ISO-NE says gas shortages may hurt power grid

The president and chief executive officer of New England’s regional electric grid operator said Wednesday the grid is facing “significant vulnerabilities” as the mix of generation resources shifts from nuclear and oil-fueled power plants toward renewable energy and generating units that run on natural gas.

“Industry trends and state policies are driving changes in the system,” Gordon van Welie, ISONew England’s top executive, said during a “State of the Grid 2019” presentation to reporters. “Nuclear, oil, and coal-fired power plants that operate with fuel stored on-site are retiring in greater numbers and they are being replaced by more natural gas-fired power plants and renewable resources. The new resource mix is cleaner but it is also dependent on the weather or timely natural gas deliveries.”

Cheaper natural gas prices have made electricity produced by power generators that run on the fuel less costly than the energy produced by nuclear power plants. New England had eight nuclear power stations in 1990 that made up 25 percent of the region’s power producing capacity; now, three of the power plants remain and make up 13 percent of the overall generation capacity, but actually generate 30 percent of the electricity.

In the coming years, wind power will play an even greater role in New England’s energy portfolio, according to van Welie.

Wind power now comprises two-thirds of the new energy resources preparing to connect to the ISO-NE grid.

But in terms of the present, weather this winter “has been relatively mild,” which means the availability of natural gas to run power plants has been plentiful, according to van Welie.

“What is a concern is to see how the market will perform when we had a winter like last year when it was cold for two weeks,” he said.

The natural gas pipeline network that brings the fuel into New England has a constrained capacity, which limits how much can be brought into the region during periods of high demand and also results in price spikes

during those periods.

The residential natural gas market operates in what are known as “firm” delivery contracts, meaning they can not be interrupted. Power plants, on the other hand, typically operate on interruptible delivery, in part because it is cheaper than a firm contract.

“We don t think we’re going to see any significant pipeline expansion into the region,” van Welie said. “We have to make do with what we have.”

The continued lack of adequate natural gas pipeline capacity is making van Welie “incrementally more concerned” than last year about the potential for power plants coming up short of the fuel necessary to produce electricity.

In order to guarantee the reliability of the regional electric grid, ISO-NE is adapting the rules for its power procurement market as well as changing and planning and operational procedures.

For example, this is the first winter that ISO-NE’s pay-for-performance capacity market rules have been in effect. Under the new rules, power producers will receive enhanced incentives, bonus payments to ensure power plant operators are ready and able to meet their obligation to provide energy.

Owners of power plants that fail to deliver power as promised will face financial penalties.

“Pay for performance will help definitively (in making sure power plant operators have adequate supplies of natural gas),” van Welie said. “The trouble with pay for performance is that it’s in realtime. And when you’re in trouble (in terms of natural gas supplies), the price gets really high. When you get into an energy shortage condition, how do you signal to the market there is an impending energy shortage?”

To that end, ISO-NE officials are about a year into a three- to five-year project developing a new energy market design for the region “that includes moving from a day-ahead market (for meeting the region’s electricity needs) to multiple days ahead,” van Welie said.

“We’re beyond the initial stages of working on it,” he said. “We will release a detailed white paper on it in April.”

Creating the new market requires obtaining approval from the Federal Energy Regulatory Commission, to which van Welie said ISONE will submit its plans by the end of the year.

“I'm reasonably optimistic if we file by November we’ll get an answer in early 2020,” he said. “The real question is whether or not they will require any changes to our plan. This is a very complex project, the most complex in the history of the ISO.”