ISO-NE energy security improvements paper

Regional transmission organization ISO New England Inc. has released a "discussion paper" on the region's energy security, presenting "the ISO’s current perspective on underlying problems, root causes, and longer-term market solutions."

The 77-page paper notes that the region's electric power system "is undergoing a major transition" as nuclear, coal, and oil-fired power plants are retiring and being replaced by newer, more efficient natural-gas fired generation and renewable technologies like solar and wind. It expresses the ISO's concern that these replacement resources rely on the "just-in-time" delivery of their energy sources -- and that weather variations and capacity constraints on interstate natural gas pipelines mean these resources present greater fuel security challenges.

The paper concludes that "in many situations" the ISO-administered wholesale electricity markets do not provide adequate financial incentives for resource owners to make additional investments in supply arrangements that would be cost-effective and benefit the power system at times of heightened risk. It notes that while customers would benefit from reduced electricity prices if generators delayed their use of limited fuel stocks to the most critical period (which might not come for days), present market designs do not offer a generator a clear incentive to stockpile and maximize the value of their fuels.

But, ISO-NE says, "these challenges have sensible solutions," including "additional sources of energy supply (or reductions in demand) when gas pipelines are most constrained, renewable resources experience adverse weather, or both." The paper presents three core components of a solution: a multi-day-ahead market, new ancillary services in the day-ahead market, and a seasonal forward market.

The grid operator has taken a number of short- and medium-term steps toward addressing these challenges through market reforms, and has been tasked by the Federal Energy Regulatory Commission with developing a long-term solution by this fall.