In 2019, an Independent Systems Operator (ISO) sought to update its Cost of New Entry (CONE) value and Offer Review Trigger Prices (ORTPs) to set the auction parameters in the Forward Capacity Market (FCM). The CONE value represents an estimate of the total and net costs associated with developing the most economically viable new capacity resource in the ISO’s region. Meanwhile, the ORTP values estimate the entry costs for all resource types that would reasonably be expected to participate in the FCM, and these values are used to screen offers from new resources that may require further review per the ISO’s buyer-side market power mitigation provisions.
Concentric collaborated closely with the ISO and its stakeholders over a span of eighteen months to review the methodology and calculations of the CONE and ORTP values across several resource types, including gas-fired resources, solar, onshore and offshore wind, battery, demand response, and energy efficiency resources. This effort involved the analysis and preparation of:
- Capital cost information, including installed costs as well as fixed and variable operating and maintenance costs.
- Financial parameters, including the cost of debt, cost of equity, and risk premium.
- Energy and ancillary services offer price assumptions and modeling of energy and ancillary services revenues.
- A financial model designed to calculate the levelized annual cost required to ensure the recovery on and of investment costs.
This work included presenting at eight stakeholder meetings attended by over 80 of the ISO’s market participants to discuss and debate the assumptions, calculations, and conclusions. The final analysis and report were filed with and approved by the Federal Energy Regulatory Commission in 2021.
