Capacity Market FERC Gas ISO-NE Markets Planning Renewable Energy

New England Grid Operator Ignores Value of Offshore Wind

April 3, 2019

The operator of New England’s regional electricity grid is asking federal regulators to approve a plan to pay power generators more in the name of winter energy security—essentially an assurance that there will be enough power to meet customers’ needs during extended periods of cold weather. Unfortunately, the plan continues to prioritize polluting energy and ignores the energy security contributions of offshore wind and other renewable energy resources. The proposal reflects a pattern of ignoring or undercounting the electricity benefits of carbon-free renewable energy in the region.

Winter energy security speaks to an important function of the region’s grid operator, ISO New England: Ensuring there is enough electricity to keep the lights on at reasonable cost is its core mission. But the grid is changing, and the power resources most suited to meeting this mission are also changing.

New offshore wind farms will enhance New England's energy security. Unfortunately, the region's grid operator continues to ignore these benefits. Photo: Nicholas Doherty / Unsplash
New offshore wind farms will enhance New England’s energy security. Unfortunately, the region’s grid operator continues to ignore these benefits. Photo: Nicholas Doherty / Unsplash

Wind and solar power are increasingly proving to be good not just for fighting climate change and improving our health, but for reducing power costs and improving the grid’s performance.

Despite these benefits, ISO New England is proposing to continue down a path that relies on conventional fossil fuels rather than the clean energy technologies the region’s states and customers are demanding. Combined with other recent actions by the ISO and its federal regulator—the Federal Energy Regulatory Commission, or FERC—New England customers are increasingly being forced to pay too much for an electricity grid that is too dirty.

Proposal Ignores the Benefits of Renewables

The ISO is concerned about winter energy security because during stretches of extreme cold, such as when the polar vortex dips into the region, New England’s natural gas supplies can become constrained. As gas demand for heating increases, gas availability for power generation decreases. Because natural gas-fired generation comprises the largest share of New England’s power plant fleet, the ISO is concerned that extreme conditions could lead to future power shortages.

In the proposal it filed last week with FERC, ISO New England seeks to create a new compensation scheme to address winter energy security, by paying generators an estimated $112 million to $158 million more per year if they maintain fuel stores on hand. The costs of the proposal would be passed onto customers in the form of higher electricity rates.

Oil-fired generators that store oil in storage tanks and nuclear power plants with uranium would be eligible for new payments. Generators that sign contracts guaranteeing delivery of natural gas from pipelines or LNG tankers would also be eligible.

Hydroelectric generators with water stored in reservoirs would qualify, but . . . renewable wind and solar generators would not.

Energy Security Is About Meeting Energy Demand, Not Storing Fuel

Ensuring there are resources in the region with fuel supplies on-hand can provide some assurances about winter energy availability, but it is not a silver bullet. In recent years, many fossil fuel-fired power plants have been unable to perform during winter storms due to problems such as igniter failures, frozen coal piles, and frozen boiler tubes. In January 2018, a power line failure during a winter storm forced the Pilgrim nuclear power plant in Massachusetts to shut down.

Moreover, focusing only on resources with stored fuel discriminates against fuel-free resources like wind and solar, even if those resources often perform when we need them most.

In fact, a recent ISO New England analysis shows how valuable resources like offshore wind can be in times of wintertime grid stress—the periods the ISO is most concerned about. Several New England states are in the process of building out the region’s offshore wind fleet. Rhode Island has the region’s first offshore wind farm off Block Island, and in the coming years, thousands of megawatts of new offshore wind capacity will be built to take advantage of this otherwise untapped resource.

The ISO found that had these offshore wind farms been available during the 2017-18 winter, they would have relieved pressure on other generation types, lessening the need for fossil fuels to meet customer demand and lowering electricity prices.

Coastal New England wind farms offer especially high value power because winds offshore tend to be more reliable than those onshore and offshore wind farms can be located close to population centers where the power is needed most. Strong winds are also associated with extreme weather events, like a polar vortex, enabling offshore wind to improve the region’s energy security, even as cold temperatures might bring New England’s gas system to its knees.

ISO New England’s Energy Security Analysis Is Fundamentally Flawed

Despite this analysis, the ISO’s latest proposal fails to recognize offshore wind’s energy security contributions. This reflects a longer trend. The ISO’s “operational fuel security analysis,” which kicked off the current winter energy security discussions last year, similarly undercounted the contributions of fuel-free offshore wind and other renewable energy resources, as well as energy efficiency, in meeting energy security.

FERC has aided and abetted these failures. Despite broad rejection by the region’s stakeholders of the ISO’s fuel security analysis and its subsequent proposed “solutions,” the Commission has deferred to the ISO’s conclusions. Recently, FERC also refused to act to enable the region’s first large offshore wind farm to participate fully in New England’s electricity market. Last year, FERC approved a complicated ISO New England proposal that makes it more difficult for new renewable energy projects to enter the market and displace fossil fuels.

A Better Way Forward

It’s not too late to change course. FERC should reject ISO New England’s fuel security proposal and instead require the ISO to address winter energy security in a manner that fully recognizes and values the contributions of renewable energy resources like offshore wind.

Last week’s proposal is supposed to be a stopgap measure, but later this year, ISO New England will submit a “long-term” proposal to address winter energy security. If that proposal similarly undervalues and ignores renewable energy, FERC should reject it too.

The ISO is rightly focused on ensuring there is enough electricity to meet customer demand, but until it accounts for renewable energy, its solutions will continue to cost customers too much while locking in a grid that is too dirty.