The NYISO released its Q3 2026 STAR on October 13. On October 28 the Management Committee voted to advance the 2026 Reliability Needs Assessment to the NYISO Board of Directors for final approval. We summarized the findings of both in this post. Here, we look more closely at what the two reports signal about how the NYISO’s markets and its reliability planning relate to one another.
Wholesale electricity markets in NY have been designed to reflect where and when investment is needed on the grid. A market signal of higher prices is intended to identify where investment is needed and attract the resources capable of serving customers reliably. Lower prices can signal excess supply and signal support for supply to retire. Reliability planning processes apply stringent reliability planning rules to forecasted demand and expected supply and transmission capability to identify grid needs. The two processes are meant to work toward the same end, but they do not always count the same resources or value the same attributes. Where they diverge, the results create uncertainty about what gets built, what gets retained, and what participants can reasonably anticipate.
The CHPE Determination
CHPE entered commercial operation on May 13, 2026. The NYISO determined that it had demonstrated its planned power capability on October 2, 2026. For roughly five months in between, the project was available to the markets but not counted on for reliability planning. That determination was material to the NYISO’s decision to call on the Danskammer Units 1-4 to stay in service under an Interim Service Provider rate, as well as the Q2 STAR findings of a Lower Hudson Valley need, which led to a solicitation of Reliability Need solutions being issued. That solicitation led developers to prepare proposals that were ultimately not evaluated once CHPE was deemed to have demonstrated its planned power capability by NYISO planners.
The issue is not timing, but rather that a project can be approved for commercial operation and participate in the wholesale markets while reliability planning treats it as unavailable. Both the initial commercially-available determination of participation in the NYISO’s markets, and the subsequent determination by planning to not count CHPE’s market participation in its planning assessments, resulted in uncertainty, both for participants deciding how to position themselves in the New York market, and for anyone forecasting what a future planning study will count. The rules governing planning inclusion lack clarity and transparency, amplifying the uncertainty.
As a reminder, New York does not have a forward market structure. So, the marketplace relies on information from planning analysis, such as long-term peak load forecasts and assumptions about large power projects, to provide long term market signals.
Planning forecasts do not need to have perfect projection, and most participants understand that there is a consistent bias in planning matters towards conservatism. That is just good planning practice. However, a new resource, once it has received its Capacity Rights Interconnection Service and entered the NYISO’s Installed Capacity Market, is a resource that gets included in planning assumptions. To not do so calls into question the rigor of the rules for allowing resources into the market, and stringency of reliability planning rules. These assumptions matter, because they directly impact both market signals needed to attract and retain supply, and ultimately, if customers are getting the reliability services they are paying for.
What Capacity Prices Reflect
The same pattern appears in what capacity prices reflect. Reliability has two components. Resource adequacy asks whether there is enough supply overall to reliably meet demand. Transmission security asks whether there is enough supply in the correct locations to support the safe operation of the New York State bulk electric transmission system so that resources can be deployed to manage overloads of the wires. Two of the three Reliability Needs in the 2026 RNA are transmission security needs, in New York City and the Lower Hudson Valley.
The 2026 RNA acknowledges that the current ICAP market structure primarily compensates resources for resource adequacy and only indirectly compensates them for transmission security. The NYISO’s Reliability Attribute-Based Pricing for Transmission Security project is intended to address that. The 2026 RNA lists it as a 2027 project and states only that the NYISO will engage with stakeholders to evaluate it. The work that would align market incentives with transmission security needs sits at least a year away and most likely longer before any approved concept actually impacts market signals.
However, the ICAP market demand curve enhancements proposal, now before stakeholders, leaves the definition and operating characteristics of a proxy unit unchanged. The effect is that the ICAP market signals will lack continuity with NYISO’s own reliability concerns. Transmission security is a reliability criteria that the market does not compensate resources for, and, as we have seen since the Q3 2025 STAR, transmission security remains the largest driver of resource gaps in New York’s future. In fact, the NYISO’s Market Monitoring Unit, Potomac Economics, in response to the 2026 RNA says the “NYISO market incentives are inadequate to address the Reliability Needs, leading to retirements, lack of investment, and out-of-market procurements.”
The proxy unit selection matters. The last demand curve reset set capacity prices against a two-hour battery, and the demand curve enhancements project does not propose to refine that definition. The 2026 RNA includes a table setting out the directional reliability value of a 500 MW project by resource type. Of its eight entries, the shortest-duration storage option is a four-hour battery. A two-hour battery does not appear at all. The 2026 RNA goes further:
“Given the long duration of the deficiencies in New York City (up to 16 hours) and Lower Hudson Valley (up to 7 hours), storage projects would likely not provide the reliability value set forth below, unless they are combined with other solutions that are not duration limited.”
Luminary raised concerns about the proxy unit when the reset proposal was published. The 2026 RNA now supplies the NYISO’s own assessment of what these needs require, and a two-hour battery is not on the list. Leaving the definition unchanged risks carrying that disparity into the next demand curve period.
A reasonable question is why forward power and capacity prices do not appear to reflect what these reports describe. The answer is structural. Capacity prices are set against a proxy unit, not against the resources the planning process says are needed. Recent experience also suggests that reliability needs in New York are resolved through retention, designation, and contracts rather than through new merchant projects. If participants expect a need to be solved outside the market, they will not price it into the market, and prices that do not reflect scarcity will not attract new investment.
What Comes Next
Wholesale markets exist to attract and retain supply where the system needs it. The 2026 RNA states that purpose directly as well as what the system needs to maintain reliability. Taken together, these reports show a planning process and a market pricing process working from different pictures of what the system requires. Reconciling the two is critical to the continued success of the New York’s wholesale markets and that work falls to the NYISO and its stakeholders. Only time will tell if one cohesive picture can be painted for both NYISO’s planning process and its wholesale market outcomes.
About Luminary Energy
Luminary Energy LLC provides advisory services to wholesale power generators and market participants in NYISO and ISO New England. To learn more about Luminary Energy’s services or to connect with a member of our team, contact us at [email protected].