Potential closure of Boston power plant raises new concerns

  • Natural gas is the main fuel behind electric supplies in New England and will continue to be so for years, says ISO-New England. Courtesy—ISO-NE

  • A sign near the entrance to the town of Scituate, Mass. indicates almost the entire town is without power after after a destructive nor'easter, on Sunday, March 4, 2018. (Greg Derr/The Quincy Patriot Ledger via AP) Greg Derr

Monitor staff
Published: 4/28/2018 11:42:12 PM

The threat by the owner of a huge gas-fired power plant near Boston to shut down unless it can make more money selling its power has added more urgency to a long debate about how to maintain the stability of the region’s power grid during winter, and how to get the six New England states to share the expense.

“The big elephant in the room is cost allocation. We’ve already said that we think this is a cost that is regional in nature. ... This is an energy shortage problem during the winter, that will affect the whole region,” said Gordon van Welie, president of ISO New England, the quasi-governmental group that oversees the region’s electric transmission system. “No one’s going to escape the effects of the problem, and so therefore we think the region as a whole should pay for this problem.”

Van Welie was one of several speakers at a Regional Energy Forum held by the New England Council, a regional business association last week. The big news during the two-hour session was that ISO-NE would ask FERC, the federal body overseeing energy policy, for a rules waiver to let Exelon Power get a higher rate for power produced by Mystic 8 and 9, two units at its power station near Boston.

Exelon said earlier this month that by 2022 it planned to shut all three operating units at Mystic, which can burn either natural gas or oil depending which is cheaper, as well as a small but fast-starting jet unit deployed only during times of very high demand. The company said the units were losing money because of low wholesale electricity prices during much of the year.

However, analysis by ISO says that the two most efficient Mystic units, numbers 8 and 9, need to stay operating longer to reduce the chances of rolling electricity brownouts, known as “load-shedding,” during winter. Between them, the two units can produce 1,400 megawatts of electricity, or about 15 percent more than Seabrook Station nuclear power plant.

Their loss would lead to an “unacceptable risk to reliability,” according to ISO’s analysis, partly because it might imperil operation of the Distrigas liquid natural gas terminal, one of the two main terminals that bring LNG into New England. Mystic is Distrigas’ main customer.

Van Welie said that next week ISO will ask FERC, the federal agency overseeing power, for a waiver to allow Exelon to be paid more for Mystic, and would be working for changes to what are known as tariffs “to make fuel security a reason resources can be retained for reliability.”

The concern with this approach, as several speakers pointed out, is that an “out of market” approach could make it harder to tweak existing power markets to reduce the chance of power shortages in winter, when natural gas-fired power plants have trouble getting fuel because it is being used for heating. In particular, payments to one power plant could trigger similar demands by other plants.

“This is a game of chicken,” said Katie Dykes, chairwoman of the Connecticut Public Utilities Regulatory Authority and chairwoman of the Board of Directors of the Regional Greenhouse Gas Initiative, which uses auctions to set a price on carbon emissions by power plants in nine states.

“If we don’t find a way to value fuel security, they might go away. But if we do, they might exercise market power to seek payments out of market,” she said.

Not everybody Friday was so worried, however. Doug Hurley, an associate of Synapse Energy Economics, which helps clients deal with regulated utility markets, told the group he thought that current arrangements and planned changes would stave off power cuts in worst-case scenarios, including payments for dual-fuel power plants to keep extra oil on hand as a backup when natural gas got tight.

One thing that everybody agreed on who spoke Friday: There is no chance that any new natural gas pipelines will be built in New England in the foreseeable future. Several years ago many groups, including most New England governors at the time, supported the idea of bringing more gas into New England from shale fields in New York and Pennsylvania, but those plans were scuttled by public opposition to construction combined with difficulty in getting power plants to sign enough long-term contracts to finance the pipelines.

Van Welie and ISO have for years been expressing concern about the region’s dependence on natural gas as a fuel for producing electricity. About half the region’s power is now made by gas-fired plants.

The low wholesale cost of electricity from such plants, and from the small but growing amount of renewable energy, has ruined the business plans of many other types of power plants, particularly coal and nuclear plants. The closure of many such plants has increased concern about maintaining electricity during long cold snaps when gas supplies are limited.

(David Brooks can be reached at 369-3313 or dbrooks@cmonitor.com, and on Twitter @GraniteGeek.)

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