On July 28, 2025, the New York State Energy Research and Development Authority (NYSERDA) issued its first request for bids on 15-year Index Storage Credit (ISC) contracts as part of its effort to incentivize battery energy storage development in the state.
You can read more about the missing money problem that the ISC was designed to alleviate, as well as its design, here.
Each month, ISC contracts will require NYSERDA to cover potential shortfalls between a Reference Price and Strike Prices for contract holders.
Strike Prices are determined based on bids submitted by battery owners when applying for ISCs and is generally representative of a target revenue threshold for a project. The Reference Price is calculated to estimate the average potential daily revenue for batteries in each zone on a monthly basis.
However, because of how the Reference Price is calculated, a battery can earn wholesale revenues that are higher or lower than the Reference Price.
Therefore, outperforming the Reference Price enables a given battery to earn revenues above its Strike Price - and potentially facilitates a lower, more competitive Strike Price bid.
Siting is the best way for a battery to beat the Index Storage Credit’s Reference Price
The Reference Price is calculated based on the average revenue opportunity for a battery within one of New York’s 11 load zones.
Within each zone, some nodes enable batteries to earn more revenue than the Reference Price. This occurs because the Reference Price reflects average zonal - rather than nodal - revenue opportunities.
In northern Zone F (Capital), some nodes offer over $14/MW-day more energy arbitrage potential than the Reference Price implies. This equates to a potential 6% premium over that zone’s Reference Price.
In the eastern portion of Zone K (Long Island), this upside is even greater. Many nodes offer TB spreads over $30/MW-day higher than the proxy spread used in Reference Price calculations. These nodes can provide revenue upside that is over 10% higher than the Reference Price.
Siting can also create risk for ISC recipients. At some nodes, spreads are up to $32/MW-day below the Reference Price’s benchmark. Owners of battery energy storage projects hypothetically sited at these nodes may need to build a “buffer” into their Strike Price bid to hit their target revenue.
A battery can outperform its Reference Price because of how REAP is calculated
The Reference Price is the sum of the Reference Capacity Price (RCP) and the Reference Energy Arbitrage Price (REAP).
The RCP can’t be outperformed, because capacity prices are zonal rather than nodal, and the RCP assumes a battery fully captures all capacity awards in its zone.
The REAP, however, doesn’t represent the maximum achievable arbitrage revenue.
The REAP is the monthly average of day-ahead zonal TB spreads. These spreads do not always reflect the nodal prices a battery is exposed to when charging and discharging.
On Long Island, the REAP generally aligns with nodal spreads in the winter and spring. However, in the summer and fall, spreads tend to vary more across the zone. As a result, the REAP overstates arbitrage potential at some nodes, and understates it at others.
Consequently, some projects will earn less than the Reference Price, while others can exceed it.
Consider two four-hour batteries on Long Island - one in Holtsville and one in Northport. Both have similar costs and bid into the ISC with a $600/MW-day Strike Price. Because they share the same duration and zone, their monthly Reference Prices are identical.
With identical Strike and Reference Prices, both projects receive the same ISC make-whole payments each month.
Both projects earn revenues in line with their Strike Price early in the year as revenue opportunities closely track the zonal reference.
However, arbitrage opportunities begin to diverge in the summer. In July, the Holtsville battery’s arbitrage opportunities rise more than $120/MW-day above the Reference Price, while Northport’s TB spreads fall $120/MW-day below it.
As a result, Holtsville’s post-settlement revenue can reach $720/MW-day in summer, while Northport fails to meet the Strike Price.
Each project owner should consider their TB spreads relative to their zone’s REAP
An average spread of $105/MW-day for a project in Zone D (North), can exceed the REAP by $5/MW-day - based on average prices from 2022-2024 - lifting revenues above the Reference Price. However, a $105/MW-day spread for a project in Zone F (Capital) would instead be $45/MW-day below the 2022-2024 zonal average REAP of $150/MW-day.
If both projects share the same Strike Price, the Zone D site would likely earn higher total revenues than Zone F’s. The project in Zone D earns larger ISC payments, while both projects face similar actual wholesale revenue opportunities.
Projects should also account for seasonal variations in the REAP within the same zone, as congestion patterns differ throughout the year.
In Zone D, a $105/MW-day TB spread delivers higher upside in April - over $50/MW-day above the REAP of $55/MW-day - but falls $20/MW-day below the REAP of $125/MW-day in July.
As congestion patterns shift, projects may exceed their Strike Price in some months, and miss it in others.
For additional revenue, battery owners may also consider the Real-Time Market
Battery owners can also outperform their Reference Prices by capturing revenue in the Real-Time Market.
The Real-Time Market is more volatile than the Day-Ahead Market, which is the market used for the REAP calculation.
In every zone, capturing the real-time spread, instead of the day-ahead spread, raises potential earned revenue above the Reference Price.
The uplift is highest in Zone D (North), where energy arbitrage performed in the Real-Time Market enables batteries to outperform the Reference Price by up to 63%.
This uplift can also potentially enable a battery that has a day-ahead nodal spread that falls below the zonal average to still earn revenues in excess of the ISC Reference Price.
Take, for example, the same Northport node on Long Island referenced above.
This node underperforms its zone’s REAP when based on day-ahead arbitrage. But by capturing the real-time spread instead, a battery here could still outperform the Reference Price by up to 33%.
However, this revenue stream isn’t a guarantee.
Fully capturing the revenues implied by real-time TB spreads is even more difficult than in the Day-Ahead Market. It requires accurate and precise forecasting along with flexible operations.
Owners and operators have multiple pathways to outperforming the ISC Reference Price
The Index Storage Credit program rewards batteries that can outperform their Reference Price.
This can be accomplished by:
- siting a battery at a node with day-ahead spreads that are higher than the zonal average,
- or leveraging the Real-Time Market to capture larger spreads than in the Day-Ahead Market.
Ancillary Services also offer a path to exceeding the Reference Price. Though these are priced zonally, a battery can stack Ancillary Service revenues throughout a given day or month and exceed the ISC Reference, and therefore Strike, price.
Projects that leverage all of these approaches are best positioned to outperform the Reference Price and thrive under New York’s ISC program.
