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FLASH: RTO's Capacity Market Auction Ends in Shortfall of Resources to Meet Demand, Despite Tripling of Cost
ISO New England's capacity auction to procure capacity to meet a mandated reserve margin resulted in a shortfall of resources for the 2017–2018 year, the ISO said.
According to an ISO news release, preliminary results show that the Forward Capacity Market (FCM) auction concluded with about 33,700 megawatts (MW) of the 33,855 MW of capacity required for the 2017–2018 capacity commitment period.
The auction concluded with a capacity clearing price of $15.00/kW-month when a resource submitted a bid to withdraw from the auction if the price fell lower.
The capacity clearing price of $15.00/kW-month will be paid in 2017–2018 to about 1,370 MW of new capacity resources cleared in this auction
About 24,885 MW of existing resources will be paid an administrative price of $7.025/kW-month.
Another 1,030 MW of existing resources with multi-year supply obligations will be paid at rates set in previous auctions. In Northeast Massachusetts/Boston (NEMA/Boston), 3,085 MW of both new and existing resources will be paid $15.00/kW-month based on administrative pricing rules. Another 3,330 MW of self-supply resources will not be paid through the FCM.
A preliminary estimate of the total cost of the capacity market in New England in 2017–2018 is about $3.05 billion; by comparison, through the first seven auctions, the total cost to the region ranged from about $1.06 billion in 2013 to $1.77 billion in 2009.
"The large number of resource retirements -- nearly 10% of the region’s total capacity -- announced in just the past few months has caused a dramatic shift in the region’s power supply landscape," said Gordon van Welie, ISO New England’s president and chief executive officer. "The region abruptly went from a capacity surplus and low prices in previous auctions to a capacity shortfall and relatively high prices. The slim capacity margin and the resulting auction prices are a clear signal to the marketplace that the region needs more power generation and demand reduction capacity."
Major power plants planning to retire by June 1, 2017, include Brayton Point, a 1,535-MW power plant located in southeastern Massachusetts; Vermont Yankee, a 600-MW power plant located in southern Vermont; Salem Harbor, a 750-MW generator in northeastern Massachusetts; and Norwalk Harbor, a 350-MW power plant located in southwestern Connecticut. In addition, about 600 MW of demand resources submitted retirement requests.
The ISO said that while the auction closed with slightly less capacity than will be needed in 2017–2018, the FCM design provides mechanisms for such gaps to be closed through periodic reconfiguration auctions held over the next three years.
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February 5, 2014
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Reporting by Paul Ring • ring@energychoicematters.com
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