During Winter 2015-16, it looked like the price of power in Buffalo, NY was going to be at record-breaking lows for the year. Gas prices were cheap, wind generation was abundant, and power prices were lower than they have been in recent memory.
From December 2015 to February 2016, the Zone A power price averaged $24.20 for the on-peak average DA clear, just half of last year’s average of $53.24, and a fraction of the 2013-2014 winter price average of $92.16. Even during the bitter cold of the Valentine’s Day weekend, on-peak average prices didn’t break $35.
But these low prices were also in part a result of a sustained coal burn from the Huntley coal plant in Tonawanda, NY. Slated to retire on March 1, 2016, the NRG owned coal plant appeared intent of burning down the remainder of its coal pile on site prior to shutting down for good. With the shutdown requested by the owner in August of 2015, NRG had stated that the coal plant was no longer economical to run in current market conditions. The Huntley coal plant, in operation since 1957, is located in a very unique situation in Zone A- close to the load center of Buffalo, the plant operates inside a ring of older 230 kV transmission lines that serve the city of Buffalo.
NYISO had declared that there was little risk to reliability by retiring this plant, stating, “Based upon the expectation of the timely completion of the National Grid upgrades… reliability will be maintained through at least the year 2020 if Dunkirk is mothballed January 1, 2016 and Huntley is retired March 1, 2016.”
However, Genscape has observed Huntely as an incredibly important plant in Zone A due to its congestion relief effects. Zone A often experiences congestion on its set of older 230 kV lines that feed the Buffalo city center, due to contingency based risk from the large amount of power flowing from the Niagara hydroelectric project and imports from Ontario. This large amount of power is often at risk of flowing down the 230 kV system near Buffalo and overloading the lines, and this risk can cause substantial congestion pricing. Huntley, operating at the load end of the 230 kV system, relieves this congestion by running.
And, as soon as the Huntley plant retired, Genscape began seeing immediate and drastic effects in the DA market. Within two days of Huntley’s retirement, the Zone A price broke its winter record, averaging $39.88 on a mild day with a low of 20 degrees Fahrenheit in Buffalo.
Congestion along the Niagara – Packard and Packard – Sawyer 230 kV lines has been severe during on-peak periods, driving up the Zone A price. Prices in Buffalo NY have cleared as high as a daily average of $54.62, while prices in New York City – the area of highest demand in the state- have hardly broken $30.
NYISO has requested transmission line upgrades to be completed in Zone A before the worst of the summer heat, but those will take until the end of June to complete, and the long term outlook for Zone A is uncertain. It remains significantly doubtful that minor line improvements can reverse the effect of retiring 436 MW of generation.
Additionally, this situation represents significant risk to the rest of NY power prices throughout the summer and beyond. With such significant congestion risk in Zone A, power flows from Ontario and from the Niagara Falls Hydroelectric Project both can cause dangerous overloading in Buffalo’s 230 kV lines without Huntley running to counterbalance the heavy electricity flows moving east.
These are two of the largest sources of clean and cheap power for the entire state, and the current situation in Buffalo means that they may not be able to run during the worst of the summer heat. This makes the issue not only a reliability risk for Zone A and the Buffalo area, but for the entire New York State transmission grid as well.
In the meantime, Zone A continues to be the most expensive zone of power in NY state, with little end to the situation in sight.
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