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New England Public Policy Center
Research Report No. 06-2
by Carrie Conaway
Full-text paper 
New England needs a reliable supply of energy for its day-to-day
functioning and its economic growth. The right mix of fuels
and technologies must be in the right place at the right time,
all the time. Because of the long lead times in building energy
infrastructure, ensuring system reliability requires making
decisions, investments, and policy today that will allow the
region to meet expected demand many years from now, while
at the same time buffering the region from the impact of unexpected
short-term changes in energy markets. And this, in turn, requires
both well-functioning markets and carefully crafted public
policies.
Reliability is of particular concern to New England, for
several reasons. First, the region is lacking in traditional
indigenous sources of energy. This means the region's energy
sources come at higher cost because they must be transported
farther to get here, and it can also leave the region vulnerable
to interruptions in supply and price spikes in world markets.
Second, some are concerned that the deregulated structure
of the region's wholesale and retail electricity markets may
not be providing the right incentives for firms to invest
in new generation capacity, which could threaten system reliability.
Third, most agree that even if the right incentives were in
place, it would still be difficult to find communities willing
to host this new infrastructure because of the region's fragmented
local decision making and increasing community concerns about
the safety, security, and economic impacts of these facilities.
New England's state governments can and should take a more
active role in ensuring system reliability. They can work
to maintain the region's fuel diversity by responding to the
region's dramatic growth in natural gas demand and by experimenting
with incentives to promote renewable energy sources and new
technologies. They can reduce demand through new energy pricing
structures and energy efficiency programs. They can work with
ISO New England and energy regulators to improve the incentives
for investing in electrical generation. And they can smooth
the process of siting new infrastructure so that community,
regional, and national considerations are all given due weight.
New England's energy problems were not quickly created, and
they will not be quickly resolved. But they cannot be ignored,
for they are too important to the region's future. Without
the assurance of an energy system that can meet immediate
demands along with long-term growth, the region puts its economic
prosperity at risk.
Full-text paper
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