NY agencies complain grid rules penalize storage

New York state energy agencies have complained to federal regulators that the New York electric grid operator's market rules are interfering with the state's policies supporting the increased deployment of energy storage resources.

In a complaint filed on July 29, 2019 with the Federal Energy Regulatory Commission, the New York State Public Service Commission and New York State Energy Research and Development Authority assert that the development of energy storage resources in New York is necessary for legitimate state purposes, such as "enhancing reliability, resilience, and fuel diversity, as well as reducing environmental and public health impacts associated with fossil fuel emissions." New York has announced $400 million in funding for energy storage initiatives, and has released an implementation plan for energy storage market acceleration.

However, in their complaint the agencies note that development is frustrated by market rules adopted by the New York Independent System Operator. In particular, the state agencies point to NYISO tariff provisions that require energy storage resources participating in the wholesale installed capacity (ICAP) market to be subject to buyer-side mitigation measures which "would severely limit, or even eliminate, the ability of Energy Storage Resources to be paid for the value they provide."

According to a draft NYISO presentation on buyer side mitigation posted on the grid operator's website, buyer-side mitigation or BSM is one tool NYISO uses to "mitigate the market effects of conduct that would substantially distort competitive outcomes in the ISO Administered Markets, while avoiding unnecessary interference with competitive price signals." Specifically, the presentation describes buyer side mitigation's purpose as "to prevent uneconomic entry from artificially suppressing capacity prices." Resources that are subject to the buyer side mitigation rule will be examined in a two-part test to determine whether a minimum "offer floor" will be imposed.

The complainants request "that the Commission preserve the cooperative federalism approach" by the Federal Power Act and grant a blanket exemption from the buyer-side mitigation measures for all energy storage resources that seek to participate in the NYISO's ICAP auctions, or at least enable up to 300 megawatts to energy storage resources to enter the market each calendar year without the threat of mitigation.

The Federal Energy Regulatory Commission has taken a variety of actions in recent years to accommodate the entry of electric energy storage facilities into the grid and wholesale markets, including Order No. 841 and 841-A which established reforms to remove barriers to the participation of electric storage resources in certain organized wholesale markets. The New York agencies' complaint remains pending as of the end of July 2019, with public comment solicited until 5:00 pm Eastern Time on August 19, 2019.