NYISO on Jan. 22 laid out the timeline for its Capacity Market Structure Review project, which will take up the better part of 2025.
Speaking to the Installed Capacity Working Group, Brendan Long, market design specialist for NYISO, said the objectives of the review include identifying current market structures “that will help facilitate New York’s evolving grid consistent with policy goals” and exploring potential alternatives. The ISO will solicit feedback from the group throughout the year with the goal of producing a final report in the fourth quarter.
Just like the rest of the U.S., demand for electricity is growing exponentially in New York. The review was called for by stakeholders and the ISO last year to determine whether the capacity market provides adequate resources efficiently and effectively.
According to its schedule, NYISO will propose a priority list of key areas of the market for potential enhancement by the end of the first quarter, propose an initial set of “high-level solutions” in the second quarter and “further analyze and refine” the recommendations in the third.
In response to stakeholder questions, Long said that considering reactive power compensation was on the table and that the review would include evaluating how the market ensures transmission security. The ISO is also going to consider long-duration energy storage compensation structures.
“It’s absolutely something we’ll consider, and we’ll whittle down further as the project progresses,” Long said.
One stakeholder pointed out that the project came about because market participants were frustrated with the capacity market; they asked whether identifying the sources of frustration was a priority for the review. Long said NYISO is “definitely going to keep our ears open” for stakeholder feedback and it will play a major role in the direction of the study.
“I think that it’s important that part of this project is an articulation of why the current structure is not working,” Chris Casey, of the Natural Resources Defense Council, said in agreement with the previous stakeholder. “I think it’s important to zoom in on that to know how to fix it. It’s more than just collecting the frustrations of the stakeholders. We need to identify and articulate the reasons why this market might not be producing efficient results anymore.”
NYISO’s structures needed to be harmonized with the state’s programs, he said. “I don’t think we should come out of this with a structure that pretends that certain revenue sources don’t exist or is otherwise blind to state programs because I think that ultimately produces results that are inefficient and costing customers more than they need to pay.”
Doreen Saia, chair of the Energy and Natural Resources Practice at Greenberg Traurig, echoed Casey’s point, saying any capacity market changes needed to take state policy into consideration.
Saia also asked the ISO to keep in mind that the market structure has been in place for more than a quarter-century and that stakeholders would require “adequate meeting time” to discuss potential changes. This comment came after a November and December where stakeholders had grown frustrated with ISO projects they saw as rushed or incomplete. (See Large Consumers Vent Frustrations with NYISO’s Proposed SCR Changes and Winter of NYISO Stakeholders’ Discontent over ‘Complete’ Projects.)
Several stakeholders, including Casey, urged the ISO to avoid incrementalism and seriously consider the fundamental structure of the market. They said that changes, like new types of resources, might be coming in 10 to 20 years and that any new market structures had to be flexible enough to accommodate them.
“Fundamental changes to the structure, at least looking into them, are in the scope of this project,” Long said. “It might not necessarily be prioritized in our list of key areas, but I wanted to clarify that it will definitely be something we’re open to hearing feedback.”