For the first time, the coal-fired power plant in Bow has failed to win funding from an annual program designed to guarantee future electricity supplies.
Bids from two coal generators at Merrimack Station were passed over in the forward capacity auction for 2026-27 although bids from its two small, kerosene-fired turbines succeeded.
The power plant has been paid many hundreds of thousands of dollars a month under the system in return for guaranteeing that it can produce certain amounts of electricity when needed, such as during extreme cold snaps when natural gas-fired plants have trouble getting fuel. It has already won these capacity payments for the next two years.
It’s not clear what effect the failure to win the latest auction will have on the future of the power plant, which is one of Bow’s biggest sources of property tax.
The president of Granite Shore Power, which owns the plant, told the Monitor after the 2020 capacity auction that Merrimack Station could be financially viable even without capacity payments. “Can you make a business model out of being a seasonal peaker? We believe we have and are,” Jim Andrews said at the time.
A “peaker” is the industry term for a power plant that operates only when the system need is at a peak, as compared to a plant that is paid for generating electricity all year long. In recent years, Merrimack Station has produced power less than 10% of the time.
The forward capacity auction is run by ISO-New England, which operates the six-state power grid. Under the process, ISO-NE estimates the amount of electricity the region will need three years in the future and generators bid a per-kilowatt price that would lead them to guarantee to produce power on demand. The lowest bids are accepted until the estimated needs are met.
Prices for this year’s auction were around $2.60 per megawatt-month, roughly the same as last year. Prices went as low as $2 per kilowatt-month in 2020.
The money, which comes out of everybody’s electricity bill, is paid whether power plants are asked to produce electricity or not. It comes on top of any per-kilowatt payment for actual power generation.
Advocates say this program is needed to give plants the financial incentive to stock up on fuel or otherwise make sure they can meet emergency power needs. The auction was created in response to concern about brownouts during times of extreme need, especially in winter when most natural gas is used for heating rather than power production. New England is heavily dependent on natural gas to fuel our electric power plants.
Critics call capacity auctions a subsidy for large power plants, one that favors the use of fossil fuels and undermines the transition to a power grid that takes advantage of systems like demand reduction and efficiency.
The two coal-fired plants at Merrimack Station can produce 438 megawatts of electricity, enough to power roughly 450,000 homes. That’s about 1/3 the amount produced by Seabrook Station nuclear plant.
The site’s two kerosene-fired turbines produce just 17.6 megawatts each. However, they can be turned on and off very quickly, unlike most large power plants, which make them valuable during times of peak power need. Their winning bids will generate about $90,000 a month in auction payments.