Blog Page Banner

How much can you rely on your friends?

We’ve all been there. You’ve got a big move coming up. Nobody likes moving, and this one is going to be extra bad – the forecast is hazy, hot, humid. That air conditioner needs to make it up the stairs.

A bunch of your friends offer to help, but will they actually show up? And if they do, just how much help will they be? They’re a mix of ready, willing, and able: One has a bad back, but drives a pickup. Another is annoyingly clumsy but is bringing his power-lifting nephews.

At some point in our lives, we’ve all had to ask ourselves, Who can I really count on? And just how much can I count on them?

New England’s electricity market is engaging in a similar process of self-reflection.

This summer, New England’s stakeholders kicked off a new technical stakeholder process, “Resource Capacity Accreditation (RCA) in the Forward Capacity Market (FCM).” Through it, the market operator, ISO New England, “seeks to identify and implement methodologies that will more accurately reflect resource contributions to resource adequacy.” In essence, the electricity market needs to better understand which power plants can run and when they can run, and then appropriately pay for that level of reliability.

At first glance, this should seem easy. Electricity is a commodity. Just like one bushel of corn can be swapped for another, a megawatt of electricity is worth any other megawatt of electricity. Once an electron hits the grid, it doesn’t matter if it’s from a natural gas plant or from a wind turbine.

But of course, it’s not actually that simple, because each power plant creates that megawatt differently – some burn gas, others harness the power of a river, others rely on the wind, and so forth. And the ISO needs to know exactly when those megawatts are going to flow into the grid in order to comply with strict reliability requirements for how it operates the grid in real-time and the way it plans to operate the grid in the future.

So, through the capacity accreditation process, New England is trying to establish a better way to quantify each resource’s reliability contribution and ensure that there are enough electricity supplies to meet demand and reserves. To do so, the electricity market will take into account each power plant’s physical characteristics (things like, technology, availability, fuel supply, location, etc.) to determine an “accreditation value.” That value, in turn, will be how much the electric grid and consumers should be able to depend on that resource in the future, which in turn will help determine how much money the market compensates the resource for its service.

It is worth noting that New England has a system in place that has served it sufficiently for decades. At a basic level, the current method assesses a given resource based on its expected contribution a specific reliability target in the future. Those values, are analytically determined using different methods. For example, many resources are assessed based on their maximum output capability and frequency of not being available (or outage rates). Many weather-dependent resources, think wind and solar, have their values based on their average historical output during a predetermined time frame, when demand is expected to be high. But there are assumptions baked into that process that are growing less suitable as the resource mix on the grid changes. Most glaringly, the existing approach presumes that all those megawatts are perfectly substitutable – that is, that each unit of electric capacity contributes equally. (For more details on the current methodology and the growing concerns with it, visit this August 2021 presentation by the ISO.)

It’s clear that the time is ripe for a new look in the mirror. The nature of the generators on the grid is changing – largely in response to explicit state policies, market signals, and improved technology. 20 years ago, nearly 20% of the electricity consumed in New England came from coal; this past year, less than 1% did. Similarly, 20 years ago, 15% of the electricity came from natural gas; in 2021, 45% of it did. The services the grid will provide need to evolve in turn – for important products like reserves or for ramping up quickly to meet gaps.

In this way, the capacity accreditation process is a sign of the larger changes that are occurring and underscores the timeliness and necessity of this effort. This is particularly important as many existing power plants will have reliability requirements for years to come. A process is therefore necessary to measure and ensure the reliability contributions of existing power plants along with those of coming new energy sources on an equal basis.

And, while reliability is always a top priority, the reliability of our electric grid will become even more important over the next decade as we begin the critical work of decarbonizing the non-electric sector. Since 1990, transportation emissions have increased by 6.8% while building emissions related to heating and cooling, have largely remained steady, decreasing by a modest 4%. Collectively, these sectors alone represent 70% of all carbon dioxide emissions in New England, and the fastest way to decarbonize those sectors will be to electrify them. As a result, ISO New England is projecting the region’s annual net electricity use will increase by about 14% over the next decade as the heating and transportation sectors go electric. The bottom line: Over the next decade, the 15 million people of New England will become more dependent on electricity than ever.

This regional stakeholder process is scheduled to finalize rules in a little over a year and take effect in the Forward Capacity Auction to be held in February 2025 (FCA 19). While it is not the only effort underway to ensure a reliable grid going forward, it is a critically important component.

NEPGA and its members are eager to keep this process moving and put in place these important reforms as quickly as possible. Our members, along with ISO New England and hundreds of NEPOOL stakeholders, will be working hard to get it done.

But, perhaps, not as hard as you and your friends worked moving into that new apartment on a hot summer day – with the AC in tow.

Posted in Blog.