New England Continues to Undercount Storage Ahead of Market Reforms
The grid operator ISO-NE is overhauling its capacity market and its proposed resource accreditation reforms, which determine how the grid values each technology’s reliability contribution, and the current proposal risks leaving energy storage behind. A resource’s capacity value is often crucial for the commercial viability of new advanced energy projects, and ISO-NE’s current proposal would undervalue energy storage’s accredited capacity value by approximately 15 percent. ISO-NE has expressed an explicit desire for New England to be a region where renewable energy, demand response, and energy storage come to do business. States have likewise committed to transitioning to cleaner resources that are less dependent on the region’s limited fossil fuel infrastructure. Undervaluing storage risks discouraging investment and raising consumer costs by procuring capacity that would otherwise be unnecessary.
Previously in May, we explored how New England needs more flexible resources like storage, and identified initial concerns with ISO-NE’s proposal. Fast-forward five months: progress has been made, but those fundamental issues have not been addressed. With an initial vote on the proposed design in early November, we enter a critical window and last opportunity for ISO-NE to incorporate a simple fix into their proposal.
Over the past few months, United has made four presentations to the New England Power Pool (NEPOOL), highlighting how limitations in ISO-NE’s software and modeling assumptions may be causing it to undervalue storage. ISO-NE’s assumption that there is no energy available for charging is overly conservative since it overlooks off-peak and overnight energy generation from renewables and imports. ISO’s stakeholder-requested sensitivity results, which United helped spearhead, confirm that accounting for additional charging energy increases storage accreditation. This reinforces our concern that the model understates storage’s value.
ISO-NE has made important progress—but it’s not enough
As part of its broader capacity market reforms, ISO-NE has proposed a two-year transition period to gradually introduce new resource accreditation values, giving market participants time to adjust. The transition also provides an opportunity for ISO-NE and stakeholders to further evaluate the modeling limitations that could unfairly reduce storage’s accreditation value. ISO-NE deserves credit for acknowledging the storage modeling issue exists and has twice come to stakeholders proposing solutions. While the proposed modifications are an improvement, they are band-aid solutions that only modestly improve the prior proposal. They likely undervalue storage and certainly do not address the underlying modeling issues.
Responding to our consistent feedback, ISO-NE proposed a winter energy storage heuristic in August. The mechanism increases winter storage accreditation based on duration: a 24-hour storage resource would receive no accreditation reduction attributable to its energy duration limitations, with shorter-duration resources receiving proportionate increases. The stated goals are to provide a mechanism that “increases the accreditation of energy limited and storage resources” in recognition of the “modeling limitations,” while giving ISO-NE and stakeholders more time to further evaluate the model during the two-year transition period. The heuristic is a promising stopgap that mitigates storage derates while ISO-NE investigates permanent modeling fixes.
However, this approach falls short in two key areas. First, by approximately 15 percent, assigning 26 percent Marginal Reliability Impact when it’s likely closer to 30 percent. Second, the mechanism would simply expire after the transition period, regardless of whether ISO-NE fixes the foundational modeling issues. If the mechanism simply expires before meaningful changes are implemented, what may be defective storage accreditation values would become effective.
A Unified Proposal Emerges
New England’s storage industry has unified behind a single proposed package of straightforward amendments. Because energy storage is a resource that is poised to play a critical role in New England’s energy future, consumer advocates like the Massachusetts Attorney General’s Office (MA AGO) have also advocated to fix the storage modeling issue through an amendment that would result in similar outcomes to our proposal. Advanced Energy United presented its latest proposal in September, mirroring a similar proposal presented by storage developer Flatiron Energy, in response to ISO-NE’s August storage heuristic mechanism. That proposal has evolved into a jointly sponsored Storage Coalition amendment which proposes to do three things.
First, we support adopting the proposed heuristic and its underlying mechanics, but support shifting the baseline to better reflect energy available for charging.
Second, we propose that the heuristic adjustment remain in place until ISO-NE implements permanent modeling fixes, preventing overly conservative accreditation values from taking effect if the transition period ends before those fixes are implemented.
Finally, the proposal would lengthen the transition period from two to three years to soften the impact of upcoming reductions in storage accreditation and give ISO-NE more time to develop and implement permanent modeling fixes.
What’s Next
Stakeholders should watch whether ISO-NE adopts measures and safeguards that help ensure permanent modeling fixes are implemented. With industry participants and other stakeholders increasingly converging around the need for a more durable solution, ISO-NE now has an opportunity to address these concerns in its initial filing rather than leaving them to a potentially contentious stakeholder vote. Doing so would send a much clearer signal that New England intends to value storage fairly and emerge as a market where flexible resources can invest with confidence.