The New York Independent System Operator (NYISO) was founded in 1999, a period of high electricity prices, in hopes that a more competitive marketplace would help bring the cost of electricity down (NYISO). Currently, the NYISO is responsible for the reliability of power generation and transmission in the state of New York. For over a decade, the capacity of generation and transmission constraints around New York City and Long Island have been a subject of concern. Since 2001, NYISO has faced growing apprehension that it will not be able to ensure reliability using only in-state resources, as the load is growing faster than new capacity (NYISO).
New York City and Long Island’s Impact on Prices
Since mid-2005, New York City and Long Island have had a significant impact on NYISO’s ability to ensure reliability in the region while minimizing prices. The figure below demonstrates how population-dense New York City and Long Island require over 50% of the total load for the state during peak summer months, although the two cities only make up 42.2% of the population (City of New York).
Due to its detached geographic location and high population density, this region has been challenging to serve- which has affected pricing. Figure 2 displays the high percentage of electricity price represented by congestion on average for NYC and LI (seldom below 10% of the LMP) versus the rest of the NYISO zones (seldom over 10% of the LMP).
Furthermore, Figure 3 demonstrates that the cost of losses in NYC and LI are twice that of the rest of the state on average.
NYISO’s recent efforts have been toward boosting capacity to serve the load demands of NYC and LI, and toward demand response programs to cut down load at peak serving times. Regardless of NYISO’s efforts, LMPs are still higher in NYC and LI than the rest of New York State (NYISO). The main reason is that these regions depend greatly on power from upstate and out-of-state generation, but transmission constraints restrict transfer levels to around 3000 MW (NYISO).
Solving the Transmission and Capacity Issue
So what is NYISO currently doing to improve New York City and Long Island’s transmission and capacity issues? And how does this challenge look going forward? For an in-depth analysis on growth of capacity and transmission in the NYISO, check out our October 2013 DataWatch article, “In Search of Equilibrium: Growth of Capacity and Transmission in the NYISO”