By William Opalka

Prices dropped 26% in ISO-NE’s 10th Forward Capacity Auction as new resources more than made up for retiring generation, the RTO reported on Thursday.

The capacity auction, held Monday for the 2019/20 commitment period, cleared more than 1,800 MW of new generation and demand response.

The clearing price dropped to $7.03/kW-month from last year’s $9.55/kW-month, the first decline in four years.

Almost 36,000 MW of capacity was acquired at a total cost of about $3 billion, down from $4 billion in FCA 9. (See ISO-NE Capacity Prices Likely to Fall in Future.)

“Competition was robust in this year’s Forward Capacity Auction,” ISO-NE CEO Gordon van Welie said in a statement. “The high participation in the auction demonstrates the interest in the New England marketplace and bodes well for meeting future resource adequacy requirements.”

The region is expected to lose 4,200 MW of coal, oil and nuclear generation by 2019, including Entergy’s 680-MW Pilgrim Nuclear Power Station.

RTO officials said 35,567 MW of capacity cleared the auction to meet the 34,151-MW installed capacity requirement for 2019/20:

• 31,371 MW of generation, including 1,459 MW of new generation;
• 2,746 MW of demand-side resources, including 371 MW that is new; and
• 1,450 MW of imports from New York and Canada.

New Generation

Three new gas-fired generators totaling 1,302 MW cleared the auction.

“These resources cleared at a price that was lower than the estimated cost of building a new power plant,” Robert Ethier, vice president of market operations, said during a media briefing. “Even at that price, three new, large power plants cleared at the auction.”

The pre-auction estimate for a new gas-fired plant was $10.81/kW-month. Like all recent construction in New England, the plants will have dual-fuel capability to burn fuel oil in the winter when necessary.

Ethier said ISO-NE and other financial analysts two years ago arrived at the higher figure based on their estimates of where the market was headed. “It certainly came in lower than a lot of industry observers expected,” he said.

The new generation is being built in areas where they are most needed, Ethier said, relatively close to where the Pilgrim plant is located.

About 485 MW of the Burrillville Energy Center 3 in Burrillville, R.I., cleared the auction. Chicago-based Invenergy is developing the $700 million, 900-MW combined cycle facility in the northwest corner of the state.

NRG Energy’s 333-MW Canal 3 in Sandwich, Mass., also cleared. The fuel oil-burning plant is being repowered to natural gas.

“I think it’s fair to project that those resources will provide energy to the region where the Pilgrim generation is retiring from,” Ethier said.

The auction also cleared a new 484-MW natural gas-fired combined cycle plant in Bridgeport, Conn., owned by Public Service Enterprise Group’s PSEG Power. The $550 million plant is expected to begin construction in 2017 and will be located at the site of the existing coal-fired Bridgeport Harbor Station site.

PSEG said Thursday it will finalize plans to retire the 400-MW Bridgeport Harbor and create a $2 million fund to support environmental projects and improvements for city residents to meet a state law that mandates community environmental benefit agreements to mitigate environmental effects of development projects. It also said it will work with Bridgeport to support local hiring. The city has promised “unqualified support” for the new power plant.

Unlike in FCA 9, the same clearing price will be paid to all capacity zones in New England. About 850 MW of the new resources will be built in the reconfigured Southeastern New England zone.

In its former configuration, the Southeast Massachusetts/Rhode Island zone last year failed to attract adequate resources. Administrative prices there were set at $17.73/kW-month as a result.

This year, the region was divided into two zones: Rest of Pool, which comprises Connecticut, western and central Massachusetts, Vermont, New Hampshire and Maine; and Southeastern New England (SENE), which includes Northeast Massachusetts/Greater Boston and Southeast Massachusetts/Rhode Island. (See ISO-NE Proposes New Capacity Zones for FCA 10.)

Firsts

The auction included several firsts, the RTO said.

The first offshore wind farm in the U.S. cleared the auction, with 6.8 MW, or 20% of its nameplate 34-MW capacity. Deepwater Wind is building the facility off Block Island, R.I. It is expected to be operating by the end of the year.

Two large fuel cell facilities, providing 2.5 MW each, also cleared.

ISO-NE said 27 MW of new wind and 44 MW of new solar cleared the auction; in all, 135 MW of wind and 65 MW of solar facilities cleared in FCA 10.

A total of 40,131 MW of resources, including 6,700 MW of new resources, qualified to compete in the auction.