The Future of New England’s Electricity Grid

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Eric Johnson Director of External Affairs for ISO New England and Ben DAntonio Counsel & Analyst for the New England States Committee on Electricity or NESCOE photo by Kay MannThe New England electricity system is changing, with natural gas power generation plants beginning to displace coal, oil, and nuclear plants.  However, increased reliance on gas along with infrastructure constraints, power plant retirements, and integration of renewable resources all present new market and price uncertainties. On October 20, 2016, The Environmental and Energy Technology Council of Maine (E2Tech) hosted a forum entitled, “‘New England Electricity Outlook-Get Plugged In!” to examine all that is unfolding in New England’s electricity market, and how regional players are increasing reliability at the most competitive price, incentivizing innovation, and working with state policymakers to manage all of these changes. Green Energy Maine was there and brings you this report.

The Marcellus shale across parts of Pennsylvania and New York may contain more than 150 trillion cubic feet of recoverable natural gas, and as new wells and pipelines come online, delivering natural gas to markets in the Northeast becomes increasingly feasible. While displacing other fossil fuels and nuclear with gas and renewables will take time, regional procurement and coordination could bring more wind power from Maine, more hydropower from Canada, and more solar power from throughout the Northeast. The growing movement to extend and expand the Regional Greenhouse Gas Initiative beyond 2020 could provide additional investment in state energy efficiency programs. Managing system reliability and planning within a competitive wholesale electricity market while unlocking natural gas capacity constraints and regional investment in renewable resources are seen as being important to Maine’s energy plans.

Eric Johnson Director of External Affairs for ISO New England photo by Kay MannThe first of two panelists to speak was Eric Johnson, Director of External Affairs for ISO New England.

For the past two decades, New England’s Independent System Operator (or ISO) has been investing in grid reliability by overseeing the region’s restructured electric power system. Their #1 job is to “keep the lights on”. They have no financial interest in any of the companies that provide the power to the grid. Rather, they are like the interstate highway system for electricity. ISO is fuel-neutral and they notice when a fuel is inadequately supplied, as it affects the reliability of the power supply. The ISO has two primary goals: archiving reliability through competitive wholesale markets and achieving reductions in carbon emissions.

More recently, there has been a shift in emphasis, toward giving input into policy processes. Every state in New England has had transmission upgrade projects done since 2002, to ensure reliability. Starting in 2017, the ISO will be working with states and stakeholders to identify public policies that are driving transmission needs.

New England has a number of regional ties to New Brunswick, Quebec (both inbound) and New York (outbound). It is expected that 16% of the region’s needs will be met by imports in the coming years. Challenges on the resource side include retirements of the aging “fleet” of power generation plants, inadequate natural gas infrastructure and renewable resource integration.

There has also been a policy shift at the Federal Energy Regulatory Commission (or FERC): there will be new opportunities for developers to introduce proposals for meeting increased power transmission capacity, rather than allowing only the incumbent transmission & delivery (T&D) utilities providing this (in Maine, these are CMP and Emera Maine). This element of competition for the transmission and delivery of power is a new thing.

Natural gas is the dominant fuel source for new generation capacity in New England; the second largest is wind. We have not built up the natural gas pipeline infrastructure commensurate with the capacity of new gas generation plants. We also have few delivery points for LCG. Gas pipelines are designed to serve their customer base at peak demand times. There is often curtailment of gas-fired generation plants in winter, during times of peak gas heating demand.

The price of natural gas tends to be very volatile and the wholesale price of electricity follows its ups and downs closely. The price hit a record low in 2012, followed by all time highs in the next 3 winters. When pipelines are unconstrained, New England”s wholesale electricity prices are competitive with other regions.

Power generated from oil and coal amount to less than 6% of our electricity supply annually. Power plant emissions have dropped, as well. In winter, when there is competition for heating, the ISO tends to fill up the fuel tanks of the oil and coal plants so they are ready for backup deployment. The region is at risk of losing substantial non-gas power generation resources; some have already been retired. This has  big impacts on overall system reliability. ISO runs a forward capacity market auction each year to line up generation capacity. Most of the resources bidding are natural gas plants in southern New England.

Renewable Portfolio Standards mandated by the states are driving proposals for renewable energy. VT has the highest at 59% and Maine the lowest at 10% for 2020. The primary sources of renewable energy used to meet these are wind and solar, according to Mr. Johnson. Energy efficiency is the number one alternative resource; this will have a flattening effect on demand over time, by design.

More infrastructure will be needed to deliver energy from proposed renewable energy resources. A great deal of wind power development is now being proposed for remote areas of Maine, outside the current transmission lines. Major proposals for hydropower and wind are also being made in New Brunswick, Quebec and Labrador. There is a need to transmit this power to load centers in southern New England. As time goes on, there will be many more distributed resources on the grid and there will be a great need for energy storage.

There is an initiative underway to integrate [wholesale power] markets and public policy (IMAPP). in August 2016, NEPOOL launched a stakeholder process to develop a framework document by December to provide guidance to the ISO regarding potential changes to wholesale power markets. Discussion of this will unfold in 2017.

Ben DAntonio Counsel & Analyst for the New England States Committee on Electricity or NESCOE photo by Kay MannThe second panelist to speak was Ben D'Antonio, Counsel & Analyst for the New England States Committee on Electricity (NESCOE)

NESCOE is a nonprofit organization that represents the collective interests of 6 New England States. Maine’s energy director, Patrick Woodcock, serves on their board.

Power rates in New England are high compared to other regions in the country. Since 2010, we have invested more in reliability-based transmission than other regions have. Our transmission rates are what is largely causing this disparity. NESCOE believes that competition in the power transmission market may provide some relief.

As Mr. Johnson said, FERC’s “Order 1000” made a big shift in the transmission market by introducing competition for long range transmission needs. Thus far, it has not worked as planned. Order 1000 asks ISO’s to plan and account for state public policies. NESCOE advocated for a process that states would actually use, with a central decision-making role for interconnection.

NESCOE is litigating before FERC to ask that states should have a central role in the decision-making process for their rules.

The part of ISO-NE that determines how to TRANSMIT power lets us consider states’ public policies under FERC’s Order 1000. The part of ISO-NE that determines what resources will GENERATE electricity generally does not consider state laws and policies. There are laws in place that support this paradigm.

The problem between policies and markets is that the current wholesale market meets resource needs at the lowest price; nothing more or less. The IMAPP process to address this is just in the conceptual phase. Everything is on the table and we all need to work together; any results of the process are years away. NEPOOL leadership has said, ““We, as an industry, need to get back on track and begin a more productive conversation toward finding solutions that better harmonize state public policy objectives with open, transparent and efficient wholesale market design.”

Some important principles to consider in this process are:
1) the relative cost effectiveness of different mechanisms,
2) self-determination for states: uncompromised state determinations about this mandates that cause states to incur costs and
3) the fact that New England is diverse; no state wants to be compelled to fund other states’ mandates.

NESCOE also believes that the IMAPP process should:
enable reaction to different market conditions and state laws as they change over time;
focus on achieving longer-term goals (10-30 years), cost-effectively;
minimum enable the achievement of the current RPS requirements;
consider some states’ need to accomplish their current objectives in the near term and
attempt to minimize short term financial effects to current existing resources.

Where is IMAPP headed?
So far, 15 entities have offered a range of proposals to address state mandates. These Included a tax on carbon dioxide emissions at the generation level and an additional procurement market at a regional level: a forward clean energy market. A new clean energy proposal integrated with the current capacity market also was proposed to co-optimize renewable and traditional generation resources.

Two economic studies are underway: one by NEPOOL and one by NESCOE. NESCOE has “Mechanisms 1.0” on its website and “Mechanisms 2.0” is under development. In this study, NESCOE will set up different scenarios of what the future might look like and run them through with different policies in place. There are lots of other entities doing studies and providing inputs toward the eventual plan.
Further information is available at in the Resource Center.

Both of the speakers’ presentations can be found here.


Q: In Massachusets, we have been troubled by short-term environmental requirements vs the long-term process of shifting infrastructure within these short mandates (like 3 years).
BD: A court case in MA has asked regulators to reexamine how these laws are implemented; 2020 goals may be extended to 2025 or later.

Q: What is being done to address the environmental goals in the case of wind power?
EJ: The resource capability is in northern Maine and the population is in southern parts. If the wind resource were built out, there would be curtailments. So, transmission upgrades have been integrated into some of the project proposals. The questions is whether the production cost of electricity can be shown to be reduced by large capital investments in transmission.

Q: Why would Maine want to invest in carbon reduction when our carbon footprint is so much lower than southern New England? We use more oil for heat and transportation than for electric power generation? Heat pumps are so efficient that they offset our oil use

The spikes in demand (and prices) for the regional grid affect Maine, so we are all in this together. Vermont is trying to go off the grid. N
EJ: Carbon reduction goals are state initiatives, and ISO-NE has no input for them.

Q: Transmission lines are privately owned. How does competition enter into transmission infrastructure in the new proposals?
BD: The PJM-ISO (PA-NJ-MD) is the biggest system grid out there. I showed a slide where competitive bids were way lower than the incumbent T&D utilities’ bids on transmission. When a project is proposed, the problem lies in integrating it into the existing T&D system (called an “open access paradigm”). The ISO is allowed to neutrally use the “highway” and dispatch resources as needed.
EJ: The competition space is breaking new ground. All the details of interconnectivity have yet to be worked out. FERC is trying to interject innovation along with competition.
Bill Ferdinand, moderator, added that Maine’s new law requires that non-transmission alternatives be included in any generation proposal.

Q: What is the status of the Tri-State RFP?
EJ: The New England states have been looking at ways to secure resources in the most cost-effective way. The 3 states are MA-RI-CT. The bid ends on Oct. 24.
BD: NESCOE has no interest in this RFP, so as to avoid any conflict of interest. the proposals will be reviewed by the states’ PUC’s and then by FERC.
Bil Ferdinand: There are many proposals in Maine.

Q: Cost competitiveness is often compared in a static environment. We should have to compare in cases where variables change. How strong is your organization to inform the sates of how policies can be best be evaluated?
BD: Often there is a cost-benefit analysis approach. Most reviews are done at the state level and each state evaluates things differently.

Q: Do the ISO’s care about the possibility of cyber-attacks and other geomagnetic disturbances?
EJ: A 24-7 cybersecurity monitoring team is on duty. We take it very seriously. We are probed constantly and so work with FBI and neighboring ISO’s to share information and also to plan for recovery from a potential attack. Electromagnetic pulses and other geological disturbances are a threat and there will be a cost to harden the grid against it. Maine, being closer to the pole, is at higher risk than is southern NE.

Q: Where are resources being directed more?
EJ: Cybersecurity is the higher priority as far as threat defense resources go. ISO-NE operates from one building, like an air traffic control tower. We are headed toward a system where we have not hundreds but thousands of generation resources.

Speaker photos by Kay Mann.