Snowed-in and disappointed I cannot attend the 2019 NEPGA Energy Summit today
image credit: Authors back deck covered in snow
- Dec 2, 2019 4:45 pm GMTDec 2, 2019 5:05 pm GMT
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The weather forecasters were spot on in their predictions of a Northeaster winter storm and I’m snowed-in, unable to attend the 2019 NEPGA Energy Summit in Boston, which I was really looking forward to. This happens occasionally when you live on the side of a Mountain (East Mountain) and a large snowfall overwhelms the city DPW plowing operations. But I won’t let that stop me from sharing with my readers what I intended to share with other attendees of the Summit, so here goes.
There’s no need to reiterate everything we’ve been hearing and reading about for the past year in the press about the problems with capacity markets as expressed in letters from Senators, Attorney Generals, ISO New England and other stakeholder issues. In my opinion, the time has come to focus on designing solutions that will achieve a two-part goal: Satisfy State Energy Targets for emission free energy AND ensure that we have reliable electricity at our fingertips, at a just and reasonable $ amount for all (consumers, generators, TSO, etc.). In an attempt to start an open dialogue and focus on solution design, I want to put all of my cards on the table for all to see. Some people believe a carbon tax is the best solution to achieve State energy targets. I believe there is a better solution available, a capacity exchange, like REBA and Level Ten have implemented, operated by ISO’s, that co-optimizes procurement of renewable energy to meet State Energy targets along with essential grid services needed for reliability, all at the most reasonable $ amount.
First a little background is in order. I worked as the Enterprise Architect in the Business Architecture and Technology (BAT) department in ISO New England when the Forward Capacity Market concept was first proposed by market development and progressed through NEPOOL market committees to become a real market. An outside contractor was hired by ISO New England to create and operate the FCM descending clock auction and to develop the market clearing engine that would apply linear programming, optimization techniques to find the lowest cost resource mix, to receive capacity payments to go along with their capacity supply obligations (CSO). Six months before the first FCM auction was scheduled to start the contractor alerted ISO New England that they were unable to develop the market clearing engine and ISO would have to find another option. That’s when the BAT department, the ISO’s R&D group, was called into action. A very talented team of 6 was assembled from BAT, IT and Market development to design, develop, test and put into production the FCM clearing engine and we had 6 months to complete the work. I served as the software architect for the clearing engine and also developed the testing framework. This is where I developed my original interest and affinity for capacity market design and software solutions. To be clear, I am not an economist nor a market designer; I’m a software architect and software engineer with an understanding of capacity markets and the design/development of software solutions for capacity markets in New England. I took an early retirement from ISO New England on 11/1/2018, but I just wasn’t ready to take my seat in the stands – I had to be contributing to be happy. In December 2018 I decided to start Reliable Energy Analytics and my first priority was to analyze capacity market performance in New England, which led to the realization that a dropping demand curve, largely due to increasing renewable across the region, combined with a high amount of excess capacity acquired from 2015-2019, would drive down FCM clearing prices for all generators to an unsustainable level, for years to come (Capacity payments are prorated down when excess capacity exists at the last step in the descending clock auction, which harms all generators, leading to band-aid treatments like CASPR, fuel subsidies and other out of market techniques). That’s when I developed the Always on Capacity Exchange concept (AOCE), borrowing heavily from renewable energy buyer marketplace designs, while maintaining a laser focus on meeting resource requirements for reliability (essential grid services) that an ISO Needs. I approached the development of AOCE as if I was still working at ISONE and the call came in to solve the FCM problems today – just like the first FCM clearing engine was developed. But this time the objective function would have to co-optimize procurement of renewable energy to meet State Energy targets along with the acquisition of essential grid services needed for reliability using a fuel neutral approach (i.e. ramping, baseload gen, FFR/PFR, Volt-Var control, etc.), all at the most reasonable $ amount.
I planned to attend the NEPGA Energy Summit today to share my story and to emphasize the role I wish to play going forward in the pursuit of the next FCM solution. I plan to serve in a technical advisory role representing a party that wishes to influence the design and development of a revised FCM solution (FCM V2) or whatever replaces the existing FCM design in New England. My goal is to participate, as a technical consultant in understanding the FCM policies/market rules, as they are being developed, and to assist my client in understanding the benefits/consequences of these rules as they are being developed, and to accompany my client through design/development and implementation of FCM V2 to achieve optimal results. I defer to the policy makers, influencers and decision makers to provide the final direction so that the technical people, like me, can get to work on a solution.