Thursday, January 24, 2019

NY Details Carbon Charge on Wholesale Suppliers

By Michael Kuser

RENSSELAER, N.Y. — NYISO on Monday proposed a framework for applying and billing carbon charges to New York energy suppliers under the state’s proposed scheme to price greenhouse gas emissions in the ISO’s wholesale electricity market.

NYISO staffer Nathaniel Gilbraith told New York’s Integrating Public Policy Task Force (IPPTF) emissions from Clean Energy Standard-eligible wholesale suppliers would not be subject to the carbon charge nor would upstream or fugitive CO2 emissions and other greenhouse gas emissions such as methane and nitrous oxide.

Historical NYISO Fossil CO2 Emissions by Generator Type | Brattle Group

Exempt resources would include those participating in the Special Case Resource, Emergency Demand Response, Demand-Side Ancillary Services and Day-Ahead Demand Response programs, he said.

Why Exempt?

“Our rationale for this is because they’re primarily load reduction,” Gilbraith said. “Resources in these programs infrequently produce energy using emitting resources. About 90% of all program megawatts are pure load reduction with no local generation.”

In addition, collecting data from these resources would create potentially sizable new reporting requirements for the resources with few resultant carbon charges returned to loads, he said.

“I don’t want us to lose sight of the optics of creating exemptions from the program we ultimately introduce and the public’s receptivity ultimately to a major new initiative,” said Howard Fromer, director of market policy for PSEG Power New York.

“Sometimes these resources may be seen as emergency resources, but in the neighborhoods in which they exist they’re not always so well received,” Fromer said. “It’s a politically easier sell to say we are not exempting anyone. If you are putting out carbon in this sector, and you’re in the wholesale market … we’re capturing all of this.”

Applicable emissions would include those associated with startups, no-load levels and generation that receives wholesale market compensation. The ISO will work with resources to establish a reference emissions allocation method.

Emissions associated with heat and steam sales fall outside the scope of a wholesale electric sector carbon charge, Gilbraith said. Cogeneration resources will report emissions associated with the provision of wholesale energy and ancillary services, excluding those associated with heat and steam sales.

Verifying Data

NYISO will develop internal processes to verify supplier emissions as reasonable and accurate.

Cogeneration, behind-the-meter net generation (BTM:NG) resources and distributed energy resources in particular, will be required to submit data allowing the ISO to verify the emissions associated with wholesale energy and ancillary service sales, Gilbraith said.

RGGI and Eastern Interconnect (EI) CO2 Emission Reductions (2017–2031) | Brattle Group

Inaccurate, insufficient or untimely data submissions will be subject to penalties administered consistent with the existing penalty review process, he said.

NYISO’s Tariff defines BTM:NG as a “facility eligible to serve both its host load, which is a behind-the-meter load, and then sell excess capability as a wholesale sale into the NYISO markets,” Gilbraith said. “When the resource serves host load … it’s not a wholesale market transaction and therefore it falls outside the scope of a wholesale electric sector carbon charge.”

BTM:NG resources will report emissions associated with the provision of wholesale electric energy and ancillary services — that is, “net generation” — and not emissions associated with serving their host load, Gilbraith said.

Billing and Invoicing

The previous week, the ISO proposed to base the carbon impact on LBMP (LBMPc) on real-time system dispatch to determine carbon charges and credits, as opposed to forecasting the impact. The change would be consistent with the LBMPc used to allocate residuals to loads, and the ISO would also create a new billing code for carbon charge settlements. (See NYISO Proposes Border Pricing Plan for Carbon.)

NYISO would submit emissions data pursuant to explicit timelines aligned with current practice, and for the daily bill and the first monthly invoice, supplier emissions will be automatically populated with an initial emissions estimate based on the carbon component of the reference level, Gilbraith said.

Suppliers’ reference levels will be determined by the ISO’s market mitigation analysis department, which has “means of tracking whether or not bids are competitive at a 10,000-foot level, so they include provisions including heat rate for the supplier,” Gilbraith said. “So we’ll enhance that product to include a carbon component for each bid, and note that will be the basis for the initial carbon charge.”

Suppliers will be required to submit emissions true-ups within 60 days of the initial invoice, which is usually sent five day after the end of the month, he said. There will be a mandatory penalty for failure to submit emissions true-ups on time. Suppliers will be able to further true-up emissions data after the four-month invoice but not after the final bill closeout.

Stakeholder Concerns

The ISO asked market participants to submit written comments on the proposal, but several stakeholders balked at the request without more feedback coming the other way, as in an updated proposal from NYISO.

Michael DeSocio, the ISO’s senior manager for market design, summarized stakeholders’ desire for clarity on the schedule and on exactly what the grid operator is proposing ahead of the planned announcement of a final proposal on Dec. 17.

“If we’re going to go through this process, we’ll probably need more than another meeting or two, and we’ll look to create additional meetings and lay out what that schedule looks like,” DeSocio said.

IPPTF Chair Nicole Bouchez, NYISO’s principal economist, said the task force would release a revised schedule as soon as possible.

The task force next meets at NYISO headquarters Oct. 29 to discuss allocation of carbon charge residuals and the transparency of carbon impacts. That meeting will also hear a Calpine presentation, delayed from this week, on how a carbon charge might affect hedges on transmission congestion contracts.