United States: CAISO Tariff Changes Facilitate Participation Of Small Renewable And Storage Technologies In California Energy Markets

On June 2, 2016, FERC approved revisions to the California Independent System Operator's open access transmission tariff that facilitate the participation of small, distribution level energy generation, storage and demand-related resources in the CAISO wholesale energy and ancillary services markets.  For individual generators, the CAISO tariff sets a minimum capacity of 0.5 MW to participate in the CAISO markets.  The revisions approved by FERC permit smaller distributed energy resources (DERs), including distributed generation, energy storage, dispatchable load (such as pumping load that can increase or decrease its consumption), and plug-in electric vehicle charging stations, to form aggregations of 0.5 MW or more that are eligible to participate  in CAISO energy and ancillary services markets.  

The core of the DER program is that an aggregation of DERs will itself become a new resource that can participate in the CAISO market.  For example, 10 owners of individual 50 kW small solar photovoltaic projects connected to Southern California Edison's distribution system could aggregate to form a 0.5 MW DER.  CAISO will treat the aggregation, rather than the individual solar projects, as the market resource.  The aggregation will submit bids, similar to bids submitted by other CAISO market participants, and must comply with CAISO instructions.  If they fail to follow dispatch instructions, the DER will be subject to financial penalties, in the form of uninstructed imbalance energy charges.  CAISO's rules regarding telemetry will apply similarly to DERs – namely DERs with an aggregated capacity of 10 MW or greater, and those that provide ancillary services must provide real-time data through telemetry to CAISO, similar to a participating generator's obligation.  The data provided is for the aggregate resource, and not the individual energy resources comprising the aggregation.

In particular, the CAISO tariff revisions establish a new eligible market participant, known as a "Distributed Energy Resource Provider" or "DER Provider" – an entity that owns or operates an aggregation of DERs for purposes of participating in the CAISO markets.  Aggregated resources may be located within one or more nodal pricing nodes.  However, a DER Provider cannot aggregate more than 20 MW of resources that span different pricing nodes; there is no maximum size for aggregating DERs located in the same pricing zone.  Resources that participate in an aggregation must be connected to a distribution system or a metered subsystem, which is a geographically contiguous system that has been operating as an electric utility within the CAISO balancing authority that is responsible for balancing its own loads and resources.  

The CAISO tariff revisions provide specific eligibility requirements for generating resources to participate in a DER aggregation.  Generating resources that are one MW or greater must continue to register with CAISO as individual generators and are not eligible to aggregate their capacity through a DER Provider.  Generating resources that are between 0.5 MW and one MW must terminate any CAISO participating generating agreement before participating in a DER aggregation.  In addition, generating resources that participate in net metering cannot participate in a DER aggregation, since excess energy from a net-metered resource is deemed to be "banked" for later withdrawal and accordingly is not available for export into CAISO markets.

Each DER must be located in a single sub-load aggregation point – or Sub-LAP – in order to insure that it does not create additional congestion.  This same requirement applies to CAISO demand response resource aggregations, to insure that they do not exacerbate congestion by allowing aggregations to operate across congested interfaces.  The CAISO is divided into 23 Sub-LAPs, each with an area large enough to accommodate significant DER capacity.  The Sub-LAP boundaries are depicted in a map set forth as Figure 1 of CAISO's initial filing (available at p. 11 of the link below).

Each DER Provider can either work with or become a scheduling coordinator itself to participate in the CAISO markets.  The scheduling coordinator for the DER Provider must provide schedules and bids based on the aggregated resources' "generation distribution factors" – namely, how much energy will be provided from each generator, storage facility or demand resource within the aggregation.  If the scheduling coordinator does not include generation distribution factors with its bids, CAISO will use existing information that it has on file for the DERs.  CAISO's initial filing provides examples to illustrate this requirement. 

In one example, CAISO describes an aggregation of similar energy resource types that are located at three different pricing nodes:P2, P6 and P8.  In this example, the scheduling coordinator submits a bid for one MWh with distribution factors of 0.2 at P2, 0.5 at P6, and 0.3 at P8. 

In this example, assuming the DER Provider's bid clears the market and the DER Provider receives a dispatch instruction to provide one MWh, the response at the pricing nodes should be 0.2 MWh at P2, 0.5 MWh at P6, and 0.3 MWh at P8.  Typically, a participating generator would incur penalties from CAISO, referred to as uninstructed imbalance energy charges, if their distribution factors differed materially from those set forth in their bid.  In contrast, under the DER program, CAISO uses meter data at the DER Provider level and not the pricing node level.  Accordingly, if there are deviations from the distribution factors of the individual DERs but the net energy provided by the DER Provider (here, one MWh) is the same as in its bid, there is no uninstructed imbalance energy charge.  CAISO may propose enhancements to its initial proposal if distribution issues arise.  DER Providers must enter into a pro forma contract that sets forth the terms and conditions under which CAISO and the DER Providers will carry out their respective responsibilities under the CAISO tariff.  The DER Provider agreement must include a list of each DER comprising the aggregation, which the DER Provider must update if it adds or removes DERs from the aggregation.  The pro forma DER Provider agreement does not require the DER Provider to address its relationship with the individual DER owners or operators that comprise the aggregated resource.  Also, CAISO's existing requirements relating to telemetry would apply – namely that resources with a rated capacity of 10 MW or larger must provide real-time data to CAISO via telemetry.

A copy of CAISO's filing can be found here.  A copy of FERC's order can be found here.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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