The regional electric grid operator for New England is beginning to study how it could play a new role in cutting power sector emissions.
ISO New England oversees the electric grid for the six-state region, coordinating the real-time flow of electricity as well as operating longer-term markets to make sure an adequate supply of generation is being built.
Traditionally, as with other regional grid operators, its top concerns have been reliability and affordability: making sure it always has enough power to keep the lights on at the lowest possible price.
In recent years, though, many states have adopted a third priority: reducing emissions. Critics say grid operators have been slow to respond, and that their policies have become barriers to states’ climate goals by prioritizing conventional power plants over emerging clean energy resources.
ISO-NE’s recent Pathways study, released in February, lays out four possible frameworks for how the grid operator might integrate clean energy into the grid. They include continuing the status quo, creating a new clean energy market, implementing carbon pricing, and a hybrid scenario.
Advocates say the report is a pivotal — if long overdue — step toward decarbonizing the region’s power supply.
“To date, the ISO’s market designs have been holding back the region,” said Melissa Birchard, director of clean energy and grid reform at environmental advocacy group the Acadia Center. “This study is a first step to changing that.”
Goals and barriers
The New England states have generally set ambitious goals for reducing greenhouse gas emissions. Five of the states have decarbonization mandates that aim to eliminate all or most carbon dioxide emissions by 2040 or 2050. New Hampshire has called for a reduction of 80% by 2050, though this target is not enshrined in law.
To reach these targets, each state has its own combination of incentive programs, regulations, and energy procurement strategies. Connecticut, Massachusetts, and Rhode Island have all committed to significant offshore wind energy procurements, and Massachusetts’ solar incentive program is designed to bring 3,200 megawatts of renewable energy online.
It is widely believed, however, that the actions of individual states will not be enough to achieve the needed carbon reductions across the entire regional grid.
“To meet the decarbonization goals at the state level requires such a monumental shift of capital and investments,” said Dan Dolan, president of the New England Power Generators Association. The current course, he said, “is probably unsustainable.”
For many years, renewable energy supporters, climate activists, and state leaders have contended that the way ISO-NE pursues its goals has created barriers to decarbonizing the grid. For example, the organization’s minimum offer price rule — set to end in 2024 — has made it financially challenging for renewable resources to participate in capacity markets, advocates argue.
“It’s hard for the states to make progress when the ISO’s markets are putting up barriers,” Birchard said.
Four paths forward
The Pathways study is an attempt to begin investigating ways ISO-NE might in fact help drive the decarbonization of the grid over the coming decades.
“It’s asking, ‘What types of wholesale market designs might best help the region get to where it wants to go?’” said ISO-NE spokesperson Matthew Kakley.
The study, conducted by Boston-based economics consulting firm The Analysis Group, lays out four scenarios:
- Continuing the status quo, in which individual states choose their own policies and enter into long-term contracts with renewable energy suppliers to achieve their targets.
- Creating a forward clean energy market, a centralized market that compensates clean energy resources for committing to supply power at a future date.
- Implementing a carbon price, which would require generators to pay for their carbon emissions and then return the money generated to energy consumers.
- A hybrid scenario combining a forward clean energy market for new non-emitting resources with a carbon price for existing generators.
The study returned a broad-level look at the potential advantages and disadvantages of each scenario. A net carbon price would likely reduce carbon dioxide emissions most cost-effectively, with a forward clean energy market or a hybrid model performing just slightly less effectively. A carbon price and, to a lesser extent, a hybrid approach would also provide incentives for generators to reduce their carbon intensity.
A carbon price, however, would require the highest level of coordination among participating states, while the status quo, in which states operate individually, would naturally require the least coordination.
Now, ISO-NE will be collecting feedback from stakeholders as it determines the next steps forward.
“It’s really intended to be the foundation for broad discussions,” Kakley said.
States to play a key role
Some of the interested parties have already declared their preferred path forward. ISO-NE has long advocated for a carbon price, and the New England Power Generators Association has also made clear that this is their preference as well.
“We’re heartened to see that’s the lowest-cost option under the analysis that was done,” Dolan said.
The New England States Committee on Energy, a group representing the six New England states in regional energy matters, has been active in advocating for better ways to decarbonize the grid. In 2020, the group released a vision statement outlining the ways it felt the current ISO-NE markets placed obstacles in the way of clean energy development.
The group has welcomed the Pathways study as a valuable first step and said it will hold off on endorsing a specific option for now. However, it also acknowledges it “is interested in continuing development of [a forward clean energy market], which each state could elect to use to facilitate financing for new clean resources.”
Whatever path is chosen, there is widespread agreement that ISO-NE will need the support and engagement of the states to make the solution work.
“The states are going to play a key role in whatever market mechanism is selected here,” said Phelps Turner, senior attorney with the Conservation Law Foundation. “They’re going to be key participants and their views are critical in selecting and designing which mechanisms go forward.”
However, even as stakeholders embrace the Pathways study, many feel it has taken too long to get to this point. The need to make decisions and take action is only getting more urgent, Turner noted.
“It’s going to take time to design and implement whichever market mechanism or mechanisms the region decides to go with,” he said. “We’re keeping an eye on the clock here.”