Renewable energy is beginning to have an impact where it counts, in the cost of electricity, as generators pledge to sell power to the New England grid at prices that keep falling and will be down more than 70 percent over four years by 2023.

As a result, consumers will likely pay less, but the dollar impact on electricity bills is not known because utilities will factor the costs differently in rates.

Jerry Elmer, senior attorney at the Conservation Law Foundation, a Boston environmental advocacy organization, said wind, solar and anaerobic digestion – a process in which microorganisms break down biodegradable material to manage waste or produce fuel – are contributing to increased power supplies that are helping push down prices.

“There’s just a lot of electricity capacity on the market,” he said. “This shows a very substantial shift in the nature of our electricity grid, away from traditional fossil fuels to renewables. What states have been investing in over the years is coming to fruition.”

Critics, however, say conventional, carbon-based sources of energy such as natural gas, the region’s overwhelming favorite, still play too large a role as climate change is seen as an increasing threat.

Solar, wind and other zero-carbon sources of energy are adding to an abundance of electricity that’s boosting supply and cutting prices. Wind power, solar, biomass and other renewable energy accounts for 3,066 megawatts, according to ISO. Electricity produced by solar does not include so-called behind the meter power generated on rooftops and other sites not connected to the grid.

Declining prices are due to other factors, too. The U.S. Energy Information Administration cited flat or declining peak demand for electricity, which has contributed to surplus generating capacity. In New England, demand is falling due to a falling or stagnant population, improved energy conservation, less extreme summers and winters and even the loss of energy-consuming manufacturing, said Anne C. George, ISO’s vice president for external affairs and corporate communications.

In addition to record low prices – $2 a kilowatt-month, down from $7.03 in the 2016 auction for 2019-2020, with the price representing monthly payments to generators and energy efficiency investments for each kilowatt provided – the Feb. 3 Forward Capacity Auction “continued New England on its path toward a clean energy grid of the future,” he said. The auction is intended to secure commitments from generators to make sure there’s enough power to meet demand expected three years from now.

The capacity market is separate from the larger energy market in which generators and others compete daily to provide power. To Deborah Donovan, senior policy advocate at the Acadia Center, a clean energy advocacy group, the prices in the most recent auction are a “leading indicator” of trends to come.

As part of nearly 29,000 megawatts of energy procured in the recent auction, about 317 megawatts were designated as a new source of renewable technology, such as solar and wind, ISO said.

The consistent price drop in the annual auction is rippling through the marketplace as businesses, particularly manufacturers that run machines and equipment nearly nonstop, pay less for power.

“We’re seeing the best three- and four-year prices for Connecticut businesses ever,” said Tom Guerra, director of energy operations at the Connecticut Business & Industry Association.

Katie Dykes, commissioner of the Connecticut Department of Energy and Environmental Protection, said the states deserve the credit for low prices, the the result of energy efficiency and renewables. Yet despite the increasing role of renewable energy, much of the power purchased is conventional energy.

ISO’s capacity market “continues to prop up old plants based on the revenue they’re receiving,” Dykes said.

“Because they procured such a glut of conventional power, it’s depressing prices that generators are getting,” she said.

“I’d disagree with the way she characterizes it,” George said. “The bulk is natural gas and nuclear, renewables and hydro. If you think about what’s coming through the market, that’s the mix. There are not enough renewables on the system to close the gap.”

Major offshore wind projects, for example, have not yet generated power that’s in the system, she said.

In New England, natural gas was the dominant fuel source last year, accounting for 40 percent of the mix, up from 13% in 2000. Nuclear accounted for 25 percent, renewables were at 9 percent and hydropower at 7 percent, according to ISO. Oil has fallen to 0.1 percent of the fuel mix from 17 percent 20 years ago.

Shifts in energy sources are coming in large part from state officials in New England who are requiring more reliance on renewables. Massachusetts, for example, requires retail electricity sellers to annually demonstrate the use of clean energy to generate a specified percentage of their electricity sales.

The minimum percentage began at 16 percent in 2018 and increases 2 percent annually to 80 percent in 2050.

Legislation in 2016 also directed Massachusetts’ utilities to solicit cost-effective renewable energy, including hydropower and offshore wind.

Dan Dolan, president of the New England Power Generators Association, said a challenge with renewables is to develop storage to make sure reserve power is available “when the sun doesn’t shine and the wind doesn’t blow.”

He cited another factor in lower prices in the auction: federal approval of a proposal by ISO to keep the Mystic Generating Station, a natural gas-fueled plant outside Boston, operating. Owner Exelon Power had said it would close the plant, the second largest in New England after the Millstone Power Station in Waterford.

Dolan said renewable energy is not yet having a significant impact on the source and pricing of energy in New England.

“It’s on the horizon. I expect to see it in the future,” he said. “We’re seeing some impact, but not in a major way. In three to five years, we’ll see a major shift in the supply base.”


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