Category Archives: Uncategorized

Power Advisory Presents at CanWEA Spring Forum

Yesterday, our President John Dalton presented at the CanWEA Spring Forum on the Opportunities Offered by the New England Electricity Market for Eastern Canadian Wind Projects.  The presentation and discussion presented Power Advisory’s perspective on renewable energy drivers in the New England electricity market including recent State-level initiatives that are creating opportunities for clean energy from Eastern Canada. Hear on market drivers, State policy updates, renewable energy incentives (RECs, RPS) and opportunities for Canadian wind energy

For more information, please click here

Power Advisory Supporting Prince Edward Island New Energy Strategy

Power Advisory is pleased to announce the strategic support for Prince Edward Island as the Province develops a new energy strategy.  Power Advisory, in partnership with Dunsky Energy Consulting, will help to develop a comprehensive energy strategy with focus on sustainability, energy efficiency, conservation and renewable energy alternatives.  The assessment will consider the economic benefit to the province and will be integrated with the provincial climate change strategy.

See the PEI announcement here

Power Advisory discusses evolving solar energy feasibility at Homebuilder & Renovators Expo

Travis Lusney, Director at Power Advisory, participated on a panel at the Homebuilder & Renovator Expo on December 3 in Toronto.  The panel “Evolving Economics: Tracking How Solar Energy Feasibility is Improving from Year to Year” discussed the evolving economics of solar in relationship to electricity pricing, carbon pricing, feed-in tariff, and net-metered incentives.

For more information, please see the Expo’s website here.

Entergy’s Retirement of Pilgrim: Response to Markets or Market Failure?

John Dalton, President, Power Advisory LLC

Entergy Corp.  announced yesterday that it would retire the Pilgrim Nuclear Power Plant (683 MW) no later than June 1, 2019 citing “low energy prices, little expectation of near-term market structure improvements and increased operational costs”.    Entergy noted that as of June 1, 2019 that Pilgrim would no longer participate in the ISO-NE’s Forward Capacity Market (FCM), but that it may elect to shut the unit down prior to this.   (If it did so, it would need to discharge its Capacity Supply Obligation from past participation in Forward Capacity Auctions in one of ISO-NE’s reconfiguration auctions.)

The loss of Pilgrim will appreciably increase New England’s reliance on natural gas-fired generation and would appear to strengthen the hand for those arguing that additional action is needed to address this over-reliance.    Taking a different perspective, in its Press Release Entergy noted that “wholesale energy market design flaws continue to suppress energy and capacity prices in the region” and that “also detrimental are a state proposal to provide above-market prices to utilities in Canada for hydro power”.   While the above referenced proposal clearly would have adversely affected the economics of Pilgrim if it were implemented, it would appear that Entergy’s decision was based on current economics.  These economics were appreciably worsened when the unit was placed on a list by the Nuclear Regulatory Commission that would cause it to be subjected to enhanced inspections, at an increased operating cost of $45 to $60 million per year.  Interestingly, Entergy noted that the decision to retire the unit would be neutral to positive for cash flow through 2020.

This decision is further confirmation that New England’s electricity markets are struggling to incent the desired mix of generation resources in the wake of low underlying natural gas prices, but with sustained natural gas price volatility in the winter months from pipeline constraints.    Entergy also suggested that long-term contracts for Class I renewable resources were distorting New England energy and capacity market prices.   The evidence here is clearer cut.  With Class I REC prices for some New England states in the mid $50/MWh range, but with RGGI allowance prices equating only to about $2.5/MWh for a CCGT, the value of carbon in the ISO-NE markets appears to be significantly underpriced, with long-term contracts for renewables contributing to this.   Unfortunately, for Pilgrim a fix would be too late and for Massachusetts overall there don’t appear to be any more “at risk” large non-carbon emitting resources in state that would benefit from getting these pricing signals right.   However, with a regional power market attention to these issues continues to be important.

Entergy Sells RI CCGT: Reading the Tea Leaves

John Dalton, President, Power Advisory LLC

Entergy announced that it had an agreement with Carlyle Power Partners to sell its 583 MW Rhode Island CCGT for $840/kW.  Is this a strategic exit from the ISO-NE market with an anticipated top in Forward Capacity Auction (FCA) prices or, as has been suggested by UBS, another indication that Entergy is getting close to shutting down the Pilgrim nuclear plant?

It certainly appears that FCA prices have peaked based on evidence of “capacity creep”, i.e., what are likely to be relatively low cost increases in capacity at various existing facilities (primarily CCGTs) across New England. (See the ISO-NE Interconnection Queue)  However, if Entergy were planning on closing Pilgrim wouldn’t it hold on to its RI CCGT to get the market heat rate and possibly the FCA valuation bump from the closure of the 677 MW of baseload supply?

UBS notes that the RI CCGT was a physical hedge for Entergy’s Vermont Yankee (retired) and Pilgrim Nuclear Power Plants and that with an impending retirement of Pilgrim the CCGT isn’t core to Entergy’s return to basics strategy.

Hydro One IPO: Managing Risk and Finding Value

John Dalton, President, Power Advisory LLC

On September 17th Hydro One filed the Preliminary Prospectus for its IPO with the Ontario Securities Commission.  The Prospectus confirmed the direction provided the Premier’s Advisory Council on Government Assets that the Province intends to sell down its interest to 40%, but that any one shareholder be limited to no more than 10%.  Interestingly, the Prospectus notes that concurrent with the closing of the offering Hydro One will enter into a Governance Agreement with the Province that will prescribe the role of the Province in the governance of Hydro One.   This Governance Agreement would appear to be critical to investors in assessing the government’s role going forward – calling into question how “concurrent” will be implemented.

The Prospectus indicates that Hydro One will have a dividend policy based on a target payout ratio of 70 to 80% of net income, which initially will be about $500 million annually.  The Prospectus identifies a wide range of risk factors including various regulatory risks.  Of particular relevance to Hydro One are revenue attrition from distributed generation, microgrids and energy storage as well as the potential for reduced capex from the Ontario Energy Board’s (OEB’s) competitive process for developing transmission infrastructure.  (Power Advisory assisted the OEB with the initial development of that process.) Ontario is currently considering alternatives to the feed-in tariff (FIT) regime, which is still being used for small projects (up to 500 kW).  This policy outcome as well as the OEB’s ongoing consideration of distribution rate design alternatives will have implications for load attrition risks faced by Hydro One as a distributor.  (Power Advisory is currently assisting clients formulate alternatives to the FIT.)

In addition, despite teaming with another Ontario incumbent Hydro One wasn’t selected to build the East-West line, which was the first Ontario facility subjected to OEB’s competitive designation process.  While the East-West line development schedule has been delayed, an important question is what are the prospects for other major transmission investments that will be subject to such an OEB designation process.  Clearly, there are lots of issues to sort through in assessing a reasonable value for the Hydro One shares being issued.

Gordon Kaiser joins Power Advisory LLC’s Toronto Office as an affiliate and Executive Advisor

Power Advisory LLC is pleased to announce Gordon Kaiser has joined our Toronto office as an affiliate and Executive Advisor. Gordon is an independent arbitrator and mediator in disputes involving energy contracts and projects including construction and project finance.  For Gordon’s extensive bio please see our Power Advisory Team page