By Michael Kuser

NEW YORK — NYISO CEO Brad Jones likely summed up the sentiments of the dozens of industry experts attending Infocast’s New York Energy Market Summit last week to learn more about the state’s rapidly evolving grid and changing policy landscape.

“All of us seem so thankful to be in this industry at this time,” Jones said. “There’s so much change going on, so much opportunity to do new things and create new things.”

Here’s more of what we heard at the summit.

Tx Development ‘Eats Its Own Young’

Kevin Sheen, vice president of business development at Terra-Gen, said New York began falling behind other states in renewable development despite having started a 10-year renewable energy credit (REC) program in 2004 that managed to incent about 1,400 MW of wind over the past decade or so.

Realizing it needed to do more, the state last year began offering 20-year REC contracts, Sheen noted. He said that the state’s commitment to improve transmission signals to developers that New York is worthy of their investment and time. The ISO’s Congestion Assessment and Resource Integration Study process identifies the top congestion elements on the system and indicates where developers ought to be thinking in terms of building additional transmission. (See NYISO Study Identifies Key Areas of Tx Congestion.)

“Delays are part of development — they happen in every market — but I think New York has done the best they can to try to address that,” Sheen said.

Transmission developers cited permitting and interconnection costs as the two biggest risks for new project development.

“We recently saw Deepwater Wind narrowly get through the East Hampton town board process by a 3-2 vote, so five individuals held the fate of that 90-MW cable” connecting the offshore project to land, Anbaric Development Partners project manager Bryan Sanderson said.

Bringing 2,400 MW into NYISO Zones J and K is going to be hard because the ISO’s study process takes three to five years, Sanderson said, leaving companies to bid today on costs they will not know until 2022.

“Imagine New York procuring its first offshore wind farm and the interconnection costs come in $500 million more than projected,” he said. “That would be a huge embarrassment. Just ask Massachusetts about their Northern Pass experience.

“One problem with transmission development is that it eats its own young, so you solve the problem like congestion and the price arbitrage disappears,” Sanderson continued. “How do you pay for your line when your mere existence eliminates your profit stream?”

John Douglas, CEO of transmission developer oneGRID, noted there’s been talk of developing a national backbone grid to optimize renewables, but no one has resolved the problem of who will pay for it and how all the RTOs would interact.

“It’s unfortunate, because we’re going to end up with all these regional, Band-Aid optimizations when there could be something national,” Douglas said.

Public Policy Challenge

Jones addressed the conflict between state policies and RTO market principles, pointing out that both ISO-NE and PJM went to FERC with solutions to what they saw as state interventions that could undermine their wholesale markets.

“When New England brought CASPR [Competitive Auctions with Sponsored Policy Resources] to the commission, they said, ‘We want to address it in this way,’ essentially to change the capacity market structure, which would arguably eliminate the impact of state subsidies on new resources,” Jones said.

“The FERC agreed with them, but in a decision which I never knew was possible. They approved 3-2,” Jones said. “Clearly the FERC was torn; they struggled with that decision.” (See Split FERC Approves ISO-NE CASPR Plan.)

Jones said the commission saw ISO-NE’s solution as being different from PJM’s rejected solution in that the former was dealing only with new assets that were being subsidized, while the latter was dealing with both new and existing assets, primarily nuclear and coal units.

“New York looks very similar to PJM, with assets that have been retained, plus new assets, but FERC has not decided to take any action on New York,” Jones said. “I think the commission is waiting to see where the NYISO gets on its work to price carbon directly into the wholesale market.” (See Stakeholders Annoyed by NYISO Carbon Price Draft.)

Off the Grid

Douglas said he realized how most large industrial customers are looking for change when he heard that a survey by one of the nation’s largest utilities found that its top 15 customers all want to get off the grid.

“Imagine you’re an integrated, investor-owned utility and your top customers are all saying they don’t want to have anything to do with you,” Douglas said.

oneGRID is planning the 1,000-MW HVDC Empire Connector project to move energy from upstate into New York City via the Gowanus Substation in Brooklyn. The project is now in the second phase of its solicitation, aggregating wind, solar and biomass supply offers to sell into the city.

Contracted merchant power “is a forgotten pathway to transmission development,” and customers in New York want it, Douglas said.

“We found out how important physical delivery is to customers in New York City for both reliability, and probably more importantly, for resilience,” Douglas said. “HVDC is so controllable that it actually counts as in-city generation, so it’s a tremendous advantage.”

While renewable energy resources are known for changing the direction of power flow on the grid as smaller generators along the line feed their excess electricity back onto the grid, New York City has so far been unaffected by that phenomenon, said Damian Sciano, Consolidated Edison director of distributed resource integration.

“We’re in a dense urban area … so even when someone puts a fairly large solar installation in, or CHP [combined heat and power] — those are the two big things we see in our service territory — it’s pretty much consumed very close to where it’s generated,” Sciano said. “We don’t typically have backfeed on the substations.”

Valuing Offshore Wind

Lawrence Berkeley National Laboratory research scientist Andrew Mills said a team at the lab compared the levelized cost of energy estimates with value estimates and found that the most attractive U.S. sites for offshore wind are located off New England, while the least attractive are far offshore of Florida and Georgia, where the water is deeper and the wind speeds are lower.

Wind energy off the southeast coast is worth about $160/MWh less than the best sites up north, he said.

“We were very interested in questions about the seasonal and diurnal profiles of offshore wind and how much that might be driving differences in the value across these sites,” Mills said. “If you were to just have a flat block of power, which is constant across all hours, we wouldn’t be far off in the estimates we came up with … within 5% or so.”

Differences in average energy and REC prices primarily drive locational variations, not differences in diurnal and seasonal wind generation profiles, he said. The market value of offshore wind was lowest in the most recent year evaluated, 2016, falling roughly 50% from 2007.

The marginal total market value of offshore wind — considering energy, capacity and RECs — varies significantly by project location and is highest for sites off of New York, Connecticut, Rhode Island and Massachusetts. The median, 2007-2016 market value is highest in ISO-NE (around $110/MWh), in part because of higher REC prices. The energy and capacity value is higher for NYISO, particularly Long Island.

If you look south, the median value is “significantly lower, down in the $55/MW range in the non-ISO region south of PJM,” Mills said.

The capacity value can be up to 50% different from that calculated based on a flat block of power, but capacity value is only a small component of overall value, Mills said. The capacity credit of offshore wind in the NYISO and ISO-NE markets is significantly higher in winter than in summer, with offshore wind in these regions benefiting from having capacity credit assessed in both seasons.