FERC Accepts NYISO Co-Located Storage Resource Participation Model

Troutman Pepper

Troutman Pepper

On March 30, 2021, FERC accepted the New York Independent System Operator’s (“NYISO”) proposed Co-located Storage Resource (“CSR”) Participation Model to enable energy storage resources (“ESRs”) paired with wind or solar resources to share a common point of injection and participate in the NYISO-administered markets. FERC’s order accepted revisions to NYISO’s Energy and Ancillary Services (“E&AS”) market rules, its metering rules, its Interconnection Process, its Installed Capacity Market participation rules, and its market power mitigation measures to accommodate the interconnection and participation of an ESR that is co-located with a wind or solar resource. Chairman Glick issued a concurring statement addressing NYISO’s application of existing buyer-side market power rules to co-located ESR and intermittent resources, urging NYISO “to move expeditiously to replace those rules with a model that moves beyond the minimum offer price rule as a means for mediating the interaction between state policies and wholesale markets.”

NYISO’s January 21, 2021 filing proposing the CSR Participation Model explained that it is the first of several anticipated proposals that will enable blends of renewable and fossil generation, energy storage resources, and demand response resources to participate in NYISO’s markets as individual or aggregated resources that share a common point of injection. NYISO concluded in its market design process that co-locating ESRs and renewable resources would: improve the performance and flexibility of renewable resources; reduce development costs by sharing interconnection facilities; provide better access to financial incentives; and help reduce barriers to entry for ESRs.

NYISO proposed that the ESR and intermittent wind or solar resource will each participate in the NYISO E&AS and Installed Capacity markets as distinct generators that receive separate settlements. The CSR Participation Model permits two generators to submit a single, shared interconnection request and requires the two generators to share an injection limit. Among other tariff revisions, NYISO also made changes to its market power mitigation measures to address possible physical withholding and give operators additional tools to address CSRs that fail to operate within their NYISO-issued schedules and dispatch.

FERC’s March 30 order accepted NYISO’s proposal over objections from a group of intervenors including the U.S. Energy Storage Association, American Clean Power Association, Alliance for Clean Energy – New York, and the New York Battery and Energy Storage Technology Consortium. These intervenors argued that NYISO should not assess administrative fees on CSRs when the intermittent resource provides energy to the ESR and the ESR charges and stores that energy for later resale. Intervenors argued that such fees would add approximately $0.64/MWh to the cost of an ESR. FERC rejected these arguments, finding that NYISO’s proposal would assess such administrative fees to CSRs on the same basis as it assessed these charges to stand-alone ESRs and stand-alone wind or solar resources.

Although NYISO had not proposed any substantive changes to its existing buyer-side market power rules, Chairman Glick wrote separately to reiterate his belief that it is “nonsensical” to apply buyer-side market power mitigation to ESRs that are not buyers and do not have market power when participating in NYISO’s capacity market. Chairman Glick stated that if NYISO and its stakeholders cannot settle on a replacement for its current buyer-side market power rules, then the Commission “will be left with little choice but to step in and establish such rules ourselves.”

FERC’s March 30 order is available here.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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