trending Market Intelligence /marketintelligence/en/news-insights/trending/euonkenvmkoz0c-lodqugg2 content esgSubNav
In This List

Labor Day scorcher tested New England's power system with capacity shortfall


Despite turmoil, project finance remains keen on offshore wind

Case Study

An Energy Company Assesses Datacenter Demand for Renewable Energy


Japan M&A By the Numbers: Q4 2023


See the Big Picture: Energy Transition in 2024

Labor Day scorcher tested New England's power system with capacity shortfall

Hotter-than-expected weather and unplanned generator outages on Labor Day forced the regional power grid operator ISO New England to take emergency action to shore up capacity.

ISO-NE said in an online post that temperatures for Boston, Mass., on Sept. 3 soared beyond an expected high of 89 degrees F and an expected dew point, which measures humidity, of 70 degrees F to an actual high of 94 degrees F and an actual dew point of 73 degrees F. The regional transmission operator explained that consumer demand for electricity is typically lower on holidays but the heat and humidity on Labor Day led to people "cranking up their air conditioning to deal with the swampy air."

"When the dew point is above 70, every one-degree increase can cause load to rise by about 500 megawatts," ISO-NE said. "Similar effects on load are caused by rising temperatures."

As a result of the increased air conditioning use on Sept. 3, New England experienced its highest ever-recorded peak demand for electricity for a Labor Day holiday, at about 23,106 MW for five minutes at 5:50 p.m. For the hour from 5 p.m. to 6 p.m., demand peaked at about 22,956 MW, about 2,400 MW higher than expected when the day began, based on forecast weather conditions. The peak on Sunday, the day before, was just 16,752 MW, typical of holiday-weekend power loads, ISO-NE said.

Coupled with the high peak demand were unplanned forced generation outages that cut into the region's mandated operating reserves. In total, several power plants generating about 1,600 MW went offline throughout Labor Day, ISO-NE said. "To make up for the generation outages, some resources that had been providing reserves began generating electricity, and as a result, the power system dropped below the required operating reserve requirements," the RTO said.

ISO-NE implemented five of 11 measures available under its "Operating Procedure 4 Action During a Capacity Deficiency" contingency plan to shore up the region's deficient capacity. The procedure remained in place for the bulk power system from about 3:30 p.m. to 8 p.m., including the roughly two hours and 40 minutes during which New England was in a "capacity scarcity condition."

Under New England's new Pay-for-Performance market design, which went into effect June 1, if a generator fails to perform as promised during a capacity scarcity condition it must pay the other generators that made up for the shortfall by performing above their own capacity supply obligations.

The grid operator said that the emergency actions on Labor Day enabled the purchasing of emergency energy from neighboring New York state and the province of New Brunswick. Those actions also included keeping market participants informed about stressed system conditions and asking market participants to reduce energy consumption at their own facilities.

The ISO-NE said it would have also considered issuing a request for voluntary conservation on Sept. 3 if conditions had deteriorated further. But the RTO said conditions improved steadily as offline generators came back online to restore operating reserves and demand began to decline throughout late afternoon.

New England's use of power reserves to keep the lights on Labor Day also spurred wholesale electricity prices to rise as high as about $2,454/MWh during the peak demand hour from 5 p.m. to 6 p.m. In comparison, prices were about $68/MWh during the hour beginning at 9 p.m. after the operating reserve shortage had been resolved. The average hourly price for the entire day was about $262/MWh.

According to ISO-NE, the pay-for-performance penalty is $2,000/MWh for failing to meet obligation during energy shortfalls and are paid by the resources, not electricity ratepayers. In contrast, resources that overperform, including resources with no obligations, receive $2,000/MWh of additional revenue. The grid operator did not reveal which generators underperformed or overperformed on Labor Day. The performance payment and penalty rates are scheduled to increase to $5,455/MWh over the next six years.