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In both the New York Independent System Operator (NYISO) and ISO-New England (ISO-NE) electricity markets, the challenges and costs of meeting load growth and clean energy goals are becoming increasingly apparent. Meeting these goals will require additional support by state programs to overcome revenue challenges in the regional power markets, especially given headwinds related to offshore wind, energy cost sensitivity, anticipated load growth, and opposition to new fossil generation.
In a recent webinar previewing Ascend's latest NYISO and ISO-NE forecasts, Dr. Gary Dorris, CEO at Ascend Analytics, joined Dr. Brent Nelson, Managing Director of Markets and Strategy, to discuss the implications of demand growth in future winter-peaking Northeast power markets, opportunities for new renewable projects, and whether state clean energy policy commitments will hold firm in the face of increasing cost sensitivity.
The significant opportunities for renewable energy development in NYISO and ISO-NE are driven almost exclusively by state policies. As shown in Figure 1, Ascend Analytics forecasts NYISO to add approximately 15 GW of clean energy by 2030, along with around 17 GW for ISO-NE (though the ISO-NE forecast was developed prior to the recent Trump administration executive order halting offshore wind development).
Achieving policy goals, however, may prove extremely difficult, if not impossible. First, multiple offshore wind projects have been cancelled due to cost concerns, well before the Trump administration's opposition. These headwinds prove especially concerning given that offshore wind is by far the region's most abundant potential renewable resource, and thus the key to meeting renewable standards in New York and New England.
Additionally, elected officials in New York and New England have signaled waning political will for bearing the costs of a rapid transition to clean energy. In New York, Governor Hochul made a recent statement about mitigating or rethinking the state's climate goals due to rising costs, signaling a major warning about limits to policy commitment. Massachusetts also recently reduced its near-term clean peak standard (CPS) requirements in order to lower costs for rate-payers. While the change included increased long-term requirements, the risk remains that costs will get punted into the future again.
Finally, numerous other factors are combining to keep clean energy costs high in NYISO and ISO-NE. Limited land availability and poor renewable resource potential elevate and maintain production costs, which will only worsen as the best sites get taken. At the federal level, tariffs, potential domestic content requirements, and the potential for sustained high interest rates will also contribute to elevated costs.
Both NYISO and ISO-NE expect electrification-driven winter peaking to arrive in the 2030s, which will lead to accelerated load growth and increasingly complicated reliability challenges. Even before winter peaking occurs, high thermal outage rates and gas supply risk in cold weather will cause the coldest months to provide the stiffest reliability tests for both ISOs.
Winter peaking systems pose a number of cost risks and renewable development challenges. First, winter peaks tend to last far longer than summer peaks, thus devaluing the capacity of short-duration resources and creating a need for long-duration dispatchable resources. As seen in Figure 2, for example, 2022's Winter Storm Elliott elevated load for 60 hours, and contained 10-hour peaks, providing major challenges for reliability and capacity accreditation.
Additionally, supporting new entry to meet demand growth will require sustained high capacity prices. During an energy transition, high renewable penetrations depress heat rates and reduce energy margins. Battery buildout will depress ancillary prices, widen peaks, and reduce battery accreditation, especially during winters. Winter peaking will decrease gas reliability and capacity accreditation for thermals. All of this combined will drive capacity prices far higher than what has historically been seen in NYISO or ISO-NE in order to support new entry.
Ultimately, something will have to give. Northeast states will have to either allow capacity prices to skyrocket, build new gas generation and supporting infrastructure, or pay for dispatchable renewable fuel generation. None of these choices will provide cost relief.
With capacity prices rising to support new entry, market and policy restructuring may be coming to contain costs and prevent excess revenues flowing to incumbent fossil generation. NYISO and ISO-NE may seek ways to allow revenues to flow only to clean new entry without subsidizing the rest of the supply stack. Potential changes could include state-level procurement subsidies for new clean resources with capacity revenue offsets, the creation of a clean, long-duration ancillary services product, re-regulation, or bifurcation of clean/new and existing/fossil capacity markets.
State programs to support renewable energy development are currently insufficient to meet policy goals. Some existing solutions, such as New York's Value of Distributed Energy Resources (VDER) mechanism or Massachusetts' CPS, provide key support for clean energy development. However, both New York and most states in ISO-NE remain hamstrung by regulatory barriers, unsupportive market structures, and unstable commitments in the face of high costs. More subsidies and/or procurements will be needed to meet state clean energy goals, and cost tolerance will stretch the limits of policy commitment.
Access the full webinar recording, which offers guidance for where, what, and when to add new capacity resources in NYISO and ISO-NE. The webinar also offers insights related to capacity prices, projected renewable energy buildout, and updated energy demand forecasts.
AscendMI™ (Ascend Market Intelligence) delivers proprietary power market forecasts that have been trusted in hundreds of projects and resource planning activities, supporting over $25 billion in project financing assessments. Contact us to learn more.
In both the New York Independent System Operator (NYISO) and ISO-New England (ISO-NE) electricity markets, the challenges and costs of meeting load growth and clean energy goals are becoming increasingly apparent. Meeting these goals will require additional support by state programs to overcome revenue challenges in the regional power markets, especially given headwinds related to offshore wind, energy cost sensitivity, anticipated load growth, and opposition to new fossil generation.
In a recent webinar previewing Ascend's latest NYISO and ISO-NE forecasts, Dr. Gary Dorris, CEO at Ascend Analytics, joined Dr. Brent Nelson, Managing Director of Markets and Strategy, to discuss the implications of demand growth in future winter-peaking Northeast power markets, opportunities for new renewable projects, and whether state clean energy policy commitments will hold firm in the face of increasing cost sensitivity.
The significant opportunities for renewable energy development in NYISO and ISO-NE are driven almost exclusively by state policies. As shown in Figure 1, Ascend Analytics forecasts NYISO to add approximately 15 GW of clean energy by 2030, along with around 17 GW for ISO-NE (though the ISO-NE forecast was developed prior to the recent Trump administration executive order halting offshore wind development).
Achieving policy goals, however, may prove extremely difficult, if not impossible. First, multiple offshore wind projects have been cancelled due to cost concerns, well before the Trump administration's opposition. These headwinds prove especially concerning given that offshore wind is by far the region's most abundant potential renewable resource, and thus the key to meeting renewable standards in New York and New England.
Additionally, elected officials in New York and New England have signaled waning political will for bearing the costs of a rapid transition to clean energy. In New York, Governor Hochul made a recent statement about mitigating or rethinking the state's climate goals due to rising costs, signaling a major warning about limits to policy commitment. Massachusetts also recently reduced its near-term clean peak standard (CPS) requirements in order to lower costs for rate-payers. While the change included increased long-term requirements, the risk remains that costs will get punted into the future again.
Finally, numerous other factors are combining to keep clean energy costs high in NYISO and ISO-NE. Limited land availability and poor renewable resource potential elevate and maintain production costs, which will only worsen as the best sites get taken. At the federal level, tariffs, potential domestic content requirements, and the potential for sustained high interest rates will also contribute to elevated costs.
Both NYISO and ISO-NE expect electrification-driven winter peaking to arrive in the 2030s, which will lead to accelerated load growth and increasingly complicated reliability challenges. Even before winter peaking occurs, high thermal outage rates and gas supply risk in cold weather will cause the coldest months to provide the stiffest reliability tests for both ISOs.
Winter peaking systems pose a number of cost risks and renewable development challenges. First, winter peaks tend to last far longer than summer peaks, thus devaluing the capacity of short-duration resources and creating a need for long-duration dispatchable resources. As seen in Figure 2, for example, 2022's Winter Storm Elliott elevated load for 60 hours, and contained 10-hour peaks, providing major challenges for reliability and capacity accreditation.
Additionally, supporting new entry to meet demand growth will require sustained high capacity prices. During an energy transition, high renewable penetrations depress heat rates and reduce energy margins. Battery buildout will depress ancillary prices, widen peaks, and reduce battery accreditation, especially during winters. Winter peaking will decrease gas reliability and capacity accreditation for thermals. All of this combined will drive capacity prices far higher than what has historically been seen in NYISO or ISO-NE in order to support new entry.
Ultimately, something will have to give. Northeast states will have to either allow capacity prices to skyrocket, build new gas generation and supporting infrastructure, or pay for dispatchable renewable fuel generation. None of these choices will provide cost relief.
With capacity prices rising to support new entry, market and policy restructuring may be coming to contain costs and prevent excess revenues flowing to incumbent fossil generation. NYISO and ISO-NE may seek ways to allow revenues to flow only to clean new entry without subsidizing the rest of the supply stack. Potential changes could include state-level procurement subsidies for new clean resources with capacity revenue offsets, the creation of a clean, long-duration ancillary services product, re-regulation, or bifurcation of clean/new and existing/fossil capacity markets.
State programs to support renewable energy development are currently insufficient to meet policy goals. Some existing solutions, such as New York's Value of Distributed Energy Resources (VDER) mechanism or Massachusetts' CPS, provide key support for clean energy development. However, both New York and most states in ISO-NE remain hamstrung by regulatory barriers, unsupportive market structures, and unstable commitments in the face of high costs. More subsidies and/or procurements will be needed to meet state clean energy goals, and cost tolerance will stretch the limits of policy commitment.
Access the full webinar recording, which offers guidance for where, what, and when to add new capacity resources in NYISO and ISO-NE. The webinar also offers insights related to capacity prices, projected renewable energy buildout, and updated energy demand forecasts.
AscendMI™ (Ascend Market Intelligence) delivers proprietary power market forecasts that have been trusted in hundreds of projects and resource planning activities, supporting over $25 billion in project financing assessments. Contact us to learn more.
Ascend Analytics is the leading provider of market intelligence and analytics solutions for the energy transition. The company’s offerings enable decision makers in power development and supply procurement to maximize the value of planning, operating, and managing risk for renewable, storage, and other assets. From real-time to 30-year horizons, their forecasts and insights are at the foundation of over $50 billion in project financing assessments. Ascend provides energy market stakeholders with the clarity and confidence to successfully navigate the rapidly shifting energy landscape.
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