Decision a boost to renewable energy in
The New England power grid will soon become the first in the country to include renewable generation as part of the bidding process by power supply owners to provide energy three years down the road.
In a 56-page ruling issued on March 9, the five-member Federal Energy Regulatory Commission approved the plan, with one member dissenting.
The idea that state-sponsored renewable energy projects, like the Massachusetts request for proposals that was initially won by Northern Pass, would compete with nuclear, oil or coal-fired power plants in the market for future capacity was considered free-market heresy not long ago.
But with New England states promoting and subsidizing renewable energy in a variety of ways, the operator of the regional power grid, ISO-NE, proposed a way to integrate renewable generation into what is called the Forward Capacity Auction — an annual event in which power supply owners bid on the price ISO will have to pay them to guarantee they’ll be around three years down the road.
The collective cost to ratepayers of securing that “future capacity” had hovered around $1 billion a year since 2010. It shot up to $3 billion in 2017 and in 2018 will hit $4 billion.
The power plants will get that money in addition to whatever profit they make from the actual sale of electricity.
The owners of the Seabrook Station nuclear power plant, for example, will get $143 million in 2018 from New England ratepayers just for promising to stay on line.
The Merrimack Station coal-fired plant in Bow, recently sold off by Eversource, only runs during the coldest days of the year, yet will still receive payments totaling $50.7 million this year.
The high cost of this “insurance” for future energy supply is attributed to the fact that the supply of electricity in the region is diminishing as old plants retire and new projects can’t get off the ground, all while energy demand is increasing.
The Competitive Auctions with Sponsored Policy Resources (CASPR) proposed by ISO and now approved by FERC adds a new twist to the acquisition of future power supply for the region.
CASPR will enable state-sponsored hydro, wind, solar or biomass projects to buy out the forward capacity contracts of fossil fuel or nuclear plants whose owners want to retire them earlier than the existing capacity contract would allow.
The trade association representing power plant owners supports the change, albeit with reservations.
According to the FERC order, “The New England Power Generators Association asserts that the entry of subsidized resources will still put downward pressure on auction clearing prices, but nonetheless supports CASPR as a measure made necessary by the New England states’ increasing interest in subsidizing certain resources to carry out clean, renewable and alternative energy laws.”
Commissioner Robert F. Powelson dissented in the 4-1 vote.
“The two goals that CASPR tries to achieve are fundamentally in conflict and cannot coexist in one market,” he wrote.
Powelson predicted that state-subsidized renewable generation would benefit, while the incentives for private investors to build new power plants or keep old ones operating will be constrained.
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