Executive Summary

ISO New England’s Operational Impact of Extreme Weather Events study, in collaboration with the Electric Power Research Institute, assesses the impact of extreme weather on the region’s energy reliability, considering climate change projections for 2027 and 2032. The study evaluates the adequacy of energy supply during severe weather conditions, highlighting the importance of the New England Clean Energy Connect (NECEC) transmission line in significantly reducing winter energy shortfall risks. The study results suggest that adopting more energy efficiency and renewable resources, particularly offshore wind, will improve the region’s electric reliability. The findings question the necessity of current out-of-market winter reliability programs, suggesting future proposed programs should be evaluated for their necessity, effectiveness, and cost to consumers. With ongoing market changes aimed at enhancing resource accreditation and reserve purchases, the study forecasts a robust energy reliability outlook for New England.

Unpacking New England’s Extreme Weather Grid Reliability Concerns

New England’s electric grid system operator, ISO New England, has spent over a decade implementing a series of out-of-market winter reliability programs to ensure the region does not risk energy shortages in the coldest months. Now ISO New England has published a study showing that these programs, which are ultimately paid for by New England electric customers, merit careful scrutiny and quantitative analysis to determine if they are really needed.

Over the past year, ISO New England worked with the Electric Power Research Institute to analyze future weather events in the region and the risk that “extreme weather” events (or the highest-risk weather patterns) pose for energy adequacy in the region. This Operational Impact of Extreme Weather Events analysis, or Extreme Weather Study, used historical weather events and applied climate change modeling to derive potential risky summer and winter weather events for 2027 and 2032. The analysis included three parts: (1) weather modeling; (2) risk screening model development and scenario generation; and (3) energy assessments.

For each weather event cluster, ISO New England ran 720 cases to test the region’s reliability risk. These cases varied from each other through adjusted fuel inventory levels, fuel prices, energy imports, and generator outages. The analysts applied four scenarios to each weather cluster and case: with and without the Everett Marine Terminal (EMT) supplying liquefied natural gas (LNG) to the region, as well as with and without the New England Clean Energy Connect (NECEC) transmission line in service to carry energy from Quebec to New England.

Few Reliability Concerns in Winter Months

Overall, winters in New England face energy constraints due to gas supply limitations. More specifically, pipeline gas is allocated first to utilities for home heating and other building uses. The power plants are able to use the remaining gas for electricity production. Since more gas is needed for home heating in the winter, as compared to the summer, there is less available fuel in the winter for electric generation.

ISO New England analyzed two winter clusters in this analysis: (1) a long-duration extreme cold wave with low wind and solar availability and (2) a short- to mid-duration extreme cold snap with low wind and low solar availability under the four scenarios described above. ISO New England found that NECEC greatly reduces the probability of energy shortfall in the region. Specifically, ISO New England found that in the two scenarios without NECEC in place, there was a maximum of a 7.6 percent risk of energy shortfall. This risk was less than 1 percent in the two scenarios with NECEC in service, suggesting that NECEC greatly improves regional winter reliability. The two scenarios with EMT in service compared to the two scenarios without EMT in service did not provide significant evidence that the terminal is necessary for the region’s electric reliability. ISO further determined, in all four scenarios, that the energy shortfall potential in the 2027 winter cases is manageable. Moreover, ISO New England found that the risk and depth of energy shortfall events was likely to be smaller in 2032 than in 2027.

ISO New England also ran a series of sensitivities on the four scenarios, adjusting inputs related to resource mix and projected load growth. Overall, these sensitivities showed that increasing the load in the region and/or retiring residual fuel oil units increases the risk of energy shortfall in the region. Despite this increase in risk, ISO New England determined that the risk is still expected to be manageable.

ISO New England also solicited feedback from New England Power Pool stakeholders and ran additional sensitivities. These sensitivities included adjusting a wide variety of inputs, such as level of clean energy adoption, resource retirements, load profile, imports, and fuel storage levels. Some key takeaways from the sensitivity analysis include:

• Minimizing load growth, such as from energy efficiency adoption, can greatly reduce the risk and depth for energy shortfall.
• Replacing fossil resources with renewable resources on a one-to-one qualified capacity basis reduces the risk and depth of energy shortfall.
  • This is particularly effective with offshore wind adoption. That is, offshore wind greatly improves winter reliability in the region.
  • This is also particularly effective for natural gas retirement. That is, natural gas resources do not provide significant winter reliability benefits in the region, as compared to renewable resources.
  • This is not true for residual fuel oil and nuclear units. That is, residual fuel oil and nuclear units are still very beneficial for winter reliability in New England.
• Reductions in natural gas supply in the region could lead to increased oil use during extreme weather events.

It is also worth noting some caveats and limitations around this study. Most notably, this analysis focused only on energy adequacy and did not account for dispatch conditions. Accordingly, if resources were dispatched in a different manner, the reliability risks in the region could look different. Additionally, the analysis did not consider upcoming market changes which could impact resource entry and exit decisions, such as the Resource Capacity Accreditation project (designed to better accredit resources for their reliability benefits during risk events) and the Day-Ahead Ancillary Services Initiative (designed to incorporate reserve products into the day-ahead market).

Finally, this analysis does not address transmission security issues due to resource retirements. More specifically, if resources retire, there may be transmission constraints for bringing replacement energy into the retirement region.

Even Fewer Concerns in Summer Months

Due to increased gas availability in the summer, the region faces fewer energy adequacy issues in the summer months than in the winter months. Overall, the analysis included three summer weather clusters for 2027 and 2032. For each of the weather cluster and year combinations, ISO New England found no energy shortfall risk and only very minimal risk for reserve shortfall. ISO New England did not run additional sensitivities on the summer scenarios, given the minimal risk found in the core analysis.

Questionable Need for Winter Reliability Programs

Overall, the Extreme Weather Study found that winter reliability in the next decade is not expected to be a major concern, particularly with the projected resource mix and load growth. Although ISO New England projected potential energy shortfall in the worst-case scenarios analyzed, this shortfall is considered manageable with the current operating procedures and is not expected to lead to loss of load. Accordingly, the region should remain skeptical of current and future out-of-market winter reliability programs.

As an example, ISO New England most recently implemented the Inventoried Energy Program (IEP) to compensate resources for storing fuel throughout the winter months for the 2023–2024 and 2024–2025 winters. However, ISO New England has not provided quantitative analysis of the benefits of this program. Accordingly, we cannot definitively say whether the benefits of IEP (i.e., reducing the risk of unserved energy in the winter) outweighed the cost that consumers paid for it. And now ISO New England’s analysis suggests that such programs could be unnecessary. While the Extreme Weather Study did not explicitly look at the years covered by the IEP, the analysis results suggest that winter reliability should not be a major concern in the near term. Quantitative evidence is essential to understanding whether the region needs additional reliability measures, what risks the region faces, and how much consumers should be willing to pay to mitigate the risks.

Upcoming Changes and Next Steps

In addition to the minimal risks found in the Extreme Weather Study, ongoing market changes are expected to further reduce the winter reliability concern in the region. ISO New England’s Resource Capacity Accreditation project is designed to improve resource accreditation and focus reliability analyses on the region’s riskiest days, not just the highest load days. These risky days are likely to occur in the winter in New England, when gas resources are particularly constrained by fuel access. Accordingly, the updated accreditation methodology will ensure a more reliable resource mix is purchased in the region. The Day-Ahead Ancillary Services Initiative, which purchases additional reserves in the day-ahead market, is also expected to reduce the risk of energy shortfall, including in the winter.

Finally, the resource mix used in the Extreme Weather Study did not include significant renewable energy adoption and did include significant retirement of fossil resources. We expect to see more renewable resource adoption and fewer resource retirements over the next decade, which would further reduce winter reliability concerns.

ISO New England intends to continue using the analysis framework and model developed in the Extreme Weather Study to determine the level of reliability risk the region is willing to accept. This risk level, known as the Regional Energy Shortfall Threshold (REST), will be developed over the next year or so. The Extreme Weather Study, in combination with market adjustments and resource mix changes, provides quantitative evidence that winter reliability issues over the next decade are unlikely to cross such a threshold.

Source: ISO New England. 2023. “Operational Impact of Extreme Weather Events: Final Report on the Probabilistic Energy Adequacy (PEAT) Framework and 2027/2032 Study Results.” Available Here.