The Federal Energy Regulatory Commission last week approved ISO New England’s “day-ahead ancillary services initiative,” or DASI, an effort designed to bolster the grid operator’s ability to call on flexible resources to meet its operating needs.
When combined with the end of ISO-NE’s forward reserve market, the grid operator estimates DASI will increase annual wholesale market costs by about $104.4 million, or 1.1%, based on an analysis of costs from 2019 through 2021. Flexible resources such as energy storage and gas-fired power plants stand to benefit from the additional revenue.
“These improvements provide an important recognition for the fast-start and ramping services that are critical to the continued reliable operation of the New England market,” said Dan Dolan, president of the New England Power Generators Association. “While long overdue, these fuel and technology neutral [DASI] products become even more important as increasing amounts of large-scale renewables come online with the potential for major changes in both demand and supply needs.”
Fast-start services in New England are virtually uncompensated, but that will change when the DASI products are put in place, according to Dolan. The proposal takes effect March 1, 2025, but could be revised depending on how it performs.
“NEPGA appreciates that FERC recognized the need for ongoing reviews to evaluate the competitiveness and efficiency of the market in the coming years, including considering whether the design should be amended to include a longer lead-time reserve product,” Dolan said.
The new market will provide incentives for flexible resources to take day-ahead steps needed to perform in real-time, which will become increasingly important as the resource mix changes and ISO-NE faces greater operational uncertainties, FERC said in its Jan. 29 decision, noting that the owners of resources that fail to meet their day-ahead obligations will be penalized.
DASI will procure and pay the resources ISO-NE relies on for reserves in “an efficient, transparent, and cost-effective manner,” FERC said.
Currently, ISO-NE relies on non-market processes to identify the reserves it expects to need in the following day, the grid operator said in the proposal it and the New England Power Pool Participants Committee filed in October at FERC.
The process results in resources being underpaid, ISO-NE and NEPOOL said. They also lack a financial obligation or incentive to perform in real-time, according to their proposal.
“DASI will provide targeted compensation and clear financial obligations and incentives for the flexible resources on which the region currently relies, and on which it will increasingly rely as the region heads into the future,” they said.
Under the plan, ISO-NE will run a day-ahead ancillary services market jointly with the existing day-ahead energy market. It will procure 10- and 30-minute operating reserves from fast-ramping and fast-starting resources needed to meet anticipated real-time reserve requirements for the next day, ISO-NE and NEPOOL said.
The proposal includes a set of market power mitigation rules that will screen for and mitigate the exercise of market power in the day-ahead ancillary services market.
The proposal was supported by the New England States Committee on Electricity, which represents the region’s governors, the Electric Power Supply Association, the National Hydropower Association and NEPGA. The proposal unanimously cleared ISO-NE’s stakeholder process.
ISO-NE plans to monitor the performance of the new day-ahead market and consider possible changes to it if needed.
FERC Commissioner Allison Clements “strongly” supports the decision. “For a proposal of this complexity to have near universal support in the record and unanimity in the stakeholder process is a testament to the hard work and productive collaboration of many in New England,” she said in a statement issued alongside the order.