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How the Installed Reserve Margin Supports Reliability in New York

April 27, 2023

The NYISO’s capacity market supports reliability and cost efficiency through competitive auctions in which Market Participant’s meet resource adequacy requirements. Those requirements are established each year by the New York State Reliability Council (NYSRC), which sets the Installed Reserve Margin (IRM) for the system. The IRM represents the minimum level of capacity, beyond the forecasted peak demand, which utilities and other energy providers must procure to serve consumers.

For the capability year beginning May 1, 2023, the council recommended an IRM percentage of 20.0%. That percentage means that the system needs to have on hand enough resources to meet consumers expected peak demand on the hottest summer day, plus 20.0% more in case demand goes higher or a generator or transmission line trips off.

Developing the IRM is an extensive study process that unfolds over much of the prior year. The IRM is based on updated load, resource, and transmission models. It is derived by engineers, meteorologists, and economists, using strict reliability rules, engagement with industry stakeholders, and oversight from regulators. Input includes information from NYISO planning and resource adequacy teams, which evaluates changes in forecasted demand, supply performance capabilities, and transmission system constraints.

All these inputs are fed into a computer model of the entire electric system that looks at the probabilities of higher demand and facilities going off-line. The NYSRC evaluates these estimates and submits its determination to both the New York Public Service Commission and the Federal Energy Regulatory Commission for acceptance.

The whole process is one of the key planning elements that contributes to New York operating the grid to the most stringent reliability criteria in the nation.

How do we use the IRM? For the 20% IRM, we projected a peak demand (the highest demand load, generally on a hot day in summer) of 32,049 megawatts (MW). To meet this demand and to comply with regional reliability rules, we’ll need to have 20% more than that available in our Installed Capacity Market, or a total of about 38,459 MW. Through this market, resources are essentially paid to be available when needed, and that availability is critical to keep the grid operating.

In years past, most energy on the grid came from dispatchable resources capable of operating “on-demand” with a high level of availability. These include nuclear, hydropower, and gas turbines, which you can generally count on to be available when the system needs them.

However, with the state moving to a grid increasingly reliant on clean energy, the IRM will also change (while remaining critical to system reliability). Solar and wind are intermittent resources that don’t respond on demand. Solar power is affected by season, as well as by cloudy weather, and, of course, won’t operate at night. Wind power is also dependent on seasonal and daily weather changes. As a result, these resources have lower capacity factors.

While energy storage, like batteries and pumped hydro, help meet unexpected demands for power, current technologies can only run for a limited number of hours. Due to the intermittent nature of renewables, we will need new “on-demand” resources to supplement wind, solar and storage. As we move to increased renewable resources under the Climate Leadership and Community Protection Act, we will need these fast-ramping, on-demand resources to respond to requests from grid operators.

The NYISO’s job is to see this need coming and prepare for it. We are already studying what the energy grid of the future will look like, and how to maintain system reliability for all New Yorkers when that time comes.