Update on the 2017/2018 Winter Reliability Program
Friday, October 27, 2017 at 2:55PM
ISO New England in Industry News & Developments, capacity, demand resources, natural gas, winter

10/18/17 update: Initial participation results posted.

For the fifth year in a row, a winter reliability program is in effect in New England to address seasonal reliability challenges created by constraints on New England’s interstate natural gas pipeline system. The program is a short-term, cost-effective effort to help ensure eligible generators have the fuel needed to operate reliably during very cold winter periods.

Program objective

About 45% of the total generating capability 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, little to no pipeline capacity remains available for sale to power generators, putting significant amounts of natural-gas-fired generation at risk of not being able to get fuel when needed. Liquefied natural gas (LNG), which is brought into New England on tanker ships, may also not be available unless generators contract for it ahead of time. The region then relies on oil-fired resources to fill the gap, provided that these plants have sufficient on-site fuel supplies throughout the winter.

New England’s winter reliability programs are designed to incentivize eligible power plants to secure sufficient fuel at the beginning of winter by offsetting some of the carrying costs for unused oil or LNG contracts at the end of the winter. Demand-response resources are also incentivized to be available to help reduce winter demand. Developed collaboratively through the ISO’s stakeholder process, the programs 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 the same as last year’s program:

See the program rules in Market Rule 1, Appendix K for details on eligibility requirements at various stages, inventory caps, and how program payments are calculated. Compensation 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. All generators are also subject to nonperformance charges.

2017/2018 participation update

The table below reflects the status of the 2017/2018 winter program after the initial October 1 participation deadline. The participation amounts and expected costs are preliminary and subject to review and revision.

Type Participants Amount
eligible for compensation
Payment rateProgram usageProgram costs
Oil 84 units
2.848 million barrels
$10.33 per barrel TBD
Expected maximum cost exposure: $29.42 million
LNG 0 units 0.0 MMBtu $1.72 per MMBtu None $0.00
DR 3 assets 7.5 MW $1,033 per MW-month, plus energy payments if dispatched
TBD Expected maximum cost exposure: $23.24 thousand (not including energy payments)

 

Previous winters’ participation and results

Results of the 2015/2016 and 2016/2017 programs can be found on the Winter Program Payment Rate webpage. Information on the two earlier winter programs can be found in “New England power system performed well through winter 2014/2015” and “Oil inventory was key in maintaining power system reliability through colder-than-normal weather during winter 2013/2014.”

While participation has varied from year to year, the winter program has been an important insurance policy, helping to ensure reliability during hard-to-predict winter temperatures. Those temperatures largely determine program fuel usage. For example:

No program LNG has ever been used, and this year no generator has registered to participate in the LNG program. For the past few years, pre-winter contracting for LNG (a requirement for program participation) has been at a higher price than the prices for other fuels or demand response during winter. The program doesn’t guarantee participants will be called to run. Instead, as usual, the lowest-cost resources among all those participating in the market are dispatched first to meet demand.

Dual-fuel commissioning

Incentives were offered during winters 2014/2015 and 2015/2016 for natural-gas-fired generators to add dual-fuel capability and also have sufficient oil in the tank at the start of each winter through December 1, 2017. (The date for establishing eligibility to participate has passed, and no new dual-fuel commissioning is being accepted.) The cost incurred for this facet of the program was $1.54 million, of a total cost cap of $5.7 million. Six units commissioned dual-fuel capability, for a total winter seasonal claimed capability addition of 1,774 MW:

Learn more

Article originally appeared on ISO Newswire (http://isonewswire.com/).
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