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ISO Outlook 2020: New England capacity additions about the same as 2019

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ISO Outlook 2020: New England capacity additions about the same as 2019

Capacity outlook

Wind and solar make up nearly three-fourths, or 613 MW, of the 821 MW of power generation capacity, including 30 MW of battery storage, expected to come into service in the six-state ISO New England region in 2020, according to S&P Global Market Intelligence data.

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The largest planned projects are in Maine and include the 94-MW Somerset Wind Plant that Clearway Energy Inc. has in Somerset County. NextEra Energy Inc. is in the early stages of developing the 77-MW Farmington Solar Project in Franklin County, Maine.

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US generation capacity additions dominated by wind, solar

Solar forms bulk of new power supply planned in PJM

Retirements in CAISO almost entirely gas-fired

Wind, solar account for over 90% of ERCOT capacity additions

New England capacity additions about the same as 2019

Wind driving MISO capacity additions as retirements slow

Wind comprises nearly all of SPP's new generating capacity

New York to see shutdown of Indian Point nuke unit

Long-planned hydro, gas plants in Canada expected in service

States in the region have generally been aggressive in seeking new and larger amounts of renewable energy resources. Massachusetts, Connecticut and Rhode Island, for example, have contracted for future offshore wind resources. Most recently, Rhode Island Gov. Gina Raimondo signed an executive order in January calling for the state to have all of its electricity needs fulfilled by renewable resources by 2030. Maine Gov. Janet Mills signed legislation in 2019 to have 80% of the state's power come from renewables by 2030 and 100% by 2050.

Only 136 MW of new gas-fueled capacity is scheduled to begin operating in 2020 in New England, compared to nearly 1,100 MW that began operating in the region in 2019. Overall, however, the region is adding about the same amount of capacity overall as it did in 2019. Targeted for operation in June is a 64-MW unit at the Thomas A. Watson Generating Station in Norfolk County, Mass., that is owned by a group of cities, towns and cooperatives. It will be an addition to an operating two-unit facility.

Market Intelligence data show no approved retirements set for 2020. A sizable closure in 2019 was the 683-MW Pilgrim Nuclear Power Station, which owner Entergy Corp. shut due to low wholesale energy prices.

Supply/demand analysis

In 2019, the amount of capacity available in the region was 38,888 MW, a total that includes the Pilgrim facility. Between 2014 and 2019, peak power demand in the region dropped from 24,385 MW to 23,973 MW.

The lower load and higher capacity available in 2019 bumped up the supply-demand ratio to 62.2% that year from an average of 46.8% over the past five years. The ratio is calculated by taking the difference in unadjusted total operating capacity per year and peak load reported by the ISO and dividing that difference by the same peak load. The figure is not meant to reflect operating reserve margins, which indicate the excess available capacity as a percent of peak load.

Forward power and gas prices at certain hubs in the New England market peak in the winter months. At the NEPOOL-Mass hub, power contracts for February 2020 delivery average $53.35/MWh, based on around-the-clock prices from OTC Global Holdings. At the Northeast Massachusetts and Boston, or NEMA/Boston, hub, forward contracts for delivery in the same month average $55.79/MWh. At both hubs, power contracts for delivery in the summer months average in the low-to-mid $20s/MWh to the low $30s/MWh. Overall, forward contract prices for 2020 are below forward prices for 2019 delivery contracts. Forward contracts for 2019 delivery averaged between $29/MWh and just below $80/MWh, according to a January 2019 Market Intelligence outlook.

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Commodities outlook

Gas contracts for January 2020 delivery averaged $6.964/MMBtu at the Algon Gates hub. February 2020 delivery contracts averaged $6.485/MMBtu and hover below $3/MMBtu for the summer and fall months.

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The spike in gas prices at the start of the year has compressed forward spark spreads, which serve as a measure of gas plant profitability and reflect the difference between gas and power prices. At the NEPOOL-Mass hub, power prices are insufficient to cover gas prices assuming a unit with a 7,000 Btu/kWh heat rate, and the spark spread falls to negative $1.69/MWh in January. With power contracts for February averaging $53.35/MWh, roughly $6 above levels in the prior month, spark spreads return positive and average in the $9/MWh to $10/MWh range from March forward. The spread peaks in July at $13.21/MWh.

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