For Investors, Developers and Generation Owners making investment decisions in the ISO-New England RTO it’s imperative to be up to date on the market fundamentals, latest regulatory updates, and other rule changes that may impact pricing moving forward.
Parameters are set for the ISO-New England (ISO-NE) 16th Forward Capacity Auction slated to open on February 7th for the procurement of capacity for the 2025/26 Capacity Commitment Period (CCP). Clearing Prices are expected to decline from the FCA15 Auction due to a decrease in Net Installed Capacity Requirements (Net ICR) and Net Cost of New Entry (Net CONE).
The decline in Net ICR from the FCA15 auction is attributed to a lower peak load forecast driven by a change in the PDR Reconstitution Methodology. The new methodology embeds expiring Energy Efficiency (EE) measures as load reductions in the gross load forecast based on an EE resource’s Capacity Supply Obligation (CSO) rather than its actual performance, yielding lower gross load growth overall. The new methodology led to a 1,278 MW decline in peak load from FCA15. ESAI Power’s Capacity Watch™ report discusses the new reconstitution methodology and Net ICR and peak load recovery timeline in greater detail.
De-listing activity will play a crucial role in determining the outcome of the FCA16 auction. Our latest Capacity Watch™ discusses the market ramifications of the auction’s capacity surplus, as well as the amount of de-listing needed to end the auction. Existing resources without a static or retirement de-list bid will have to rely on the Dynamic De-list Bid Threshold (DDBT) to exit the auction.
For FCA16, the DDBT will be $2.61/kW-mo under the new DDBT methodology. The DDBT establishes the price at which existing resources can exit the descending clock auction without retirement, permanent, or static de-list bids. Due to the capacity surplus in this auction, the clearing price in FCA16 is expected to be influenced by dynamic de-list bids. Subscribers can reference our recent Capacity Watch to get detailed analysis on precise capacity to de-listings in FCA15 as compared to our forecast for FCA16.
This auction is also likely to be the last with MOPR-related elements, including Offer Review Trigger Price (ORTP) and Competitive Auctions with Sponsored Resources (CASPR). Following the low FCA16 clearing price, prices are likely to increase in FCA17 and beyond, but the low auction parameters will continue to weigh on FCA clearing prices.
ESAI’s updated forecast, reflecting the ISO-NE FCA16 parameters and rule changes, is discussed in the latest issue of Capacity Watch published recently to our subscriber base. For more information about our Capacity Forecasts, see our Capacity Market Coverage. To request access to ESAI’s Quarterly Power Service fill out this form free trial form