The recent ISO – New England forward capacity
auction conducted on February 4th corresponding for the period of 2022 – 2023
resulted in a clearing price of $3.80/kW/month, an 18% price reduction from
last year’s auction of $4.63/kW/month for 2021 – 2022.
This comes as very positive news, quelling the unsettling predictions on shortage of electricity generation over the coming years in the region. Through the auction, ISO-NE found that 34,839 megawatts of generation capacity should be readily available for 2022 – 2023 period. The estimate is even 1,089 megawatts over what the predicted peak demand for that summer will be, on the hottest day. The goal of these auctions is to get commitments from suppliers to ensure there will be enough electricity generated for the year; these producers get paid in advance to meet the obligation. Power plants that do not meet their individual production requirements for the period will face fines for the missing capacity.
As depicted by the above chart, prior capacity auctions for 2017-2018 and 2018-2019 resulted in high prices in the $8 – $12/kWh range for every ISO-NE sector due to significantly reduced capacity from multiple plant closures. Additionally, part of this supply will be contributed by the first offshore wind project in Massachusetts as the New England region pushes for renewables to form a larger portion of the supply. Ongoing incentives for customers to participate in demand response also set a stable path for the future of energy prices in the region.
