UPDATE: August 13, 2019: Adds comments from New York ISO President and CEO Rich Dewey

Dive Brief:

• The New York Public Service Commission has initiated a review of resource adequacy programs to ensure that available capacity products align with the state's renewable energy and emission reduction goals, rather than unwittingly keeping afloat older and dirtier resources.
• According to the Natural Resources Defense Council (NRDC), New York ISO rules may underestate the value of clean energy resources, possibly leading to the procurement of unnecessary, polluting generation. 
• The PSC said its review will be focused on considering the best alignment of policies under existing mechanisms such as the ISO's Installed Capacity (ICAP) auctions, or whether new alternative approaches should be pursued.

Dive Insight:

New York energy policies have laid out a range of requirements and priorities, and regulators say they want to ensure the interrelated systems that are in place are working efficiently towards the same goals.

For example, as part of New York's Reforming the Energy Vision initiative, the PSC is working to align compensation and value for owners of distributed renewable generation, while the ISO works to ensure that there is adequate electricity supply.

"The primary goal of the new proceeding is to consider whether capacity products are likely long-term effective solutions for the State's resource adequacy needs given the likely future generating resource mix," the commission said in an Aug. 8 statement.

The ISO's ICAP approach provides pricing signals for new investment in order to promote resource adequacy. Utilities and retail suppliers in New York purchase sufficient ICAP to meet peak load demand plus excess amounts required in the ISO's wholesale tariff, which is approved by federal regulators.

"We must continue to make sure that all of the state's energy policies share a common goal," PSC Chairman John Rhodes said in a statement.

Mandatory capacity markets are used in New York, ISO New England and PJM Interconnection, but other models exist. Texas has an energy-only market. Many states utilize an integrated resource planning process.

New York's Climate Leadership and Community Protection Act requires at least 70% of the load served by jurisdictional entities come from eligible renewable technologies by 2030. The state is also looking to procure 9,000 MW of offshore wind by 2040, 3,000 MW of energy storage by 2030, and is aiming for an 85% reduction in statewide greenhouse gas emissions by 2050. 

NRDC officials say they are concerned New York ISO's capacity market rules could prevent clean energy resources supported by state and local policies from selling in that market.

"Were that to occur, because utilities and other energy suppliers are required to buy enough capacity to meet the installed reserve margin, they would in turn be obligated to buy capacity from other, non-supported resources, ensuring the continued operation of highly polluting power plants even though they are not necessary to keep the lights on," NRDC experts Jackson Morris and Cullen Howe wrote in a recent blog post.

NYISO says it is working to get more storage and renewables onto its system.

“Working closely with the state and other stakeholders, [NYISO] recently proposed innovative market design changes to the Federal Energy Regulatory Commission which, if approved, will speed the integration of renewable energy resources and battery storage technology into the wholesale markets," NYISO President and CEO Rich Dewey said in a statement emailed to Utility Dive.

"Future market design efforts are focused on the need for additional resource flexibility, which is critical given the state’s new carbon reduction and renewable goals. [The Aug. 8] order is the beginning of an important discussion on resource adequacy and we look forward to engaging with the Public Service Commission throughout the process to share our expertise, information and ideas,” the statement continued.

Initial comments are due to the PSC Nov. 8, followed by at least two weeks for replies. The commission's order includes seven topics to be addressed, including whether "the interaction of policies and market structure mechanisms" results in "safe and adequate service at just and reasonable rates for customers."