ISO New England aims to overhaul its capacity auction process by buying capacity a month ahead of time instead of three years in advance, according to a proposal filed with the Federal Energy Regulatory Commission on Dec. 30.
The proposal to switch to a “prompt” capacity auction framework in June 2028 would bring a range of benefits to New England, including making its load forecasts and other key inputs used to set the auction’s parameters more accurate, according to the grid operator.
In a change from current practice, the capacity auction would only be open to existing resources.
“These factors have the potential to improve both the efficiency of capacity auction outcomes and the ability of the market to meet its resource adequacy objective,” ISO-NE said.
Partly, the proposal aims to address uncertainty about New England’s future resource needs, according to ISO-NE.
Driven by home and vehicle electrification, ISO-NE expects its reserve margin will fall from 15% in 2029 to 8% in 2034, the grid operator said. However, that forecast may be overstated after the 2025 budget bill ended federal tax credits for electric vehicles, ISO-NE said.
So far, there hasn’t been significant data center development in New England, but that could change, according to the grid operator.
“Such uncertainty … demands a capacity market design that procures capacity based on the most up-to-date and accurate data regarding supply and demand dynamics,” ISO-NE said.
The proposal also calls for changing ISO-NE’s process for considering power plant retirements. Currently, power plant owners can retire a resource only by submitting a “de-list bid” into the capacity auction four years ahead of a planned retirement. ISO-NE plans to replace that process with a one-year advance notification requirement.
“The reforms to the capacity resource deactivation process will facilitate capacity suppliers’ use of more accurate information about resource and economic conditions before deciding upon whether to proceed with a deactivation — and will also improve the flexibility of deactivated resources to return to the market if conditions so warrant,” ISO-NE said.
The proposal received broad stakeholder support and is one part of a broader capacity market reform initiative, according to the grid operator.
ISO-NE is working with its stakeholders to develop a winter and summer seasonal capacity auction framework instead of its existing annual construct, which sends a price signal reflecting summer peak demand, the grid operator said.
“This will allow the capacity market to send a price signal that reflects the value of resources toward meeting winter demand, as it increases, which, in turn, will provide capacity suppliers with the incentive to ensure resources are capable of performing to meet that demand, by (for example) shoring up fuel supplies and/or installing dual fuel capability,” ISO-NE said.
In the same proposal — set to be filed late this year at FERC — ISO-NE plans to replace its existing summer performance-based capacity accreditation process with requirements that capture the marginal reliability contribution of resources during high reliability risk periods, the grid operator said.
ISO-NE said its proposal will include “novel” provisions that reflect New England’s gas pipeline constraints that can affect the region in the winter.
“The gas constraint will be modeled in the seasonal capacity auction, where it is anticipated to ‘bind’ in the winter auction clearing to reflect the more limited availability of gas during the winter months,” ISO-NE said.
ISO-NE asked FERC to accept its proposal so it is effective by March 31.
