Market impact of Massachusetts clean energy solicitation unclear
Massachusetts’ selection of the Northern Pass Transmission project to deliver 1,090 MW of hydro power from Quebec could significantly impact wholesale energy and capacity markets, but there is disagreement over the results for market participants and ratepayers.
“The biggest impact on the market will be on the energy side,” Dan Dolan, president of trade group New England Power Generators Association, said Friday in a phone interview. “Roughly 1,000 MW will be coming in as a price taker, depressing prices of other resources that won’t get 20-year power purchase agreements with Massachusetts consumers,” he said.
In March 2017, Massachusetts issued a request for proposals for about 9.450 million MWh/year of electricity, equal to about 17% of the state’s annual load. The state received 46 bids from solar, wind and hydro projects, from which it selected Eversource Energy and Hydro-Quebec’s Northern Pass project.
The bid’s final acceptance and contract award are conditional upon successful contract negotiations between the parties and regulatory approval from the Massachusetts Department of Public Utilities.
The solicitation’s goal is to create “clean energy pricing that is competitive with carbon-emitting fossil fuels,” according to a statement the Massachusetts Office of Energy and Environmental Affairs and Department of Energy Resources released Thursday. The procurement is described as the largest clean energy solicitation in the state’s history and it will increase Massachusetts’ clean energy electricity supply to nearly 50%.
The state on June 29, 2017 issued a separate RFP for 1,600 MW of offshore wind that will be awarded under long-term contracts, with project selections to be announced in April.
The combined hydropower from Northern Pass and the offshore wind RFP would account for 40% of the energy supply in Independent System Operator of New England territory, according to Dolan. “In Massachusetts, it would mean roughly 60% of the megawatt-hours supplied to the state would be locked into long-term out-of-market contracts,” he said.
The trade group contends Northern Pass is a bad deal for consumers, who will face higher electricity rates, but Eversource argues the project will decrease wholesale power prices.
“The introduction into the regional energy market of the clean energy transmitted by Northern Pass will impact the wholesale market by diversifying it and reducing the wholesale cost of energy,” spokesman Martin Murray, said in an email Friday.
Specifically, Northern Pass is estimated to reduce wholesale energy costs by about $600 million/year for 10 years, according to expert economic analysis filed with News Hampshire permitting authorities, Murray said.