Proposed Energy Market Rules for New England Evaluated by Analysis Group Consultants

April 15, 2020

An Analysis Group team led by Principal Todd Schatzki, and including Managers Christopher Llop and Charles Wu and Senior Analyst Timothy Spittle, developed an impact assessment of new market rules proposed by the New England Independent System Operator (ISO-NE). The proposal, known as the Energy Security Improvements (ESI), was developed to address gaps in the current electricity marketplace that have contributed to concerns about the region’s ability to handle persistent energy security challenges, particularly during the winter. ESI includes new day-ahead ancillary services to the market to address identified gaps in the energy supply; these services can improve reliability outcomes but have not been appropriately incentivized by current market rules. The new services’ design provides technology-neutral market signals aligned with the underlying gap in services needed to address fuel security concerns – and, in turn, to improve both the reliability and the efficiency of the market for these services.

To provide a quantitative analysis of ESI’s impacts to ISO-NE’s energy markets, the team developed a market simulation model integrating ESI’s unique features, including the co-optimization of multiple day-ahead products, endogenous ancillary service constraints, and the energy call options procured to supply ancillary services. Using this model, the Analysis Group team evaluated ESI’s effects on a variety of market outcomes, including changes to price, supplies, emissions, and payments, as well as impacts to New England’s fuel system operations.

The report’s authors wrote that, “ESI would create strong financial incentives for resources to maintain more secure energy supplies.”  As a result, “ESI’s collective impact … would be expected to improve reliability outcomes, particularly during winter periods.”

View the report