Price Impacts of Energy Transition on the Interconnected Wholesale Electricity Markets in the Northeast United States

Our regression analysis documents that energy policies to promote renewable energy development, as well as hydroelectric imports from Canada, lead to short-run reductions in average electricity prices (also known as merit-order effects) throughout the Northeast United States. Changes in the reliance upon renewable energy in one of the Northeast’s three interconnected electricity markets will impact wholesale prices in the other two. The retirement of a 1000 MW nuclear plant can increase prices by about 9% in the Independent System Operator of New England market and 7% in the New York Independent System Operator market in the short run at reference hubs, while also raising prices in neighboring markets. Some proposed large-scale off-shore wind farms would not only lower prices in local markets at the reference hubs modeled but would also lower prices in neighboring markets.