Implementing Voluntary Residual Capacity Markets for Clean Energy Policies

Explore the concept of voluntary residual capacity markets to support the implementation of state clean energy policies. Learn how these markets allow load-serving entities to meet capacity obligations outside traditional markets, respecting state goals and methods. Discover the workings and design choices of such markets, along with options for non-FCM procurement and consumer protections.

• Clean energy
• Capacity markets
• State policies
• Energy procurement
• Market design

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1. Voluntary Residual Capacity Markets to Facilitate Implementation of State Clean Energy Policies Casey Roberts Senior Attorney - Sierra Club casey.roberts@sierraclub.org Presentation for New England Energy Vision Wholesale Market Design Technical Forum Day 2 January 25, 2021

2. Voluntary Residual Market: What and Why? A load-serving entity can meet all or part of its capacity obligation through contracts outside of the Forward Capacity Market. Ensures that state policy resources count toward the region s resource adequacy assessment. Respects not only states decarbonization goals, but also how states choose to achieve those goals. Presentation Title | Proprietary & Confidential | Page 2 Casey Roberts Energy Vision Wholesale Markets Technical Forum Presentation | Page 2

3. How a voluntary residual capacity market works ISO-NE would still define resource adequacy, determine appropriate reserve margins, parameters of MRI curve LSEs procure either through FCM, or outside of FCM, or some combination Non-FCM procurements would respect locational constraints, be subject to Pay for Performance rules Presentation Title | Proprietary & Confidential | Page 3 Casey Roberts Energy Vision Wholesale Markets Technical Forum Presentation | Page 3

4. Design choices for Voluntary Residual Market Remove load from MRI curve if it as contracted for capacity outside of FCM? Any restrictions on year-to-year variability in an LSE s purchasing decisions (i.e., stay outs)? Limit non-FCM capacity sales to state policy resources? Move residual auction closer to capacity commitment period? Presentation Title | Proprietary & Confidential | Page 4 Casey Roberts Energy Vision Wholesale Markets Technical Forum Presentation | Page 4

5. Options for Non-FCM Procurement Existing state procurement processes. Centralized auction operated by state or group of states. Capacity trading platform with publicly available market data could improve transparency, price Presentation Title | Proprietary & Confidential | Page 5 signaling. Casey Roberts Energy Vision Wholesale Markets Technical Forum Presentation | Page 5

6. How are consumers protected? Consumers avoid buying unnecessary capacity, may end up buying slightly less overall. State regulators ensure that utility decisions to purchase through FCM or outside of FCM are prudent in light of available alternatives. Option to buy through FCM limits seller s ability to exercise market power in non-FCM bilateral contracts Presentation Title | Proprietary & Confidential | Page 6 Casey Roberts Energy Vision Wholesale Markets Technical Forum Presentation | Page 6

7. New England Energy Vision 1. Meet States decarbonization mandates and maintain resource adequacy at the lowest cost by using market- based mechanisms; 2. Establish effective mechanisms that accommodate existing and future long-term contracts for clean energy resources executed pursuant to state law; 3. Integrate distribution-level resources effectively and efficiently; 4. Allow interested buyers and sellers to participate; and 5. Provide for an appropriate level of state involvement in market design and implementation. Presentation Title | Proprietary & Confidential | Page 7 Casey Roberts Energy Vision Wholesale Markets Technical Forum Presentation | Page 7

8. A FCM enormous step in the right direction, but does not necessarily address the other ways in which FCM is a poor fit for New England s energy future. voluntary would residual be an clean Presentation Title | Proprietary & Confidential | Page 8 Casey Roberts Energy Vision Wholesale Markets Technical Forum Presentation | Page 8

9. Thank you! casey.roberts@sierraclub.org Presentation Title | Proprietary & Confidential | Page 9 Casey Roberts Energy Vision Wholesale Markets Technical Forum Presentation | Page 9