Dive Brief:

• In its regional outlook released Wednesday, ISO-New England again raised concerns about reliability related to fuel supplies.

• In its 2018 Regional Electricity Outlook, the ISO said that with the expected retirement of more oil, coal and nuclear plants in the coming years, keeping the lights on in the region “will become an even more tenuous proposition.”

• Among possible remedies, the ISO listed enhancements to natural gas infrastructure or to the supply chains for liquefied natural gas and oil and relaxation of rules to allow easier permitting and operation of dual-fuel plants, investments in more renewable energy and transmission lines to deliver it, and further demand reduction measures.

Dive Insight:

ISO New England’s 2018 Regional Energy Outlook (REO) noted several positive trends in the region, including declining wholesale power prices and a cleaner mix of generation resources, but also acknowledged that there is a likelihood of inadequate fuel supplies by the winter of 2024-2025.

ISO New England’s biggest challenge to reliability, according to the REO, is the lack of fuel infrastructure to supply 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 late-December, early-January cold snap strained New England’s power sector. The lights stayed on, but electricity prices spiked as natural gas for power generation become scarce. Gas is heavily used for heating in New England, and gas utilities, which sign long-term supply contracts for the fuel, get priority over generators.

Operators of gas-fired power plants rarely sign long-term supply agreements for gas because they are reluctant to lock in supplies without knowing how much fuel they will need. That often puts them at the mercy of the spot market and high prices when cold weather sets in. That prompts dual fuel plants in the region to switch to oil-fired generation.

During the cold weather, oil-fired generation jumped to 35% while gas fell to 18%. Usually oil supplies about 1% of ISO New England’s fuel mix and natural gas about 49%.

That scenario has played out for many years in New England and was the topic in a report the ISO issued after the cold snap in which it warned that fuel issues could lead to reliability problems by 2025. During that cold snap, the Pilgrim nuclear facility unexpectedly went offline, and oil-fired plants filled in the gap. Though there were no localized outages, the grid operator noted gas constraints and increasing severe weather could boost wholesale power prices and hurt the region's plans to shift toward more renewable energy. 

In the report, and in its new outlook, the ISO noted that the oil supplies in the region were beginning to run low toward the end of the cold snap increasing the reliability risk to the system. Higher levels of more polluting oil generation also raise emission levels and increases the risk that some generators could face curtailment as they approach emission limits.

In the REO, ISO New England said if fuel security is not addressed, the region “will face a setback to both future power system reliability and state efforts to transition to clean energy economy-wide, as well as increased energy costs.”

The report notes that the ISO can address the fuel supply issue by seeking authority from the Federal Energy Regulatory Commission to improve the market’s pricing of fuel constraints, strengthen the financial incentives for power plants to secure more reliable wintertime fuel arrangements, and, if necessary, retain resources essential to ensure grid reliability.

On June 1, pay-for-performance incentives go into effect in ISO New England’s forward capacity market. Those incentives are designed to reward resources that make investments to boost performance during periods of system stress and penalize resources that do not perform.

The ISO also notes, however, that some remedies lie outside of its authority, such as investments in gas infrastructure such as gas pipelines, relaxation of rules to allow easier permitting and operation of dual fuel resources, and investments in more renewable energy resources.

However, some of those types of investments face steep challenges in New England. A proposed power line designed to bring hydropower from Canada, was recently challenged on procedural grounds and may not see the light of day. And last year Enbridge cancelled a planned gas pipeline expansion in New England, citing a lack of policy support.

In the REO, ISO New England also notes that it can only provide the stimulus for investments. “It will be up to market participants and state officials to take actions to secure forward fuel arrangements or bolster supply- or demand-side infrastructure.”

The New England Power Generators Association “is committed to working with ISO-NE and the states on delving into a rigorous review of fuel security in the region and options available to continue meeting the requirements and goals in New England,” Dan Dolan, the industry group’s president, told Utility Dive.