On June 24th, ISO-New England (ISO-NE) hit a peak load of 26,024 MW at 7pm, the highest load experienced since 2013. With load marginally higher than forecast and a spike in outages (primarily natural gas units), real-time locational marginal prices (LMPs) were over $1,000/MWh, over twice the day-ahead market (DAM) price. Power Advisory analyzed the potential impact that additional battery energy storage system (BESS) and offshore wind capacity could have had on these ISO-NE RTM LMPs (figure below) as well as the market revenues that these two generating resources would have realized. (table below). The figure shows the reduction in real-time LMPs from 5,000 MW of additional BESS capacity. The table shows the: (1) $/MWh real-time LMP reduction attributable to 1,000 and 5,000 MW of additional BESS and OSW capacity: (2) value of these savings on a $/kW basis; (3) net energy revenues the projects would have earned; (4) the net value of the project, which is the sum of (2) and (3); and (5) how these savings compare to the estimated revenue requirements for these two technologies. The savings on a $/kW provides an indication of the indirect benefits (i.e., wholesale price reductions) for these technologies and contrasting the savings on a $/kW basis with the revenue requirement provides an indication of the relative value of these resources.For the BESS we assumed “perfect information”, i.e., that the party dispatching the BESS units would schedule to operate in the hours with the highest RTM LMPs. Clearly, this is overly optimistic. However, the highest RTM prices were generally well correlated with the highest load periods suggesting that an operating strategy of focusing output during the top 4 load hours would have served the BESS operators well. There’s also the issue of whether the BESS operators would have elected to participate in the DAM (rather than the real-time market) to effectively lock in the energy arbitrage margins offered. Regardless, even if they participated in the DAM, this capacity would have yielded significant price reductions. Our analysis also indicates that offshore wind would have made a major contribution to lower RTM LMPs. We estimate that the capacity factor for offshore wind during the June 23rd and 24th heat wave would have been about 48.5% given prevailing wind speeds.
