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Accommodate or  Achieve? Accommodate or  Achieve?

Accommodate or Achieve? - PowerPoint Presentation

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Accommodate or Achieve? - PPT Presentation

Accommodate or Achieve Integrating Markets and Public Policy in New England Robert Stoddard on behalf of Conservation Law Foundation Raab AssociatesPJM Roundtable June 2 2017 Disconnects between RTO markets and state policy goals ID: 773613

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Accommodate or Achieve? Integrating Markets and Public Policy in New England Robert Stoddard on behalf of Conservation Law Foundation Raab Associates—PJM Roundtable June 2, 2017

Disconnects between RTO markets and state policy goals 2 RTO markets are narrowly efficient Achieve reliability goals At least cost Disconnect when state policies have: Broader goals Broader cost metrics Many goals have been brought into the markets by pricing SO 2 , NO X attainment But mixed success with other goals RECs to attain RPS RGGI to attain CO 2 goals

Achieving state policies is critical to market health Vicious Circle States achieve outside of markets RTO markets weakened Narrow RTO metrics Markets fail to achieve state policies Virtuous Circle States work mostly within markets Robust RTO markets Robust RTO metrics Markets achieve state policies 3

NEPOOL IMAPP ProcessIntegrating Markets and Public Policy 4 Year-long stakeholder process Traditional NEPOOL stakeholders Plus state commissions Solutions sorting into two broad categories: Accommodate: moderate impact of state action on market prices Short-term priorityAchieve: minimize need for state actions outside of ISO marketsLong-term goal

ISO-NE’s “Accommodate” solution: CASPRCompetitive Auctions with Subsidized Policy Resources 5 CASPR design balances four objectives: Competitive capacity pricing – minimize price suppressive effect of subsidized policy resources Accommodate entry of subsidized policy resources – minimize investment in duplicative capacity resourcesAvoid cost shifts – one state shouldn’t bear costs of another’s subsidyTransparent, market-based approach – extend, rather than upend, established markets

Achieving State Policy in MarketsPersonae Dramatis in constrained policy space 6 Design advanced by CLF, NextEra and Brookfield after extensive consultation with state and ISO-NE officials

Goals of Dynamic Clean Energy Market (DCEM) designProvide states new tool for achieving policy goals that: Uses centralized markets Achieves policies at least cost Attracts and retains cost-effective resources Creates visible, competitive prices Fosters broad participation of innovative technologies & resources Meets most, if not all, state requirements for clean energy 7

DCEM Design ConceptDCEM auction procures the clean energy attribute only Clears MWh quantities of Carbon-Linked Incentives to Policy Resources (CLIPR) Products: Base product: generic zero-emitting MWh, new and existing Premium product(s): as required to implement specific state policy States or their agents provide demand bids (price & quantity) Cleared quantities must be reoffered for additional nine yearsAuction closely precedes base capacity auctionExpected clean energy revenues are “in market” for MOPRNew CLIPR improves on existing REC products:Consistent definition across region (for “base” product)Link hourly payment to carbon reductionPotential for multi-year contract for new resources8

DCEM mimics carbon price for policy resourcesCLIPR refines traditional REC payment Illustrative REC payments Flat payments in every hour Added incentive to offer negative energy prices, even during periods with excess energy Illustrative CLIPR payments Payments scale in proportion to CO 2 emissions of marginal energy units Incentive to produce clean energy when and where it avoids the most CO2 emissionsNo added incentive to offer at negative prices9 REC payments CLIPRpaymentsMarginal CO2emissionsMarginal CO 2emissions

Different CLIPR payments enhance opportunities for storage 10 Dynamic Clean Payments Market Energy Price Pay Energy + Dynamic Clean Price When Charging Earn Energy + Dynamic Clean Price When Discharging

DCEM compared to carbon pricingDCEM Market-set price to meet quantity targets determined by states Benefits targeted narrowly on policy resources Limited cost impact, but Excludes some cost-effective carbon reduction, e.g. DR & EE No impact on dispatch stack Potential multi-year commitment aids financingInitial interest from state commissionsClear cost causation & cost allocationCarbon PricingPrice set administratively in a FERC-approved tariffBroad impact on markets achieves carbon reduction most efficientlyHigher net consumer costBenefits flow also to low-emission units, demand-side, behind-the-meter gen Reorders supply stack (with multiple fuels)Risk of price decreases raises financing QsStates unanimously oppose carbon pricing in federal tariffPotential spill-over costs11

Next steps in New England for Dynamic Clean Energy Market 12 Technical evaluation by states’ consultant Further development by IMAPP sub-groups Tariff development by Markets Committee