New England Capacity Costs to Decline By 2024
by Max Stewart
The Independent System Operator of New England (ISO-NE) is responsible for determining capacity costs and how much electricity needs to be available during times of peak demand, which typically occurs during hot summer months due to a spike in demand for air conditioning and cooling purposes. In order to guarantee adequate resources, ISO-NE holds a forward capacity auction three years in advance of requiring the supply.
ISO-NE announced last week that it’s annual auction for the capacity year 2023-2024 has concluded, and preliminary numbers show that the cost to ensure grid reliability for 6/1/2023-5/31/2024 will be the lowest level since inception of the auction system. The auction cleared at $2.00/kW-month which is 47% less expensive than capacity costs for 6/1/2022-5/31/2023 at $3.80/kW-month, and a sharp 88% decline from Capacity Year (CY) 2018-2019 when the clearing price was $17.73/kW-month. The included table shows the year over year decline in detail.
Each energy consumer throughout New England is responsible for paying their fair share in order to maintain grid reliability. As a result, capacity is a component that makes up an “all-inclusive” energy supply price. With capacity costs on the decline through 2024 and wholesale electric rates trading at multi-year lows, it may make sense to take advantage of supply pricing through 2025. Please reach out to an Atlas Energy Advisor to discuss how this will impact future energy budgets.