By Michael Kuser

RENSSELAER, N.Y. — Third-party consultant Analysis Group is putting the finishing touches on a NYISO study examining the impacts of pricing carbon into New York’s wholesale electricity markets.

The study will augment the Brattle Group report process that concluded in December.

“There are lots and lots of unknowns,” Sue Tierney, a senior adviser with Analysis Group, said Tuesday as she presented the ISO’s Installed Capacity/Market Issues Working Group with an update on the new study. Tierney expects to release the technical report and an executive summary for policymakers at the end of May.

Couch White attorney Michael Mager, who represents Multiple Intervenors, a coalition of large industrial, commercial and institutional energy customers, asked whether Analysis Group would be redoing or revising Brattle’s analyses or simply accepting and building off the results. He noted that Brattle had concluded that increases in energy market prices from carbon pricing would lead to a dollar-for-dollar reduction in future renewable energy credit prices, an assumption he thought overly optimistic. He asked whether Analysis Group would be revisiting that type of conclusion by Brattle or incorporating it into its own analyses.

“We are not going back and trying to tweak their results and see what we can find,” Tierney said. “You and the Brattle Group and the other stakeholders have already spent months on that, and it’s a standalone work. We’re going to be using Brattle data to run slightly different analyses … all of which are hypothetical, ‘what-if’ analyses.”

“We’re saying, ‘If you did this, what would the price impact be?’” Tierney said. “We’ll be looking at direct and indirect economic impact and induced effects. Going to the dynamic effects, a carbon price works in tandem with other New York policies to accomplish the state’s environmental goals.”

NYISO’s discussion around carbon pricing has prompted the question of whether any fossil fuel generation – like the Big Allis plant pictured – will ever again be built or re-powered in the New York City area.

Carbon Context

Since her initial presentation last month, Tierney received comments from several stakeholders, including the Long Island Power Authority, which she said had a number of questions on carbon pricing policy designs, implications of a carbon price and beneficial electrification. (See Analysis Group Presents NYISO Carbon Pricing Study Plan.)

Large consumers, such as Multiple Intervenors, wanted to know more about the implications of an incremental carbon price on business location decisions, she said, or the extent to which the study would be examining where firms should invest. She said the study would not try to guess what a carbon pricing scheme might mean for manufacturers deciding whether to stay or make more investments in the state; instead, it would use NOx and SOx emissions data to calculate particulate emissions and health impacts.

While the comments submitted so far will eventually be posted for all stakeholders to read, they are not yet available; however, a sense of some stakeholders’ positions can be gleaned from related proceedings.

In discussing Brattle’s estimates of the impacts of a carbon pricing mechanism on wholesale market and consumer prices, Tierney said that she wanted to talk about customer bill impacts in addition to price impacts.

“New York’s economy is very efficient in terms of electric energy use, more efficient than Alabama, for example, even though the latter’s prices are lower than in New York. So we don’t want to look just at price impacts; we also want to look at bills,” Tierney said.

Mager said large industrial customers look at rates, not bills, while Erin Hogan, representing the New York Department of State’s Utility Intervention Unit, said it was not fair to compare Alabama and New York because “they don’t have our heating load.”

Tierney replied that she made that comparison to highlight a point: “It’s just to illustrate that we will talk about both rates and bills. Some people discuss rates only, which is also a distortion.”

The new analysis will address the possible application of NYISO buyer-side mitigation to resources receiving RECs and zero-emission credits and other potential revenue streams outside ISO markets.

In describing how the Analysis Group might approach discussion of any direct — or indirect — relationship between the adoption of a carbon price and any action by FERC, Tierney refused to guess how the commission would act on concerns regarding the entry of out-of-market resources, the potential exercise of market power, or the potential risks and cost implications of changes in buyer-side mitigation in New York.

“We don’t know where FERC is going on this or even who’s going to be on the commission,” Tierney said.

Draft 2019 Master Plan

Ryan Patterson, NYISO capacity market design associate, presented the working group with an initial draft of the ISO’s 2019 Master Plan, a single document intended to provide a roadmap for future capacity market enhancements.

NYISO last year created the first master plan at the request of stakeholders, with each project grouped into one of three initiatives discussed in the ISO’s 2019-2023 Strategic Plan, including grid reliability and resilience, efficient markets, and new resource integration.

Mike DeSocio, the ISO’s senior manager for market design, asked what stakeholders want from this year’s master plan.

Troutman Sanders attorney Stu Caplan, representing NY Transmission Owners, said some factors were outside the control of the ISO.

“It could be a FERC compliance filing or something that requires interim attention, such as a market exploitation that must be corrected,” he told RTO Insider in an email. “The simple point is, stakeholders appreciate updates from the ISO.”

Caplan asked Patterson if it would be feasible to provide a semiannual update for those projects that enter the plan outside of the project prioritization process.

“Yes, that’s the point here,” Patterson said.

“I don’t want to suggest that the only way to get a project in is by putting it through the project prioritization process,” DeSocio said.

The ISO will release and discuss an updated draft on May 22, issue a final draft Aug. 27 and release the final Master Plan in December in conjunction with the 2020 Business Plan.