UPDATE: May 11, 2022: The Federal Energy Regulatory Commission on Tuesday approved the New York Independent System Operator’s proposal to exempt clean energy resources from buyer-side mitigation, or BSM.

“We find that NYISO’s proposal reduces the risk, present under the current BSM rules, of at least three significant harms: over-procurement of capacity, inflated capacity market prices, and inefficient price signals from the capacity market,” FERC said in its decision.

FERC also approved NYISO’s plan to create a marginal capacity accreditation design methodology to measure how much resources support reliability in peak periods.

Dive Brief:

• The New York Independent System Operator's (NYISO) proposal to exempt clean energy resources from "buyer-side mitigation" — a process that limits the lowest price a resource can bid in capacity auctions — has sweeping support, according to comments filed Wednesday with the Federal Energy Regulatory Commission.
• However, clean energy advocates oppose a key element of the reform package: a "vague" plan for a "marginal capacity accreditation" framework, which NYISO would use to measure the reliability value of resources during periods of peak energy use.
• Potomac Economics, NYISO's market monitoring unit, supports the reform package. "These proposals constitute a capacity market design framework that can adapt to impacts of climate policy and maintain reliability efficiently and at reasonable cost to consumers," Potomac Economics said, noting it would provide clarity to investors on the direction of New York's capacity market.

Dive Insight:

NYISO's early January proposal marked another step in the reworking of East Coast capacity markets so they don't stymie state energy policies.

With FERC's support, NYISO, ISO New England and the PJM Interconnection in recent years adopted rules that limited how low resources that were subsidized by states, such as wind, solar and energy storage facilities, could bid in capacity auctions.

Supporters of the rules argued those resources artificially suppressed capacity prices. States and other opponents of the buyer-side mitigation rules, called minimum offer price rules in PJM, said they interfered with state policy and would drive up costs.

These issues are critical in New York, which requires that 70% of its power supply come from renewable energy resources by 2030 and be emissions-free by 2040.

Under NYISO's proposal, which was supported by 82% of its stakeholders, resources that meet New York's Climate Leadership and Community Protection Act goals won't face lower-end limits on their capacity bids.

The proposal also establishes a marginal capacity accreditation framework that would assign a value to classes of resources based on their location on the grid. Resources that provide little additional reliability benefit to an area would have a lower value and receive less capacity revenue. The framework aims to steer resource development to areas where they are most needed.

NYISO intends to work with stakeholders to develop the framework's implementation and technical details so it could be effective by May 1, 2024.

NYISO asked FERC to approve its proposal by March 6 so it could be in place for a pending group of interconnection requests.

"The package of related reforms strikes a well-balanced approach by recognizing state-required supply resources in the [installed capacity] markets, while reflecting their marginal contribution to reliable electricity supply in New York," Central Hudson Gas & Electric, Consolidated Edison Co. of New York, the New York Power Authority, New York State Electric & Gas, Niagara Mohawk Power, Orange and Rockland Utilities, the Long Island Power Authority and Rochester Gas and Electric said in joint comments.

The marginal capacity accreditation framework will prevent consumers from buying capacity that doesn't provide reliability benefits, according to the utilities.

Generally, as more capacity of a certain type of resource is added to the system, the reliability benefit of the additional capacity falls, the utilities said.

A Brattle Group study found that installing 5,000 MW of solar generation would cut the marginal reliability contribution of solar resources in the summer in half, and adding another 5,000 MW would cut it in half again, the utilities said.

A coalition of renewable energy advocates supported the plan to eliminate buyer-side mitigation for clean energy resources, but objected to the marginal capacity accreditation framework, saying it was "impermissibly vague."

"Critical questions such as what the methodology will be, who it will affect and how it will affect them, how it will interact with reliability standard requirements, or even when it will go into effect are unspecified," the coalition said, adding that, as proposed, FERC won't review the details.

Those details are crucial in understanding how the capacity accreditation framework will work in practice, according to the coalition, which include Sierra Club, the Natural Resources Defense Council, Sustainable FERC Project, American Clean Power Association, Advanced Energy Economy, Alliance for Clean Energy New York, Cypress Creek Renewables, Enel North America, New York Battery and Energy Storage Technology Consortium, Centrica Business Solutions, Tesla, Borrego Solar and Voltus.

Based on "fragments" in NYISO's proposal, it appears the framework will lead to inaccurate resource adequacy determinations and inaccurate price signals, they said.

"Because NYISO's revised tariff language is essentially an empty vessel for NYISO to fill as it pleases, its proposed tariff does not provide adequate notice to customers and market participants of the proposed rate change or how it will affect them," the coalition said.