As New England ISO moves towards a cleaner grid, they are undergoing long-term infrastructure changes that will potentially increase trading opportunities. The most impactful infrastructure changes include the development of wind generation, increasing amount of behind-the-meter (BTM) solar, retirement of Brayton Point coal plant, and the upcoming retirement of the Pilgrim nuclear power plant.
Development of Wind Generation
There are several wind projects proposed in New England with the most proposed capacity in Maine and offshore Rhode Island. Approximately 3.6 gigawatts (GW) (16 percent of peak load) of wind capacity will be constructed in Maine, a long distance from the primary load zone of Boston. This is likely to cause congestion as the power needs to flow long distances over an inadequate transmission system. The congestion drives downside to Maine and upside to NEMA. Last year at this time there were no wind constraints binding. Genscape now sees wind-caused constraints on the grid almost daily given wind speeds. The most frequent wind constraint is Oakfield Wind Farm, which has an average marginal price of $12.42. Also, when congestion is not occurring, the additional wind is expected to drive downside to the real-time prices as it is intermittent, resulting in higher DART spreads.
Increase in Behind-the-Meter (BTM) Solar
Another trend occurring in New England is the development of BTM solar due to favorable incentives. The past couple of years witnessed a significant increase in solar development, mostly in Massachusetts. The total amount of solar in New England is approximately 2.0 GW while the system operator can only see approximately 20 megawatts (MW), according to ISO New England. Since the BTM solar is not visible by the system operator, it generally leads to over or under committing generation in the Day-Ahead (DA), causing DART (Day-Ahead/Real-Time) spreads. These DART spreads are opening up opportunities for trading virtuals. Genscape is currently adding Locus Energy data to their load forecasting methodology, to account for the BTM solar generation.
Brayton Point Coal Plant Retirement
As mentioned above, New England is moving towards a cleaner market. With that being said, they retired the last coal-fired generator, Brayton Point, in June 2017 and replaced it with a gas-fired generator in Salem, MA called Salem Harbor Footprint. The retirement of Brayton Point is expected to have the largest impact on markets during the winter months as Brayton Point provided reliable power supply when pipeline constraints occurred. Therefore, prices are expected to be volatile during the winter months when there are pipeline constraints, simply because Salem Harbor Footprint will increase the demand on the pipeline while Brayton Point relieved pipeline demand.
Upcoming Retirement of Pilgrim
In May of 2019, 680 MW of baseload generation is scheduled to be taken offline with the retirement of Pilgrim nuclear power plant. Located in Plymouth, MA, this generator helps supply the major demand centers of Hartford and Boston. Wind generation and Canadian imports are currently proposed to replace this baseload generation, suggesting that intermittent generation and Canadian market fundamentals will be replacing reliable nuclear capacity. This places more emphasis on internal gas generation, thus exacerbating pipeline demand and requiring sufficient reserve oil generation to be available. Considerable volatility should be expected (especially over the winter) due to the Pilgrim retirement.
In summary, there have been several changes in the market that increase volatility in prices and present trading opportunities. These opportunities can be observed in the increased volumes traded on ICE. The changes that drive this volatility are the development of wind generation, increase in BTM solar, retirement of Brayton Point coal plant, and upcoming retirement of Pilgrim. These changes are creating a new market dynamic that Genscape analysts are monitoring daily and communicating diligently to their clients.
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