Keeping the Grid Reliable in New York

First, New York’s wholesale markets are unique and differ from the way markets are structured in California. Next, the work that we do as the New York Independent System Operator is distinct from the role the California grid operator plays. Finally, there are large differences in the design of New York State’s and California’s energy markets. We explore these differences in more detail below:

1.   New York has an Installed Capacity Market

A main part of our 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.

Resource adequacy promotes reliability by making sure enough generating capability is available to meet grid demand at peak times of electricity consumption. Our ICAP auctions offer a centralized competitive market in which utilities and other electricity supply companies can procure sufficient generating capacity to meet their expected electricity demand. Our centralized capacity market creates clear responsibility for resource adequacy, includes specific rules and stiff penalties for non-performance, and offers price transparency to spur competition and drive costs down.

In addition, our planning processes include generator deactivation studies and periodic assessments of both resource adequacy and transmission system needs to identify threats to reliability and to take action if necessary.

California lacks a centralized, mandatory capacity market and instead relies on contracts between utilities and other electricity supply companies that serve customers and generators. The California Independent System Operator (CAISO) is required to secure any additional resources necessary for reliability. In a report to California’s governor, CAISO identified market practices that “exacerbated the supply challenges under highly stressed conditions.”

2.   New York has regional coordination

California, like other ISOs, imports energy from several neighboring states. In New York, both energy and capacity are imported from neighboring regions. Resources importing capacity services into New York must meet strict market rules, just like resources located within the state, to be available 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 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.”

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 are 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 of non-operating energy resources

Our markets in New York help to drive out 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? We run computer models that depict what would happen to the grid if we lost the use of certain energy resources due to weather or other system conditions. This allows us to be ready for contingencies, including the potential loss of some of our largest supply sources.

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.