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The Road to 2040: Reserve Margins and Why They Matter

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The Road to 2040: Reserve Margins and Why They Matter

March 22, 2021

The Installed Reserve Margin (IRM) is an important part of our management of the energy grid and the electricity markets. It’s a valued piece of the puzzle that makes sure we have enough resources to serve us when something unexpected happens on the grid. To find out what the IRM is and why it’s a vital figure for maintaining reliability on the grid, read on.

The IRM is a percentage of generating capacity. “Capacity,” in this context, refers to the maximum amount of electricity that a generator can generate.

When issues occur such as a generator shutting down or a transmission line going out of service, we need to make sure other generators are available to keep the lights on across New York. Consumers may also need more power than we expected, like on a hot summer day when air conditioners are turned up, so ready supplies need to be available to meet their needs.  This margin of capacity reserve is essential to support reliability.

The IRM is set by the New York State Reliability Council (NYSRC), based on regional reliability rules, annual peak demand projections, grid constraints, and the makeup of the supply mix anticipated to meet demand. For the next capability year starting May 1, the council recommended an IRM percentage of 20.7%.  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 20.7% more in case demand goes higher or generators or lines trip off.

Developing the IRM is an extensive study process that unfolds over much of the year. Based on updated load, resource, and transmission models, engineers, meteorologists and economists derive the year’s recommended IRM using strict reliability rules, engagement with industry stakeholders, and oversight from regulators. Input includes information from NYISO planning, which evaluates changes in forecasted demand, supply performance capabilities, and transmission system constraints. All of 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 FERC 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 20.7% IRM, we projected a peak demand (the highest demand load, generally on a hot day in summer) of 32,405 megawatts (MW). To meet this demand and to comply with regional reliability rules, we’ll need to have 20.7% more than that available in our Installed Capacity Market, or a total of about 39,113 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 capacity factor. 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 based increasingly on clean energy, the IRM will be very important. 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 a lower capacity factor.

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 (CLCPA), we will need these fast-ramping resources to be called upon by 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 Yorker when that time comes.

For more about how we are addressing a zero-emissions grid with market-based solutions, visit the 2040 Power Grid webpage.

We are an independent, not-for-profit corporation responsible for operating the state’s bulk electricity grid, administering New York’s competitive wholesale electricity markets, conducting comprehensive long-term planning for the state’s electric power system, and advancing the technological infrastructure of the electric system serving the Empire State.

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