The NEPOOL Markets Committee last week debated 13 amendments to proposed updates to parameters for Forward Capacity Auction 16 (2025/26).

Many of the amendments, which were discussed during the last half of the committee’s Oct. 6-8 virtual meeting, challenged revenue figures proposed by Concentric Energy Advisors (CEA) and Mott MacDonald, two consulting firms hired by ISO-NE to update the FCM parameters.

Deborah Cooke, the RTO’s principal analyst for market development, presented responses to stakeholder questions about updates to the net cost of new entry (CONE) and offer review trigger prices (ORTPs).

The discussions continued a debate from the committee’s September meeting and previewed votes scheduled for November. (See ISO-NE Challenged on Wind, Solar, Storage Revenues.)

Face-off on Offshore Wind

Abby Krich and Alex Worsley of Boreas Renewables presented four amendments on behalf of RENEW Northeast, including capital costs and the investment tax credit for the ORTP calculation for offshore wind. A capacity offer below the ORTP triggers a unit-specific review by the Internal Market Monitor to verify the resource’s cost.

RENEW said the RTO’s proposal to use $5,876/kW (2019$) for the overnight capital cost of OSW and assumption of a 0% tax credit results in an ORTP of $52.46-$52.67/kW-month, which RENEW believes is double the actual cost. [Editor’s note: An earlier version of this article did not include ISO-NE’s updated figures.] RENEW has proposed using a lower overnight capital cost of $3,000/kW (2019$) and a higher tax credit of 18%.

Krich said $3,000/kW is a reasonable, middle-of-the-range estimate of expected costs for OSW projects in New England. A capital cost of up to $3,200/kW would still result in an ORTP of $0.

CEA said the RENEW analysis is “inappropriate,” and its estimated ranges should be revised upward. CEA challenged RENEW’s use of data from European and Chinese projects.

Krich told RTO Insider after the meeting that ISO-NE’s cost was accurate “8-10 years ago,” but they are no longer appropriate.

‘More Reasonable’ EAS Revenues

Ben Griffiths, an energy analyst for the Massachusetts Attorney General’s Office, offered a summary memo and presentation that outlined “a straightforward optimization model to more reasonably estimate” energy and ancillary services (EAS) revenue available to a storage device. Griffiths said the AG’s model produces “an operational schedule for storage that maximizes revenues” from participation in three of the RTO’s markets — energy, 10-minute spinning reserves and regulation — while respecting the storage device’s technical limitations.

Griffiths added that the AG disagrees about the “reasonableness of the CEA EAS revenue estimates for battery storage resources.”

A reasonable operator using a battery for energy, reserves and regulation should be able to earn $54.87/kW-year, assuming the Forward Reserve Market (FRM) sunsets, and $59.11/kW-year, assuming the FRM is maintained, Griffiths wrote. CEA’s contrasting estimates average EAS revenue from these three markets at $45.71/kW-year with an FRM sunset and $55.26/kW-year assuming it is maintained.” (See “Support for Forward Reserve Market Sunset,” NEPOOL Markets Committee Briefs: Oct. 6-8, 2020.)

Griffiths said these revenue estimates are “conservative” and the AG’s office “fully expects that more advanced dispatch schemes could yield higher revenues.”

NEPGA Proposes Amendments on Amortization Period, Owner’s Cost

The New England Power Generators Association (NEPGA) proposed changing the amortization period for the net CONE reference unit (a GE 7HA.02 gas-fired combustion turbine) to 15 years from 20 years. NEPGA’s Bruce Anderson said the 20-year amortization period fails to reflect the risks faced by developers, which creates “a finite period concluding in economic obsolescence.” There is “no evidence that the reference unit would be able to sustain its annual cash flows in real dollar terms for 20 years,” he added.

Anderson said NYISO recently reduced its reference unit’s economic life to 17 years to recognize the potential impact of New York state law and policy. In New England, most states have renewable portfolio standards requirements that involve the procurement of energy from non-carbon-emitting resources.

Additionally, NEPGA put forth an amendment that would take a “bottom’s up approach” to the owner’s cost. NEPGA proposes $12.45 million in owner’s cost — almost five times Mott McDonald’s $2.5 million estimate, which Anderson said is “woefully inadequate” to cover the known owner’s costs, let alone any contingencies.

NEPGA said its figure takes into account initial screening studies and work sufficient to qualify for the FCA and obtain a capacity supply obligation (CSO), plus activities necessary to install the equipment, interconnect it and ensure successful commercial operation. NEPGA said it ignored costs associated with electrical interconnection, network upgrades, gas interconnection, gas pipeline upgrades, initial fuel inventory and financing costs, while Mott McDonald said its estimate captured these activities and contingencies.

At NEPGA’s request, CEA and Mott McDonald updated their dispatch to include seasonal intraday fuel price premiums ranging from 4% in summer to 20% in winter.

NEPGA had asked for time on the agenda to amend the net CONE proposal to include an intraday premium in the event CEA and Mott McDonald chose not to account for it in their updated modeling. NEPGA said it will evaluate the consultants’ proposed intraday premium accounting and could bring forward an amendment at the November committee meeting.

NESCOE Amendments Look at Reference Unit, PfP

While NEPGA sought to shorten the reference unit’s assumed life, NESCOE said it should be increased. NESCOE’s two amendments would boost the useful economic life of the reference unit to 25 years and escalate pay-for-performance (PfP) revenues to account for inflation.

NESCOE proposed that the net CONE resource should be increased to reflect the expected economic life of the reference unit and that PfP should be increased for inflation, reflecting the recalculation of the performance payment rate (PPR) every three years. There are no corresponding Tariff language revisions since these amendments are changes to input assumptions in the analysis.

Calculating net CONE using a 25-year life for the resource reflects a better balance between the physical life of these facilities and a reasonable expectation of their economic life, NESCOE said. The estimated reduction in net CONE is $0.63/kW-mo. Adjusting PPR revenues for inflation is more consistent with the treatment of other revenues with an estimated reduction in net CONE of $0.12/kW-mo., it added.