New England's power grid operator is launching two new initiatives to shore up wintertime reliability in time for the upcoming cold-weather season, including a 21-day-ahead energy forecast that will take stock of regional fuel inventories. The other change is a next-day market mechanism that seeks to ensure that limited fuel supplies are used when they are most cost-effective and valuable for grid reliability.
Announced Nov. 2, the changes in ISO New England's operations and markets are designed to help keep the lights on during the coldest winter days, when high demand constrains supplies to natural gas-fired power plants across the increasingly gas-dependent northeast U.S.
In an online post, ISO-NE said that both initiatives are expected to bolster system reliability, with the new day-ahead market mechanism correctly "reflecting the actual costs of preserving fuel when there are limited energy supplies." The 21-day-ahead forecast of fuel inventories will encourage power plant owners to respond to impending fuel shortages by ensuring they acquire enough fuel to operate, said the ISO.
The initiatives were crafted in response to two weeks of extreme cold weather from Dec. 26, 2017, through Jan. 8, 2018, when the reliability of the region's grid depended on limited oil supplies stored on-site at oil-fired and "dual-fuel" generators. The regional transmission organization said it became apparent a few days before the prolonged cold snap broke that some of the power plants were running out of oil, with no refueling in sight. ISO-NE said the region's oil-fired and dual-fuel generators started the 2017/2018 cold spell with their oil tanks 68% full, in aggregate, but burned through the oil supplies until they were down to approximately 19% full by the end of the two weeks, with some tanks nearly empty.
100-year cold snap
During that stretch, New England cities endured average temperatures below normal for at least 13 consecutive days, of which 10 averaged more than 10 degrees F below normal, and Boston, Mass., saw its most extreme cold wave in 100 years.
Under the new initiatives, starting Nov. 28, ISO-NE will begin publishing a 21-day energy forecast accounting for the inventories of oil, coal, natural gas and other fuels at New England power plants, as well as any factors that could limit the plants' availability, such as emissions restrictions. The forecasts will cover a range of expected conditions, from normal supplies to shortages that require the declaration of an energy alert or an energy emergency.
"With sufficient advance notice, it's hoped that resource owners will evaluate their fuel supplies and take action to ensure they have enough fuel to operate or will lock down arrangements to have more fuel delivered in time," said ISO-NE.
The second change, known as the "Energy Market Opportunity Cost" initiative, will be implemented on or around Dec. 1. This reform of ISO-NE's daily energy market will provide each generator with an estimated opportunity cost that can be incorporated each morning into their offer price for the next day. The opportunity cost represents the net revenue or profit that would be lost if the generator used up its fuel early in lower-priced hours, rather than preserving the fuel to generate electricity later during more profitable hours when prices are usually higher.
The opportunity cost estimate will enable suppliers to price their daily energy offers in a way that will preserve fuel for later periods, when it may be needed more — and when generators can earn more as well. Further, ISO-NE said the new market-based approach should reduce the need to tap out-of-market resources to preserve fuel, which happened during the winter 2017/2018 cold spell, when the high cost of natural gas pushed energy and reserve prices sky-high.
