Prices in ISO New England's next capacity auction in February will likely be lower than in the grid operator's last auction, given the region's ample supply and a dip in demand, according to analysts from ESAI Power, a market research and consulting firm in Wakefield, Massachusetts.
ISO-NE expects it will need 31,645 MW in a Feb. 7 forward capacity auction to meet its needs for the 2025-26 capacity year, down nearly 5% from the 33,270 MW it sought in its last auction, according to a request filed Tuesday at the Federal Energy Regulatory Commission.
Battery storage was a big winner in ISO-NE's last auction, garnering capacity obligations for almost 600 MW, but several factors make it unlikely there will be a repeat for storage in the upcoming auction, Scott Niemann, ESAI director and principal, and Joe Prosack, ESAI power analyst, said Friday.
ISO-NE holds annual capacity auctions to help make sure it has adequate power supplies three years in the future. In the last auction, ISO-NE obtained "capacity supply obligations" from generators, demand response resources and energy storage facilities totaling 34,621 MW for about $1.36 billion.
The capacity auction can provide crucial revenue to generators. Peaking power plants, for example, depend heavily on revenue from capacity auctions, according to Niemann.
Driven by a change in how ISO-NE calculates its peak load, the grid operator's capacity requirement fell 1,625 MW for the upcoming auction compared to its last one, Niemann said. It will take about five years of load growth to return to the level from the last auction, he said.
In its last annual capacity auction, three storage projects totaling almost 600 MW cleared the auction, up from 17 MW in the 2020 auction.
The winners included two lithium-ion battery projects being developed by San Francisco-based Plus Power: the 175 MW/350 MWh Cross Town project in Gorham, Maine, and the 150 MW/300 MWh Cranberry Point project in Carver, Massachusetts.
Long-term, ESAI expects storage will play a growing role in ISO-NE's capacity auction, but short-term factors weigh against an immediate repeat in the February auction, Niemann said.
Existing resources qualified to take part in the auction total 33,356 MW, down from 33,662 MW last year, according to a separate filing at FERC. The qualifying capacity includes 3,275 MW of demand-response resources.
The grid operator qualified an additional 5,246 MW of proposed resources for the upcoming auction. Information about the new resources is confidential.
In a move that could affect the auction, ISO-NE on Nov. 4 asked FERC for permission to terminate a capacity supply obligation that NTE Energy won in the grid operator's 2019 auction for its planned 650-MW, natural gas-fired power plant in Killingly, Connecticut.
ISO-NE contends NTE missed project development milestones, giving the grid operator the right to end the capacity supply obligation. Under its capacity supply obligation, the Killingly plant is supposed to be operating by June 1.
If FERC approves ISO-NE's request, the Killingly project, which faces opposition, would be ineligible to participate in the upcoming auction. It would be "surprising" if FERC didn't approve ISO-NE's request to end the capacity supply obligations, according to Niemann.
ISO-NE asked FERC to approve the request by Jan. 3 to give the grid operator time to reflect the decision in the next auction.
NTE plans to fight ISO-NE's request, according to NTE Managing Partner for Development Tim Eves.
ISO-NE's request is based on an incorrect assumption about a financing milestone date, Eves said in a statement.
"Financing for the Killingly Energy Center is imminent, and this filing will only further delay this much-needed source of cleaner, more affordable energy," Eves said. "We will exercise all options available to show FERC that Killingly has not only already commenced its construction schedule, but also will be online in time to meet its capacity supply obligation."