On March 22, 2024, Foley Hoag hosted the latest gathering of the New England Electricity Restructuring Roundtable. The Roundtable, which has been meeting regularly since 1995, was originally organized to contemplate the changes wrought by the restructuring of the electric power industry. Nearly three decades later, the Roundtable continues to feature leading industry thinkers, regulators, policymakers, and businesspeople from across the Northeast and across the country. The March 22, 2024 meeting of the Roundtable, entitled “Preparing the Electricity System and Wholesale Markets for a Reliable, Affordable, and Decarbonized Future,” addressed one of the most pressing issues facing the industry during the clean-energy transition: the proper role and design of wholesale markets.
On at least one proposition, voiced by Charles Dickerson, CEO of the Northeast Power Coordinating Council, panelists agreed: “The capacity markets we have today will not serve us as well in the future as they have in the past.” Mr. Dickerson sat alongside Commissioner Katie Dykes, Commissioner of the Connecticut Department of Energy and Environmental Protection and Gordon van Welie, President and CEO of ISO New England, on a panel named “Electricity System and Wholesale Markets – the Big Picture.” As panelists noted, capacity market constructs are used in several regions across the United States to facilitate energy resource adequacy by soliciting capacity, commitments by generators to deliver power when called upon years in the future. Mr. van Welie explained several reforms now underway at ISO New England aimed at adapting the ISO’s capacity markets to the region’s rapidly-changing generation fleet, including making capacity a seasonal rather than annual product, replacing the existing “forward” capacity auctions with “prompt” auctions, in which generators would bid to commit capacity for the coming year, and introducing new methodologies for capacity accreditation.
Capacity markets were originally designed for an industry dominated by dispatchable resources such as fossil fuel-fired power plants, but today, they are open to both dispatchable resources and variable renewable resources such as solar and wind energy. Can capacity markets operating under these circumstances still assure resource adequacy, and from there, system reliability? And how should new market constructs procure the attributes—not just dispatchable capacity, but also, for example, frequency response—that historically were available to grid operators as a matter of course, but must be solicited via market signals if they are to appear in the grid of the future?
If the panelists’ discussion was any indication, the singular capacity market as an answer to the question of resource adequacy will be replaced by a multiplicity of solutions. Several such solutions, emerging from the crucible of state policies requiring decarbonization and the prospect of electricity demand in the Northeast roughly doubling in the coming decades, were proposed during the Roundtable’s second panel, named “Electricity System and Wholesale Markets – Stakeholder Perspectives.” Alicia Barton, CEO of Vineyard Offshore, and Nathan Hanson, President of LS Power Generation, pointed to the potential for offshore wind facilities to provide clean power consistently relative to other intermittent resources, while minimizing transmission system upgrades by delivering power at existing points of interconnection. Multi-state offshore wind procurements, of the sort now being pioneered by Connecticut, Massachusetts, and Rhode Island, can help to spread costs; new, flexible power purchase agreements can achieve an acceptable distribution of risk between developers and ratepayers; and policymakers can look to innovative offshore wind transmission solutions now being deployed in other jurisdictions, like New Jersey. The shape of the energy supply and demand curves themselves can be altered: panelists discussed the present and future role of battery storage, pumped hydropower, and demand response, including their recent contributions to averting grid crises in New England and California. Further, improvements to existing transmission infrastructure, and to regulatory incentives around transmission management and development, can draw value out of the grid assets we already have, pointed out Liz Anderson, Chief of the Energy & Ratepayer Advocacy Division of the Massachusetts Attorney General’s Office, and Dan Sosland, President of the Acadia Center.
The challenge of creating markets capable of maintaining system reliability while decarbonizing and growing the electric power sector is great, but the revolution now underway also offers tremendous opportunities. As Mr. Sosland noted near the end of the Roundtable: “Look at what we’re trying to accomplish together—it’s historic.”
Foley Hoag works with government entities, industry trade groups, early-stage companies, and project investors and developers to advance the energy transition, helping clients to formulate and navigate novel procurement, financing, and regulatory compliance strategies that bring projects from conception to completion.
