New York Independent System Operator (NYISO) President and CEO Richard Dewey said recent federal orders narrowing exemptions to buyer-side mitigation (BSM) market rules in its capacity zones "present a pathway" for the state's ambitious climate goals, and do not impact zero emission credits for upstate nuclear energy or the planned upstate onshore wind development.

"When we sat down and digested [the orders] ... it actually didn't play out nearly as bad for New York or for the renewables and storage projects as we feared," he told Utility Dive.

Energy storage in New York City and the lower Hudson Valley, where congestion and higher capacity rates make the resource very desirable, will be the "most adversely impacted by these orders," he said, adding that the grid operator is planning its own improvements in BSM test methodology to favor storage.

Dewey expects several stakeholders will continue to request a rehearing of the orders from the Federal Energy Regulatory Commission. Separately, New York ISO is working to recalculate a renewable energy exemption cap, after FERC rejected its original methodology.

The toll on storage

For many new renewable resources, however, New York City and the mitigated zones are crucial and "highly desirable" for new developments, according to Bill Acker, executive director of New York Battery and Energy Storage Technology Consortium (NY BEST). Those groups will be spearheading opposition to the FERC orders and the restrictions on new resources.

"The lower part of the state and the New York City area have more congestion, more constrain and have higher capacity prices and higher demand charges for customers of electricity," Acker told Utility Dive. The BSM rules are "effectively blocking one of the most lucrative markets" in the country, he added.

NYISO is trying to address opportunities on a separate track, through a project announced this year that looks into BSM test methodology changes to favor energy storage, which Acker noted could be "potential incremental improvements." NY BEST is a confirmed participant of the project.

The project should give storage "an opportunity to more easily pass the mitigation tests," Dewey said. "It's not quite an exemption where they don't get tested, but we think that some of the changes we're proposing to our test will make more of them" qualify for market participation.

The project is "unlikely to completely rectify this issue, as we're moving forward to head toward a high renewable grid, if we have rules that effectively bar storage ... from participating in the ISO," Acker said. 

Likely minimal upstate impacts

Stakeholders repeatedly compared the expected FERC orders to regulators' decision to institute a minimum offer price rule for new subsidized resources in the PJM Interconnection. The New York grid operator is relieved that will not be the case, despite narrowing exemptions.

The impact of the BSM rules will be contained to the Lower Hudson Valley and New York City, Dewey said, as buyer side mitigation does not extend to other regions, per one of FERC's four orders. New upstate resources can qualify for renewable energy credits from the New York State Energy Research and Development Authority (NYSERDA) without affecting their participation in NYISO markets.

"There was a fear that [the BSM] was going to create an impediment that didn't exist in the past," in the upstate region, where a lot of renewable generation, "specifically onshore wind, was already intended and planned," he said. 

New downstate resources, in the mitigated zones, will need to be tested, but FERC created "a pathway" for a renewable energy exemption, and the grid operator is "fine tuning the rules" so renewable resources can get through the BSM test, Dewey said. 

Because of the capital intensive and low performance capacity nature of renewable projects, state regulators had complained against NYISO tariffs, saying renewables did not suppress prices and should be exempt from mitigation within BSM zones. NYISO supported this complaint against its own tariffs, and Dewey interprets FERC's order as agreeing that a renewables exemption should exist within mitigated zones.

FERC "did give us a homework assignment to change the way that the cap is calculated that we had proposed when we filed in support of the exemption," Dewey said. NYISO has 30 days since the orders were filed to calculate a different proposed methodology, which would provide a pathway for resources like offshore wind that are likely to be connected in New York City.

The cap "was rejected really on the premise that we had used some statewide numbers as opposed to considering what the actual market conditions are in the [mitigated] zone."

NYISO has been communicating with New York state regulators and energy officials to compare interpretations of the FERC orders, Dewey said.

Despite NYISO's interpretation of the order, NYSERDA views the FERC orders restricting BSM exemptions as "an attempt to undermine New York’s nation-leading policies to combat climate change, rapidly expand clean energy and achieve a 100% emissions-free electricity system by 2040."

The FERC orders "will force customers to pay more to prop up expensive fossil fuel power plants while destroying our great state’s precious natural resources and elevating community and resident risks in the face of increasingly severe weather events," NYSERDA wrote in a statement.

NYSERDA spokespersons refused to elaborate on discussions with NYISO about the impacts of the orders. The New York Department of Public Services deferred to NYSERDA for comment on the FERC orders. 

NYISO is holding stakeholder meetings next week to discuss its annual strategic planning process and to address the FERC changes.

NYISO's carbon pricing

A wide range of stakeholders, from renewable energy groups to the Electric Power Supply Association, have lauded carbon pricing in NYISO's capacity zones as a preferred way to reduce market impacts of clean energy subsidies.

The state's proposal to add a social cost of carbon "makes the impact of potential mitigation determination much less constraining to the renewable development ... helps remove the barrier," Dewey said.

For storage, however, carbon pricing will not mitigate things significantly, Acker said.

From the point of getting endorsement from the state's governor, it will take about a year to put carbon pricing in place, he added. The grid operator is developing pricing requirements and will have to go through FERC for the proposal. NYISO's proposal will be compatible with the carbon cap and trade program the state has in place, as part of the Regional Greenhouse Gas Initiative.

Calculating the locational price of energy is very similar across various markets, Dewey said, so NYISO has received interest from its PJM and ISO New England counterparts.