As wholesale energy markets and state regulators grapple with the challenges of transforming the U.S. power grid toward a carbon-free future, disagreements over to how achieve certain targets seem unavoidable. In New York, the latest such conflict is about market participation opportunities of energy storage resources.
State regulators last month filed a complaint with the Federal Energy Regulatory Commission (FERC) over mitigation measures applied by the New York Independent System Operator (NYISO) that could potentially impact the deployment of energy storage resources across the state, particularly the New York City metropolitan area.
The New York State Public Service Commission (PSC) and New York State Energy Research and Development Authority (NYSERDA) stated in their complaint that NYISO's current tariff provisions interfere with the state's policy objectives by subjecting energy storage resources that participate in the wholesale capacity market to buyer-side mitigation measures.
"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 complaint, which was filed on July 29, said.
Further, PSC and NYSERDA described NYISO's buyer-side mitigation rules as a "shield to preserve the market position of incumbent generators and as a sword against new market entrants."
Both state agencies are asking FERC to grant all energy storage resources a blanket exemption from NYISO's mitigation measures. Alternatively, should the commission decline to issue a blanket exemption, the complainants propose a megawatt cap exemption that would enable up to 300 MW of energy storage resources to enter the market each calendar year without the threat of mitigation.
In their complaint, PSC and NYSERDA also said that NYISO's current mitigation measures are inconsistent with FERC Order 841, designed to provide fair market access for energy storage. The order, which was approved by the commission in February 2018, has been hailed as landmark decision by the storage industry.
"One of the issues we found before 841 was that many of the [Independent System Operators], though they were beginning to recognize the value of energy storage on their grids, were implementing these kinds of changes at different rates and in different ways, and so it made it more difficult for a company like ours to really launch a unified strategy across the U.S.," Chris Streeter, chief information officer at energy storage developer Convergent, told Utility Dive.
Neither PSC, which is a division of New York's Department of Public Service (DPS), nor NYSERDA provided Utility Dive with additional information about the complaint. "The complaint speaks for itself," a DPS spokesperson told Utility Dive.
Setting a precedent
New York has the most aggressive energy storage target in the country, and FERC's ruling on this complaint could set a precedent for wholesale markets around the nation.
In 2018, Democratic Gov. Andrew Cuomo set New York's energy storage goal at 1,500 MW by 2025. Building on the governor's target, NYSERDA and DPS, together with stakeholders, developed the New York State Energy Storage Roadmap.
Based on the recommendations of the roadmap, the PSC in December issued an energy storage order that expanded the governor's goal to 3,000 MW of energy storage by 2030. The roadmap also laid out deployment mechanisms to achieve both the 2025 and 2030 energy storage targets.
Even though both figures are statewide targets, New York regulators expect that the New York City metro area will be the biggest beneficiary from the deployment of energy storage systems based on its unique regional characteristics, which includes transmission and gas constraints and a reliance on fuel oil for reliability during winter periods, the complainants said.
The metro area, however, is included in NYISO's mitigated capacity zones — Zones G-J — which apply buyer-side mitigation measures. According to the complaint, state regulators expect this will result in energy storage project developments shifting away from the region.
"[T]he purpose of buyer-side mitigation is to prevent uneconomic entry from artificially suppressing capacity prices," according to a NYISO training document.
PSC and NYSERDA reject the idea that New York's energy storage goal and deployment policy seek to suppress capacity market prices.
"Therefore, there is no rational basis to apply [buyer-side mitigation] measures to Energy Storage Resources in a manner that improperly interferes with legitimate state actions that fall within the regulatory authority reserved to states under the [Federal Power Act]," according to the complaint.
NYISO has not yet officially responded to the state's complaint.
The ISO "is committed to creating market opportunities for these important new technologies as demonstrated by our market design response to FERC Order 841, and our recent proposal for expanding market rules for distributed energy resources," Kevin Lanahan, Vice President of External Affairs and Corporate Communications at NYISO, told Utility Dive in an email. "We will respond to the Public Service Commission's filing via the FERC process. We look forward to continued collaboration on DER and storage efforts with all stakeholders, including the PSC and [NYSERDA]."
NYISO declined to provide any further comment, as the matter is pending before FERC.
State regulators are asking FERC to fast track their complaint in order to provide clarity for prospective developers.
