FACED WITH POWER plant closures, New England’s regional power grid operator is paying out an estimated $4 billion in incentives to ensure adequate supplies of electricity three years from now.

ISO-New England said the cost of the incentives, which are used to spur investments in new generating plants, energy efficiency measures, and electricity demand reduction programs, has been rising sharply. From 2008 to 2016, the cost of the incentives hovered between $1 billion and $1.8 billion a year. In the auction for 2017, the cost jumped to $3 billion and it soared 33 percent to $4 billion for 2018.

The cost is rising as the need for new sources of electricity is increasing. By the middle of 2017, ISO-New England said 10 percent of the region’s existing electrical generating capacity is expected to retire, such as Brayton Point in Somerset, whose owners announced last year they planned to close the 1,500-megawatt coal-fired plant in 2017.

The incentives are awarded through an auction process designed to yield power supply commitments three years from now at the lowest possible price. In this year’s auction, about 84 percent of the power needs for 2017 came from existing generators in the region and imports from New York and Canada. The remaining 16 percent came from three new power plants – one in southeastern Massachusetts and two in Connecticut – as well as commitments by big consumers of electricity to reduce consumption during periods of shortage.

The auction took place across four zones in New England – Connecticut; Greater Boston/northeastern Massachusetts; central Massachusetts/ Vermont/ New Hampshire/Maine; and southeastern Massachusetts/Rhode Island.

The auction clearing price across the first three zones was $9.55 per kilowatt month, but supplies were inadequate in the southeastern Massachusetts/Rhode Island zone so no auction was held there. Instead, the starting auction price of $17.73 per kilowatt month was awarded for 353 megawatts of new generating capacity and a price of $11.08 was imposed for existing resources.

The cost of the incentives, combined with the value of electricity sold in the region, provide a picture of New England’s wholesale bill for electricity. That bill has been rising sharply. In 2012, the region spent a total of $6.4 billion — $5.2 billion on electricity and $1.2 billion on incentives. In 2013, the tab rose to $9.1 billion – $1.1 billion on incentives and $8 billion on electricity. Last year, the bill was $10.2 billion — $1.1 billion on incentives and $9.1 billion on electricity.

The rising tab for electricity comes at a time when officials in all six New England states are grappling with how to expand the supply of power in the region while complying with laws requiring reduced carbon emissions. Environmentalists want to see states rely more on renewable forms of energy, which tend to be more expensive and lack scale. Business groups, meanwhile, are pushing for new pipelines that would bring cheap natural gas from Pennsylvania to the area.

5 replies on “Power incentives hit $4b”

  1. A visit to the state’s Executive Office of Energy and Environmental Affairs website greets one with the following statement:

    “Welcome to the Executive Office of Energy and Environmental Affairs (EEA), the only state Cabinet-level office in the country that oversees both environmental and energy agencies. In putting energy and environment under one roof, former Governor Patrick set a course toward a clean energy future, and the six agencies under EEA are following that direction with vigor, in close collaboration with the Legislature and many outside partners.”
    State mandates enforced by this office has yielded a 37% electric rate increase in a period when demand for electricity has remained relatively flat. The pursuit of wind power has destroyed neighborhoods in Falmouth, Fairhaven, Kingston, Scituate, Florida and Monroe. The MassDEP, under the control of this office, has been ineffective in enforcing noise pollution regulations against the owners of giant wind turbines, in the above neighborhoods. Plans are under way to destroy mountain ridges throughout the Berkshires filling them with giant wind turbines.
    Since 2008 ISO-NE has been warning that these mandates for renewable energy are going to drive up rates, and compromise grid reliability. Policymakers are forcing the early retirement of both coal and nuclear power plants in favor of natural gas. The primary reason is that variable power resources, like wind and solar, can only faction with the firming capacity of flexible power from natural gas. The EOEEA has been telling us that the integration of wind and solar will diversify the fuel supply that will reduce cost and improve reliability. Experience so far is showing just the opposite is true.
    Ironically, all this is undertaken in an attempt to reduce greenhouse gas emissions. Studies now show that the need for backup firming of wind and solar by fossil fuel avoids little to no carbon.
    This misguided effort to a clean energy future by state government is going to more than double electric rates, compromise grid reliability, and construct unnecessary gas pipelines and high voltage power lines that are ecologically destructive.
    Let’s hope governor Baker does not follow in his predecessor’s footsteps!

  2. Marie Jane says: Do you think the Environmental Affairs side of this ill-conceived matchup
    gets the meaning of NortheasternEE’s statement: “Ironically, all this is undertaken in an attempt to reduce greenhouse gas emissions. Studies now show that the need for backup firming of wind and solar by fossil fuel avoids little to no carbon.”

    Governor Baker and our Legislature need to revisit the industrial wind turbine agenda and Green
    Communities 2008. Perhaps they can answer, before moving forward with both these unrealistic “visions”, how we shut out/shut down known reliable power sources like coal and nuclear knowing the inadequacies of solar and wind. Why would our Governor and Legislature embrace something that truly is not in the best interest of the Commonwealth.
    Wind and solar are not dependable, the effect on carbon emissions is proven to be negligible, there are health issues that have never been addressed and must be, the economic figures are staggeringly negative. No matter how much money is thrown at either, it is will never be more than it is, woefully inefficient and ineffective. Why are we doing this? The solution will surely cause more harm than the perceived problem.

  3. Oh, really? I don’t know about you, but not all of us are electric hogs that consume in quantities that make one tremble with fear in the night that their hot tub heater will fizzle when the next nuke goes down. Contrary to what seems to be the prevailing meme here, DE-centralized & grid independent generating sources would be the best solution to our power problems, but while we’re at it, Ma. isn’t doing nearly enough to ensure we maximize solar & wind build out. We should require every big box roof, warehouse, every factory, every DPW & municipal structure be engineered to house solar arrays and use conservation technology. Instead, what do we have? Go into any one of these places & you will see an incredible waste of energy, every light on, ceiling heaters, massive doors and questionable insulation. Start there, make it the law. In the end, businesses and towns will save huge amounts on electricity & heat. The state ought to be looking into the latest water turbine technology & consider offshore & river applications. There’s plenty that could have been done already and should be done now to stop wasting energy. in Massachusetts. How about size restrictions on all those idiotic McMansions the super wealthy want? How about an energy tax based on square footage? It could be keyed to income to avoid penalizing the middle class & the poor. Lots of things to do- not enough imagination & follow through. Too many entrenched interests and stubborn mindsets aren’t good for the commonwealth.

  4. Very true that a ton of power is wasted. Just went into a furniture store in Nashua and saw about 200 halogen spot lights in the store. On my way I saw about 100 houses with severe ice dams where the snow had melted off of the upper part of the roof.

    All homes should be retrofitted to seal and insulate the attic properly to avoid ice dams, and all large users of electricity should have an excess consumption surcharge (as well as time varying electric rates) to provide an economic incentive as well as a large loan fund that can be used to fund the needed capital improvements (like LED lighting) to fix this problem once and for all.

    MA may be rated #1 in energy efficiency, but that is not because we are the most efficient. It is because we were starting out from such a low baseline of efficiency, with poorly constructed houses that consumed 2 to 3 times the amount of heat they should have when they first started measuring the progress of various regions in reducing consumption of energy.

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