Renewable Resources Can Increase Grid Reliability, Reduce Dependency on Natural Gas, and Lower Costs

By Jackie Litynski and Jason Frost, Synapse Energy Economics

Reducing energy costs is our top priority and mission at PowerOptions, so we asked our ISO-NE experts to investigate the impact of fuel mix—specifically impacts of renewable energy to the cost and reliability of energy supply for our Members. What follows is the result of that investigation and analysis.

– PowerOptions Energy Team

New England’s continued reliance on natural gas generation for electric supply has proven problematic and costly during extreme weather events, such as heat waves and cold snaps. During cold winter weather, for example, access to natural gas is often limited or prohibitively expensive just when the system needs it most; this happens when gas pipeline capacity into the region becomes constrained and local gas distribution companies (LDCs or Utilities) have priority on pipeline natural gas for end-use customers (primarily used for home heating). To better prepare for severe weather events, ISO New England (the electric grid operator) is currently working on multiple initiatives, including a study of the region’s vulnerabilities during extreme weather events and a significant change in capacity market rules to better compensate resources based on their ability to generate power when the system needs it most.

Thanks in part to the New England states’ ambitious clean energy goals for the electric power sector, an increasing amount of clean energy is available to help remedy this problem. According to ISO New England’s 2022 Solar PV Forecast, total solar capacity in New England increased to nearly 4,800 MW through the end of 2021. And in the coming years, thousands of megawatts of offshore wind capacity are expected to come online. Despite the increasing prominence of clean energy resources, the region’s out-sized reliance on natural gas for electric supply persists.  

Cost is one reason this reliance is a problem. Even when the grid performs reliably, the price of gas dependence can be steep. European demand for LNG to displace Russian gas imports, along with other factors, has increased gas prices here in New England. Remember, we supplement the lack of pipeline capacity with LNG, which we must compete for in the world market. And when gas is too expensive or unavailable, the grid turns to expensive fuel oil and coal resources. As a result, projected New England electricity prices for the winter months have skyrocketed. Wholesale electricity prices doubled between the winter of 2020–2021 and the winter of 2021–2022, and this winter’s prices are on track to climb even higher. The U.S. Energy Information Administration anticipates that on-peak electricity prices will be 35 percent higher this January than they were in January 2022. 

Analysis of Winter Cold Snap Fuel Mix

We analyzed ISO New England’s generation fuel mix data to examine how the system is currently performing during challenging weather conditions and to understand the extent to which new clean energy resources such as solar, wind, and storage can lower costs and improve reliability during these periods. 

New England faces electric generation difficulties during cold snaps, and particularly in long-duration cold snaps. We analyzed six cold snaps from the last two winters (December 16 to 18, 2020; January 30 to February 1, 2021; February 9 to 12, 2021; January 11 to 16, 2022; January 26 to February 1, 2022; February 14 to 15, 2022), as well as four additional cold snaps from the previous two winters (December 11 to 13, 2018; January 11 to 23, 2019; January 29 to February 2, 2019; December 17 to 20, 2019). Figure 1 displays a representative cold snap from December 2020. 

As seen in Figure 1, the region depends heavily on natural gas during winter cold snaps. Yet, this is when natural gas has a limited ability to ramp up during peak hours due to constrained gas availability in the pipelines. As a result, additional resource types need to come online or ramp up to higher levels of generation to accommodate the natural gas shortfall. That is, oil and coal resources cover some of the generation need that natural gas is either unable to meet or that oil and coal can meet more economically. For the region to select a cost-effective and reliable resource mix, the ISO’s new capacity market rules should reflect these limitations of natural gas resources to perform during potential winter cold snap reliability challenges. 

Although winter solar generation is limited, wind generation can provide a consistent level of generation during winter cold snaps. Offshore wind is also expected to operate at high capacity factors in the winter, and the first major project will be coming online as early as next year. Altogether, this suggests that clean energy resources can help significantly with energy security during current winter system stress events.

Analysis of Summer Heat Wave Fuel Mix

Summer heatwave peak generation is around 4,000 MW higher than that of winter cold snaps. We analyzed the fuel mix during four heat waves in the last two years (June 28 to 30, 2021; August 25 to 27, 2021; July 19 to 25, 2022; August 4 to 9, 2022), as well as three heat waves from 2018 (August 2 to 9, 2018; August 28 to 30, 2018; September 4 to 6, 2018). Figure 2, below, depicts a representative recent heat wave from August 2021. 

Natural gas accounts for even more of total electric generation during summer heat waves than during winter cold snaps. The region also uses more natural gas during heat waves than during the rest of the summer, with up to an additional nine percent of generation coming from natural gas. For example, natural gas accounted for 62 percent of the total 2022 summer fuel mix and 71 percent of the fuel mix during the August 4 to 9, 2022 heat wave. Additionally, the system uses oil during summer heat waves, particularly in peak hours, whereas it almost never uses oil on an average summer day. 

Renewable generation patterns are also different in the summer than in the winter months. Solar and pumped storage resources are used more during peak hours. Together, these clean energy resources account for around 4,000 MW during a peak generation hour. Solar resources can significantly reduce the peak demand from typical fossil fuel resources during sunlight hours, while hydro and pumped storage resources can smooth out the later hours of the peak load, after the sun wanes. This shows that solar and pumped storage resources can show up when needed during summer system stress events, and ISO’s Resource Capacity Accreditation process should appropriately account for that. 

Moreover, hydro-pumped storage shares similar operating characteristics with battery storage, suggesting battery storage can complement a growing amount of solar power in the future to serve more peak demand with clean energy. Accordingly, battery storage combined with solar generation can further push down peak generation needs from other resources.

Key Takeaways

Despite state policies calling for more clean energy, New England remains heavily reliant on natural gas for electric generation. This reliance exacerbates the region’s challenges in meeting load requirements when natural gas availability is limited—such as during cold snaps. Clean energy resources can partly rectify these generation difficulties. In particular, onshore wind has shown up during winter cold snaps and, in addition to offshore wind, can play an important role mitigating winter fuel concerns going forward.

New renewable resources can also offer substantial economic value by displacing high-cost fossil fuel generation during winter cold snaps. In the summer, solar generation demonstrates a notable impact during peak load hours, and additional solar generation would only increase that benefit during these hours. Moreover, storage (including batteries and pumped hydro) paired with clean energy resources can elongate the duration of emissions-free electric generation into the later peak and evening hours. 

While ISO New England and other stakeholders have expressed concern about an electric system heavily reliant on intermittent resources, we are still a long way off from such a scenario. In the meantime, clean energy resources can increase the reliability of our electric system and reduce our dependency on natural gas.