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The electric grid,
. . . has been called the most complex machine in the world, and
. . . ISO New England runs our $7-billion-a-year corner of it.
They buy power from 350 generators — a mix of:
. . . . . . fossil fuel plants,
. . . . . . nuclear reactors,
. . . . . . hydroelectric,
. . . . . . wind, and
. . . . . . solar generators; and
. . . dispatch electricity over 9,000 miles of high voltage transmission lines.

ISO New England needs to run the grid with near 100% reliability,
. . . while managing the wholesale electricity market,
. . . to ensure the lowest price possible.

So this year, ISO New England switched to Pay for Performance.
. . . All generators already sign a 3-year contract, in the Forward Capacity Market,
. . . to produce a certain amount of energy, when called upon.
. . . When ISO calls, they must fulfill their contractual obligation.
“If you told us ‘I’ll be there, and I’ll perform to this level,’
. . . but you don’t, you have to make a refund — that’s the stick.
. . . The carrot is that the refund flows to someone else who performed, and
. . . essentially covered for your non-performance.”

“So if their transmission line goes down, the power plant gets penalized,
. . . despite the fact they don’t own the transmission line.
If they can’t get fuel, the power plant gets penalized.
. . . And so what it does is put a tremendous onus for the power plants,
. . . who made the investments to be able to run on the most critical periods of time.”

1-23-2019 Source:  New England #Energy: Pay for Performance (P4P)