Mitigating fuel diversity risks in a deregulated market

Abstract

Studies conducted by ISO New England have identified risks related to disruptions in fuel-supply chains. The results show that New England continues to face potential reliability risks and exposure to high wholesale electric energy costs. The primary reason is that the region depends heavily on natural gas and oil to generate electricity. As the demand for electricity grows, the region must continue to find ways to reduce its over-reliance on natural gas. Or, it must increase the gas storage and transportation infrastructure to support the increased demand, particularly during winter peak-load conditions, when heavy dependence on natural-gasfired generation competes with the space heating needs from residential and commercial customers within the core natural gas markets. These stresses on the regional natural gas delivery system continue to be a reliability concern.Significant progress has been made to improve the reliability of electric system operations during the winter and to increase the dual-fuel capability of the regional generation fleet. New market incentives, such as those provided by the Forward Capacity Market (FCM,) are designed to promote the availability of resources when needed most. The increased financial incentives within FCM should work to increase the number of generators with dual-fuel generating capability or alternatively, their procurement of firm fuel supplies. Over the long-term, upgrading and expanding the region's natural gas infrastructure would also improve access to the natural gas supply. This could occur by building new liquefied natural gas (LNG) import terminals (that have firm gas supply-anddemand contracts) and by expanding existing intrastate, interstate, and international natural gas pipelines.Emerging environmental regulations coupled with expanding renewable portfolio standards (RPS) will most likely stimulate the development of new, renewable energy sources and other alternatives, such as imports from eastern Canada or New York, which also work to improve the fuel-diversity situation.