By Michael Kuser

NYISO stakeholders on Monday explored detailed assumptions and modeling descriptions for a study on transitioning the New York grid to a cleaner future.

Roger Lueken and Sam Newell of the Brattle Group presented the Installed Capacity/Market Issues Working Group (ICAP-MIWG) the thinking behind the study, which will simulate market operations and investment through 2040 to inform ISO staff and stakeholders on market evolution. (See NYISO Focus Turns to Grid ‘Transition’.)

“The model is reasonable for painting a broad-brush picture of how the supply and demand will look in the future,” Newell said. “It’s not a super granular model, it’s zonal, with a ‘bubble’ [representation] transmission layout and is a somewhat stylized representation of the generation fleet where we aggregate individual units

“There are a lot of unknowns currently about how we will meet the state goals, and what kinds of new resources will come in,” Newell said.

The modeling helps the ISO answer several questions, he said, such as what types of renewable resources will be needed to meet the Clean Energy Standard, including flexible resources and storage, and how electrification will affect load profiles and market operations.

“Wow, the world is so different now, three weeks after our last meeting, but we’re just building on what we did then to provide more detail on the assumptions and on some of the modeling approaches,” Newell said.

New York Gov. Andrew Cuomo in February proposed a budget amendment to speed up the permitting and construction of renewable energy projects in order to meet the state’s ambitious clean energy goals. (See Cuomo Proposes Streamlining NY’s Renewable Siting.)

The Climate Leadership and Community Protection Act (A8429), signed into law last July, calls for 70% of New York’s electricity to come from renewable resources by 2030 and for electricity generation to be 100% carbon-free by 2040. It also nearly quadrupled New York’s offshore wind energy target to 9 GW by 2035.

The CLCPA’s clean energy mandates also include doubling distributed solar generation to 6 GW by 2025, deploying 3 GW of energy storage by 2030 and raising energy efficiency savings to 185 trillion BTU by 2025.

Modeling Approaches

David Clarke, director of wholesale market policy for Power Supply Long Island, asked how the study would simulate the impact of shortage pricing on energy revenues in the CLCPA future, which might hinge on the supply-demand balance and the amount of surplus capacity in the system.

“We are only partly representing [shortage pricing] in the study,” Newell said. “First of all, we’re not necessarily representing all of the features of either extreme net load conditions that could lead to shortage pricing, nor are we fully representing the dynamic challenges of ramping, and so we’re not fully going to capture that, even if we do represent the upgrade in demand reserve curves in the model.

“Secondly, we’re not actually designing this study to explore the different ways to implement enhanced shortage pricing, for example, through a richer demand curve,” Newell said. “That actually takes a lot of design and is tricky to do well.”

In modeling generators, Lueken said the study is accounting for known retirements and additions to occur over the next few years and not just existing resources, as in the ISO’s 2019 Gold Book.

“So, for example, we are accounting for the potential for downstate peaker retirements due to the new NOx rule,” Lueken said. “We’re currently planning to assume that downstate peakers built before 1986 retire, that frame units built after 1986 retire, that the aero-derivative units built since 1986 could, instead of retiring, decide to economically retrofit. However, we’re reevaluating these assumptions based on the compliance plans the generators have submitted to the ISO.”

The new NOx regulations go into effect May 1, 2023, with initial rate limits of 100 parts per million on a dry volume basis, corrected to 15% oxygen. Generator compliance plans were due March 2, 2020. (See NY DEC Kicks off Peaker Emissions Limits Hearings.)

The study also models the declining capacity value of wind, solar and storage.

“The capacity value of the 5,000th MW of solar will be much lower than the first MW of solar because as you get so much solar in the system, it tends to shift the hours that capacity is needed to other hours in which the solar is not generating,” Lueken said. “It’s the same for wind, and there’s a similar dynamic in place for energy storage.”

The high-level approach to develop the relationship between the amount of resources deployed and the capacity value of these resources entails varying the amount of each technology in turn while holding everything else constant, he said.

“For all the resources, the capacity value falls off quite a bit when you have 10,000 MW deployed,” Lueken said.

Capacity Market and Reliability

Clarke presented a study by PA Consulting and the Long Island Power Authority on how the transition to renewable energy resources will impact the ISO’s installed capacity market, moving to a system dominated by low variable-cost, high fixed-cost resources from one now dominated by the opposite: high variable-cost, low fixed-cost units.

“We are basing our capacity market on the premise that new capacity is needed,” Clarke said. “If you have to add capacity for something and it’s not monetized [in the capacity market], in this case greenhouse gas abatement, the premise that you’re going to need new capacity for reliability is really no longer a valid premise.

“Making a more granular market, making sure there are sufficient market signals for generators to recover the ‘missing money,’ breaking down what things capacity is providing, different kinds of capacity and paying them for things they are providing — that is the kind of approach I see as being necessary in the long run,” Clarke said.

Voluntary bilateral markets should continue, but the underlying market price should be disaggregated. These structural changes are necessary in the long run, as the existing structure may not best advance the state’s clean energy mandates, he said.

“As energy margins and prices are declining, [and] the needed capacity is facing retirement, we recognize the essential need for long-term support for renewable resources,” Clarke said.

Howard Fromer, director of market policy for PSEG Power New York, asked why a resource would need long-term support: “Is your own model still going to encompass out-of-market support? That seems to undermine everything you’re talking about in terms of [market] efficiency.”

“I don’t think it needs to,” Clarke said. “There will be attributes that will be monetized as we move in this direction, and attributes that aren’t, so to the extent that we have not monetized the attributes that we need, there will be need for renewable resources and out-of-market payments in the long term.”

The proper place to recognize the desirable attributes of renewable energy resources is in the energy market, said Mark Younger, president of Hudson Energy Economics.

“We have a multiyear effort to properly try and capture the value of those renewable attributes but have not yet been successful. But that is the proper way to capture it, to put a price on energy attributes and incorporate it into the market,” Younger said.

Storage resources would still have value in scarcity conditions requiring a price signal, “but it’s not a capacity signal. Trying to do it through a capacity price is a very blunt instrument being wielded by blind people,” Younger said.

Clarke said the paradigm of trying to include everything possible in a 2040 energy price was “not particularly workable.”

Clarke highlighted differences among those who would allow highly volatile and perhaps extreme energy and ancillary service prices driven by flexible resource shortages to provide the incentive for their construction from those that would assure development of sufficient flexible resources through a targeted capacity payment.

“We do support the NYISO’s proposal to enhance ancillary services revenues as a means of more efficiently distinguishing resources that can provide flexible resource services over and above those that cannot,” he said. “However, we do recognize that an additional missing money payment for flexible capacity attributes could signal an appropriate mix.

“I see energy as declining in price and in value generally,” Clarke said. “I also see some reliability challenges going forward — increasing ICAP requirements, net load shifting, a changing load shape and frequency of ramping, saturation of particular renewable resources in certain load pockets and continued need for firm dispatchable resources.”

Clarke showed a graph indicating that offshore wind speed — and ultimately power output — is more broadly distributed than the duration of conventional generation outages.

“If the Long Island buoy data perfectly correlated with the sites offshore New York City, then the capacity value of offshore wind would be effectively zero,” Younger said. “While this is informative to indicate that we probably are massively overvaluing the capacity value of wind, because there are so many hours with very low wind speed, it doesn’t really take us beyond that observation.”