Performance Incentives in ISO New England's Forward Capacity Market

July 3, 2013

ISO New England (ISO) is currently conducting a stakeholder process to redefine the product it buys through the Forward Capacity Market (FCM).  ISO has proposed to replace the current penalty structure for failure of a Capacity Resource to be available during a Shortage Event with a Performance Incentive package. ISO’s explicit goal is to provide an increased incentive for suppliers to be available during critical periods and to provide clear financial incentives for capacity suppliers to make economic investments to improve performance, whether through investment in dual-fuel capability, purchase of firm fuel transportation, or other creative approaches to enhancing system reliability. In this paper, Senior Consultant to CRA Robert Stoddard considers the ISO proposal and  assesses the range of possible improvements in the FCM design to address the reliability concerns raised by ISO.

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