ISO-NE Capacity Market: Forecasts, FCM Insights & Merchant Curves

Last updated: April 2026. Reviewed quarterly alongside Noreva’s merchant curve releases.

ISO New England (ISO-NE) operates the wholesale electricity markets and manages the bulk power grid for the six New England states: Connecticut, Maine, Massachusetts, New Hampshire, Rhode Island, and Vermont. Its capacity market, the Forward Capacity Market (FCM), with annual Forward Capacity Auctions (FCAs) determining clearing prices, is one of the most technically sophisticated in North America, designed to address New England’s unique combination of geographic isolation, heavy winter fuel dependency, and an accelerating energy transition.

For developers, lenders, and investors with assets or projects in New England, ISO-NE capacity revenues are a defining component of project economics. Noreva provides institutional-grade ISO-NE capacity market forecasts: near-term FCM auction price models and long-term merchant curves built for project finance, valuation, and risk analysis.

How ISO-NE’s Forward Capacity Market Works

ISO-NE’s FCM procures capacity commitments through an annual auction held approximately three years before the delivery year, structurally similar to other forward capacity constructs in the US. The auction determines an annual capacity price (in $/kW-month) paid to cleared resources for the full commitment year. Key structural features of the FCM include:

Unlike PJM’s sealed-bid format, the FCM uses a multi-round descending clock auction in which the price declines until excess supply is eliminated. This format provides participants with real-time signals about where the market is clearing.

ISO-NE’s Pay-for-Performance mechanism, filed in January 2014, approved by FERC in May 2014 (Docket ER14-1050), and implemented June 1, 2018, ties capacity payments to actual delivery during Capacity Scarcity Conditions. Resources that over-perform during scarcity events earn additional payments; under-performers pay penalties. PJM’s Capacity Performance construct (2015) was modeled on ISO-NE’s PFP, not the reverse. PFP creates meaningful financial exposure for resources without firm fuel arrangements, particularly during winter cold snaps.

New England is a largely islanded grid with limited interconnection to neighbors. Internal transmission constraints define sub-regional zones, including Connecticut and Maine, that can clear at prices above or below the system-wide FCM price. These constraints remain a persistent feature of New England’s supply-demand balance.

The FCM demand curve is anchored by the Cost of New Entry (CONE), typically based on a reference combined-cycle gas turbine. Net CONE subtracts projected energy and ancillary service revenues to estimate the net capacity payment a new entrant would require.

Feature

ISO-NE FCM

Auction format

Descending clock (multi-round)

Procurement horizon

~3 years forward

Commitment period

Annual (June to May)

Price unit

$/kW-month

Locational zones

System-wide plus constrained sub-zones (CT, ME)

Performance obligation

Pay-for-Performance

Price ceiling anchor

Net CONE

Capacity Auction Reforms (CAR): Prompt and Seasonal Market for FCA 19

ISO-NE is fundamentally restructuring the FCM. On December 30, 2025, ISO-NE filed its Capacity Auction Reforms (CAR) proposal with FERC, transitioning the market from a forward annual design to a prompt and seasonal design starting with the Capacity Commitment Period beginning June 1, 2028 (FCA 19).

The three core changes are:

  • Prompt auction: Capacity will be procured shortly before the commitment period rather than three years in advance, allowing supply and demand projections to reflect more accurate near-term information.
  • Seasonal commitment periods: Separate summer and winter capacity products will replace the single annual commitment, recognizing that New England’s reliability needs and resource performance differ materially across seasons.
  • Resource Capacity Accreditation (RCA): Updated accreditation methods will assign capacity credit based on each resource’s marginal contribution to reliability, with explicit treatment of fuel security risk and renewable variability.

FCA 19 was originally scheduled for February 2025 and has been delayed multiple times to accommodate these reforms. The transition has direct implications for project finance and bidding strategy: forward revenue visibility shrinks, but seasonal granularity and accreditation reforms create new value differentiation across resource types. Noreva’s ISO-NE forecasts incorporate the CAR transition explicitly, with separate scenarios reflecting prompt and seasonal pricing dynamics from FCA 19 onward.

Why Is Winter Reliability Critical in ISO-NE?

No US capacity market is more directly shaped by winter fuel security than ISO-NE. New England’s electricity system is heavily dependent on natural gas, which also heats much of the region’s housing stock. During winter cold snaps, pipeline constraints can limit gas availability to power plants precisely when demand peaks, forcing oil-fired or dual-fuel resources to serve load at significantly higher cost.

This dynamic creates asymmetric reliability risk. Unlike summer adequacy challenges, which are typically addressed by adding peak capacity, winter reliability in New England depends on fuel that can actually be delivered: on-site oil storage, LNG dual-fuel capability, or other dispatchable non-gas resources. ISO-NE’s market design, Pay-for-Performance framework, and separate winter reliability measures all respond to this structural challenge.

The weather and grid stress lessons relevant to New England’s winter reliability framework are explored in The Shape of the Storm: Lessons from Fern.

What Drives ISO-NE FCM Capacity Prices?

New England has retired a significant share of its oil and nuclear baseload capacity over the past decade, including assets critical to winter reliability. Each retirement tightens the reserve margin and increases reliance on imports, new entry, or the remaining dispatchable fleet. The economics of maintaining aging thermal units, especially dual-fuel resources, remain a persistent source of upward pressure on FCM prices.

Building new generation in New England faces some of the highest development costs in the US: expensive land, complex permitting, and congested interconnection queues. Offshore wind remains the principal long-term new-entry category, but long timelines and cost escalation constrain the speed at which new supply can relieve the market.

States such as Massachusetts and Connecticut continue to procure renewable generation through long-term contracts. These resources may enter the FCM at low offer prices because their economics are partially supported outside the capacity market. That can suppress near-term clearing prices even as broader system reliability tightens.

New England leads the US in energy efficiency investment, with state programs systematically reducing peak demand growth. Demand response resources also participate actively in the FCM. These demand-side factors limit load growth and shape the system-wide capacity demand curve that ISO-NE uses to clear the FCM.

Driver

Effect on FCM Price

Direction

Thermal retirements (oil, gas, nuclear)

Reduces dispatchable supply and tightens reserve margin

Upward

State offshore wind procurement

Adds low-offer supply that can suppress auction clears

Downward

Winter fuel security risk

Raises the value of dual-fuel and oil-capable resources

Upward

Energy efficiency programs

Reduces peak demand growth

Moderate downward

Pipeline and import constraints

Limits ability to serve load from outside New England

Structural upward pressure

Noreva ISO-NE Capacity Coverage

Noreva’s ISO-NE forecasts cover upcoming capacity auctions, including system-wide clearing prices and zone-specific outcomes for Connecticut, Maine, and other import-constrained areas. Forecasts integrate retirement schedules, state procurement timelines, winter fuel security risk, and policy developments into scenario-based outputs. The underlying methodology is detailed on our How It Works page.

ISO-NE’s transmission constraints create persistent price differentiation between the system-wide FCM clearing price and zonal sub-prices in Connecticut and Maine. Resources located inside an import-constrained zone can command a zonal premium, reflecting the underlying value of locational capacity and deliverable capacity. Noreva tracks zonal divergence across FCAs and models forward zonal spreads under each scenario.

Recent Forward Capacity Auctions illustrate the price level and zonal dynamics that define ISO-NE capacity. Noreva’s historical pricing datasets cover FCAs from FCA 1 forward, with system and zonal granularity.

ISO-NE FCA Clearing Prices, Recent Auctions ($/kW-month, UCAP)

Auction

Commitment Period

Rest-of-System

Notes

FCA 14

2023/24

$2.00

Substitution Auction held; some demand-curve adjustments

FCA 15

2024/25

$2.61

System-wide clearing

FCA 16

2025/26

$2.59

System-wide clearing

FCA 17

2026/27

$2.55

System-wide clearing

FCA 18

2027/28

$3.58

Last FCA under the legacy forward/annual design

Noreva’s ISO-NE capacity merchant curves support long-term asset valuation, lender underwriting, and portfolio strategy. These curves reflect the expected evolution of the New England supply stack, including offshore wind entry, continued thermal retirements, interconnection developments, and the transition toward the CAR framework.

ISO-NE’s reliability challenges are fundamentally seasonal. Noreva’s datasets separate summer peak dynamics from winter fuel security risk and include technology-specific capacity credit assumptions for wind, solar, and storage, reflecting ELCC methodology where relevant to forecast construction.

Why Noreva for ISO-NE Capacity Forecasting

Noreva combines fundamentals-based modeling with trader-informed pricing inputs, a methodology no other ISO-NE capacity data provider offers at this depth. Learn more about Noreva and the broader capacity services we offer. Our ISO-NE coverage is built around five differentiators:

  • Fundamentals + transactional insights: We pair our in-house supply, demand, and policy modeling with live broker inputs and bilateral transaction data sourced through our sister company Karbone, which has 15+ years of capacity market trading and origination experience in ISO-NE. Most data providers rely on fundamentals alone; Noreva ties ISO-NE forecasts to where the market is actually transacting across FCAs, bilateral windows, and zonal products.
  • Low / Base / High scenarios: Every ISO-NE forecast ships with three calibrated scenarios, enabling risk teams, lenders, and developers to stress-test assumptions on retirement pace, offshore wind entry, winter fuel security, and the CAR transition without re-running the model.
  • Customizable scenario workbench: Clients can adjust load growth, retirement schedules, ELCC factors, gas and oil prices, state procurement assumptions, and seasonal accreditation inputs, then re-run ISO-NE forecasts on demand. The workbench is built for analysts who pivot quickly between IC decks and lender conversations.
  • Full data stack through Noreva Data Hub and API: Historical FCA pricing, daily marks, weekly forwards, zonal splits (CT, ME, system), and 25-year merchant curves, all accessible through the Noreva Data Hub or directly via API for integration into project finance models, DSCR engines, and portfolio risk systems.
  • Advisory layer: Beyond data, Noreva supports clients with asset valuation reports, pro-forma reviews, PPA and offtake structuring support, origination advisory, and project benchmarking, drawing on Karbone’s direct market experience.

Use Cases: Who Relies on ISO-NE Capacity Forecasts

Offshore wind and storage developers in New England need to understand both contracted revenues and the merchant capacity layer. Noreva’s ISO-NE capacity forecasts help size that incremental revenue stream and support commercial strategy.

FCM revenues can be a material component of debt sizing and valuation. Lenders need defensible base cases and downside scenarios that capture New England’s structural drivers, particularly winter reliability and zonal pricing. The rigor of capacity price forecasting is especially important here, where state-market interactions complicate any standard underwriting model.

PFP creates meaningful downside exposure for resources that cannot perform during scarcity conditions. Noreva’s scenario analysis supports quantification of winter stress exposure, fuel risk, and non-performance sensitivity.

ISO-NE Capacity Market: Key Concepts

  • Resource adequacy: The reliability objective of the FCM, ensuring New England has enough committed capacity to meet peak demand.
  • Forward Capacity Market (FCM): ISO-NE’s central capacity market design.
  • Forward Capacity Auctions (FCAs): The annual auctions that determine clearing prices under the current framework.
  • Pay-for-Performance (PFP): ISO-NE’s performance-based settlement mechanism during scarcity conditions.
  • Planning Reserve Margin (PRM): The reserve buffer above forecast peak demand.
  • CONE / Net CONE: Key demand-curve reference concepts in auction design.
  • Firm capacity: The premium product, accredited capacity with firm transmission to the load pocket.
  • Capacity merchant curves: Long-dated forward price curves used for valuation and underwriting.
  • Generation asset valuation: The broader valuation discipline that integrates capacity forecasts with energy revenues, costs, and policy incentives.
  • NEPOOL GIS: New England’s generation attribute tracking system, relevant to certification and broader market workflows.

How ISO-NE Compares to Other US Capacity Markets

US Capacity Market Design Comparison

Market

Auction Format

Procurement Horizon

Commitment Period

Locational Granularity

Performance Obligation

CAISO

Bilateral (no centralized auction)

Annual + monthly + 3 to 5yr (MTR)

Annual + monthly

System / Local RA zones

RA showings

ISO-NE

Descending clock (transitioning to prompt/seasonal at FCA 19)

~3 years forward currently; prompt from FCA 19

Annual currently; seasonal from FCA 19

System + CT, ME zones

Pay-for-Performance

MISO

Prompt seasonal PRA

Annual

Four seasons

10 Local Resource Zones

ELCC + accreditation

NYISO

Spot + strip + bilateral

Monthly + 6-month strips

Summer / Winter capability periods

NYC, LHV, LI, ROS localities

UCAP derating + ICAP demand curve

PJM

Sealed-bid (BRA)

~3 years forward

Annual

RTO + LDAs

Capacity Performance

SPP

Bilateral + RA showings

Annual

Seasonal (summer / winter)

System + sub-zones

PBA

For broader market commentary across all US capacity markets, see Noreva’s Market Views.

Frequently Asked Questions: ISO-NE Capacity

The FCM is ISO-NE’s annual capacity market framework. It procures commitments from generators and demand-side resources to be available during the delivery year and pays cleared resources a capacity price in $/kW-month.

FCA 19 is the Forward Capacity Auction for the Capacity Commitment Period beginning June 1, 2028. It was originally scheduled for February 2025 but has been delayed multiple times to accommodate Capacity Auction Reforms (CAR), which transition ISO-NE from a forward annual design to a prompt seasonal market with updated Resource Capacity Accreditation. ISO-NE filed its CAR proposal with FERC on December 30, 2025. FCA 19 is expected to be the first auction conducted under the reformed design.

New England’s dependence on natural gas for both heating and electricity creates pipeline constraints during cold weather. That makes winter reliability more difficult than in many other US markets and increases the value of resources with secure fuel arrangements.

State-sponsored resources, particularly offshore wind, may enter the FCM at low prices because their economics are supported by long-term contracts. That can suppress auction clears even when broader system reliability remains tight.

CONE is the estimated cost of building a new reference generator in New England. Net CONE adjusts that estimate for expected energy and ancillary service revenues and helps anchor the auction demand curve.

See the market. Price the future. 

See the market. Price the future. 

BOOK A DEMO

CONTACT US

Access Noreva’s ISO-NE Capacity Forecasts

Noreva’s ISO-NE capacity datasets are designed for direct use in project finance models, lender materials, valuation work, and portfolio risk frameworks. Coverage includes near-term FCM forecasts, long-term merchant curves, zonal pricing views, and scenario-based market analysis.

To learn how Noreva’s ISO-NE capacity forecasts can support your next transaction, underwriting process, or asset valuation, book a demo with our team.