auction with a bid of $3.8 million. The second auction, held for Virginia on September 4, covered approximately 112,799 acres about 23.5 nautical miles from the Virginia Beach coastline; Dominion Virginia Power won that auction with a bid of $1.6 million.
The Maryland auction later this month will follow procedures similar to those used in the previous two auctions. Based on previous expressions of interest and qualifications, BOEM has determined that sixteen companies are eligible to bid on the Maryland sites:
Offshore wind project developers must coordinate regulatory, financial, and engineering efforts. Securing a site for a project is a major step forward, but is only one of many important steps necessary to build an operating offshore wind project -- something the U.S. still lacks. How much interest will the Maryland auction draw? Who will win the right to lease the two parcels in the Maryland wind energy area, and how much will they pay? Will the auction winners actually build offshore wind projects? Some of these questions will be answered when the auction closes on August 19.
Last year, the Department of the Interior held its first offshore wind site auction for sites off Massachusetts and Rhode Island; Deepwater Wind won that auction with a bid of $3.8 million. The second auction, held for Virginia on September 4, covered approximately 112,799 acres about 23.5 nautical miles from the Virginia Beach coastline; Dominion Virginia Power won that auction with a bid of $1.6 million.
The Maryland auction later this month will follow procedures similar to those used in the previous two auctions. Based on previous expressions of interest and qualifications, BOEM has determined that sixteen companies are eligible to bid on the Maryland sites:
- Apex Offshore Maryland, LLC
- Bluewater Wind Maryland LLC
- Convalt Energy LLC
- Dominion Wind Development, LLC
- EDF Renewable Development, Inc.
- Energy Management, Inc.
- Fishermen’s Energy, LLC
- Green Sail Energy LLC
- IBERDROLA RENEWABLES, Inc.
- Maryland Offshore Wind LLC
- Orisol Energy US, Inc.
- RES America Developments Inc.
- SCS Maryland Energy LLC
- Sea Breeze Energy LLC
- Seawind Renewable Energy Corporation LLC
- US Wind Inc.
Offshore wind project developers must coordinate regulatory, financial, and engineering efforts. Securing a site for a project is a major step forward, but is only one of many important steps necessary to build an operating offshore wind project -- something the U.S. still lacks. How much interest will the Maryland auction draw? Who will win the right to lease the two parcels in the Maryland wind energy area, and how much will they pay? Will the auction winners actually build offshore wind projects? Some of these questions will be answered when the auction closes on August 19.
How New England plans to keep the lights on this winter
Thursday, October 10, 2013
Concerns over the reliability of New England's electricity grid this coming winter have led the regional grid operator to develop a new program designed to ensure sufficient energy is available. While natural gas remains the dominant cost-effective fuel for electric generation in New England, grid operator ISO New England expressed concern over its ability to ensure a reliable supply of electricity in the event of a natural gas shortage or supply disruption. As a result, the grid operator launched a so-called Winter Reliability Program to compensate oil-fired generators, dual-fuel generators, and demand response resources for their promise to stand ready to serve if needed. Is the program necessary? If so, will it prove sufficient to protect consumers against power outages and high prices?
ISO New England's Winter Reliability Program plan was designed to address the reliability risks arising from constraints on the interstate pipeline system's ability to meet demands for natural gas deliveries into New England, increased reliance on natural gas-fired generation, and generating resource performance during periods of stressed system conditions. While regional stakeholders are developing a longer-term fix for these risks, last winter highlighted the urgency of the problem, as natural gas pipelines supplying fuel to New England reached full capacity through the winter season, leaving natural gas more expensive and less available than it should be.
As a short-term solution, through its Winter Reliability Program, ISO New England will procure up to 2.4 million megawatt-hours of energy for the coming winter, from a combination of oil-fired generators, dual-fuel generators, and demand response assets. In exchange for their commitment to provide power when called upon, the selected generators and demand response assets will receive payments regardless of whether they are actually needed this winter.
This program was conditionally accepted by the Federal Energy Regulatory Commission last month, after which the grid operator held its competitive bidding process. When the bidding settled, ISO New England had failed to procure commitments to provide as much energy as it had sought. According to a FERC order accepting the bid results, market participants submitted bids totaling 2.29 million MWh, or 96 percent of the target, at a total offer price of $114.3 million. ISO New England proposed to trim the offered supply farther, accepting bids from 20 participants for just 1.995 million MWh, or 83.1 percent of the target, for a total price of $78.8 million.
How did ISO New England reach this result? According to the grid operator's filing to the FERC, the selected bids are all less than $31 per MWh-month. ISO New England says that beyond this point, the supply curve became steeper, and the grid operator wanted to balance fuel security for the region against the costs to consumers. But as the FERC found, ISO New England did not adequately explain its selection process, nor did it sufficiently describe why it cut off supply bids at $31 per MWh-month. As a result, the FERC directed the grid operator to submit a compliance filing within 15 days describing its process in more detail.
Once ISO New England submits its compliance filing, we will have better insight into the selection process. Further questions, such as whether the program will prove necessary or effective, cannot be answered until the winter season hits New England. Will ISO New England's Winter Reliability Program yield consumers value in excess of its $78.8 million cost?
ISO New England's Winter Reliability Program plan was designed to address the reliability risks arising from constraints on the interstate pipeline system's ability to meet demands for natural gas deliveries into New England, increased reliance on natural gas-fired generation, and generating resource performance during periods of stressed system conditions. While regional stakeholders are developing a longer-term fix for these risks, last winter highlighted the urgency of the problem, as natural gas pipelines supplying fuel to New England reached full capacity through the winter season, leaving natural gas more expensive and less available than it should be.
As a short-term solution, through its Winter Reliability Program, ISO New England will procure up to 2.4 million megawatt-hours of energy for the coming winter, from a combination of oil-fired generators, dual-fuel generators, and demand response assets. In exchange for their commitment to provide power when called upon, the selected generators and demand response assets will receive payments regardless of whether they are actually needed this winter.
This program was conditionally accepted by the Federal Energy Regulatory Commission last month, after which the grid operator held its competitive bidding process. When the bidding settled, ISO New England had failed to procure commitments to provide as much energy as it had sought. According to a FERC order accepting the bid results, market participants submitted bids totaling 2.29 million MWh, or 96 percent of the target, at a total offer price of $114.3 million. ISO New England proposed to trim the offered supply farther, accepting bids from 20 participants for just 1.995 million MWh, or 83.1 percent of the target, for a total price of $78.8 million.
How did ISO New England reach this result? According to the grid operator's filing to the FERC, the selected bids are all less than $31 per MWh-month. ISO New England says that beyond this point, the supply curve became steeper, and the grid operator wanted to balance fuel security for the region against the costs to consumers. But as the FERC found, ISO New England did not adequately explain its selection process, nor did it sufficiently describe why it cut off supply bids at $31 per MWh-month. As a result, the FERC directed the grid operator to submit a compliance filing within 15 days describing its process in more detail.
Once ISO New England submits its compliance filing, we will have better insight into the selection process. Further questions, such as whether the program will prove necessary or effective, cannot be answered until the winter season hits New England. Will ISO New England's Winter Reliability Program yield consumers value in excess of its $78.8 million cost?
US holds first offshore wind site lease auction
Thursday, August 1, 2013
Yesterday the U.S. Department of the Interior held its first competitive lease sale for renewable energy on the Outer Continental Shelf. With a total bid of about $3.8 million, Deepwater Wind New England, LLC won the rights to lease two parcels covering 164,750 acres offshore Rhode Island and Massachusetts. What do the auction results mean?
Consistent with President Obama's climate action plan, the Interior Department is promoting the use of federal lands for the production of renewable electricity. Yesterday's auction represents the first competitive auction for leases for offshore wind sites in federal waters. Following significant stakeholder process, the Interior Department identified and refined the parcels off Rhode Island and Massachusetts, and solicited interest in leasing sites. In June, the Interior Department announced that nine companies were legally, technically, and financially qualified to participate in the auction.
The auction took place in two phases in late July. First, a panel met to consider non-monetary factors, including whether any bidders held agreements that could make their project a more realistic success. For example, bidders demonstrating a power purchase agreement or joint development agreement could score bonus points enabling them to compete against higher monetary bids. Deepwater Wind's joint development agreement with the State of Rhode Island thus gave it an advantage in the second round held on July 31. This round took a more traditional auction format, with bidders placing a series of increasing bids until only one bidder remained for each parcel.
Three bidders participated in the auction: Deepwater Wind New England, LLC, Sea Breeze Energy, LLC, and US Wind Inc. After 4 rounds, Deepwater Wind had won the south parcel for $94,153, and only one other company remained in the competition for the north parcel. By round 11, Deepwater Wind had won the north parcel with a bid of $3,744,135.
With the auction completed, Deepwater Wind has 10 days to execute the lease agreements. Its first rent under the leases will be due in 45 days. Lease fees for the sites will be charged at $3 per acre, and if Deepwater Wind develops an operating project, it will also pay an annual fee roughly equal to 2% of its wholesale energy market revenues.
Building on this first auction, the Department of the Interior plans to hold a second auction for sites off Virginia in September. Eight bidders have been deemed qualified to participate in the Virginia auction. How many bidders will actually participate in the auction? How much competitive interest will arise? For what price will the parcels' lease rights sell? Will the leases - whether off Rhode Island and Massachusetts, or off Virginia - lead to operating offshore wind projects? Time will tell how the 2013 offshore wind lease auctions affect U.S. energy development.
Consistent with President Obama's climate action plan, the Interior Department is promoting the use of federal lands for the production of renewable electricity. Yesterday's auction represents the first competitive auction for leases for offshore wind sites in federal waters. Following significant stakeholder process, the Interior Department identified and refined the parcels off Rhode Island and Massachusetts, and solicited interest in leasing sites. In June, the Interior Department announced that nine companies were legally, technically, and financially qualified to participate in the auction.
The auction took place in two phases in late July. First, a panel met to consider non-monetary factors, including whether any bidders held agreements that could make their project a more realistic success. For example, bidders demonstrating a power purchase agreement or joint development agreement could score bonus points enabling them to compete against higher monetary bids. Deepwater Wind's joint development agreement with the State of Rhode Island thus gave it an advantage in the second round held on July 31. This round took a more traditional auction format, with bidders placing a series of increasing bids until only one bidder remained for each parcel.
Three bidders participated in the auction: Deepwater Wind New England, LLC, Sea Breeze Energy, LLC, and US Wind Inc. After 4 rounds, Deepwater Wind had won the south parcel for $94,153, and only one other company remained in the competition for the north parcel. By round 11, Deepwater Wind had won the north parcel with a bid of $3,744,135.
With the auction completed, Deepwater Wind has 10 days to execute the lease agreements. Its first rent under the leases will be due in 45 days. Lease fees for the sites will be charged at $3 per acre, and if Deepwater Wind develops an operating project, it will also pay an annual fee roughly equal to 2% of its wholesale energy market revenues.
Building on this first auction, the Department of the Interior plans to hold a second auction for sites off Virginia in September. Eight bidders have been deemed qualified to participate in the Virginia auction. How many bidders will actually participate in the auction? How much competitive interest will arise? For what price will the parcels' lease rights sell? Will the leases - whether off Rhode Island and Massachusetts, or off Virginia - lead to operating offshore wind projects? Time will tell how the 2013 offshore wind lease auctions affect U.S. energy development.
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