ISO-NE considers new seasonal forward market to improve energy security

Dive Brief:

The Independent System Operator New England (ISO-NE) is developing a long-term proposal to address energy security, which will be filed with federal regulators in October, the grid operator said last week.
Its plan could include a multi-day ahead market, creation of new ancillary services or development of a seasonal forward market. The ISO published a white paper April 1 that proposes a set of market design improvements aimed at coordinating generators in the least-cost, most-reliable way.
The grid operator says the transition to a cleaner regional power grid has created reliability risks during periods of extreme cold weather, when natural gas pipelines are constrained.

Dive Insight:

Long stretches of cold weather have spiked prices and challenged reliability in recent years, and now ISO-NE is working to develop market-based solutions to address the issue. The grid operator says it envisions three "core components" to its solution, including new markets to help coordinate the use of limited stored energy, such as oil and liquefied natural gas.

"As currently constructed, the region's wholesale markets do not provide sufficient financial incentives for market participants to undertake these arrangements," the grid operator said last week.

In its white paper, the ISO said it is "concerned, given the power system's evolving resource mix and the region's constrained fuel delivery infrastructure, that there may be insufficient energy available to the New England power system to satisfy electricity demand during cold winter conditions."

ISO-NE is considering solutions that include expansion of the current one-day-ahead market into a multi-day ahead market, to allow generators to optimize their use of stored fuel over a multi-day timeframe. Also being considered is development of a new ancillary services in the day-ahead market, and a seasonal forward market.

The ISO said it would conduct a "voluntary, competitive seasonal auction" to provide asset owners with "both the incentive, and necessary compensation, to invest in supplemental supply arrangements for the coming winter."

The grid operator has already taken some steps to address winter reliability issues. Last year it began developing a 21-day energy forecast that details fuel supplies in the region, primarily coal, gas and oil, and began providing generators with an opportunity cost estimate that can be incorporated into its offer price for the next day, helping them to conserve fuel for when it is needed the most.

The ISO said the white paper aims to launch further discussions among the grid operator and stakeholders. Those discussions will continue over the summer, and ISO New England said it plans to file a long-term proposal with the Federal Energy Regulatory Commission by October 15, 2019, with proposed changes to be implemented by June 2024.