Clock starts on integrating carbon pricing in New York market
- The Brattle Group released a report on Friday solicited by the New York Independent System Operator and the state's Department of Public Service that examines the impact of integrating carbon pricing into the organized power markets.
- Commissioned in 2016, the study outlines market design options that would integrate the social cost of carbon into wholesale power markets, and explores how carbon pricing can align market structures with state policies.
- NYISO CEO Bradley Jones told a House subcommittee last month that the grid operator planned to integrate a price on carbon into its market dispatch within three years after it published this Brattle Group report.
The study comes after a technical conference held by the Federal Energy Regulatory Commission to see how state incentives, such as nuclear subsidies and renewable energy portfolio standards, affect the organized market structure. Leaders of the seven organized wholesale power markets in the U.S. told the House Energy and Commerce Committee's Energy Subcommittee that the market transition to a cleaner power mix did not threaten grid reliability.
While testifying to the reliability of the grid, PJM Interconnect, and NYISO told the subcommittee they are drafting carbon pricing proposals that would incorporate state environmental goals into wholesale power markets.
PJM is reviewing its carbon pricing proposals, and NYISO just published the results of their years-long study on Friday. The idea of integrating carbon pricing into the organized market is not new. Amid anxiety over state policies and decarbonization at FERC's technical conference in May, a consensus emerged over carbon pricing. Stakeholders, including generators, academics and consultants, agreed there was a need to price carbon in wholesale power markets.
New York, in particular, crafted ambitious renewable energy and carbon reduction goals within the past five years. For instance, the state's Clean Energy Standard established a goal to hit 50% renewable energy by 2030, and guarantee nuclear subsidies for three of its struggling facilities. The state's Reforming the Energy Vision is another wide-ranging initiative that would revamp the utility business model to align earnings with social goals.
To meet those targets, the grid operator wants to examine implementing carbon pricing in its wholesale power markets.
"The NYISO and DPS agree that, in order to be successful, any carbon pricing proposal must contribute to achieving New York State’s public policies, while providing the greatest benefit at the least cost to consumers while also providing appropriate price signals to incentivize investment and maintain grid reliability," the operator wrote in a press release.
The NYISO and DPS will present the study at a conference on September 6.
Correction: A previous version of this post incorrectly said ISO-NE was reviewing its carbon proposal. The grid operator does not have one, but is proposing to change how its capacity market is operated to accommodate state policy goals and requirements for clean energy.
- New York Independent System Operator Carbon pricing study
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