October 15, 2019
The bold climate policies that are driving New York City toward a clean, renewable future will undoubtedly have a big impact on the grid and the manner in which energy is handled throughout the city and the state. In order to reduce carbon emissions and implement clean energy solutions, we will need to optimize the grid, making energy transmission more efficient for customers and utilities alike. To understand the future of the grid, it’s important to understand the present—how does the energy market work in New York? Who regulates it? How do we make sure there is enough energy to meet demand?
Resource Adequacy
An important term when it comes to electricity supply and demand is ‘resource adequacy’. Resource adequacy basically means that there is enough electricity overall to meet customer demand at any time. As things stand, the New York Independent System Operator (NYISO), a federally-regulated body, is largely responsible for ensuring resource adequacy. With the push toward a carbon-zero future and a more efficient energy grid, the New York Public Service Commission (PSC) is set to examine the current state of resource adequacy in New York, in order to determine whether or not the state should play a more significant part in ensuring resource adequacy. Of course, clean and renewable energy sources like solar and wind, as well as technology like battery storage, will be a part of the PSC’s thinking in this matter.
New York Energy Regulation
In New York, there are two regulatory bodies which share responsibility for the state’s energy system—the previously mentioned PSC, and the Federal Energy Regulatory Commission (FERC).
The Federal Energy Regulatory Commission (FERC)
The FERC is in charge of regulating NYISO, which operates ‘the bulk power system’. The bulk power system concerns the transmission of energy from power plants to smaller, local substations via large transmission lines. NYISO also oversees wholesale electricity markets where power plants sell energy to utility companies.
The New York Public Service Commission (PSC)
The PSC, on the other hand, is more concerned with the transmission of energy on a smaller scale. This means the sale of electricity from utilities/suppliers to the actual consumers of the electricity like homes and businesses. The PSC also regulates utility operation of energy distribution to homes and businesses via local substations and power lines.
(NRDC: https://assets.nrdc.org/sites/default/files/styles/full_content--retina/public/media-uploads/resource_adequacy_0.jpg?itok=8A6aGJu_)
The Capacity Market
As noted above, NYISO is responsible for ensuring resource adequacy in New York. In order to do this, NYISO operates a ‘capacity market’. This is not to be confused with the ‘energy market’ operated by NYISO, wherein actual electric energy, measured in megawatt hours, is bought and sold to ensure that energy generators meet demand. Indeed, the capacity market, measured in megawatts, doesn’t involve actual electric energy. ‘Capacity’, instead, is a promise of energy availability at a point in the future when the grid is under stress.
This means that utilities/suppliers in New York, such as Con Edison or National Grid, are required by NYISO to purchase enough capacity to exceed projected electricity demand. Not just enough, either, but enough provide a buffer when demand peaks. This required excess capacity is known as the ‘installed reserve margin’. If the installed reserve margin is 20%, then the utilities/suppliers must purchase enough capacity to exceed projected peak demand by 20%. NYISO regulates every aspect of the capacity market, and may modify the capacity market as things change over time.
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By Shane Croghan
Sources:
https://www.nrdc.org/experts/cullen-howe/ny-explores-more-hands-role-resource-adequacy-part-1
https://www.nrdc.org/experts/cullen-howe/ny-explores-more-hands-role-resource-adequacy-part-2
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