ISO-NE responded to stakeholder feedback on its capacity auction reform (CAR) project at the NEPOOL Markets Committee meeting Aug. 6, providing clarity on the scope of its capacity market overhaul.

Chris Geissler, ISO-NE’s director of economic analysis, outlined the “straw scope” of the reforms, including which topics likely will be included in the project, and those remaining under consideration.

The CAR project is intended to coordinate resource accreditation reforms with changes to the time frame of capacity auctions. ISO-NE plans to move from the current forward annual auction format to a prompt seasonal auction for the 2028/29 capacity commitment period (CCP).

This change would reduce the time between the auction and the CCP and would split the yearlong CCP into seasons. (See ISO-NE Moving Forward with Prompt, Seasonal Capacity Market Design.)

Geissler presented ISO-NE’s initial thoughts on the scope to the MC in July, and stakeholders submitted written comments prior to the August meeting. (See NEPOOL Markets Committee Restarts Work on Capacity Market Changes.)

The core aspects of the project include defining the timing and schedule of the prompt reforms, the treatment of new and retiring resources, and the delineation of seasons in the CCP, along with finalizing the accreditation reforms, Geissler said. The project also will include a focus on offer price formation, accounting for gas constraints and updating the current data systems, he added.

ISO-NE also plans to move from a descending clock to a sealed bid, which was recommended by the External Market Monitor. He said sealed bids would help enable simultaneous (instead of sequential) seasonal auctions, which ISO-NE is considering to allow bidders “to submit offers that separately reflect seasonal and annual costs.”

Geissler said the RTO still is considering whether to include an evaluation of how it will model resources that are retained via out-of-market mechanisms, tie benefits and correlated temperature-related outages.

He added ISO-NE will consider whether it can improve the existing load model used for accreditation, along with the modeling frameworks used for different resource types. Storage developers argue the RTO’s load modeling has produced unrealistic capacity shortfall events. (See ISO-NE Capacity Accreditation Reforms Spur Energy Storage Concerns.)

The RTO is unlikely to include in the scope a reconsideration of the underlying software program used for the accreditation modeling, or an evaluation of modeling of resource start time. Some stakeholders argue in favor of modeling resource start time, and the External Market Monitor (EMM) has highlighted the issue.

“Resources with long startup times that do not operate frequently provide less reliability value than more flexible units,” the EMM noted in 2021.

Scope Feedback

Prior to the meeting, a wide range of stakeholders submitted written comments on ISO-NE’s scope proposal.

A coalition of clean energy companies and environmental advocacy groups called on ISO-NE to “facilitate more discussion on how the modeled risk relates to observed real-world risk.”

Storage developers expressed concern that the new accreditation framework will lead to a significant reduction in capacity market revenue for storage resources. The impact analysis results presented in the previous stage of the accreditation project indicated storage would see the most significant revenue reduction of all resource types. (See ISO-NE: RCA Changes to Increase Capacity Market Revenues by 11%.)

Several solar companies also submitted comments urging the RTO to consider “enhancements to the modeling framework” for co-located solar and storage resources.

LS Power made the case that accreditation should account for unit-by-unit differences in natural gas availability for gas generation. The company has stressed that gas availability when temperatures decline varies significantly by state and by unit, and ISO-NE’s current accreditation proposal would not account for these differences.

“Just as the current Forward Capacity Auction methodology recognizes locational variations and unit-specific characteristics for accreditation, ISO’s CAR accreditation approach to natural gas accessibility must do the same,” LS wrote.

Meanwhile, RENEW Northeast expressed support for ISO-NE’s proposal for accrediting gas resources, writing that “the proposed market constraint for gas, as part of the seasonal market, appears to be a significant improvement and we appreciate that ISO continues to plan for this as part of the initial market reform effort.”

Calpine advocated for a simultaneous clearing design for seasonal auctions, writing that it has “grave concerns with a seasonal construct that does not allow or permit resources the opportunity to recover full (annual) costs.”

The company also stressed the scope should include an evaluation of tie benefits, and that tie benefits should be treated similarly to other capacity resources.

In contrast, Synapse Energy Economics wrote that re-evaluating the treatment of tie benefits is “not a critical priority at this stage,” adding that it likely would have a small impact on overall capacity requirements.

Several stakeholders, including the New England Power Generators Association (NEPGA), said ISO-NE should discuss with stakeholders what costs can be included in a capacity market offer price.

The Massachusetts Attorney General’s Office recommended ISO-NE “develop a longer-term strategic plan and roadmap for consideration and implementation of needed capacity market reforms that are outside the scope of CAR for CCP 19.”

Financial Assurance

A proposal by NEPGA to amend ISO-NE’s proposed updates to the financial assurance policy failed to gain the support of the MC, with 50% of votes in favor.

NEPGA’s proposal would direct ISO-NE to allow bilateral trading of capacity supply obligations (CSOs) until five business days before each obligation month and would require ISO-NE to review trades within five business days of their submission. (See NE Generators Propose Financial Assurance Changes.)

“The current rules create incremental risk and increase the cost of assuming a CSO,” said Bruce Anderson of NEPGA. “The ability to trade closer in time to the obligation month improves reliability, in that it allows for timely substitution of anticipated Capacity Scarcity Condition performance.”