BOSTON — Some 200 industry players braved the first major snowstorm of the season in order to attend the New England Power Generators Association’s inaugural energy summit last week, where state officials and investors debated the right market model to achieve environmental goals across the six-state region.

NEPGA President Dan Dolan said the inaugural conference marked the 20th anniversary of ISO-NE launching its wholesale electricity market in 1999.

Following are highlights of what we heard at the conference.

Wood Urges Markets to Become ‘Proactive’

Former FERC Chair Pat Wood III said that the electricity markets have provided a lot of benefits since the founding of the New England Power Pool in 1971, but that a “troubling amount of state subsidies outside the market … risks losing all the benefit of that market construct.”

“That efficient dispatch and that transparent display of pricing — people meeting each other in the market — brings down costs to the customer,” Wood said. “That’s fundamentally in the spirit of a public industry that’s got a lot of private interest involved but is a very publicly oriented industry.”

The link between what customers and their elected representatives want and what the markets are delivering is fraying because of the growing imbalance between market revenue and that from out-of-market contracts, he said.

“So, we’ve got to get the market design back to being a proactive function and not so much in the reactive mode,” Wood said. “Unbundle the crap out of everything and take exactly what we have in the FERC system and unbundle it.

“When we align the end-use customer price signals back to all these wonderful price signals we’re putting out in the wholesale market, that’s when we win.”

State Priorities

Massachusetts Sen. Michael Barrett, a member of the legislature’s Joint Committee on Telecommunications, Utilities and Energy, said his state can expect a big energy initiative soon.

“It’s fair to say the state subscribes to the idea that we are here to support deep electrification,” Barrett said. “Fundamentally, if you’re a power generator, this is very good news.”

Barrett said Massachusetts is “leading the way” on the Transportation and Climate Initiative (TCI), a collaboration of 12 Northeast and Mid-Atlantic states and D.C. seeking to reduce car and truck emissions, partly because New York has not joined.

“New York is sending staff to the multistate meetings, but Gov. [Andrew] Cuomo has not committed his state the way other governors have done,” Barrett said. “It would be wonderful if New York did join.”

The gasoline market does not show a perfect correlation between pricing and consumer behavior, “so if you double the price, you don’t halve consumption, but there is a positive relation, so we can make progress,” he said.

New Hampshire Sen. Martha Fuller Clark, chair of the Energy and Natural Resources Committee, said her state “has historically been a bit behind the other New England states in energy policy … which is not necessarily a bad thing, since we’ve been able to learn from the others.”

Massachusetts Energy and Environmental Affairs Secretary Kathleen Theoharides said that she is focused on bringing new renewable resources into the market as well as electrifying the transportation and building sectors to take advantage of the new hydro, wind and solar resources as they come online.

“We really feel you need to do those two pieces at the same time. You don’t just clean up your power and then do electrification next,” she said.

Transportation now accounts for 40% of carbon dioxide emissions in the state, region and country, so the TCI is working on a cap-and-trade system similar to the Regional Greenhouse Gas Initiative, which the state has been trying to do “in one form or another for the past 10 years,” Theoharides said.

“Our economies are tied together in the region, and pricing gasoline is more difficult if you’re doing it state by state,” she said. “If you look at the 12-state region, Massachusetts is about 10% of the emissions for that region, so when we’re able to get the whole region into something like this, we can actually multiply our impact on emissions 10 times.”

Theoharides said she worries about “the piecemeal nature of some our climate and energy policies” and that cities, states, regions and the federal government have to “pull together” better than they have to date.

Dan Burgess, director of the Maine governor’s Energy Office, highlighted the new push for renewables under Gov. Janet Mills and said that “a lot of the new energy legislation passed in Maine this year was done in a bipartisan way.”

Investor Perspectives

Jim Burke, executive vice president and COO of Vistra Energy, said that in the past three years, his company has “shut 4,200 MW of coal in Texas; we have just shuttered 1,500 MW of coal in Illinois last month; we have 400 MW that will close in two weeks; and our portfolio shifted from two-thirds coal to two-thirds gas.”

The company also has the 2,425-MW Comanche Peak nuclear plant in Texas, “and we’re building the largest battery so far … just an hour south of Silicon Valley; that’s a 300-MW battery.” It is also pairing energy storage with solar, he said.

“We are technology-agnostic,” Burke said. “We believe that trends that are happening in New England and California will happen elsewhere in the country, but we’d also like to see trends that are happening in Texas spread elsewhere. There are things we can learn from each market.”

Brookfield Renewable Power Managing Partner Mitch Davidson said his company invests in New England for the same reason it invests elsewhere: because it sees an opportunity to either acquire or build an asset and get a healthy return on it.

“Early on in New England, the capacity markets worked very well,” Davidson said. “In Forward Capacity Auction 8, we saw that the market was short, and the price signals were there … and in FCAs 9, 10 and 11, there were 2,000 MW built over those four capacity auctions. Those were the right signals … and that’s the kind of environment we want to put our capital to work in.”

In FCA 12, the company expanded its Bear Swamp pumped hydro facility, of which it is part owner, he said.

“What we have concerns about is the trend in which the market is heading … some uncertainties we’re seeing,” Davidson said.

Matthew O’Connor, managing director of Carlyle Power Partners, said his firm chose New England in 2015 “because it looked like a really good environment to invest: really hard to permit things, really hard to build things, lots of barriers to entry. And back then, we actually thought gas was going to come into the region.”

Carlyle is the second-largest owner of generation in New England after Vistra, with just under 2,500 MW, he said.

“We have a number of plants that are dual-fuel, so we are able to respond to ISO-NE when gas gets really short, as it does in the wintertime here,” O’Connor said.

“We see this as an attractive market, but I share Mitch’s concerns about the future,” he said. “As an example, we put almost $90 million in each of our plants over the last three years. We’re only going to be able to continue to do that if there’s going to be a return on that money, and we’re starting to get concerned that that might be good money after bad.”

Former FERC Chair Cheryl LaFleur asked, “Are you still confident that if we get the price signals right, we can still build the things that we need to serve New England? Or, how much is that in your thinking?”

“I think ‘confident’ is a strong word when answering that question,” O’Connor said. “The question is, do the economics support that [investment]? And we would argue today that they don’t.”

– Michael Kuser