If you find yourself dazed and confused by what’s happening in the world of electricity, you’re not alone. Even the folks running New England’s power grid are throwing up their hands.
That body, called ISO-New England, says it’s no longer possible to predict what’s going to happen in the future of the the electric grid, now that renewables have scrambled the supply side of power production while data centers and electrification scramble the demand side. So they’re going to stop trying.
In formal terms, they’ve asked the feds to let them stop making three-year predictions about what will be needed through what’s known as the capacity auction and instead do it month to month via a “prompt auction.”
This would be a pretty big change. The main purpose of ISO-NE is to make sure that the overlapping power grid in the six New England states can keep the lights on, no matter what. It has long used an elaborate system called the forward capacity market to estimate whether we have enough plants and wire to do that three years from now, on the assumption it takes that long to build anything if needed.
But the old rules aren’t working any more, it says, so they’ve asked FERC, the federal agency overseeing the power section, to let them buy capacity a month ahead of time. They say that flexibility will help them cope better.
Don Kreis, who as the state’s consumer advocate has butted heads with the group in the past, is sympathetic. “You’ve all these changes on the demand side and on the supply side, ISO-New England, to its credit, is trying to make its market rules more responsive to the new needs.”
He thinks there’s a chance this change, if OK’d, will save us money since the current system, he believes, has been overly cautious.
“We’re probably buying too much capacity, relying on estimates three years in the future. … We’re probably paying generators too much money to do too little,” he said.
Incidentally, as of today Kreis is writing an occasional column for the Monitor on topics that cross his desk. You can read the first of them, about the realities of switching to Concord Community Power, by clicking here.
The electrical grid needs high-level tinkering because it’s too important to be left to the invisible hand of the marketplace. Avoiding blackouts requires plants and wires that only get used now and then during heat waves or polar vortexes, but profit-minded companies won’t build something if it sits idle most of the time.
“There just isn’t enough money being paid at wholesale electricity to pay for all of the capacity you need, the ability to generate enough electricity when needed,” Kreis said.
Realizing this, governments over the past century have created various rules and mechanisms to bribe companies – sorry, I mean incentivize them – to meet demand by building extra power plants and power lines. This extra is quantified by the reserve margin, the amount of electricity that can be generated above and beyond typical needs. It is traditionally set at 15% but ISO-NE says it could fall to 8% in a decade if they don’t make changes, raising a risk of blackouts.
My guess is that this won’t be the last change we see to high-level rules governing the power system. It’s changing so fast and so unexpectedly (did you anticipate the data center deluge? me neither) that sticking to the old ways would be a bad idea. Let’s hope the new ways are better.