ENSURE RES OURCE ADEQU ACY
As discussed in Section II, above, the forward capacity auction conducted in 2014 (FCA8) indicated that the New England region will experience a shortfall in generation capacity beginning in 2017. New resources that cleared in FCA9, including a 725 MW combined-cycle plant located in Connecticut, will help the region to meet its reliability needs for 2018. The 2014 IRP projects that resources within Connecticut are expected to be sufficient to meet Connecticut’s Local Sourcing Requirement through 2024, although Connecticut generation prices will be affected by regional supply/demand conditions. If the resources cleared in FCA 9 do not come online by the 2018 timeframe, the region will experience a capacity shortfall, which will increase prices for all ratepayers in the region, including Connecticut.
The 2014 IRP concludes that Connecticut’s increased investment in conservation and load management (C&LM) programs has succeeded in halting any growth in the state’s annual average electricity demand between 2014-2024, and has reduced growth in the state’s summer peak electricity demand to 0.5% per year. Achieving this limit on demand growth will help Connecticut and the New England region avoid the cost of any increased capacity need due to growing electricity usage. By continuing to strengthen the state’s efficiency investments, as
highlighted in Resource Strategy #1, below, Connecticut can continue on this trajectory to avoid capacity costs by maximizing cost-effective energy demand reduction.
Barring any market failures, the ISO-NE regional capacity market should continue to attract new capacity to supply the existing regional need, which could include generation facilities constructed in Connecticut. However, recent changes in market rules may affect participation in the capacity market among both new and existing generators, and pending litigation is creating significant uncertainty about the ability of demand response resources (DR) to participate in the market as well. For these reasons, the 2014 IRP recommends, in Resource Strategy #2, that DEEP monitor litigation affecting DR, and utilize existing state authority to support DR as a contingency in the event that DR is not able to participate in the wholesale markets. Further, in Resource Strategy #3, the 2014 IRP recommends that DEEP continually monitor the markets and participate in ISO-NE and FERC proceedings and be prepared to utilize state authority if needed to ensure that resources are adequate to meet Connecticut’s electric needs.
RESOLVE N ATURAL G AS INFR AS TRUCTURE CONSTR AINTS
The 2014 IRP identifies inadequate infrastructure to supply the region’s increasingly gas- dependent generation fleet as the most pressing problem facing the electricity system in Connecticut and New England at this time. This infrastructure challenge threatens winter reliability and has resulted in billions of dollars in higher generation costs over the past few years. As described in Section III, above, no market solution appears to be forthcoming and all analysis concludes that this problem will persist in the years ahead. DEEP does not believe that this issue has been adequately addressed by ISO-NE and FERC and that regional market intervention is needed at this time. This problem is too big for any one state to solve alone, and all New England states should contribute to a solution. Since 2013, Governor Malloy has been actively leading the six New England Governors in a regional energy infrastructure initiative to address this problem.
Resource Strategy #4 evaluates recent studies to determine the scale of resource investment that could cost-effectively resolve the region’s winter peak reliability problem, and the potential cost- benefit of different types of resources that could help to alleviate the region’s gas infrastructure constraints. Strategy #4 recommends that DEEP secure long-term contracts with cost-effective resources by coordinating with other New England states to utilize a competitive procurement for Class I renewables and/or large-scale hydropower. In addition, Strategy #4 recommends that DEEP seek legislative authorization for an additional procurement, open to a broad range of resources including: natural gas infrastructure, LNG, non-gas generation and associated transmission (if needed), and measures that reduce demand for natural gas and/or electricity. DEEP would solicit bids from all of the above resource types, and select cost-effective resources that can contribute to Connecticut’s reasonable share of the needed regional solution. Finally, Resource Strategy #5, which recommends revitalizing the state’s incentive programs for combined heat and power facilities under 20 MW (which would likely be too small to compete in the procurements discussed and proposed in Resource Strategy #4), has the potential to contribute an incremental amount of gas and electricity demand reduction while securing energy savings for participating Connecticut customers.
ADDRESS CL AS S I RPS S HORT AGE
Connecticut’s commitment to procuring an increasing portion of its electricity from renewable resources is a critical component of the state’s ability to reduce greenhouse gas emissions from its electricity sector. Renewable generation resources also provide an alternative to natural gas generation, which is of renewed importance in light of the region’s increasing dependence on natural gas and its associated winter reliability challenge.
The 2014 IRP identifies a potential regional shortage in Class I renewable resources later in the decade, which could raise costs to customers and limit Connecticut’s ability to secure the benefits of its RPS commitment. To the extent that Class I resources are successful in the two procurements described in Resource Strategy #4, those procurements could result in a significant amount of new Class I resources coming online to mitigate the projected shortage. While the outcome of those procurements would be pending, in Resource Strategy #6 the 2014 IRP recommends continued investment in the deployment of in-state renewable generation, through modifications to existing programs to reach more in-state potential with the lowest possible subsidy. Resource Strategy #7 further calls for a re-evaluation of incentives and regulatory policies for distributed energy resources to ensure they are fully integrated into distribution system planning and operation. Finally, in Resource Strategy #8, this IRP also recommends deferring until 2018 the requirement to establish a schedule for the phase-down of the value of renewable energy credits for Class I biomass and landfill gas facilities. The delay in retirement of such facilities will avoid exacerbating the region’s capacity need and increasing reliance on natural gas generation while other resource solutions are forthcoming.
Having summarized the main policy objectives underlying the recommendations proposed in this IRP, we now turn to describe each of the Resource Strategies in detail in the remainder of this Section.