A decision made behind closed doors may set clean energy back by two years
At a time when New England should be racing to bring as much clean energy online as possible to green its electricity supply, the grid moved this past week to effectively discourage major wind and solar projects for at least another two years.
Like other regional power suppliers, New England’s grid operator has been asked by the Federal Energy Regulatory Commission to remove or change a mechanism that makes it harder for clean energy projects to enter the competitive market. But after months of saying it supported such a measure, ISO-New England reversed its stance last week and aligned with a proposal from the natural gas industry that would slow-walk any such change.
“It’s another example of not meeting the moment to usher in the clean energy transition,” said Jeremy McDiarmid, of the Northeast Clean Energy Council. “It is an example of the system not being equipped to change as fast as we need it to.”
In Massachusetts, as in other states in the region, the clock is ticking to green the electrical grid. The climate legislation passed last year requires that the state halve its emissions by 2030 and reach net zero by 2050. To do so, the state is expecting a million homeowners to switch off fossil fuels and 750,000 vehicle owners to go electric by the end of the decade. But with those increased electricity demands, a crucial piece of the state’s equation is ensuring that the grid makes a rapid switch off fossil fuels and onto renewables.
The vote on Thursday by New England Power Pool — a stakeholder advisory group appointed by the federal regulator — could make that more challenging, advocates say, because it will make those very resources less able to compete against existing fossil fuel generators
Now the matter moves on to the federal regulator for approval, where advocates are hoping to see it rejected. “If approved, it would slow New England’s ability to meet state climate goals, exacerbate climate pollution already impacting our communities and our economy, and cost consumers money they can ill afford,” said Melissa Birchard, a senior regulatory attorney for the Acadia Center, a nonprofit that advocates clean energy.
The mechanism that was voted on — called a minimum offer price rule — limits what energy projects can bid into what’s known as the forward capacity market. Developers with successful bids are able to procure financing three years in advance, helping ensure that projects have the needed funds to be developed or expanded, and that the grid will have enough energy available in the future.
The minimum offer price rule was created to help insulate fossil fuel power plants from having to compete against renewables that cost less due to state programs and subsidies that exist to help foster clean energy development. It created a floor below which a developer cannot bid, meaning that those less expensive energy supplies, like large-scale offshore wind or solar, aren’t able to compete.
The fear from regulators and the fossil fuel industry was that without such a rule, fossil fuel plants could be forced offline before adequate clean energy was ready to fill the void on the grid, creating reliability problems. The effect has been that fossil fuel-fired power plants have been able to secure bids around the region, despite increasingly ambitious climate plans from the New England states that would indicate otherwise.
“We were disappointed in ISO-NE’s last minute decision to support a two-year delay in the ability of renewables to fully participate in the market,” said Chloe Gotsis, spokeswoman for Attorney General Maura Healey. “A lot can happen in two years and this further delays the cost-saving and public health benefits customers will experience from renewables.”
The amendment will allow for a small amount of renewable energy to bid in the next two auctions — 300 MW in 2023, and 400 MW in 2024 —but that represents just a small portion of the regional assets that might otherwise enter the market.
ISO-NE and the supporters of the amendment say it is necessary to ensure grid reliability.
“The transition proposal is a dramatic improvement over the risks and uncertainties raised by the original ISO New England proposal and it represents a reasonable path forward for the region,” said Dan Dolan, president of the New England Power Generators Association.
But advocates say there has been little data or analysis to back up the claim that eliminating the pricing rule sooner would introduce any risks to grid reliability, leaving it unclear why ISO-NE reversed its stance seemingly at the eleventh hour.
“They didn’t present any analysis to back up that assertion, just broad statements,” said Bruce Ho, a senior advocate for the Natural Resources Defense Council.
Clean energy advocates also worry there could be ripple effects for the large-scale clean energy projects in the region, which could opt to develop in neighboring regions with friendlier market rules instead.
“If you have a resource that you think you could bring online in the next four to six years, then it might cause you to push back,” said Jeff Dennis, general counsel and managing director of Advanced Energy Economy.
On Jan. 21, the Federal Energy Regulatory Commission acknowledged that such an arrangement would spell trouble for renewables in New England. Chairman Richard Glick and commissioner Allison Clements wrote that the ISO-NE price offering rule “appears to act as a barrier to competition, insulating incumbent generators from having to compete with certain new resources that may be able to provide capacity at lower cost.”
The end result of the rule, Glick and Clements wrote, “is doubly bad for consumers, as they will be forced to pay for more capacity than is actually needed, and to do so at a higher price than they should,” because of the advantage that the rule gives to existing fossil fuel generators.
Since the beginning of his chairmanship, Glick has made clear that eliminating minimum pricing rules was a priority, and the New England grid is not the only one taking a hard look. The regional transmission grid organizer for 13 states in the mid-Atlantic and Washington, D.C., changed its minimum price offer rule in September to make it more favorable to renewable energy. New York’s grid supplier is in the process of reforming its rule as well.
In May of last year, ISO-NE announced its plans to eliminate the rule for New England, with a plan to lift it by an auction planned for February 2023. A few months later, in July, Dynegy, Calpine and Nautilus — all companies that own gas-fired power plants — offered up an amendment to that, asking that the rule be allowed to stay in place for two extra years to protect the reliability of the grid.
But as conversations among stakeholders — energy generators, ratepayer advocates, states, and others — continued over the following months, ISO-NE gave no indication that it supported the gas-backed amendment, according to several sources who were party to the process.
On Jan. 11, a vote at New England Power Pool, the federally-appointed stakeholder advisory group, landed resolutely against the amendment, with more than three-quarters of voters opting to get rid of the minimum offer pricing rule next year.
But on Jan. 26, in a letter to interested parties, the executive vice president and chief operating officer of ISO-NE, Vamsi Chadalavada, wrote that the grid operator had changed its stance. Following feedback with stakeholders, he wrote, ISO-NE had come to feel that transitioning too quickly could pose risks for grid reliability, whereas a slower approach “sets a steady pace for new, sponsored technologies to displace existing resources over two auction cycles.”
In the letter, Chadalavada noted that five of the six New England states “do not oppose” the slower transition. New Hampshire, the lone abstainer, does not approve of lifting the rule at all.
That change of tune from the ISO, and the tacit approval of the states, resulted in a major swing among New England Power Pool voters, and on Thursday, 61 percent of voters opted for the slower approach.
“It’s really hard to explain how you can go into a process and engage in good faith for eight or nine months and think the grid operator is working towards one thing and then have them flip flop at the very end,” said Ho.
Read the full article in The Boston Globe here.