Several transmission companies and environmental groups on Oct. 21 told the Federal Energy Regulatory Commission that buyer side incentives are needed to encourage renewable energy development in the New York ISO region.
The transmission company filing parties were: Central Hudson Gas & Electric, Consolidated Edison Co. of New York, Long Island Power Authority, New York Power Authority, New York State Electric & Gas, Niagara Mohawk Power d/b/a National Grid, Orange and Rockland Utilities, and Rochester Gas and Electric. Other parties behind the filing included the City of New York, Natural Resources Defense Council, Pace Energy & Climate Center and the Sustainable FERC Project.
They submitted the Oct. 21 comments to support exempting renewable generation resources from the New York ISO (NYISO) buyer-side mitigation procedures.
The NYISO presently operates three capacity markets or zones: one for the entire New York Control Area (NYCA) and two others comprised of Load Zones J (New York City) and K (Long Island). Under procedures approved by the commission in August 2012, the NYISO is required to evaluate the need for new capacity zones every three years. The commission approved the NYISO’s proposal to create its first new capacity zone in the Lower Hudson Valley on Aug. 13. The Lower Hudson Valley capacity zone will be comprised of Load Zones G, H, I and J, and is scheduled to take effect on May 1, 2014.
In June 2012, the NYISO filed various tariff revisions to implement identical buyer-side and supplier-side mitigation in each new capacity zone, similar to those already in effect for the New York City capacity zone. The transmission companies and the city of New York protested the filing, contending, among other things, that the NYISO had failed to demonstrate that the buyer-side mitigation procedures applicable to the New York City capacity zone were a reasonable model for new capacity zones, where conditions may be significantly different than in New York City.
The transmission companies and the city contended that the NYISO should be required to fully consider whether renewable and other resources should be exempted from buyer-side mitigation in the new capacity zone. They also noted that an exemption for renewable generation would be justified in New York City.
The commission conditionally approved the proposed tariff revisions on June 6. Among other things, NYISO was required to “evaluate and consider with its stakeholders whether modifications to the buyer-side mitigation rules in a new capacity zone are warranted to balance the need for mitigation of buyer-side market power against the risk of over-mitigation and to submit a report on this subject within 120 days.”
On Oct. 4, NYISO filed its status report and stated that there are “valid reasons for developing a renewables exemption for all New Capacity Zones, including the newly-established G-J Locality, or at least Load Zones G, H and I … and for considering whether such an exemption should also apply to Load Zone J (New York City).”
The NYISO report concludes that “[i]f the Commission were to direct it to do so, the NYISO would work with stakeholders on the concepts, and would make a compliance filing to establish a ‘renewable exemption’ suitable to conditions in [New Capacity Zones].”
FERC told that creating a buyer-side break for renewables a good idea
The parties behind the Oct. 21 filing urged the commission to direct the NYISO to make a compliance filing following consultation with its stakeholders that would establish an exemption for renewable generation in all capacity zones in which buyer-side mitigation applies, including all new capacity zones and the Zone J (New York City) capacity zone.
“Expansion of renewable generation is an important state policy objective in many state energy policies, including New York,” they said. “By exempting renewable resources from buyer-side mitigation, NYISO would eliminate an important hurdle to the development of renewable resources and enable state policymakers to achieve state objectives at the least cost. Failing to do so would limit the development of renewable resources in many areas of New York State.”
Much of the renewable generation that will be constructed in New York in coming years will be built to fulfill the state’s Renewable Portfolio Standard (RPS) goal, which currently seeks to provide 30% of the state’s energy from renewable resources by 2015. The filing parties also pointed out that the state’s long-term goals are equally clear. Executive Order No. 24, issued in 2009, establishes a goal of reducing greenhouse gas emissions by 80% from 1990 levels by 2050, by, among other things, “[e]xpanding and advancing … renewable generation.”
“While denser development patterns and higher development costs have limited development of renewable generation in the Lower Hudson Valley and New York City capacity regions in the past compared to the development that has occurred in the upstate region, the State has recently committed to support development of more renewable resources downstate,” the Oct. 21 parties said. “And, opportunities do exist. For example, the City highlighted the potential for development of off-shore wind farms interconnected with New York City’s electric grid in its long-term plan for reducing greenhouse gas emissions in New York City by 30% by 2030 and preparing New York City for future growth.”
The proposed buyer-side mitigation measures for new capacity zones would effectively preclude most new renewable generators from participating in the NYISO’s capacity market in new capacity zones, the parties contended. The NYISO rules conditionally approved by the commission (and those that already apply in the New York City capacity region) require all new capacity to bid at a level equal to or higher than an offer floor that is likely to result in their capacity not clearing the market, they said.
“New renewable generators should be allowed to enter the NYISO’s capacity markets without the risk of being subject to buyer-side new entry mitigation for several reasons,” they said. “First, generators constructed to meet State renewable goals, while their capacity contribution is generally not large, do contribute to electric reliability and that benefit should be recognized and compensated. Second, applying capacity market offer floors to renewable resources would effectively deny them access to an important source of revenue and chill their development in areas where buyer-side mitigation applies. Third, denying capacity revenues to renewable generators will only serve to increase the cost of achieving the State’s RPS goal, when the Commission’s policy objective should be to refrain from thwarting the State’s achievement of this important goal. Finally, as the Commission has recognized, States do not aid the construction of renewable resources to suppress capacity market prices, but to pursue environmental/clean energy goals. As the Commission has recognized, the purpose of the buyer-side mitigation rules is to deter resources ‘that are most likely to raise price suppression concerns.’”