Hartford Business.com
August 28, 2008
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New England’s wholesale electricity markets performed competitively in 2007 and are providing necessary incentives and price signals to spur investment in infrastructure, new power sources, and demand-side projects to assure reliability while meeting rising demand, according to an annual report by ISO New England, the region’s nonprofit wholesale electricity market operator.
Wholesale electricity prices rose in 2007, driven by higher prices for natural gas and oil and rising demand, the 206-page state-of-the-market report recalled. But the market also saw new investments in transmission lines that can transport large power loads, peaking power plants and other temporary-use power plants, and emergency generators.
The markets also prompted investments in demand-side resources, defined as efficiency and conservation projects, contracts with utilities under which businesses get paid for reducing power use during periods of peak demand or high energy prices, and small on-site generators that companies purchase.
“New England’s competitive wholesale markets are reflecting demand and fuel costs and are also encouraging investment in transmission, generation, and demand-side resources where they are most needed,” ISO President and Chief Executive Officer Gordon van Welie said.
Three key developments in New England’s electricity marketplace in 2007 were:
• The successful introduction of the Forward Capacity Market with improved investment incentives for electric energy supply and demand resources.
In the Forward Capacity Market, ISO holds auctions that draw power suppliers to bid to supply electricity three years in advance and that draw companies that offer efficiency, conservation, and demand reduction programs to bid on saving electricity three years in advance.
After this year, ISO will hold auctions once a year. The region’s first auction occurred in February, procuring enough capacity to supply the region’s energy needs in the 2010 to 2011 timeframe.
The next auction is in December.
• Transmission investment in southwestern Connecticut and metropolitan Boston improved reliability and reduced costs.
• Several disruptions to natural gas delivery that affected reliability and pricing. “Market enhancements made in 2007 are the driving force behind much of the new investment planned for New England, while the gas supply disruptions in the past year show that the region will be best served with a more diverse portfolio of fuels powering our generators,” van Welie said.
He added that $1.2 billion in transmission upgrades since 2002 and growth in demand-response programs has improved reliability.
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