The New York ISO has proposed capacity market rules changes aimed at clearing barriers to renewable energy participation as the state seeks to achieve a 100% clean energy grid by 2040.
The proposal (ER22-772), filed Jan. 5 with the Federal Energy Regulatory Commission, would exempt clean energy resources such as wind, solar, and battery storage from contentious buyer-side mitigation, or BSM, rules.
Held at multiple intervals over the course of a year, NYISO's capacity auctions are designed to ensure that enough electricity supply is available to meet demand on a spot, monthly and seasonal basis.
NYISO's BSM rules, established in 2008, were designed to combat capacity market price-suppression in load zones covering New York City and the Lower Hudson Valley by setting administrative offer floors for certain types of new market participants.
However, "the potential for conflict between the currently effective version of the BSM rules and New York state policies has never been greater than it is now and that tension will only intensify in the future," Rana Mukerji, senior vice president of market structures for NYISO, explained in the grid operator's Jan. 5 filing.
New York's Climate Leadership and Consumer Protection Act of 2019 requires the state's power grid to obtain 70% of its electricity from renewable resources by 2030. The law also requires a 100% zero-carbon grid by 2040, with mandates for an additional 6 GW of solar by 2025, 3 GW of energy storage by 2030, and 9 GW of offshore wind by 2035.
Despite existing BSM exemptions for certain resources, some new energy storage resources in the NYISO's most recent class year were nevertheless subjected to offer floors, Mukerji noted.
"If the BSM rules do not evolve, they are likely to more significantly interfere with [New York's climate policies] by mitigating new entrants that are necessary to the achievement of New York state's policy objectives," Mukerji said.
NYISO's proposal
NYISO, therefore, proposed to exclude from its BSM rules any resource that supports the goals of the state's climate law. The exclusion would automatically apply to any solar, wind, geothermal, storage, and hydroelectric facilities. It would also apply to demand response, a dispatchable resource type that involves large electricity consumers dialing back consumption in response to price signals.
"Such an exclusion will help to ensure that the BSM rules do not conflict with New York state policies and will avoid over-mitigation that could make the prices paid by consumers unnecessarily high," Mukerji said.
NYISO further proposed to implement marginal valuations for capacity market resources to accurately reflect the observed system reliability benefits that the next incremental unit of a specific resource type would provide. Under that new approach, the grid operator would study capacity accreditation factors annually, a shift from its current quadrennial review process.
Asked by NYISO to study the market impact of the proposed changes, the independent consulting firm Analysis Group, Inc. determined that the proposed rule changes would continue to produce competitive market outcomes while ensuring resource adequacy.
The proposed rule changes were supported by 82% of NYISO stakeholders.
"This change will accelerate renewable development and help reach New York's mandates under New York's Climate Act," NYISO President and CEO Rich Dewey said in a Jan. 10 statement. "This change also positions the NYISO's markets to serve New York electricity customers reliably and will attract new technologies needed for a cleaner grid."
NYISO asked FERC to allow the proposed rules to take effect on March 6.
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