State-procured and subsidized energy sources could end up supplying nearly 60% of New England's electricity needs by 2027, warned a new analysis.
Commissioned by the New England Power Generators Association, which represents merchant power producers in ISO New England, the Nov. 7 report by consulting firm Compass Lexecon analyzes the growing scale of state-mandated energy purchases and their impact on power generation resources needed for the reliability of the power grid.
Much to the dismay of NEPGA, New England states have been contracting at above-market prices ever-growing amounts of low carbon energy, including renewables and especially onshore and offshore wind and Canadian hydropower imports, as part of a larger push by state legislatures to cut greenhouse gas emissions. Also, in Connecticut, policymakers want to stave off an early retirement of a nuclear power plant by allowing that plant to participate in a competitive solicitation against other low-carbon sources for a power supply contract that favors "existing resources confirmed at risk."
Over the next 10 years, the report predicted, state-sponsored resources are expected to become the largest single source of consumer electricity supply in New England by 2023, and to exceed 50% of the consumer electricity supply by 2027. If additional offshore wind procurements are carried out quickly, state-sponsored resources could constitute approximately 58% of regional electricity needs by 2027, the report further predicted.
As a consequence of this rapid growth of state-mandated generation sources, the report said many existing resources will see their electricity production levels decline substantially to accommodate the new clean energy resources.
However, "some of the existing generation will still be needed to increase and decrease production throughout the day to accommodate changes in load and intermittent resource production," continued the report. "Given the decrease in overall energy revenues for this set of resources needed to complement the new entry, it is important that the market properly value the full set of services they provide."
Absent higher revenue opportunities in the market, the report said the developments foreshadow more power plant retirements. As noted by NEPGA, the report's findings are similar to recent work done by the ISO-NE as part of its 2016 NEPOOL Scenario Analyses, which examined high renewables integration in the region.
Meanwhile, the ISO-NE has been working on reforming its capacity auctions to accommodate state-sponsored sources while ensuring that competitive generation sources, which are needed for grid reliability, do not retire as a result of daily energy prices being suppressed to historical lows by subsidies and cheap natural gas supplies.
NEPGA's commissioned report concluded that, in order to maintain the benefits of New England's competitive power markets, action must be taken to understand the impact of the growth in contracted clean energy resources and to identify market design changes that will be needed to accommodate their market entry while providing an opportunity for other needed resources to remain economic.
Such changes, NEPGA emphasized in a statement, are particularly necessary as New England is expected to require increased flexible from market-based sources, which is inherent in gas-fired generation, to back up any intermittent contracted resources.
