The Nightmare Before Christmas

Have you looked at your electric bill lately? If you live in New England, your rates for this winter are likely to be higher than ever. In the past, Acadia Center has highlighted that this spike in prices is very likely due to our grid’s overreliance on fossil fuels like natural gas. And this week, there’s a report from Sierra Club and Strategen that confirms gas to be the culprit. What’s more, it shows that over the long term, the most effective way to protect customers from price spikes (and the climate and health damaging pollution fossil fuels create) is to transition New England’s generation to clean energy resources.

We have also seen a lot of recent information that pokes holes in the assumption that fossil fuels are more reliable than clean energy in the winter. One such example comes from Christmas Eve, 2022. As you may recall, our region was dealing with an arctic blast (itself an increasingly common phenomenon caused by climate change). Although the grid as a whole fared pretty well (the lights stayed on!), fossil fuel plants appear to have fared alarmingly poorly. And it’s not just New England – PJM, the power grid that runs from North Carolina to Chicago saw fossil fuel-fired plants fail to perform while wind provided three times as much power as planned.

In New England, the electric grid is managed by ISO-New England (ISO-NE), which operates under a mandate to maintain reliable electric service in the six state region. On a ‘normal’ winter day, the real time energy market (which you can follow on the ISO to Go app) shows prices under $100/MWh. On December 24th, though, at the peak hour, the real time energy prices in the ISO-NE energy market spiked to over $2,800/MWh, a shocking sign that things weren’t normal. When a number of generators (who we now know to be fossil fuel-fired) that had committed to run instead no-showed, ISO-NE instituted some of its emergency procedures. Stopping short of asking consumers to voluntarily conserve energy, ISO-NE ordered all of the units that were capable of coming online quickly enough to meet the peak energy demand between 4 and 6 PM, to start running. They did, there was enough energy, and, most importantly, the power stayed on. The plants who “no-showed” have to pay penalties of around $39M, all of which goes to the plants who came to the rescue under ISO-NE’s Pay for Performance rules.

So what happened? And what can we learn from it for future winter storms? ISO-NE released a report on the Christmas Eve event that found that around 2,275 MW of generating capacity (over 1/8 of the peak load that day) that was expected to be available for the peak hour became unavailable for a number of reasons. The data released by ISO-NE so far show that at least 90% of these facilities burned fossil fuels – 33% were dual fuel generators (oil & gas); 29% residual fuel oil; 15% natural gas-only generators; and 13% were distillate fuel oil generators. ISO-NE reports that 65% of these reductions were due to mechanical problems like stuck valves and fuel pump failures – these mechanical issues could be coincidental, but the magnitude raises some questions about whether those facilities are prepared for the cold winter temperatures. Regardless of the reason these facilities weren’t online when needed, it drives a hole in ISO-NE’s conclusion that fossil fuel plants are always more reliable and need to be maintained through the rise of renewable energy.

In the past, ISO-NE’s warnings about potential issues in the winter called for needing more gas. Acadia Center has pointed out the fallacy of this argument – New England’s overreliance on gas for both the majority of our electricity generation and heating of buildings creates a risk of blackouts when there is not enough gas to go around or when international instability spikes prices. The solution to that is not doubling down on gas – it’s diversifying our resource mix, making better use of flexible demand and demand response, and adding more renewable energy, where the fuel is free.

In Acadia Center’s estimation, four reforms could help avoid crises like this in the future:

• Diversify the resources and bulk up demand response programs: As Acadia Center and its partners outlined in our Winter Reliability white paper, residential, commercial and industrial, and energy efficiency programs provide controllable demand that can help keep the grid reliable in real time. A balanced portfolio of complementary renewables like wind and solar can displace fossil fuels, and adding battery storage in stacked form, can allow us to move way from our gas overreliance now, even while we wait for long-duration storage that can outlast a winter storm on one battery.
• Coordinate to build the transmission needed to bring renewables: although the New England states have individually made commitments to decarbonizing their power and entering into procurements of renewables, the lack of a coordinated regional approach to building transmission is keeping these large scale hydro, wind, and offshore wind projects from coming online. Hopefully 2023 will bring more regional coordination (and, dare we wish, help from ISO-NE?) to work with affected communities to build the necessary transmission.
• Make gas plants buy on firm contracts, or at least reflect their capacity rating to show they’re taking the risk of no fuel: in the past, ISO-NE has offered to pay certain generators to enter into firm contracts (which get first priority for the gas), rather than relying on the spot market. But such contracts are expensive, and many generators (particularly dual fuel) opt to only use gas when it’s most affordable. But, as Christmas Eve showed, such business decisions can affect the whole grid. The capacity rating for renewable energy is often lowered to reflect the intermittent nature – the risks of fossil fuels should be reflected, too.
• Reform ISO-NE governance so consumers have more of a say in decisions that impact our air, our economy, and our family budgets: for the Northeast to achieve its climate goals and capture the many benefits of clean energy resources, the rules and priorities that govern the regional electricity system must change. Through analysis, public education, and coalition engagement like with our partners in Fix the Grid, Acadia Center is driving efforts to give consumers a voice within ISO-NE.

Acadia Center is working with our coalition partners to promote these reforms at ISO-NE and NEPOOL (the stakeholder body for ISO-NE) and in public engagement and bringing to consumers information about ISO-NE and how it impacts your life and wallet.