The New York Independent System Operator (NYISO) last month became the first competitive venue in the world to allow energy storage to fully participate in a wholesale energy market.
Stemming from Federal Energy Regulatory Commission (FERC) Order 841, which directs all independent system operators (ISO) and regional transmission organizations (RTO) to remove barriers to energy storage, NYISO stepped ahead of its peers in fully opening energy, capacity, and ancillary services markets to energy storage resource (ESR) competition last month.
”This is an exciting development for the state and consumers as we move toward meeting [NY clean energy] mandates” said Rich Dewey, president and CEO of the NYISO. “By allowing ESRs to fully participate in our markets, we open up new revenue streams that will attract greater private investment in these resources and spur innovation.”
Two ways to play
The move makes NYISO the first, but the other ISO/RTOs in the country will soon follow with their own inclusive market designs. Expanding to include energy storage is being highlighted by officials as an important step in meeting the clean energy goals laid out in the state’s Climate Leadership and Community Protection Act.
After two years of discussion with stakeholders and final approval from FERC earlier this year, NYISO has established a ‘dual participation’ market model — where energy storage on the distribution system can participate in both retail and wholesale energy markets.
While most retail opportunities were already in place, energy storage is now able to also access the full suite of wholesale energy market opportunities in NYISO, including markets for energy, capacity, and ancillary services. These myriad competitive markets are traditionally the domain of large, lumbering power plants and grid assets, but competitive markets have gradually opened themselves to distributed resources (when ordered to do so).
New York is already an established market for energy storage, and despite a ramp down in incentives, the interconnection queue for distributed energy storage projects is tenfold what it was in 2018. Demand response has been the prime driver for energy storage deployment in the state to date, but ‘fully participate’ means that storage can now go far beyond just strategic load reductions.
Now the ability to value stack both retail and wholesale revenue streams could further propel energy storage, microgrids, and virtual power plants.
In technical demonstrations, energy storage has shown that it can deliver the full spectrum of wholesale market services, but competing against traditional energy resources will present new challenges. The complex dynamics of wholesale markets mean that sometimes resources are must run, or incented to operate at a loss, and shear economies of scale can sometimes make it difficult for distributed resources to maintain price competitiveness.
In anticipation of this watershed rollout, NYISO has been working with current energy storage system owners and operators to assist with market training, education, and market registration needs. It has not yet been publicly revealed if any current storage system has successfully bid into NYISO, but as of August 26 any and all energy storage in NYISO may register and offer services.
What now?
“We commend NYISO on implementing Order 841 market updates to facilitate regular participation of energy storage in its markets,” said Jason Burwen, vice president of policy for the Energy Storage Association. “NYISO is blazing the trail for the dual-use of storage in wholesale and retail service. This sets a foundation for storage market participation and is a critical first step to realizing the cost savings, resilience, and sustainability benefits that storage offers electric systems.”
New York was already an enticing marketplace for distributed energy resources. Now the ability to value stack both retail and wholesale revenue streams could further propel energy storage, microgrids, and virtual power plants.
The state has laid out ambitious plans for energy storage, including deploying 1,500 MW of the resource by 2025 and 3,000 MW by 2030. Opening wholesale markets to energy storage, storage-enabled microgrids, and other systems that include energy storage will make market economics more attractive for storage developers and customers across the state.
See related story by Matt Roberts: Distributed Energy Scores Big Win in US Wholesale Markets with FERC Order 2222
The industry has long asserted that storage can effectively compete side-by-side with traditional resources in wholesale markets, and well designed rules to access multiple value streams would accelerate deployment in first-mover territories. (In full disclosure, your author used to do a lot of that asserting as a former executive director of ESA).
NYISO’s blanket access for storage to new revenue streams and early results will be a model for other ISO/RTO markets, and will test the theory that when given full access, energy storage systems can lead to lower costs for consumers through enhanced competition, more grid flexibility and resilience, and more opportunities to innovate.
Matt Roberts is the director of strategic growth & government affairs at Microgrid Knowledge.
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