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ISO New England foresees trouble without investment in fuel security

New York (Platts)--14 Feb 2018 509 pm EST/2209 GMT


ISO New England, in its 2018 Regional Energy Outlook Wednesday, forecasts falling net energy demand and a continuing shift toward cleaner power sources, while acknowledging a trend toward lower wholesale power prices and the likelihood of inadequate fuel supply by winter 2024-25.

"Currently, the biggest challenge to the reliability of the grid is the lack of fuel infrastructure to supply the fleet of natural gas-fired generators, further emission restrictions on oil-fired generation, and the reality that older oil and nuclear generators are becoming less economically competitive and may retire before the region has added sufficient new energy sources to replace them," the report states.

The report noted the cold snap that gripped the region from December 26 through January 7 featured "constrained pipeline capacity, substantially higher natural gas and wholesale electricity prices," which prompted the dispatch of oil- and coal-fired generation to meet demand, but "oil supplies at plants around the region began to rapidly deplete ... signficiantly increasing the reliability risk to the system."

"In the coming years as more oil, coal, and nuclear leave the system, keeping the lights on in New England will become an even more tenuous proposition," the report states.

ISO New England in January released its Operational Fuel-Security Analysis report, which included 23 possible future resource and fuel scenarios for winter 2024-25.

"The analysis found that inadequate fuel supply would lead to energy shortfalls in almost every scenario, requiring the frequent use of emergency actions to fully meet demand or protect the grid," Wednesday's report states.

But Dan Dolan, president of the New England Power Generators Association, noted the analysis "does not contemplate any responses by generators to market signals or the soon-to-be-implemented pay-for-performance capacity-market design."

"Generators have the obligations to meet dispatch instructions, without excuse for non-performance," Dolan said. "This includes making fuel supply arrangements. The market structures and investments made by resource owners are helping to preserve reliability, competitive pricing and environmental improvements."

PRICES TREND LOWER SINCE 2003

New England generators have played an important role in the trend of falling wholesale power prices as described in the report, Dolan said. ISO New England's average annual wholesale price in 2017 was $33.94/MWh, the report said, higher than $28.94/MWh in 2016, but lower than every other price since redesigned wholesale electricity markets were launched in 2003.

Another factor that might have played a role in falling wholesale p ower prices may be flat to falling energy demand, which the report shows is forecast to slide by 5.6% between 2017 and 2026, after accounting for the growth in photovoltaic solar deployments and energy-efficiency efforts. The report notes that ISO New England's generation fleet is undergoing "a dramatic shift to cleaner power sources," with coal-fired energy falling to 1% in 2017 from 16% in 2000 and oil-fired energy falling to 1% from 19%, while the gas-fired energy share jumped to 41% from 13% and renewables rose to 9% from 7%.

Between 2001 and 2016, nitrogen oxides have dropped 73%, sulfur dioxide 98% and carbon dioxide 29%, the report states.

Between 2013 and 2021, ISO New England projected more than 4,600 MW of the region's capacity is expected to retire, adding that "more than 5,000 MW more of coal- and oil-fired generation could be retiring in coming years because of age and infrequent operation."

Meanwhile, 58% of the 14,800 MW of new generation in ISO New England's interconnection queue is wind, 31% natural gas and 11% other, the report states.

-- Mark Watson, markham.watson@spglobal.com

-- Edited by Valarie Jackson, newsdesk@spglobal.com




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