Dive Brief:

• The New York Public Service Commission (PSC) has adjusted demand response program rules to encourage the development of energy storage, by directing utilities to procure dynamic load management (DLM) resources for terms of at least three years while also maintaining other tariff-based DLM programs.
• Current DLM program structures "pay for yearly performance and result in a bias towards short-term, low-capital investment solutions," the commission said in its Sept. 17 order. Experts say the use of longer-term contracts could help capital-intensive projects, like storage, to move forward.
• The new programs were developed to help meet New York's energy storage goals, which include the procurement of 1,500 MW by 2025. However, demand response resources are also eligible to participate in the new DLM programs, including a new 10-minute response product called Auto-DLM that will pay participants a premium for rapid-response capabilities.

Dive Insight:

The new programs will help utilities shave peak load as well as respond to specific system needs during times of high demand. While they are open to a wide range of resource participation, the end result is expected to help develop more battery resources.

The fast response requirements of Auto-DLM "means we would use that program as a contingency rapid response," said Marlon Argueta, energy efficiency program manager for Consolidated Edison. The programs are technically "technology agnostic," he said, with only diesel-fired generators restricted from the new Term-DLM and Auto-DLM programs.

That means more typical demand response resources, such as load curtailment, changes to HVAC usage and reductions in lighting, and even gas-fired resources, can participate. But the program "is helping advance the roadmap for storage," said Argueta.

Term-DLM is essentially a day-ahead peak shaving program that can be activated throughout the utility's territory when the summer forecasted peak load is 88% of forecast system peak demand for the season, said Argueta. The Auto-DLM program can be used for reliability and peak shaving, he said, and will be made available in more specific areas.

Contract terms and payment for providers or aggregators will be paid "as bid," meaning economic resources will be paid different prices instead of utilizing a single clearing price. Ceiling prices will be informed by utilities' Marginal Cost of Service studies, which they are required to do every three years.

"The intention from the commission was to provide enhancements to dynamic load management programs to allow for more storage participation by helping put in place longer-term price certainty through multi-year contract terms," said Peter Dotson-Westphalen, senior director of market development of CPower Energy Management, and chair of the New York/New England committee for Advanced Energy Management Alliance (AEMA).

Storage costs are falling, "but today these programs still require significant investment from utilities, and existing cost-effectiveness measures may make the implementation of such programs a challenge," according to Jessie Mehroff, research analyst at Guidehouse Insights.

"Working to ensure the value of such programs remains high and can be secured over a multi-year period should, in theory, help to boost investment and participation on both the utility and customer side of the meter," Mehroff said in an email.

Dotson-Westphalen said he was pleased to see the PSC adopted several recommended modifications to the utilities' procurement plans, filed in joint comments by AEMA and the Advanced Energy Economy Institute which urged the commission to make adjustments to align resource eligibility, testing, availability, and performance requirements across all utilities. He said most of the groups' concerns were taken into account in the final order.

"These new programs and procurements will create new participation opportunities for projects developed in the state by creating longer-term price certainty," Dotson-Westphalen said.

AEMA raised some concerns the new Auto-DLM program conflicts with New York ISO resource scheduling requirements and dual participation rules, which Dotson-Westphalen said "could cause resources to have to choose" between participating in the ISO or Auto-DLM. Those concerns and recommendations were not adopted in the commission's order. 

"We'll need to re-assess, and see how many resources are willing and able to meet Auto-DLM resource requirements and weigh that against values they could otherwise earn in the wholesale market," he said.

Argueta said Con Edison will be issuing a request for proposals to acquire the DLM resources "towards end of November."