POWER September 2017 - 42

ENERGY MARKETS
Could Success Spoil ISO-NE?
Independent System Operator-New England celebrated its 20th anniversary
last July with a solid record in its energy and capacity markets, turning
around a fragmented regional electric system. Can it repeat that performance
in the face of new challenges: retiring coal, oil, and nuclear plants;
gas deliverability problems; the rise of renewables; and the need for decarbonization?
Kennedy
Maize
O
n July 1, the Independent System Operator-New
England (ISO-NE), headquartered
in Holyoke, Massachusetts
(Figure 1), marked 20 years as a wholesale,
competitive market covering Connecticut,
Rhode Island, Massachusetts, Vermont, New
Hampshire, and most of Maine (Figure 2).
When the ISO began operations, competitive
wholesale markets were a bold experiment
for the 1990s, fostered by the Federal Energy
Regulatory Commission (FERC). The foundation
was FERC's belief, based in classical
economics, that market competition would
produce superior results compared to the conventional
model of the state-regulated, vertically
integrated monopoly electric companies.
FERC's theory was that separating electric
generation, which had seen competition
arise as a result of the 1978 Public Utility
Regulatory Policies Act and the appearance
of nonutility generation companies, from
transmission and distribution would lower
consumer prices, introduce new investment,
and spur innovation. It was called " restructuring. "
There were plenty of skeptics.
New England's electric market in the
1990s, dominated by vertically integrated
monopoly electric utilities, was a mess.
Consumer rates were high. Generation was
dominated by oil, coal, and nuclear. Little
electric system investment was occurring in
the region. Reliability was problematic. Then
FERC unleashed its experiment in wholesale
electric market competition.
" The experiment was extremely successful, "
ISO-NE CEO Gordon van Welie told
POWER in an interview shortly after the
anniversary. " The aim of restructuring was
more efficient production and greater reliability.
We can check both those boxes. We
also needed to attract investment in the region. "
That box also got checked.
ISO-NE claims the following benefits
have been realized:
■ Wholesale energy prices (which translate
into consumer prices) have dropped 44%
since 2004, which was the first year of the
ISO's energy market. 2016 saw the lowest
wholesale electric prices since 2003.
1. At the controls. The control room of Independent System Operator-New England's
(ISO-NE's) headquarters in Holyoke, Massachusetts, is the nerve center for the group's operations.
Those manning the controls are responsible for ensuring the reliability of a grid that
receives power from a mix of natural gas, nuclear, coal, oil, hydro, and renewables such as wind
and solar. ISO-NE was designated a Regional Transmission Organization in 2005, and given
broader authority over development of the region's transmission system. Courtesy: ISO-NE
■ Some 14,000 MW of new-mostly gas
combined cycle-generation has replaced
older coal- and oil-fired generating capacity,
a private investment of about $14 billion.
Another $8 billion of private-sector
investment has gone into new high-voltage
transmission, with another $4 billion
coming along.
■ The new generation has slashed regional
air pollution. Nitrogen oxide emissions
decreased by 68%, SO2
95%, and CO2
tween 2001 and 2015.
■ New technology and efficiency has arrived,
including wind, solar photovoltaic,
demand response, and energy efficiency.
The changed generating profile of the
region illustrates the generation transition
that has occurred in a system that now totals
30,500 MW in capacity. According to the
ISO, in 1990, the region saw nuclear power
as the dominant generating source, at 36%,
followed by oil at 34%, coal at 16%, hydro
at 7%, natural gas at 6%, and pumped storage
at 1.7%. That general profile remained
the case for more than a decade, but that's
changed. Today " it's a much more reliable
42
www.powermag.com
POWER | September 2017
emissions plunged
emissions dropped 24% be2.
Covering a six-state region. The
ISO-NE serves six states, from Maine at its
northern end, to Connecticut and Rhode Island
in the south. Source: FERC

http://www.powermag.com

POWER September 2017

Table of Contents for the Digital Edition of POWER September 2017