NYISO on Thursday presented stakeholders an updated proposal to revise its buyer-side mitigation (BSM) rules, providing new emphasis on addressing capacity accreditation quickly and getting an objective assessment of the proposal’s market investment risk.

The ISO has asked its Market Monitor, Potomac Economics, to think through the various market issues and investment risks related to the plan, Michael DeSocio, NYISO director of market design, told the Installed Capacity (ICAP) Market Issues Working Group.

DeSocio highlighted Analysis Group’s study to support the BSM reforms proposal, saying “the results of that analysis will be important to inform whether or not the capacity market remains sufficient and effective and can be considered just and reasonable.”

NYISO last month introduced the study, which will model 10-year capacity supply and demand curves and identify the resulting market outcomes to support BSM rule revisions. Results will likely be presented later this month, DeSocio said. (See NYISO Unveils Draft BSM Study.)

Policy Resource Exclusion

New York’s Climate Leadership and Community Protection Act (CLCPA) requires the state to procure large amounts of renewable energy to get to zero-emission electricity by 2040; the introduction of so much new generation will challenge transmission and capacity market planners.

In July, the ISO presented a proposal to exempt most new renewable installed capacity (ICAP) resources from BSM evaluation. (See NYISO Proposes Sweeping BSM Exemptions.)

New resources that are required to satisfy the goals specified in the CLCPA will not be subject to review by the ISO under the BSM rules, or otherwise subject to an offer floor. Exempted resources include, but are not limited to wind, solar, storage, hydroelectric technologies (including tidal, ocean and wave generation), geothermal, fuel cells that do not use fossil fuels, and demand response (participating as a special case resource or distributed energy resource).

The proposal represents a two-pronged approach that aims to eliminate BSM risk for CLCPA resources and simplify the currently complex and administratively burdensome BSM process, DeSocio said.

The renewable exemption in its current form would be eliminated, while other existing exemptions, such as competitive entry and self-supply, would remain available to qualifying resources. The current process involving the Part A and Part B offer floor exemption tests would still be performed for resources subject to BSM.

“The set of resources is not fully known that will be meeting those [CLCPA] goals, or at least that seems to be the approach being taken by the state,” DeSocio said. “To the extent that the law is clear about these particular technologies, we’ve tried to accommodate that here.”

In response to a stakeholder question about whether hybrid resources would be exempt from BSM review, DeSocio said NYISO would consider them on a case-by-case basis because a hybrid is a mixture of resource technologies. For example, a co-located storage resource comprised of storage plus either solar or wind would be excluded from BSM review because all three technologies are included in the list.

“We don’t call it out here for two reasons: first, because we don’t have those rules yet, and second, because we’ve understood the ask from stakeholders for the new hybrid model is to also allow accommodation of fossil resources with storage and other resources. So we don’t think we can just make a blanket statement that all hybrid resources would be excluded,” DeSocio said.

Prong Two

The plan’s second prong would include additional resource types that satisfy CLCPA, such as technologies New York has identified as supporting state goals or resources that have contracted with NYSERDA to advance those goals.

The topic touches on the various tiers of renewable energy credits and whether a resource is eligible to receive a contract, DeSocio said.

“In other words, it would qualify to receive a contract through maybe one of the tiers or some other program supporting CLCPA that might be run by New York state, whether NYSERDA or some other agency, but it’s been mainly NYSERDA executing those contracts,” DeSocio said.

Because there could be potential timing issues, the ISO will be looking for the resource to self-certify and provide the ISO evidence that it qualifies under one of the categories. For example, unforced capacity deliverability rights that can demonstrate eligibility for Tier IV RECs would be included under this provision, he said.

One stakeholder said he was curious why the ISO chose to go down the path of painstakingly listing technologies as opposed to a fundamental look at whether the resource is a buyer who can exercise market power. He also wondered whether there are any legal or other downsides to the ISO’s approach.

“We chose this path to provide as much clarity to stakeholders as possible about what it means,” DeSocio said. “The approach that we laid out here we think gives us the greatest chance of surviving challenge either at FERC or in the courts.”

The ISO plans to use the remaining September stakeholder working groups to discuss feedback from Thursdays’ meeting, review examples of the probability distribution Delta Method by consultancy E3, hear the report on capacity market investment risk by Potomac Economics, and discuss possible tariff revisions connected with capacity accreditation, he said.