Capacity Auction Reforms Key Project

Access documents related to the Capacity Auction Reforms (CAR) Key Project.

Project Overview

To better ensure power system reliability and cost-efficiency as New England’s resource mix evolves, ISO New England is proposing Capacity Auction Reforms (CAR) that would transition the capacity market from a forward/annual market to a prompt/seasonal market with accreditation reforms.

This initiative has three primary components that would be in place for the Capacity Commitment Period (CCP) scheduled to start on June 1, 2028.

• Prompt Auction: Instead of three years in advance, the capacity auction would take place shortly before the capacity commitment period, reflecting more accurate information about projected electricity supply and demand.
• Seasonal CCP: The CCP changes from annual to sub-annual (seasonal) commitment periods to better address the distinct reliability challenges of winter and summer, as well as variations in resource performance from season to season.
• Accreditation Reforms: Work began in 2022 via the former “Resource Capacity Accreditation in the FCM” project to identify and implement methodologies that will more accurately reflect resource contributions to resource adequacy in the capacity market. It is critical to the reliable and efficient clean-energy transition that the accreditation methodologies are updated to reflect resources’ capabilities and how those capabilities contribute to resource adequacy. This work continues through CAR in the context of the new market constructs.

Background

For 18 years, the ISO administered a Forward Capacity Market, using annual auctions to secure commitments from energy resources three years in advance. This model reflected the market and system conditions of the time, including the concentration of peak loads/reliability risks in summer months and the prominence of natural gas-fired resources with more predictable development timelines than some other resource types.

The ISO led discussions with stakeholders in summer/fall of 2023 considering a move to a prompt and/or seasonal capacity market with accreditation reforms. Analysis Group drafted a report studying this topic, and recommended such changes (see January 2024 final report). The ISO proposed a further delay to FCA 19 to allow for time to develop a prompt and seasonal design with accreditation reforms. NEPOOL supported and FERC accepted the proposal.

The Capacity Auction Reforms project is just one of several key projects at the ISO, which continuously undertakes a variety of short- and long-term projects to enhance the region's competitive wholesale electricity markets and ensure reliable operation of the power grid.