Subsidies a Bone of Contention as Renewable Energy Producers Seek Federal Ruling
Supporters of expanding renewable energy are headed for a showdown with New England’s energy market operator at the Federal Energy Regulatory Commission over an arcane rule that could have major implications in the near future for how much is invested in solar and offshore wind compared to natural gas.
Debate over the true cost of developing solar and offshore wind projects has led to two competing proposals – one from the regional energy market operator ISO-New England and the other from the New England Power Pool, a voluntary organization of stakeholders in the regional market including Eversource, energy producers, and interest groups like Acadia Center and RENEW Northeast.
NEPOOL has proposed a lower minimum price for solar and offshore wind projects to enter a regional power auction following an analysis presented by RENEW Northeast that claimed ISO was overestimating the capital costs of those projects.
The federal regulator will evaluate the proposals to decide the minimum price that solar and offshore wind projects can offer on the regional capacity market, where suppliers buy power three years in advance. The market gives energy producers a guarantee of future revenue to encourage short-term capital investments and ensure the region will have enough generating capacity in the coming years.
Critics say that the market has largely favored natural gas resources and has effectively blocked new renewable projects like solar and offshore wind from participating. It’s one key tension between ISO-New England and its constituent states, including Connecticut.
Gov. Ned Lamont and DEEP Commissioner Katie Dykes have criticized the market operator, ISO-New England, for not accounting for the capacity of renewable resources the state has invested its own money in – which they say forces customers to pay for unneeded extra capacity in the form of natural gas-fired plants.
The decision could play a major part in determining how two key sources of renewable energy enter a market that clears about 35,000 megawatts of electric generating capacity each year – the equivalent of almost 17 Millstone Nuclear Power Plants.
A level playing field?
The idea is to select projects that can be sustained on competitive revenue sources, like the regional energy markets. ISO-New England sets a minimum offer price to the estimated amount of revenue that a generator would need to stay financially viable without state subsidies.
It’s the position of ISO-New England that renewables with guaranteed revenues from state contracts incentivizing their development would undercut natural gas plants by offering lower prices in the competitive auction. The minimum price is simply an attempt to level the playing field.
“That’s important to ensure we get the right, economic prices to sustain the revenues of the existing fleet still needed for reliability,” said Dan Dolan, president of the Northeast Power Generator’s Association, which represents both natural gas and renewable energy plants in the region. “The resources that have contracts that trigger the [minimum price] rule are certainly still allowed to compete.”