Cost/benefit information of potential market responses to address natural gas dependence

Two memos are now available that examine the potential benefits and costs associated with options that could help mitigate grid reliability risks related to the region’s reliance on natural gas. The ISO’s Strategic Planning Initiative has identified New England’s dependence on natural gas as the highest priority challenge currently facing the power system. The memos provide further information to regional stakeholders as they consider proposed solutions and market rule changes to address this challenge.

The first memo discusses the benefits associated with implementing both short- and long-term changes to wholesale markets and also reviews the potential economic impact of a widespread regional power outage.

The second memo presents a range of solutions and potential costs associated with new or upgraded system infrastructure. For example, high-level cost estimates for increasing dual-fuel-capable power plants on the system are discussed. This type of generator has the capability to switch to an alternate fuel source (such as oil) to produce electricity if constraints on the pipeline system or other natural gas supply issues arise, providing added flexibility to the grid. Other solutions and associated cost estimates include adding new natural gas interstate pipeline as well as options for new and existing liquefied natural gas (LNG) storage.

More in depth analysis would need to be performed to identify with greater specificity the benefits and costs of each of these options. It is clear, however, that as the region’s reliance on natural gas increases over time, greater private investment in hardware, fuel arrangements, or other market-based solutions to ensure resource availability will be necessary.  ISO New England is moving ahead with proposed market rule changes that can help incentivize generators to undertake these investments, as is described in the whitepaper, FCM Performance Incentives, which you can read about in this October ISO Newswire posting.

To review other Strategic Planning Initiative materials, visit www.iso-ne.com/spi.