How We Keep the Grid Reliable in New York
The power outages that occurred recently in Texas and California this past summer have raised questions of whether similar events could occur here in New York. It's worthwhile to examine how the NYISO’s markets are different than the markets in those two states and to learn more about our unique approach to maintaining grid reliability.
The work we do as the New York Independent System Operator is distinct from the role the Texas and California grid operators play. Primary among those differences are the NYISO’s capacity markets and planning functions. Let’s explore some of those differences in detail:
1. New York has an Installed Capacity Market
A main part of the NYISO’s mission is to manage the operation of the grid in New York and administer the wholesale electricity markets by which power and grid reliability services are bought and sold. One important grid reliability service – resource adequacy – is bought and sold through the Installed Capacity (ICAP) market. This is a major difference between the NYISO markets and those of Texas and California.
Resource adequacy promotes reliability by making sure enough generating capability is available to meet grid demand at peak times of electricity consumption. The NYISO’s capacity market offers a forum for buying and selling capacity through competitive auctions. Auctions are conducted monthly and for the summer and winter seasons. Consumers benefit from competitive auctions that minimize consumer costs. Investors in new technologies benefit from transparent locational pricing. Existing suppliers benefit from investment signals that reward units for maintaining or upgrading their performance. Our centralized capacity market offers price transparency to spur competition and drive costs down for maintaining resource adequacy. The capacity market also includes specific rules to incent performance and availability of resources when system needs are expected to be greatest as well as stiff penalties for non-performance. Texas and California lack capacity markets.
In addition, the NYISO’s planning processes include generator deactivation studies and periodic assessments of both resource adequacy and transmission system needs to identify risks to reliability and to take action if necessary.
2. New York has regional coordination
California, like the NYISO, imports energy from several neighboring states. Texas, however, generally does not. In New York, both energy and capacity are imported from and exported to neighboring regions, benefiting reliability in the region and strengthening market competition. Resources importing capacity services into New York must meet strict market rules, just like resources located within the state, to be eligible to serve New York consumers.
3. New York has a diverse fuel mix
In New York, the electricity that comes out of the wall of your business or home originates from many different sources. According to our recent Power Trends report, in 2019 a third of New York’s energy production was from dual-fuel generators that run primarily on natural gas but have the ability to use other fuels as well. Another third came from nuclear energy, and nearly a quarter came from hydropower.
In comparison, accounts of the incidents in California point to the state reducing fossil fuel and nuclear generating capability, leaving the state with fewer resources to balance the grid on days when there is reduced wind or clouds obscuring the sun. As CAISO’s report to the governor said, “[I]n transitioning to a reliable, clean and affordable resource mix, resource planning targets have not kept pace to lead to sufficient resources that can be relied upon to meet demand in the early evening hours.”
The NYISO followed closely the events in the south-central states related to cold weather related outages. On February 17, 2021, the Federal Energy Regulatory Commission (FERC) and the Northeast Electric Reliability Council (NERC) announced that they will open a joint inquiry into the operations of the bulk power system during the extreme winter weather conditions that were experienced by the midwest and south-central states. FERC and NERC indicated that they will work with other federal agencies, states, and utilities to review the performance of the bulk power system and determine what further investigation is appropriate.
For the past decade wind and solar energy resources have played an increasingly important role in New York and its participation is expected to grow as the NYISO market rules evolve to address these new technologies. We have developed forecasting tools that accurately predict the levels of production from these resources, maximizing their reliability, economic, and environmental benefits. Studies such as the Reliability Needs Assessment, the “70x30 Scenario” in our Congestion Assessment and Resource Integration Study (CARIS), and our Climate Change Study show that wind and solar growth would require a diverse portfolio of resources to keep the grid in balance when nature does not cooperate.
4. Clear accountability for non-performance of supply resources
Our markets in New York help to drive out costlier, and often dirtier energy suppliers through economic competition. The NYISO coordinates with New York State to address reliability needs caused by generator deactivations. We also have a mandatory notice period for units seeking to deactivate to prepare for any potential reliability concerns.
Reliability rules require that New York carries enough capacity to meet peak demand levels, as well as additional resources to provide a margin of reliability safety for certain conditions. How do we know how much is needed? Grid planners develop models that depict what would happen to the grid if we lost the use of certain energy resources due to weather, fuel constraints, transmission outages, or other system conditions. This allows us to be ready for contingencies, including the potential loss of some of our largest supply resources.
In California, the role of resource management is shared between the independent system operator and the state. According to media accounts of outages last summer, the CAISO was unaware that certain energy resources were shut down, reducing the options of where to get electricity. As CAISO noted in its report to the governor, “the existing resource planning processes are not designed to fully address an extreme heat storm like the one experienced in mid-August.”
As we continue working on the grid of the future, we operate under the most stringent reliability rules in the nation. Our long-range reliability planning requires us to examine scenarios such as extreme weather events and unexpected transmission failures to maintain reliability. And our independent structure and shared governance process gives all members of the energy sector a say in decisions affecting our markets.
As the energy grid changes, we continue doing what we do best to make sure the energy grid in New York State stays reliable.
For more about how we are addressing a zero-emissions grid with market-based solutions, visit the 2040 Power Grid webpage.