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DOE study finds plant retirements could cause Northeast power prices to spike

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DOE study finds plant retirements could cause Northeast power prices to spike

The U.S. Department of Energy has published a new report concluding that a wave of coal and nuclear plant retirements coupled with high winter demand for natural gas could cause electricity prices to spike in some fuel-constrained areas of the Northeast.

The recently released report reflects an earlier study released in March 2018 shortly after the Federal Energy Regulatory Commission unanimously rejected a DOE proposal to keep at-risk coal- and nuclear-fired units online for grid reliability reasons.

Produced by the DOE's National Energy Technology Laboratory in cooperation with the consulting firm Deloitte, the report modeled impending retirements and growing power generation demand for natural gas within the Eastern Interconnection.

Along with a "normal, business-as-usual" scenario, the report compared a scenario based on expected retirements of coal- and nuclear-fired units against two other scenarios: one in which no units with announced retirement dates occur and another in which "at-risk" units join those units in retiring.

Approximately 28,000 MW of coal and nuclear are retired under the study's expected scenario. Its at-risk scenario assumes the retirement of over 46,000 MW of nuclear and coal units currently deemed to be at-risk.

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Among its conclusions, the report found that the recurrence of high demand under weather conditions mirroring those of the Polar Vortex during the 2013-2014 winter season would have severe consequences for power prices.

In the New York ISO, for example, the report found that prices could more than triple from the normal winter scenario even assuming the state, which aims to get 100% of its power from carbon-free resources by 2040, expands its pipeline capacity. In contrast, the study estimated that under a "no retirements" scenario price increases would be 50% or less than the expected and at-risk scenarios assuming further pipeline expansion. New York regulators have opposed recent pipeline expansion proposals as the state bets big on battery storage technology.

Looking at the 13-state PJM Interconnection, the report said prices could more than double in the near-term before settling to a 50% increase once pipeline infrastructure catches up with demand. However, the report found that price increases would be less if expected retirements did not occur.

Turning to the six-state ISO New England region, the report estimated that expected retirements would produce a 50% price increase under its high winter demand scenario. With no retirements, price increases would be limited to between 5% and 10% assuming 2015-like electricity and gas demands, the report said.

Overall, the report gave a "conservative estimate" that an additional $470 million to $1.1 billion in additional pipeline capacity is needed across all regions.

However, an ISO-NE spokeswoman said in a March 10 email that the grid operator does not anticipate any significant pipeline expansion in the region anytime soon. "We have been planning for the future power system without any additional capacity," spokeswoman Ellen Foley said.

The ISO-NE has already undertaken a series of measures aimed at addressing fuel security, including an inventoried energy program that went into effect last summer. Addressing any future fuel constraints could include additional investments in renewable resources, transmission infrastructure, increased power imports and related transmission, more fuel liquefied natural gas storage, and generator contracts for adequate fuel, Foley said.

The ISO-NE also plans to file a much-anticipated long-term energy security proposal with FERC on April 15 that is designed to keep the grid operator's system reliable during energy-limited conditions. Wind power proposals now comprise more than two-thirds of the ISO-NE's interconnection queue, Foley noted.

Neither the NYISO nor PJM immediately responded to requests for comment.