In late August 2020, the New York Independent System Operator (NYISO) officially became the first grid operator to allow storage technologies to play a dual participating role in energy markets. This was highlighted recently in a detailed report by GTM Squared Sr. Editor Jeff St. John.
This was highlighted recently in a detailed report by GTM Squared Sr. Editor Jeff St. John. Subscribers can read the full article here.
Dual participation – ‘stacking’ revenue streams
So, what does dual participation mean? It means that storage technologies, such as batteries, can now earn revenue in certain use cases through wholesale markets and retail energy programs. While the Federal Energy Regulatory Commission (FERC) Order 841 mandated that every ISO and RTO across the United States open their markets to energy storage, NYISO’s implementation with dual participation is novel because it paves the way for storage developers to “stack” revenue streams, allowing for full market participation through selling energy in the day-ahead markets and real-time markets, capacity, and providing ancillary services (e.g. grid frequency regulation, reserves, etc.). In cases where a storage asset may have a bilateral agreement with the local utility—for priority dispatch rights or non-wires alternative services, for example—the project may be able to stack these additional utility payments on to its NYISO market earnings.
NOTE: In other cases, where a storage asset is participating through a retail tariff-based program—such as Community Distributed Generation (CDG) under New York’s Value of DER (VDER), or “Value Stack,” rates—it may not be able to sell services directly to the NYISO. This includes ancillary services which are currently not credited by such retail tariff programs. This may evolve as NYISO, New York utilities, and regulators grow more comfortable with dual participation and advance the software that enables it.
Benefits to NYC – facilitating cleaner energy
The ability to stack multiple revenue streams to facilitate additional battery storage projects will benefit the state, grid operators, and developers. It will help facilitate New York's clean energy and carbon reduction plan, which includes 3 GW of energy storage by 2030 to help integrate solar and wind resources. New York City will also benefit as NYISO and local utility Con Edison increasingly use battery storage, firstly to relieve congested portions of the grid and secondly to avoid reliance on new fossil-fueled peaker plants or older, aging ones (some dating to the 1970s) that exceed air pollution limits.
Renewables are being given a chance to compete on a level playing field
Understanding the dynamic complexities of dual participation will be a challenge, but it will be crucial to sustainable project development. NYISO has laid out strict rules to ensure that storage systems are available when the market expects them to be. The valuation of revenue streams is still being solidified and is dependent on multiple variables like federal regulations and how dispatch programs will be structured. For example, FERC recently ordered NYISO to apply the same Buyer-Side Mitigation rules to renewables and storage as to conventional generation, which means the state’s preferred resources will be bound by minimum bid price constraints in order to bid into installed capacity market auctions. In theory, this will make it more difficult for renewable technologies to compete with traditional fossil-fueled plants, and therefore more difficult for New York to meet the 2040 emission-free targets mandated by state law under the Climate Leadership and Community Protection Act (CLCPA). On the other hand, just two weeks later FERC issued Order 2222 requiring all ISOs and RTOs across the country to enable participation for Distributed Energy Resources (DER) and DER aggregations, including storage. The aim of Order 2222 is to level the playing field for these technologies versus conventional generation. NYISO has a four-year head start on this, having launched its DER Participation model and roadmap process in 2016; many of its protocols for DER participation will also help usher in the age of storage dual participation.
Con Edison REV Demo Project – the practical application of the changes
As these programs proceed, the intricacies of dispatch will need to be fully understood by storage developers and grid operators. Keeping an eye on this Con Edison REV Demonstration pilot project developed by GI Energy will help; it is among the first real-world applications to illustrate how these complexities may be put into practice. In this development, Con Edison will have priority dispatch rights to four 1 MW/1 MWh batteries at customer sites in New York City to support the distribution grid. When Con Ed does not need that capacity, the batteries can bid energy and ancillary services to the NYISO markets via a controls and telemetry system designed hand-in-hand with Smarter Grid Solutions.
GI Energy would welcome further discussion on any issues raised in this post, please don’t hesitate to contact Pete Falcier.