New England Swings from Energy Capacity Surplus to Shortfall

New England’s auction to acquire the power system resources required to meet consumer demand in 2017-2018 concluded this week with a slight shortfall, resulting in rising prices that reflect the need for new resources, according to ISO New England, the operator of the region’s bulk power system and wholesale electricity markets.

Preliminary results from this week show that the Forward Capacity Market (FCM) auction concluded with about 33,700 MW of the 33,855 MW of capacity required for the 2017-2018 capacity commitment period. 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 first seven auctions concluded with a significant surplus of capacity (with the exception of the NEMA/Boston zone, which had insufficient competition in the previous auction). However, for the first time in auction history, New England’s capacity auction resulted in a small shortfall relative to the requirement. In advance of this auction, 3,135 MW of resources announced plans to retire, in addition to several major plants that had previously announced their plans to retire starting this year.

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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