Modifications to the BSM Construct in the NYISO Capacity Market: Analysis of Potential Capacity Market Competitiveness and Reliability Outcomes
White paper, December 2021
The 2019 New York State Climate Leadership and Community Protection Act (CLCPA) requires “…reducing 100% of the electricity sector’s greenhouse gas [GHG] emissions by 2040,” a requirement likely to result in rapid growth of low- and zero-GHG resources on the electric system in New York State. This rapid growth is expected to affect implementation of New York’s capacity market, and in particular warrant changes to the “Buyer Side Mitigation” (BSM) rules included in the capacity market construct.
As part of its Comprehensive Mitigation Review (CMR) process, the New York Independent System Operator (NYISO) has proposed changes to the capacity market to better accommodate state achievement of CLCPA requirements, while maintaining the function and effectiveness of the market. NYISO’s changes would exempt CLCPA resources from BSM offer review, improve the accreditation of capacity resources, and include additional changes to better adapt the NYISO capacity market to the rapidly changing state climate policy context. To support its review, NYISO contracted with Analysis Group to model capacity market outcomes in representative future years assuming the proposed CMR changes are in place.
Principal Paul Hibbard and Vice President Charles Wu developed a capacity market model for New York and prepared a report analyzing the operation of the market with the CMR reforms. Specifically, the report sought to answer two questions:
- Will the NYISO capacity market continue to produce competitive market outcomes?
- Will the NYISO capacity market continue to provide financial incentives for the retention and addition of resources needed to maintain power system reliability?
The purpose of the analysis was to determine whether the NYISO capacity market would be able to continue to support the achievement of resource adequacy in New York through competitive capacity market auctions administered in concert with the rollout of CLCPA resources. The Analysis Group report, titled Modifications to the BSM Construct in the NYISO Capacity Market: Analysis of Potential Capacity Market Competitiveness and Reliability Outcomes, was included in testimony filed by Mr. Hibbard and Mr. Wu in support of NYISO’s January 2022 submission of proposed tariff changes to the Federal Energy Regulatory Commission.