Even though we are about to enter the summer months, ensuring that New England is prepared for the cold months down the road with enough energy reliability is sound energy policy and the role of ISO-New England, the energy grid operator for the region. It is not surprising that ISO recently proposed creating a new compensation mechanism for resources to ensure winter energy security.
What is surprising, though, is the way they’ve chosen to do it. ISO’s proposal —which would take effect for the winters of 2023-24 and 2024-25— serves as little more than a giveaway to electric generators, including Connecticut’s one nuclear plant, Millstone. A similar, but much larger, approach was used by ISO for select power generating units in Massachusetts. Outwardly, this was done to ensure those units do not retire, and is part of an overall effort by ISO to address perceived winter energy shortfalls.
But in terms of responsible energy policy, as someone who has spent the past 30 years immersed in New England energy policy, this is not the way to go about it, largely because the bone ISO is trying to throw Millstone’s way comes without any real evidence that the region lacks sufficient winter generation to warrant such costly, out-of-market initiatives.
ISO’s proposal would pay resources that have “inventoried” fuel that could be dispatched when the temperature drops below a certain level. Eligible resources would be electric storage, biomass, coal, certain demand response, hydro, firm natural gas, nuclear and oil. The inclusion of nuclear generation is particularly curious on this list, given that nuclear fuel isn’t “inventoried” and can’t be ramped up or down to meet electric demand. This program is simply paying the nuclear units for the same fuel burn that would occur absent the program. And this program is too restrictive by technology type; it does not provide enough of an incentive to influence a generator’s decision to keep running, and as a result negatively impacts price formation in the energy market.
Simply put, resources that could prove they have fuel available to dispatch when the trigger temperature is hit would be compensated. And that’s it —there are no performance penalties, no rigorous qualification processes and no guarantee that the electricity will be delivered when needed. ISO believes that this program —which will likely cost between $100-150 million per year for the two years it is proposed to operate, costs which will be shouldered by consumers<—would be enough to keep large nuclear plants (such as Millstone) and gas generators from closing down.
Many of us who have spent our careers in the energy industry strongly disagree.
Further, Gov. Ned Lamont recently celebrated a contract with Millstone, where Connecticut customers are committed to subsidize Millstone at the state level. Millstone was selected in a state procurement to ensure that it does not retire. So under ISO’s proposal, Connecticut customers will be paying twice – once at the state level and once at the regional level – with no added assurance of the plant remaining operational.
There is a better way.
The truth is with the New England states’ increasing commitment to renewables, including the 1,500 megawatts of offshore wind already contracted for, the region will rely less on natural gas and we will not face winter energy shortfalls as often as ISO-New England fears due to pipeline constraints.
The better idea is to allow the market to deliver the solutions, not for ISO to just choose winners and losers. If ISO believes that its own markets are not delivering the fuel needed to keep the lights on, then they should propose reforms and allow every technology to adapt to participate. It’s both the fair thing to do and the right thing to do, and is far more sensible than expensive guessing games.
Rather than needlessly double-dipping to placate Millstone, this alternative keeps in mind’s Connecticut taxpayers’ pocketbooks, and focuses instead on a more modern and conducive energy policy.
Cynthia Arcate is President/CEO of PowerOptions, a nonprofit energy-buying consortium which provides cost savings to more than 400 non-profits and municipalities in Connecticut, Massachusetts and Rhode Island.
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