ISO New England presents gas-zone demand-curve to reflect winter supply limits in capacity market

Dane Shiro of ISO New England presented a proposal to adjust how the ISO clears and values capacity in winter by reflecting limited natural-gas availability directly in the market-clearing problem.

Shiro told attendees the proposal would be part of a future filing with the Federal Energy Regulatory Commission (FERC) and described two broad approaches: an accreditation haircut that reduces how much every gas resource may sell, and a market-clearing demand-curve approach that keeps full offers but alters clearing and prices to reflect actual gas availability. He said ISO focuses on the market-clearing approach because it is more economically efficient than a nondiscriminatory haircut.

Using the 2017/2018 "bomb cyclone" as an example, Shiro said natural-gas generation fell from about 50% of load to roughly 20% on the worst day, and "oil picked up from 0% up to 30%," demonstrating the scale of winter swings that the design aims to capture. He likened the concept to existing export-constrained zones used for transmission limits but defined the zone by fuel type (gas-fired resources versus non-gas resources) rather than by geography.

ISOs method, Shiro explained, decomposes a resources reliability value into a system component and a zonal modifier (a marginal reliability impact, or MRI) and then derives a zonal demand curve. For a gas zone the critical input is an hourly, stochastic "interface limit" that reflects how much gas is available to generators at each hour, given fixed pipeline imports, stochastic LNG imports (modeled via regression), and local distribution company (LDC) demand and priority for heating.

Shiro said ISO simulated roughly 10,000 sample years for each winter, binned them by severity and then sampled years to produce hourly interface-limit profiles used in the reliability calculations. "We have gas resources in the zone, and then we have that interface limit is actually fluctuating hourly," he said, and those simulated hourly limits are used to calculate how much incremental megawatts of gas capacity are worth under different conditions.

The impact analysis output, Shiro said, shows the zonal demand curve flattens as gas availability increases: with effectively infinite gas the curve is horizontal (no penalty), and with no gas it is nearly vertical (no value). In ISOs tests the interface limit began reducing marginal value at about 2 gigawatts of gas capacity.

Shiro described consequences for market clearing: the gas demand curve becomes part of the objective function so that limited gas availability is internalized. When the constraint binds, gas-fired capacity could clear and be paid less than otherwise comparable non-gas capacity, creating an incentive to procure non-gas resources or secure firm fuel arrangements.

On remaining design issues, Shiro said inconsistent LNG imports complicate assumptions and raised questions about treatment of generators that have already secured firm pipeline transportation. "If a generator says, well, I have already secured my gas through a firm transportation contract on the pipeline... you shouldn't be subject to that... demand curve," he said, and noted the current proposal would treat such resources as exempt in the same way nuclear is treated.

During questions, Rob Palmer (Energy Explorer) asked whether ISO considered integrating a pipeline model upstream rather than using a proxy; Shiro said a full pipeline-capacity model would be significantly more complex and that ISO used a proxy, but that the simulated interface limits do incorporate pipeline and LNG caps. Russ Footwork (Polaris Systems Optimization) asked whether storage and backup fuels introduce time-coupling effects; Shiro said the interface limit is an hourly, stepping simulated value and acknowledged energy storage introduces modeling intricacies while reiterating that only a limited number of resources currently have firm fuel arrangements and those would be exempt. Seifer of Virginia Tech asked whether residential curtailment could free gas for generators; Shiro said it could in principle but he was not aware of studies quantifying the effect and noted LDC satellite LNG tanks influence availability. An online questioner, Ahmed, asked whether hourly fluctuations implied pipeline pressure issues; Shiro said the modeling assumes pipeline operations handle such details and the profiles reflect combinations of LNG and LDC demand rather than pressure violations.

The presentation closed with ISO inviting further questions as it continues impact analysis and prepares a FERC filing.