New England gas generation capacity to grow by 1GW

OREANDA-NEWS. February 09, 2015. Developers Competitive Power Ventures and LS Power and generation holding company Exelon have cleared 1,005MW of new gas-fired capacity in New England as a result of the forward capacity auction for the 2018-19 period that ended on 4 February.

The new capacity has to be on line by June 2018, the start of the one-year planning period covered by the auction. Gas-fired capacity in the region will reach more than 15GW as a result, accounting for 53pc of installed capacity, up from 43pc in 2013.

The Independent System Operator's forward auction for the June 2018-May 2019 period reached another high for clearance prices, beating the 2017-18 auction prices. The rising capacity prices reflect tightening power supply in New England, where 3.4GW of oil, coal and nuclear capacity is to retire in 2014-18.

Competitive Power Ventures's Towantic Energy Center project in Connecticut apparently has cleared the auction with 725MW of net capacity. The grid operator has not disclosed the winners but the announced capacity and details match the grid interconnection request for Towantic.

The power plant will connect to the Algonquin Gas Transmission natural gas pipeline and can use ultra-low sulfur diesel as a backup fuel. The plant cleared at \\$9.55/kW-month, meaning it can receive \\$83mn in 2018-19. New resources have the option of locking in the auction clearance price for seven years, which would provide \\$581mn of guaranteed payments in 2018-25.

New England round-the-clock power assessments average \\$48/MWh for the 2018-19 planning period, down from \\$51/MWh for the June 2015-May 2016 strip. Spark spreads for a 7 mmBtu/MWh unit average \\$13.40/MWh for 2018-19, up by 7pc from 2015-16.

LS Power's proposed expansion at the existing 225MW Wallingford gas-fired plant in Connecticut also apparently cleared in the auction. LS Power plans to build two 45MW gas turbines at the site. The expansion also cleared at \\$9.55/kW-month.

Competitive Power Ventures and LS Power were not immediately available to comment.

Exelon confirmed today that a proposed 190MW addition at the 117MW Medway plant in southeast Massachusetts cleared in the auction. The addition includes two turbines that will be used as peakers. Both will be able to use ultra-low sulfur diesel for backup. Existing units at Medway use fuel oil.

The Exelon project cleared at the highest price set in the auction: \\$17.73/kW-month. The high price resulted from a capacity shortage in the southeast Massachusetts-Rhode Island planning zone, which triggered the administratively set price ceiling for the auction. The clearance price means the new Exelon plant stands to earn \\$40mn in the 2018-19 planning period and the same annual amount for the following six years.

The attrition rate for the proposed capacity additions in New England was 12pc, as more than 8.5GW of new resources competed to clear in the 2018-19 auction.

The legal wrangle over the status of demand response in wholesale power markets adds uncertainty to auction results, with possible upside for generation owners.