Record Low ISO-NE Forward Capacity Clearing Price
On Monday, February 3, 2020, ISO New England’s 14th annual power generation forward capacity auction (FCA) closed at $2.00/kW-month, the lowest clearing price in the auction’s history, and a 47% decrease from the $3.80/kW-month clearing price resulting from last year’s FCA 13.
The auction’s record low clearing price appears to be due to major out-of-market actions. In early January, ISO-NE announced the retention of Exelon’s Mystic-8 and -9 gas-fired units for fuel security purposes under a cost-of-service agreement through the 2023-2024 capacity commitment period. ISO-NE also implemented its Inventoried Energy Program, which compensates generation resources that store fuel onsite during winter months, intended as a stop-gap measure applicable only to the 2023-24 and 2024-25 winters. Both of these out-of-market actions are intended to be temporary in nature. If the programs terminate before FCA 15’s capacity commitment period, the market may see an upward trend in the clearing price.
FCA 14’s low clearing price was foreshadowed in November, when the ISO filed a downward revision to its net Installed Capacity Requirement (ICR), a measure of the installed resources projected to be needed to meet reliability standards given total forecasted load requirements for the New England Control Area. ISO-NE’s proposed changes for FCA 14 included a net ICR of 32,490 MW, down from the 33,750 MW net ICR used in FCA 13.
The FCA 14 auction procured power generation resources to meet peak demand in 2023-2024, and received commitments from 33,956 MW to be available in those years, with 1,466 MW of surplus supply over the net ICR. More than a dozen solar and energy storage projects could have been available to participate, but confusion over federal and state interconnection procedures caused those projects to miss key qualification deadlines to compete in the auction.