Rick Gonzales
Chief Operating Officer

Rana Mukerji, Senior VP
Market Structures
 

  EET&D   : I think most of our readers have at least a cursory understanding of what being an Independent System Operator – or ISO – is, but there are probably also a lot of people that don’t completely understand what an ISO actually does. So, I think it would be useful to start off with a quick review of the rudiments involved.

  Gonzales   : That’s a fair assessment, Mike, and probably a good place to begin. As you already know, the NYISO runs a day-ahead and a real-time market for electricity, providing generators with a financially binding schedule of operation. And, as anticipated system conditions change, once the day-ahead market is settled, the NYISO also operates a real-time market designed to efficiently and economically balance any system changes that may occur.

  Mukerji   : And on a more detailed level, the NYISO also schedules transmission service for direct transactions between buyers and sellers – known as bilateral transactions. While the cost of energy in a bilateral transaction is negotiated outside the NYISO’s marketplace, a bid-based system is used to make transmission service available. Roughly 95 percent of energy is scheduled in the day-ahead market, while the remaining 5 percent is accounted for in the real-time market. Typically, about half of the energy settled in the day-ahead market is scheduled through bilateral contracts.

  EET&D   : How would you characterize the essence of what an ISO does in addition to managing the day-ahead market and bilateral power transactions?

  Gonzales   : Among the other critical functions we perform is administering competitive markets for key ancillary services that are required to support the power system. The two most important ancillary services are reserves and regulation. The NYISO aims to minimize the cost of serving electricity by co-optimizing the cost to provide energy, reserves, and regulation in its security constrained economic dispatch algorithm.

  EET&D   : Rana, without getting into too much technical detail, could you perhaps elaborate just a bit more on how that all plays out as a practical matter?

  Mukerji   : Sure. Another of the fundamental challenges of grid operations is constantly maintaining a balance between electric supply and demand. Typically, this is accomplished by moment-to-moment changes in output by generators that provide regulation service. In New York, however, competitive wholesale power markets have been in place for more than 10 years, so regulation service is provided on a least-cost basis by competing suppliers rather than a singularly contracted source.

  EET&D   : But it is my understanding that you have gone well beyond just dealing with conventional energy sources; is that correct?

  Mukerji   : Yes, while many grid operators must rely exclusively on regulation service resources from conventional hydropower and thermal-generating units to keep supply and demand in balance, the NYISO has moved to take advantage of advanced grid-scale energy-storage facilities known as limited energy-storage resources (LESRs) to provide this crucial service. As the name implies, LESRs store electricity but are limited in the amount of time they can sustain electric output.

  EET&D   : So how do you handle the obvious issues around intermittency that are an implicit concern when it comes to renewables integration?

  Mukerji   : Well, I guess you might say that the simple answer is energy storage, but the NYISO has also developed new market rules and related software specifically designed to support LESRs. In fact, when the Federal Energy Regulatory Commission (FERC) approved NYISO tariff revisions in May 2009, the NYISO became the first grid operator in the nation to establish federally approved energy-storage market rules and deploy associated software and control systems. As with all market and system changes, the NYISO worked with stakeholders through its shared-governance process to ensure the changes would meet the needs of LESR operators without creating unintended consequences for the marketplace.

  EET&D   : What type – or types – of storage are being used in your service areas?

  Gonzales   : With its existing major hydropower pumped-storage facilities, New York State has a well-established foundation of electric energy-storage resources. The New York Power Authority (NYPA) Blenheim-Gilboa facility is the fifth-largest pumped-storage project in the nation. The 1.1 GW project began providing power in 1973. A major revitalization and upgrade of the facility was completed just this year.

The state’s other large pumped-storage facility is the Lewiston Pump-Generating Plant. Part of NYPA’s Niagara Power Project, Lewiston was built in the early 1960s and is capable of producing 240 MW. Moreover, NYPA recently announced a 10-year, $460 million modernization project to upgrade the facility.

  EET&D   : Again, although we see terms like pumped storage more and more these days, it would probably be good to explain exactly what that means for those who may not be as familiar with it.

  Gonzales   : Pumped-storage units use electricity during the overnight hours, when system usage is low, to pump water into elevated reservoirs. As system electric usage increases during the day, the water is allowed to run back down through the turbines to generate electricity. Pumped-storage technology was originally viewed as a complement to large nuclear units, which cannot be cycled down during the lessened demand of the overnight hours. According to the U.S. Energy Information Administration (EIA), there is well over 20GW of pumped-storage generating capacity in the country.

  EET&D   : Rana, in your opinion, is there something in particular that is driving the proliferation of these changes, either in New York or in general?

  Mukerji   : Yes, I can say that market signals and increasing demand for regulation service have attracted the attention of developers whose new technologies are well suited to serve the regulation market. Emerging storage technologies being introduced in New York are different in scale and capability, representing a new class of resource to create a more robust, reliable power system and lower costs for consumers.

  EET&D   : Another factor that concerns many people is the speed at which renewable resources can respond to rising demand. How do you handle that part of the equation?

  Mukerji   : The LESRs currently in development will store limited grid-scale generating capacity, but their response times are what really set them apart. With an instantaneous ability to switch from drawing energy to releasing energy, they are ideally suited to provide regulation services. The use of advanced, grid-scale storage technologies to respond to second-by-second fluctuations in demand is a promising addition to New York’s resource mix that will help to improve system efficiency and reduce the need to burn fossil fuels to provide regulation service.

  EET&D   : There are several technologies out there that would seem to qualify as limited energy-storage resources, or LESRs. Can you identify some of the LESR technologies being employed by the NYISO and briefly describe their functionality along with any others that are being considered as having potential in the future?

  Mukerji   : The main LESR technologies currently under development in New York State include flywheels and advanced batteries. A flywheel energy-storage system is a rotating mechanical device (i.e., a rotating disk) that uses electricity from the power grid to create kinetic energy that can easily be converted back into electric energy when needed. And, as most people know, battery storage systems simply convert electricity into chemical energy for later release. We’re also looking at some other developing technologies that could act as LESRs in the New York market down the road. These include flow batteries, fuel cells, ultra-capacitors and compressed-air energy storage.

  EET&D   : There’s been a lot of discussion about electric vehicles lately, not just as an energy saving measure but also as a large-scale distributed energy storage resource. Is that something that could or will figure into you future plans?

  Gonzales   : Indeed, plug-in electric vehicles (PEVs) may one day act as energy-storage service providers for both the home and the electric grid. In March, the ISO/RTO Council, an organization representing North America’s ten electric system grid operators, published a study examining the feasibility of deploying various smart grid tools and services to allow grid operators to tap into the batteries of PEVs as an innovative energy-storage and distributed-energy resource to balance local energy needs.

The New York Public Service Commission and FERC have also acknowledged the important role that energy storage plays in the implementation of smart grid technologies – including that for potential PEV grid integration and other applications. In addition, increased amounts and types of electric energy storage also could be combined with Smart Grid technologies to support the future integration of large amounts of renewable energy into the electric grid, helping state and federal policy-makers meet renewable power goals.

  EET&D   : Are there any projects currently under way that would add substance to the viability of these technologies?

  Gonzales   : Yes, there are indeed. For example, Beacon Power Inc. and AES Energy Storage LLC are two companies currently developing grid-scale LESR facilities in New York based on flywheel and battery technologies. Beacon Power recently began operation of a 20 MW flywheel energy-storage facility in Stephentown, N.Y. Beacon’s system utilizes 1 MW flywheel modules consisting of 10 individual 25 kWh/100 kW flywheels integrated into a plant that can provide up to 20 MW of regulation service.

AES Energy Storage is developing three 20 MW battery storage facilities in the upstate New York counties of Broome, Onondaga and Niagara.

  EET&D   : These sound like some pretty exciting projects, and we hear a lot about these technologies as just that – technologies. What has been the driving force behind getting them to a pragmatic stage?

  Mukerji   : As stated earlier, energy, reserves and regulation have been competitively supplied since the formation of the NYISO. However, when the markets were initially developed, no one anticipated that regulation could be provided as a product separate from energy. Consequently, it was assumed that only generators could provide regulation service. None of these projects would have been possible without the changes to the NYISO’s markets.

  EET&D   : What were some of the steps that led up to those changes?

  Gonzales   : In order for New York’s market to accommodate LESRs, several steps had to be taken. First, a new type of regulation service provider had to be defined – one that would be characterized by its ability to provide continuous six-second changes in output but would not be able to sustain continuous operation at maximum energy withdrawal or injection. Once this new category was established, software changes were then made to bidding and control systems.

  Mukerji   : That’s right. The NYISO markets traditionally evaluate generator bids for energy and ancillary services simultaneously. The market software has been updated to allow LESRs to be evaluated only as regulation service providers, not as energy suppliers. By removing the requirement to offer energy and by creating an opportunity to sell regulation as a stand-alone product, the NYISO created a means for this new class of resources to participate in the marketplace. LESRs will be compensated for their regulation service in the same manner as traditional suppliers, meaning that they will receive the market-clearing price for each megawatt of regulation service provided.

  EET&D   : So how do reserves figure into this competitive operating model?

  Mukerji   : Reserves are resources available to provide fast ramping power in the event of a unit or line trip. Reserve resources can either be spinning – on-line, with additional ramping ability – or non-spinning – off-line, but able to start and synchronize quickly. The NYISO maintains varying levels of reserves in different parts of the state. I’m sure that Rick can explain how that works in a greater detail…

  Gonzales   : Regulation providers keep load and generation in constant balance. NYISO performs a system wide re-dispatch every five minutes to balance generation with short-term predicted system changes and relies on regulating resources to quickly adjust their output and consumption, and continuously balance conditions within those five-minute dispatches. Resources selected to be regulation providers must be capable of simultaneously providing the service in both the upward and downward directions. Regulation resources are a key component of integrating large amounts of intermittent resources, such as wind, without compromising system reliability.

  EET&D   : Speaking of wind, let’s talk about that. As I understand it, you have also integrated a wind component into your overall resource plan. Is that correct?

  Mukerji   : Yes, wind energy provides many benefits, such as a low energy costs and a near-zero carbon footprint; but it also brings new challenges, a consequence of wind’s intermittent nature. These challenges must be overcome by ISO/RTOs and other entities responsible for the reliable and efficient operation of the power grid.

  EET&D   : The intermittency of renewables – particularly wind – is of course, a big issue. How do you deal with that aspect without jeopardizing overall network reliability?

  Gonzales   : The intermittency of wind generation can be accommodated more effectively when the balancing area is large. This means that regional coordination is essential as we increase the proportion of wind and other intermittent sources of renewable power. The NYISO is working with its neighbors to implement an initiative called “Broader Regional Markets” that allows this to happen.

The broader regional markets initiative involves more frequent interchanges with neighboring control areas (currently interchanges are done hourly), coordinated congestion management (where transmission limitations are alleviated by re-dispatching generation on a regional basis), consistent pricing at power interchange points, and charging congestion costs to transactions that cause congestion.

  EET&D   : Is this fully operational across the NYISO region at this point?

  Mukerji   : No, the NYISO implemented its first Broader Regional Market rule this summer. In this implementation, NYISO increased the frequency of interchanges with Hydro Quebec from once every hour to once every 15 minutes, and this will be increased to once every five minutes by 2012. This increased frequency of transactions will allow NYISO to utilize the immense hydro storage capacity of Quebec to balance the intermittency of wind. Hydro Quebec also will benefit from the ability to buy renewable energy at low prices and conserve hydro resources that can then be offered at times of greater need. NYISO also will be implementing more frequent scheduling with ISO New England and PJM. This will allow wind energy to be more effectively integrated regionally.

  EET&D   : There has been a lot of discussion lately about bringing the various components of the Bulk Energy System closer together. In fact, NERC just recently issued a plan to adopt a revised definition for the Bulk Electric System and a phased approach to regional integration. Are there any pertinent changes going on that would go beyond the NYISO footprint?

  Gonzales   : The NYISO has begun working with individual utilities around the state to implement the smart grid initiative, which involves the installation of capacitor banks and phasor measurement units – or PMUs – on the bulk transmission system throughout the state. The capacitor banks will improve the efficiency of the state’s bulk transmission system by reducing the amount of electricity that is lost when carried over long distances, thus saving the state approximately $9 million each year. The installation of PMUs and integration of the data provided will improve grid operators’ visualization capabilities and situational awareness. Eventually, the NYISO’s PMU network will connect with PMU networks in New England, the Mid-Atlantic, the Midwest and Ontario to create broader situational awareness throughout the Eastern Interconnection, the NYISO explains.

  EET&D   : Rick, you get the last word. Anything you’d like to add before we close?

  Gonzales   : Two things. First, I’m very pleased to note that New York has developed new market mechanisms intended to effectively incorporate large amounts of renewable energy in the future and as a result, is positioned to effectively accommodate up to six times the current levels of intermittent energy without impacting system reliability. This will help drive new investment in renewable energy in New York as well as significant consumer benefits.

And finally, we’re very excited to report that the NYISO has broken ground on a new $35.5 million primary power control center facility, which is being built adjacent to the NYISO’s headquarters in Rensselaer, New York – near Albany. This new 64,000 square-foot control center is being developed to replace the NYISO’s existing, 42-year-old control center in Guilderland. Construction of the new control center is scheduled for completion in 2014, while the overhaul of the Guilderland facility is set to be finished in 2012.