RESTRUCTURING
ROUNDTABLE
June 10, 2011
Ways to Better Integrate Policy,
Planning and Electricity Markets
in New England
Mary J. Healey
CT Consumer Counsel
NASUCA, President
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Views from a Consumer
Advocate
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What were the goals of electric deregulation?
8 Years of market experience: lessons
learned;
Good, bad, and areas of needed focus going
forward;
Where do we go from here?
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How will New Resource
Decisions be Made?
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The Short Answer:
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For Generation and other supply resources, by
state actors.
For Transmission, through FERC-approved
regional tariffs and FERC-regulated rates.
In other words, not by markets.
This may have positive and negative aspects
but the reality is leading us this way.
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The Great Renewables
Buildout
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In New England and elsewhere, meeting the
RPS requirements by the end of the decade
will require significant development of new
renewable resources (on- and off-shore wind,
perhaps new hydro, biomass, solar, etc.).
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It appears likely that much of the renewables
buildout will need a long-term contractual
backstop to support financing.
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Why will New Renewables
Require Contracts?
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REC pricing has been volatile and is subject to
regulatory risk.
Different renewable plants have very different needs for
REC prices. A REC price that might achieve solar may
vastly overpay biomass, for example. So, it is hard to
define and design the compensation in the “renewables
market.”
Energy Revenue Risks
 Difficulties in dispatching intermittent resources in the
energy market.
 Lower expected energy revenue for renewables due
to shale gas supply developments.
FCM penalties for intermittent resources.
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What Will the Renewables Buildout
do to Regional Market Prices?
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Lower them, presumably. The costs of the
plant would primarily be paid through “public
benefits charges” on customer bills, not
through market revenues.
“Contract for differences” approach.
The renewable capacity will therefore add
capacity and energy without seeking to set
higher clearing prices.
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Can FERC Take Action to Elevate Market
Prices in Response to State-Supported
Capacity
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It can try, and it already is trying. (e.g., April
13 Order re FCM).
However, in the long run, if renewables
increase an existing surplus, how can prices
stay high? Is that a market?
If FERC artificially elevates market prices
during a surplus this would send a bizarre,
contradictory signal—build more!
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What about New Fossil Plants?
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Several “restructured” states are building or considering
building new fossil units under long-term contracts,
including Connecticut, New Jersey, and Maryland.
Utilities in non-restructured states in RTOs (like PJM) are
also building.
Little is being built without such support.
With low prices, or at best volatile price signals, and a
possibly increasing surplus of capacity, the trend toward
long-term contracts will likely continue if states desire,
despite the surplus, to build new, cleaner fossil units to
replace old, inefficient units.
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CT’s “Extra- Market” Resource
Developments
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RFP for capacity- only contracts, leading to Kleen
Energy (high intermediate, ~620 MW), Waterside Gen.
(peaker, ~66 MW), Waterbury Gen. (peaker, ~96 MW),
Ameresco (EE – 5 MW)
Peaking RFP (full C-O-S by CFD) GenConn Middletown
and Devon, PSEG New Haven (totaling ~530 MW)
Project 150 renewables (didn’t work)
Significant EE support that participates in FCM
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Is this the End of Competition?
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No. States will presumably use competitive
RFP processes to select resources.
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Merchant generation facilities could still
succeed or fail based on the efficiency of
operations. Long-term contracts can provide
incentives for such things as excellent
reliability performance, or punish poor
performance.
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Are these Developments
Disastrous or Surprising?
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Not at all. Why should we ever have expected
that markets would make our resource choices
for us given:
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The multiplicity of goals
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Fuel Diversity;
Reliability
Affordability;
Reducing Emissions,
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Replacement of old, inefficient plants on existing sites
Building cleaner-burning fossil plants on new sites
Promoting Renewables;
Economic Development.
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Are these Developments Disastrous
or Surprising? (continued)
No, again, why should we have expected the “invisible
hand” to make all the supply resource decisions given:
-The difficulties of Nimbyism;
-The fact that, given Nimbyism, there are natural
advantages to a State seeking to have new generation
built at or near sites where power plants (and the
transmission infrastructure) already exist;
-That the short-term nature of market signals does not fit
well with plants that require compensation over decades
- New Transmission lines built on a regulated paradigm
can obviate the need for power plants,
-Etc. and so on!!!
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CT’s Large New Energy Bill Continues to
Seek Resource Building (“the Visible
Hand”)
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Long-term contracts for solar (a/k/a “zero emissions
generation”)
Long-term contracts for fuel cells (a/k/a “low emissions
generation”)
Potentially significant new EE investment through IRP
Allows long-term contracting with existing plants if desired
to hedge the market
Allows some utility-owned renewables
New CHP programs; and
Our massive RPS requirement (20% of our energy by
2020) has not been reduced
For more information go to SB 1243 in http://cga.ct.gov
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Where do we go from here?
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Serious collaborative on market design
issues where the visible hand can work with
the invisible hand.
Our Common Interests compel us to get it
right:
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Not about refilling the toothpaste tube,
Not about putting power suppliers out of business;
It is about recognizing states’ legitimate energy
needs and goals.
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