Markets and Operations
Maintaining day-to-day power system reliability through increasing uncertainty requires nimble, responsive strategies. Shifts in the types of resources that power our grid are driving different short-term and seasonal needs, making it more important than ever to secure the right mix to meet demand in the next few years, and to develop innovative tools that support daily operations.
A New Approach to Securing Capacity
A reliable grid requires a diverse resource mix that can provide energy and other services across a broad range of system conditions. ISO New England secures these services through a suite of wholesale markets. The capacity market helps ensure the region has the power it needs by driving investment in resources and securing obligations from them to supply electricity or reduce demand when called upon. Beginning in 2008, the ISO administered annual auctions to secure commitments from energy resources three years in advance. But expected retirements of older resources and increases in renewables require a new approach. In collaboration with stakeholders, we are redesigning the capacity market to support power system reliability and cost-efficiency as New England’s resource mix evolves.
The ISO’s Capacity Auction Reforms project will change the way capacity is secured. The project’s first phase, approved by FERC in March 2026, changed the capacity market to a prompt structure — meaning auctions will take place within months, not years, of delivery periods beginning in 2028. It also shortened the timeline for existing resources exiting the market. Now known as deactivation, the new process requires resources to announce their exit one year before the delivery period, instead of four.
The project’s second phase, which the ISO expects to file with FERC by the end of 2026, will introduce a seasonal element to the capacity market. Separate auctions will be held ahead of winter and summer to account for each season’s unique reliability risks, including gas constraints that challenge cold weather operations in New England. The market will also include a new accreditation methodology that allows for an apples-to-apples comparison among resources when evaluating their contributions to reliability.
Together, these changes will provide a more responsive and cost-effective capacity market, use more up-to-date demand forecasts and supply offers, improve investment and retirement signals, and help ensure that consumers get what they pay for.
Innovations in Day-to-Day Operations
In 2025, the ISO made enhancements to the Day-Ahead Market to ensure that the region has the resources necessary to satisfy the load forecast for the next operating day, and also to respond to unexpected events, such as the sudden loss of a generator or a sharp change in demand.
The enhancements, known as Day-Ahead Ancillary Services (DA A/S), enable the efficient scheduling of both energy and reserves in the Day-Ahead Market by allowing resources to offer both products. The implementation of DA A/S helps improve operation a power system with increasing variability in supply and demand.
Thanks to DA A/S, reliability and efficiency in the Day-Ahead Market have increased. The ISO is now targeting several areas for adjustments that could improve cost-effectiveness while maintaining the benefits of the market’s design structure. These changes are consistent with recommendations from the ISO’s Internal Market Monitor and will be filed with FERC in summer 2026.
The ISO is continuing to explore future needs for the changing system. Reserves are a valuable tool the ISO uses in the routine operation of the power grid. ISO system operators can call on resources that participate in the reserve markets to provide electricity quickly when needed to support reliability. Reserves are currently called on 10 and 30 minutes before they are needed.
Increases in renewables like solar and wind, which can be more variable from moment to moment than traditional fuel-burning resources, require new approaches to predict our reserve needs. Throughout 2026 and beyond, the ISO will implement more dynamic, real-time methods to determine our region’s reserve needs, and explore the possibility of adding longer-response reserves to the market, which would be called on 60 or 90 minutes before they are needed.
Evaluating the Impact of Extreme Weather
During cold snaps, New England has long been challenged by limited gas infrastructure — as well as our location at the end of the pipeline — to meet the combined peak demand from heating customers and power generation. Weather-related risks to reliability can also arise in summer. Assessing when certain periods of extreme weather might occur and how long they might last can provide an “early warning” system that helps the region prepare for challenges.
The ISO’s innovative Probabilistic Energy Adequacy Tool (PEAT) is now used ahead of each summer and winter to evaluate the chances of an energy shortfall. The tool will also be used annually to assess the potential for shortfalls five and 10 years into the future. These assessments measure risk in terms of the Regional Energy Shortfall Threshold (REST) and are designed to give the region time to prevent an energy shortfall or lessen its impact. REST focuses on weather conditions that could occur, on average, once every 90 summers or winters.
PEAT provides a valuable complement to our 21-Day Energy Assessment Forecast and Report. During the extreme cold weather of early 2026, this assessment provided crucial information that kept New England’s power grid reliable throughout its most challenging winter in nearly a decade.
Altogether, our innovative work in markets and operations is strengthening ISO New England’s capabilities to manage an evolving grid in ways that minimize costs and preserve our region’s track record of reliability.