The New York ISO is looking to focus on power market enhancements designed to improve energy and capacity market price formation, smoothly integrate renewable resources and strengthen ancillary services markets in the coming five years.
One of NYISO's main challenges in the coming years will be adjusting its wholesale power markets in ways that facilitate New York's extensive clean energy goals, according to a 2020-2024 Strategic Plan presentation given to the grid operator's management committee Dec. 18 and posted to the regional transmission operator's website.
Signed into law over the summer by Gov. Andrew Cuomo, the New York State Climate Leadership & Community Protection Act, known as New York's "Green New Deal," mandates that renewable energy resources supply 70% of the state's electricity needs by 2030 and that the state obtains emissions-free power by 2040.
The law also calls for 9,000 MW of offshore wind power capacity by 2035 — compared with none currently — 6,000 MW of solar by 2025, 3,000 MW of energy storage capacity by 2030 and significant energy efficiency gains by 2025.
"New York State's clean energy requirements will be met by leveraging the power of competitive markets to drive efficient, reliable outcomes," NYISO said.
The power market implications of meeting these requirements include:
* Increased participation of distributed energy resources, microgrids and aggregators in wholesale markets.
* Accelerating growth in both grid-scale and rooftop solar power as well as onshore and offshore wind power resources.
* Growth in grid-scale energy storage as well as aggregations of storage with other distributed resources.
* Increased regulatory and investment risk from state-sponsored resource additions and policy action.
Operationally, NYISO will be faced with a heightened need to monitor transmission congestion as more wholesale resources participate in its markets and an increased need for flexibility due to supply and demand uncertainty associated with intermittent resources, behind-the-meter solar and demand response, according to the presentation.
Depressed energy prices are also expected as zero marginal cost resources such as wind and solar proliferate, which will increase the importance of ancillary service pricing, NYISO said.
Quick-start resources needed for flexibility will increasingly receive fixed-cost recovery from the capacity market, the grid operator said. NYISO also predicted it will need to increase headcount and budget requirements to enact these market improvements.
Growing volumes of renewable energy resources, energy storage and distributed energy resources will create a "more dynamic grid, where supply is increasingly comprised of weather-dependent renewable resources and flexible resources will be needed to balance intermittent generation," NYISO said.
This will require capacity market pricing improvements, constraint-specific shortage pricing and enhanced fast-start pricing. The grid operator plans to introduce ancillary service shortage pricing and enhanced reserves for constrained areas.
Higher renewable energy penetration will involve a comprehensive review of its market power mitigation measures to avoid interference with competitive price signals.
In terms of integrating public policy into the wholesale power markets, NYISO sees its carbon dioxide emissions pricing plan as critical. However, New York state officials have yet to take a view on the proposal.
Implementation of the mandates set forth in the state climate law will be handled by a 22-member Climate Action Committee that is still being formed. That group will play an important role in deciding whether to move forward with NYISO's plan to price carbon emissions into its dispatch system.
The New York Public Service Commission initiated a review of the state's resource adequacy programs in August, including NYISO's capacity market, largely in response to the climate law's requirements. This review will unfold in 2020 and could lead to considerable capacity market design changes.
Jared Anderson is a reporter for S&P Global Platts. S&P Global Market Intelligence and S&P Global Platts are owned by S&P Global Inc.