The energy department of outgoing Massachusetts Gov. Charlie Baker left behind a gift on the governor’s last day in office: a Forward Clean Energy Market proposal.
The document, put together by Massachusetts Department of Energy Resources officials along with Brattle Group and Sustainable Energy Advantage, is intended to be a first draft that could eventually make its way into the NEPOOL stakeholder process.
It will add new weight to longtime discussions about creating a clean energy market in the region for the purpose of encouraging the buildout of more renewable and non-emitting energy sources.
FCEM is the preferred regional decarbonization solution of the states, which are wary of the political implications of carbon pricing. But ISO-NE has warned that FERC or the courts could find the proposal discriminatory.(See NE States, ISO-NE Start to Wrestle with Next Steps on Pathways.)
“Massachusetts views the FCEM as a critical, and presently missing, institutional pillar that will be required to support equitable, affordable, and reliable clean energy transition,” the proposal says.
Structure and Governance
The proposal calls for creating a new independent nonprofit to administer the FCEM, led by representatives of each of the six New England states. Whether it would be FERC jurisdictional is up for debate. Under the main proposal it would, but the proposals’ authors also acknowledge that they might need an alternative structure separate from ISO-NE and overseen exclusively by state officials.
The FCEM’s auctions would line up with ISO-NE’s existing capacity market, taking place every three years. Buyers in the market (such as state agencies, competitive retailers, utilities, municipalities and private companies), taking part voluntarily, could procure one of a number of types of clean electricity certificates.
The FCEM would include several other mechanisms that the proposal says are designed to “facilitate the financing of large volumes of new clean electricity resources.”
Those include a new resource price lock-in that guarantees new resources a clearing price for a term of 15 years at the rollout of the FCEM, the option for buyers to specify that their demand must be fulfilled by new resources and the option for buyers to submit a “phased entry” demand bid that offers greater flexibility in the startup date for projects that can offer a more competitive price if they initiate operation in future years.
Multiple certificates on offer
The system would be designed to handle both several region-wide products and whatever certificates states want to put forward on their own, the proposal says.
The first region-wide product would be a New England Renewable Energy Certificate that would be comprised of onshore and offshore wind, solar, hydroelectric and some distributed energy resources.
The second would be a Clean Energy Attribute Certificate, representing “energy generated by any non-emitting energy resource,” including renewables as well as nuclear.
The third is a GHG Marginal Abatement Certificate that includes all of the above, as well as storage and demand response.
And the fourth is a Clean Capacity Certificate that represents all of the above plus clean capacity imports.
States could then list their own products, with no limits on scale or technology types.
“These state-defined rules need not match the rules applicable to similar regional FCEM-defined products. However, over time, the experience with innovative product offerings within the FCEM and across participating New England states may be mutually informative, improving the economic efficiency and efficacy of both state policies and the FCEM products,” the proposal says.
Buyers would have the option to procure their certificates from any combination of the products listed.
The FCEM would use the NEPOOL Generation Information System to track certificates.
