CAISO Issues Energy Storage and Distributed Energy Resources Phase 4 Decision

On October 1, 2020, the California Independent System Operator (CAISO) Board of Governors issued a decision in the Energy Storage and Distributed Energy Resources (ESDER) Phase 4 initiative. The Board of Governors approved several rule enhancements intended to enable integration of the 1,500 MW of storage and distributed generation resources expected to be installed on the CAISO controlled grid by the end of 2021.

First, non-generator resources will no longer need to execute a participating generator agreement and a participating load agreement; rather, a single market participation agreement will be adopted. The CAISO defines non-generator resources as resources having the capability to serve as both generation and load and can be dispatched to any operating level within their entire capacity range. Transitioning to a single agreement will neither affect non-generator resources’ market participation nor obstruct existing agreements.

Second, the CAISO will allow storage resources to submit an end-of-hour, state-of-charge bid parameter. Currently, scheduling coordinators must self-schedule to manage a storage resource’s state-of-charge. This is inefficient because of the timing lag between market execution and bid submission deadlines. The new rule will better allow the CAISO’s market systems to dispatch a storage resource as economically as possible.

Third, the CAISO will allow demand response (DR) resources to submit a maximum daily runtime parameter. The parameter will allow DR resources to specify the maximum number of hours they can be committed and dispatched on a daily basis. The parameter will better align DR providers’ actual operating characteristics with their market participation.

The Board of Governors also approved the following items:

• Refinements to the flexible-ramping product to address uncertainty caused by load and variable energy resources that materialize between market runs.
• Enhancements to the Import Bidding and Market Parameters Proposal ensuring market changes in Federal Energy Regulatory Commission Order No. 831 align with the Western energy market.
• Extension of reliability must-run contracts through 2021 for the Dynegy Oakland, Starwood Energy Group and CSU Channel Islands Site Authority generating units.
• The maximum import capability multiyear allocation proposal, which facilitates multiyear contracting for resource-specific import resource adequacy by CAISO load-serving entities.
• Updates to the CAISO’s rates and fees for 2021, which were developed following the completion of a cost-of-service study.

The CAISO’s rule enhancements are timely. In a joint report, the CAISO, California Public Utilities Commission (CPUC), and California Energy Commission described shortcomings in resource planning as a cause for California’s August outages: “In transitioning to a reliable, clean and affordable resource mix, resource planning targets have not kept pace to lead to sufficient resources that can be relied upon to meet demand in the early evening hours.” In November 2019, the CPUC determined that 3,300 MW of generation would need to be procured by load-serving entities by 2023 to maintain reliability. As California transitions to a cleaner generation portfolio, development of improved tools and practices for accurately reflecting the operating characteristics of a diversity of resources will be crucial to providing Californians with clean, reliable, and affordable power. The CAISO’s ESDER Phase 4 rule enhancements are intended to be a step in the right direction.

For more information, please contact Christian Briggs or Brian Biering.