In early June, FERC approved parts of ISO-NE and NEPOOL’s “jump ball” filing on offer review trigger price (ORTP) values for the 2025/26 capacity commitment period (ER21-1637). In addition, the commission accepted NEPOOL’s proposed ORTP value for battery storage and proposed federal tax credits adjustments for solar resources for Forward Capacity Auctions 17 and 18.
FERC also accepted the RTO’s proposed ORTP value for offshore wind and the establishment of ORTPs for hybrid and co-located resources, rejecting NEPOOL’s proposed revisions in each case.
Chair Richard Glick dissented in part on the order, writing that FERC should have adopted NEPOOL’s ORTP estimates for OSW, “which better reflect market activity as opposed to bureaucratic cost estimates that bear little relation to reality.” He argued that NEPOOL’s use of publicly available data from four recent power purchase agreements for large regional OSW projects gives its plan “a clear and strong connection to the actual resources being developed in New England.” (See FERC Accepts, Rejects Parts of ISO-NE, NEPOOL ORTP Filing.)
Abigail Krich, president and founder of Boreas Renewables, provided extensive feedback during the NEPOOL stakeholder process, including a review of the publicly available data, which became part of a series of stakeholder amendments such as the assumed capital costs for OSW projects.
“ISO-NE assumes that an 800-MW OSW project in New England with a 2025 commercial operation date would optimistically have a capital cost of $5,350/kW,” Krich said during a Northeast Energy and Commerce Association webinar on ORTPs last week. “From the extensive research and analysis we did with the help of Daymark Energy Advisors, this seemed to be entirely outside the bounds of industry expectations for a project of this particular size, time and location.”
Krich’s research and analysis produced an ORTP calculation that assumes a capital cost of $3,326/kW, which she believes “falls squarely within the range of industry expectations.” She added that this one assumption makes the difference between OSW having a default offer floor price equal to the auction starting price versus having the flexibility to offer it any price a project wishes in the auction.
“Now, unfortunately, in my opinion, the commission accepted [ISO-NE’s] assumption, which leaves us where we are today with no ORTP for offshore wind,” Krich said.
Krich is encouraged that for the first time, there is an ORTP value for solar and battery storage resources that are of increasing significance “as their economics rapidly improve.” She added that onshore wind once again has an ORTP of $0, which recognizes it as among the most cost-effective renewable resource options in New England.
Ben Griffiths, energy analyst for the Massachusetts Attorney General’s Office, said that Krich and others did “great” work on the renewable generation side of the equation, so he focused on battery storage.
“Storage is one of those technologies that we think is super important for the state and keeps showing up in various roadmaps for how we’re going to reach our 2050 targets,” Griffiths said. “It’s also ... hard to think about in large part because it has these unique characteristics ... and we don’t have a great track record of being able to say exactly what we think it will do in the markets going forward just because the installed base is so small.”
After reviewing the RTO’s battery storage approach, Griffiths said that the conclusion was that it was too rigid and too simple, leading to suppressed revenue estimates and unreasonably high ORTP values.
“We thought we could advance the conversation a little bit by trying to come up with a new set of models that could more accurately reflect how storage operators might try to use a battery,” Griffiths said.
That modeling came up with an ORTP value for battery storage of $2.601/kW-month. Griffiths found that “amazing,” as it represented a 70% reduction from the initial value proposed early in the stakeholder process.
“It certainly appears that storage is going to be able to participate at almost any price it wishes, as opposed to being sort of severely constrained due to these unrealistic cost estimates,” Griffiths said.
Krich added that it is “entirely plausible” that several large batteries clear the next FCA.
“I think we’ll see more batteries clear because of the ORTP, but clearly batteries were already able to clear in the auction even before having this ORTP,” Krich said. “Although this certainly lowers the hurdle for them to be able to do that.”
Except for OSW, Griffiths said that technologies like solar, storage and onshore wind “have come into their own” and are not only viable through subsidy.
“Having ORTPs like this means that we can let a large number of renewables enter capacity markets through the front door, and we don’t have to worry about things like the [Competitive Auctions with Sponsored Policy Resources] substitution auction that is a piece of market design that has not lived up to the expectations we had for it. So, I think this is, at minimum, a good opportunity to sort of remove barriers to entry and ideally should help facilitate cost-effective, new generation entering the market.”
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