Officials Question Role of Natural Gas, Regional Energy Market in Connecticut’s Future


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Most years, New England’s electrical grid walks a fine line to ensure that all six states have an uninterrupted supply of power – balancing a generating capacity depending heavily on natural gas, with infrastructure that is inadequate to fuel all of those plants.

So when the grid operator ISO-New England announced late last year that there might not be enough gas available to power the grid through an extended cold snap, ISO President Gordon van Welie said it was a good-faith effort to bring more transparency to the electric grid’s shortcomings.

But in Connecticut, energy leaders have already been questioning the value of the regional market they say has leaned heavily towards funding natural gas-fired plants – which produced 17 percent of the region’s electricity in 2000, and 45 percent in 2018. That has come at the expense of new renewables needed to meet the state’s goals for reducing carbon emissions.

And with ISO warning that the regional grid might not be able to provide the state with reliable energy, some are asking who is responsible for keeping the lights on in the deregulated energy market.

“I think between ISO, the generators, and the utilities – no one’s in charge,” Needleman said. “There is no responsible party, and there’s sort of a light and loose federal oversight of it.”

That’s one of the reasons that Needleman wanted the legislature’s energy committee to hold a forum on the electric grid, planned for Tuesday at 11 a.m. on CT-N. 

Needleman said ISO needs to be able to answer questions about the grid and electricity market, to identify problems the region is likely to face and find ways to address them.

In a letter to Van Welie last December, Katie Dykes, the state’s commissioner of energy and environmental protection, shared her frustration that ISO had raised concerns about reliability without offering solutions. 

“I think Connecticut has done more than its share to help address this issue, including taking extraordinary steps to prevent the Millstone nuclear power plant from prematurely shutting down,” Dykes said. “Because, had Millstone shut down, it would not be a hypothetical, we’d be experiencing significant reliability challenges in a winter like this.”

Dykes warned that without solutions from ISO, the grid will only become more precarious as extreme weather becomes more frequent due to global warming.

Dykes said she expects discussions with ISO to continue on reforming the regional energy market, and she has gone so far as to raise the threat of leaving the market if it can’t align with Connecticut’s goals.

“It’s unacceptable to tell the electric customers here in our state that we’re in danger of outages if we have sustained cold weather,” she said. “This is New England.”

Power plants, but no fuel

Just a few years after the energy market was deregulated in 1998, the constrained supply of natural gas had become an issue.

A cold snap in January 2004 brought the New England electric system “close to its limits” as unavailable gas-fired units left the grid operator racing to keep up with record-high demand, according to a report from the North American Electric Reliability Corporation.

That 2004 report – a debriefing on the cold snap – raises a familiar warning: New England’s growing reliance on natural gas for power can be a problem during extreme cold snaps. 

In a recent conversation with CT Examiner, NERC Director of Reliability Assessment John Moura said, on its face, the New England grid has plenty of capacity – meaning there are enough power plants to produce far more electricity than the grid would need on a peak day. But it’s not a given that there will be fuel to run the plants, he said, in part because the same pipelines that feed power plants also serve home heating customers, who draw up fuel during cold weather – and new pipelines aren’t being built.

“In the past, you might say, ‘We have plenty of capacity, we’re good,’” Moura said. “But things go wrong. Machines break, gas is constrained and gets interrupted, you might not have the variable resources [like solar] that you planned to have.”

And the grid has only become more reliant on natural gas since that 2004 near-miss.

In 2013, the ISO found that oil-powered generators were maintaining their storage tanks with only about one-third of their capacity heading into the winter – only enough to run for about two days if called on to run at full capacity.

In response, ISO created incentives for plants to store more oil reserves, but federal regulators said the subsidy unfairly lowered prices for other generators.

In 2018, ISO tried again, this time looking to address a flaw in its forward capacity market – where projects are selected and funded to ensure sufficient electric capacity three years in advance. 

The forward capacity market is a key piece of how the deregulated energy market of New England controls electric capacity: forecast how much power the grid needs in three years, and then fund enough projects to meet that need.

But even when those plants were built, they couldn’t always run when needed, and more and more went offline at critical times because of fuel shortages, the ISO reported. 

In response, ISO began penalizing plants that failed to meet their supply obligations, and awarding bonuses to plants that exceeded their obligations.

Four years into that program, Dykes said the program has raised costs for Connecticut electric customers without addressing the issue of reliability. If anything, say Dykes and environmental advocates, the forward capacity market has made the situation worse by favoring natural gas-fired projects.

Connecticut demands solutions

Dykes said she appreciates that  ISO-New England wants to communicate more openly about these issues, but she said the grid operator needs to come up with solutions. 

“I’ve been concerned that they’re raising this alarm, but without sharing a plan for how to address the reliability risks associated with sustained, New England-style cold, winter weather,” Dykes said. “I mean, this is New England. We have cold weather, and sometimes it lasts for several days. So what are they doing?”

The New England States Committee on Electricity shared her concerns, and followed up with a letter to van Welie in January, saying that the grid operator cannot be “passively waiting for [federal] direction” on this issue, and calling for prompt attention on the risks of sustained cold weather on the electric grid.

According to Needleman, it appears that nobody is responsible for ensuring a reliable supply of electricity. But with a market run by a private organization like ISO-New England, with limited transparency, regulated at the federal level by FERC, there is only so much states can do, he said. 

“When you have distribution companies doing their thing, generators doing their thing, and a grid manager that’s being directed by FERC to be fuel neutral, you end up with a generation system that’s always gonna go for the cheapest unless states themselves procure energy,” Needleman said. 

Generators could stockpile oil, but that comes at the expense of their profit. Having the state contract for oil-fired generators would be unpopular with environmentalists, and the state couldn’t mandate that power plants in Connecticut stockpile oil even if it wanted to, Needleman said

Dan Dolan, president of the New England Power Generators Association, said he’s optimistic that the attention on reliability this winter will give a necessary push to discussions of reform, allowing the states and ISO-New England to find an agreement in short order.

Dolan said one option is to pay reserve generators that sit idle until they’re called upon to help meet high demand. Now, those plants aren’t paid for the time they spend on standby, but that’s something the market is going to have to start to value to provide these “peaking” plants enough revenue to stay open.

Connecticut’s Integrated Resources Plan, a document DEEP produces every two years to guide electric planning, poses another solution for Connecticut: leave the regional market.

“Connecticut finds itself at a crossroads, and is faced with a difficult choice: continue to push for changes to a broken market design, through a process that has generally proven unresponsive to [Connecticut’s] needs, or pursue an exit from a regional arrangement that has become incompatible with the achievement of Connecticut’s long-term goals,” DEEP’s most recent Integrated Resource Plan states.