The New England grid may still be facing serious challenges and resource shortages even though the region has not recently experienced a power emergency, ISO New England President and CEO Gordon van Welie said.

Speaking to reporters Feb. 27 during an annual briefing on the state of the New England grid, van Welie said the power system is operating reliably and competitive markets are working but the ISO-NE has challenges ahead.

Van Welie recalled that the grid operator's recent Operational Fuel-Security Analysis, released in January, determined that the main threat facing the New England grid is the possibility that power plants will not be able to secure the fuel they need to operate, particularly in the winter months. That study reviewed 23 scenarios, finding energy shortfalls in every scenario in winter 2024/2025.

The ISO-NE is trying to develop market mechanisms that could prevent such threats to reliability. Van Welie added that the grid operator is not recommending that certain infrastructure be built in the region. Instead, its role is to create "economic stimulus" that incentivizes market participants to make new investments or firm up contracts on existing infrastructure.

"Our preference would be to pay for the required reliability services to maintain grid reliability through the wholesale markets ... that is a market design challenge," van Welie said. "There's a separate question of what to do if somebody wishes to retire prior to us having those types of changes in effect in the market."

Since developing and implementing major market changes typically takes between 12 and 24 months, van Welie said the grid operator is exploring other ways to keep retiring generators online if they are needed to maintain grid reliability. But he said the ISO-NE will not ask the U.S. Department of Energy for a waiver under Federal Power Act Section 202, which can be used to keep a generator online during emergency situations.

Instead, van Welie said he prefers to use authorities immediately available to the ISO-NE. For instance, the ISO-NE has used reliability must-run agreements in the past to ensure enough generation capacity is available. "What's new about it ... we've not had to seek authority prior to this to do that for fuel security. So that's the new dimension to this problem."

He likened the pressures on the New England grid to a race. State policymakers are increasingly restricting emissions from fossil fuel generators while encouraging energy efficiency and renewable resources. Older fossil fuel resources, meanwhile, are retiring. "If there's a mismatch between the speed of those two activities, we're going to have to do something to slow things down so that we keep the grid reliable," van Welie said.

On other policy issues, he detailed the grid operator's recent Competitive Auctions for Sponsored Policy Resources proposal aimed at ensuring that state-sponsored resources can enter the capacity market and earn revenue without affecting other resources. The proposal, which is being considered by the Federal Energy Regulatory Commission, will maintain competitive prices in the capacity market and resource adequacy while helping states achieve their clean energy goals.

Van Welie expects FERC to rule on the proposal in March, with the changes in place in time for the next forward capacity auction in February 2019. He acknowledged that CASPR, as the proposal has been dubbed, is not a perfect solution. The ISO-NE instead has voiced support for having the wholesale market set a carbon price as the best way to accommodate state clean energy policies.

"We do understand that [a carbon tax] is not the preferred choice of the states, and we respect that, and hence we have come up with [CASPR]," he said.

On FERC's recent energy storage order, which aims to remove market barriers for resources such as flywheels and batteries, van Welie does not expect too much to change for ISO-NE. He said work in the region was well underway to accommodate those resources as states have pushed for their inclusion in the markets.