Dr. Felder demonstrates a clear understanding of the objectives, and challenges, associated with a future pathway forward for NEPOOL to address State energy goals while simultaneously ensuring a reliable electric system for the region. He identifies four criteria representing critical success factors that must be addressed by a proposal in order to be considered viable:
- the achievement of States’ energy objectives
- addressing the so-called double capacity payment issue
- ensuring sufficient price integrity in the markets (i.e., addressing price suppression)
- the increasing need for balancing resources in a future state. Pathways may not procure sufficient amounts and types of balancing resources that the region needs to operate the grid reliably
He analyzed several of the proposed options in detail, with the following conclusions regarding item 4, the need for balancing resources needed for reliability:
- neither the FCEM nor the ICCM explicitly address the balancing resource issue
- Net carbon pricing does not explicitly address the balancing resource issue
He accurately points out that both carbon pricing and FCEM/ICCM options fail to adequately address the acquisition of resources needed for system balancing (reliability), which is an absolute necessity for any solution that claims to be a solution for resource adequacy and a replacement for the existing Forward Capacity Market.
I agree with the majority of Dr. Felder's findings and analysis in the linked report, with one exception regarding the following statements.
Two options propose changes/reforms to the FCM: Capacity as a Commodity (Gabel Associates, 2020) and Always on Capacity Exchange(“AOCE”) (Reliable Energy Analytics, 2019). As currently formulated, however, both options have not explicitly made clear how they would help to advance or achieve States’ clean energy objectives, address the double payment/price suppression tradeoff, or ensure sufficient balancing resources. If either of these options are pursued in future pathway discussions, it would be useful to understand how they would specifically help to facilitate the resolution of one or more of these issues.
It's unclear what information Dr. Felder reviewed to reach this conclusion, however I would encourage him to look more closely at the design mechanisms within AOCE that address all of these criteria:
AOCE addresses the need to satisfy State Energy goals as a first priority as indicated in these references:
AOCE addresses the double payment and price suppression issues by providing States with a capacity exchange as an alternative to RFP processes currently used to acquire resources to meet State Energy Goals. Resources needed to satisfy State energy programs can be acquired through AOCE, using a competitive wholesale market approach, eliminating double payments, that occur today. Price suppression is addressed by replacing FCM with a clearing process whereby each grid service is cleared independently resulting in a uniform clearing price for capacity.
AOCE addresses the acquisition of critical grid services offered by resources needed for balancing and to ensure reliability of electric service across New England:
I welcome the opportunity to address any questions or comments from Dr. Felder, in order to provide a more accurate assessment of the AOCE proposal, and it's ability to satisfy the items cited as concerns in his analysis of AOCE, in time to include an updated analysis of AOCE in his final report.