ISO-NE pitches market rule changes for FCA 13
ISO New England pitched a two-stage capacity auction process this week aimed at better accommodating states’ out-of-market actions as the region upped its efforts to reduce greenhouse gas emissions through the procurement of more renewable resources.
Up to 1,200 MW of state-sponsored clean energy generation procured pursuant to a 2016 Massachusetts law could be ripe for participation in ISO-NE’s 13th forward capacity auction scheduled to be held in February 2019 for the 2022-23 delivery year.
But without market rule changes, the grid operator told the Federal Energy Regulatory Commission in a tariff filing Monday that these resources are unlikely to clear the auction because ISO-NE’s minimum offer price rule requires them to bid into the market at their unsubsidized cost. This is expected to force electricity ratepayers to pay both for the new state-sponsored resources and for the cost of additional capacity procured through the forward capacity market.
ISO-NE’s proposed competitive auctions with sponsored policy resources rules attempt to accommodate the entry of sponsored new resources while prioritizing the preservation of competitive prices in the capacity market, the grid operator said.
Tariff changes pitched Monday would provide a financial incentive for existing resources that clear the auction to transfer their capacity supply obligation to state-sponsored resources and permanently exit the market. This would avoid “a potentially significant overbuild of the system — against the backdrop of a New England power system that already has substantially more capacity than required,” ISO-NE said.
Specifically, under CASPR, ISO-NE would hold a primary auction as the first stage of the process that runs very much like current FCAs, with new resources subject to the MOPR and priced retirement bids below the clearing price being awarded CSOs. SUBSTITUTION AUCTION FACILITATES CSO TRANSFERS
That would immediately be followed by the second phase: a new, voluntary secondary market referred to as the substitution auction. At that time, existing resources that obtained CSOs in the primary auction but are willing to exit the market can bid the highest price they are willing to pay to shed their CSOs.
State-sponsored resources that did not clear the primary auction can take into account their out-of-market revenues, as no MOPR is applied in the substitution auction, to make offers at the lowest price they are willing to accept CSOs. The substitution auction then matches these voluntary bids and offers.