Dire predictions that power plant closures in New England would strain electricity supply so far are proving to be wrong. An auction conducted last month by the region’s grid operator to meet demand in 2021 attracted more than enough power, and at the lowest prices since 2013.
“The lower clearing price and surplus capacity are indicative of a market that works,” Robert Ethier, vice president of market operations at ISO-New England, said following the Feb. 6 auction.
This trend is shaping a wholesale electricity market in which the cost of power is falling, but the cost of getting it to homes and businesses is driving bills higher.
Natural gas prices are at their lowest level nationally since 1999. That drove wholesale power prices last year in New England, which relies on gas to make half of its electricity, to their lowest point since 2003, according to the ISO.
Homeowners can see this trend on their bills. For a typical home in southern Maine that uses 550 kilowatt-hours of electricity a month, the energy portion of the bill fell from $55 a decade ago to $36.30 last year.
The reverse has been happening on the transmission and distribution side.
ISO-New England reported recently that $8 billion has been spent to upgrade transmission lines since 2002. Central Maine Power’s five-year Maine Power Reliability Program accounted for $1.4 billion of that. Customers are now paying down these investments. For a typical CMP customer, transmission and delivery charges went from $36.17 in 2007, to $46.15 last year.
These dynamics seem likely to remain in place, at least for a while.
Every year, the ISO seeks bids for power supply three years in the future. Last year, three new power plants in southern New England that will primarily burn natural gas cleared the auction for 2020.
They will help fill big capacity holes left by closures of coal and nuclear plants in Massachusetts.
This year, the grid operator needed to nail down at least 34,075 megawatts of capacity for 2021. It got more than that, with demand met largely by upgrades at existing plants. And it was helped by 640 megawatts of energy-efficiency and demand-reduction measures.
At the same time, ISO-New England was able to lower its capacity target by 720 megawatts, thanks to the growing contribution of small-scale solar electric systems.
Taken together, the cost of all this capacity in 2021 will be $2.4 billion – a $600 million reduction from the last auction.
One concern for this energy mix, though, is the continued heavy use of natural gas. This dependence can create reliability concerns on the coldest winter days, when pipelines are strained to supply both power plants and building heat.
Some new capacity was built last year and more is planned, but opposition to large new pipeline projects is likely to restrain gas supplies for the near future.
Tux Turkel can be contacted at 791-6462 or at: