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NY authorities ask FERC to change market rules hampering energy storage growth

Two New York state authorities have asked the Federal Energy Regulatory Commission to exempt storage resources from market rules they claim will inhibit the state from meeting its ambitious clean energy targets.

In a July 29 complaint, the New York State Public Service Commission and the New York State Energy Research and Development Authority asked the commission to fast-track a request to exempt storage resources from buyer-side mitigation measures used in the New York ISO's wholesale installed capacity market.

The NYISO uses a test to determine whether bids submitted in its installed capacity, or ICAP, market are economic to prevent the exercise of market power by participants who also buy capacity and therefore can benefit from a low price.

Asserting that the state grid operator's rules serve as "both a shield to preserve the market position of incumbent generators and as a sword against new market entrants," the state authorities urged FERC to grant a blanket exemption from all buyer-side mitigation measures to all energy resources seeking to participate in the NYISO's ICAP auctions.

"While even the threat of mitigation has a deleterious impact discouraging market entry, actual mitigation would severely limit, or even eliminate, the ability of energy storage resources to be paid for the value they provide," the state authorities argued.

The complaint comes as New York seeks to make energy storage a key pillar of one of the most ambitious decarbonization efforts in the world. Responding to a 2017 law, the NYPSC in December 2018 set a goal of adding 3,000 MW of energy storage by 2030, with an interim target of 1,500 by 2025, while authorizing up to $310 million in incentives.

In addition, Gov. Andrew Cuomo on July 18 signed a sweeping climate law requiring the NYPSC to establish a renewable energy program by June 30, 2021, to ensure that at least 70% of the power consumed in the state be generated by renewable energy systems by 2030. The law also mandates the complete elimination of planet-warming emissions from the electricity sector by 2040.

While acknowledging that those goals are statewide, the state authorities told FERC that they anticipate the New York City Metropolitan Area will benefit the most from the deployment of energy storage resources. That area "has unique regional characteristics, including transmission and gas constraints and a reliance on fuel oil for reliability during winter periods," they said.

The authorities specifically took issue with the NYISO's buyer-side mitigation measures being applied in only two "constrained" mitigated capacity zones that cover New York City and the Lower Hudson Valley. Applying buyer-side mitigation measures to those zones "will shift project development away from the region where energy storage can provide the greatest reliability, resilience, fuel diversity, environmental, and public health benefits," they asserted.

The authorities also argued that granting a blanket exemption for energy storage resources would fulfill the spirit of FERC Order 841, a regulation aimed at removing barriers that keep storage resources from participating in wholesale markets. Issued in February 2018, the order directed each regional transmission organization and independent system operator to establish market rules that accommodate the participation of storage resources in their capacity, energy, and ancillary services markets.

NYISO's compliance filing responding to that order, which is still pending with the commission, would subject storage resources in New York and the Lower Hudson Valley seeking to participate in its ICAP auction to its existing buyer-side mitigation measures. The July 29 complaint asked FERC to direct the NYISO to make another compliance filing within 30 days that would allow storage resources to participate as capacity suppliers without review under, or potential mitigation by, the buyer-side mitigation rules.

The complaint also requests fast-track processing procedures in order to implement the exemptions, noting NYISO's next interconnection process will begin on or around Aug. 7. (FERC docket EL19-86)