9/9/16 update: The chart has been updated with final program participation results. Despite “the winter that wasn’t” (read the winter 2015/2016 operations recap), the winter reliability program remains instrumental in augmenting New England’s fuel security.
In September, the Federal Energy Regulatory Commission approved a program for the current and next two winters to address seasonal reliability challenges created by constraints on New England’s interstate natural gas pipeline system. The previous programs for winters 2013/2014 and 2014/2015 proved to be cost-effective short-term solutions to help keep the lights on in New England during very cold winter days.
The Winter Reliability Program for 2015/2016 to 2017/2018 is designed to incentivize certain power resources to secure sufficient fuel at the beginning of winter. The ISO’s 2015/2016 winter outlook identified 4,220 MW of natural-gas-fired generation at risk of not being able to get fuel when needed on days with an average temperature of 7°F; in extreme cold, at an average of 1.6°F, up to 5,004 MW are at risk. (Read the press release and the outlook presentation.) More than 45% (about 13,650 MW) of the total generating capacity in New England uses natural gas as its primary fuel. However, multiple studies and the ISO’s operating experience show that the pipelines carrying natural gas into the region are running at or near full capacity to serve heating demand during most of the winter. Particularly on the coldest days, there is little to no remaining pipeline capacity available for sale to power generators.
New England’s winter reliability programs, developed collaboratively through the ISO’s stakeholder process, serve as a stop-gap measure until longer-term capacity market changes—Pay-for-Performance (PFP) incentives—go into effect on June 1, 2018.
Eligibility and program caps
Eligibility, qualification, and compensation caps are similar to those for the 2014/2015 winter program:
The table below reflects final results for oil and LNG, as of 6/27/16. The number of participants and levels of eligible participation may differ from those reported earlier; see the program rules for details on eligibility requirements at various stages, inventory caps, etc. Total costs for the 2015/2016 program are about $37.5 million.
|Type||Participants||Amount eligible for compensation ||Payment rate||Final program usage||Final program costs*|
||2.954 million barrels
||$12.90/barrel||254,845 barrels (December: 21,251; January: 75,277; February: 153,985; March 1–15: 4,332)||$35.91 million (after penalties of $1.26 million)|
|LNG||8 units||1.278 million MMBtu||$2.15/MMBtu||None||$2.58 million (after penalties of $166,949)|
|DR||6 assets||26.5 MW||$1,290/MW-month||All 26.5 MW dispatched for three-hour period 1/5/16||$210,316 ($116,745 monthly payments; $93,571 energy payments)|
*See the program rules for the factors that go into the calculation of program payments, such as resource types, inventory caps, and performance requirements.
The costs of the program are based on two factors:
Compensation is calculated as detailed in the market rules, and is based on the carrying costs of fuel oil that is unused at the end of the winter, unused LNG contract volumes, or supplemental demand response provided.
Dual-fuel commissioning update
Continuing from the 2014/2015 program are incentives for natural-gas-fired generators to add dual-fuel capability and also have sufficient oil in the tank at the start of winter. The date for establishing eligibility has passed, and no new dual-fuel commissioning is being accepted; previously-authorized commissioning must be completed on or before December 1, 2016.
The cost incurred to date for this facet of the program are $1.34 million, of a total cost cap of $5.7 million. Six units submitted intent to commission dual-fuel capability, for a total winter seasonal claimed capability addition of 1,774 MW:
Five units (1,456 MW) have successfully added dual-fuel capability, and one unit (318 MW) is still working toward this.
Materials related to the development of the program can be found on the ISO’s webpage Winter Reliability Solutions for 2015/2016 to 2017/2018 Key Project.