California Independent System Operator

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By Michael Gergen, David Pettit and Christopher Randall

The CPUC’s market-shaping decision provides guidance regarding the “stacking” of multiple electricity system services.

A new decision from the Public Utilities Commission of the State of California (CPUC) has set the stage for improved economic viability for California’s energy storage industry. The January 17 decision — Decision 18-01-003 in Rulemaking 15-03-011 (the Decision) — establishes a set of rules to guide utilities on how to “promote the ability of storage resources to realize their full economic value when they are capable of providing multiple [or ‘stacked’] benefits and services to the electricity system.”

To advance this objective, the CPUC has adopted 11 stacking rules to govern the evaluation of multiple-use energy storage applications, as well as associated definitions of services and service “domains.” The agency also established a working group to develop certain issues further and directed the CPUC’s Energy Division to prepare a report in 2018 on the state of the energy storage industry.

By Michael Gergen, Tyler Brown, David Pettit and Christopher Randall

At the most recent meeting of the Board of Directors of the California Independent System Operator (CAISO) held on February 16, 2017, the President and Chief Executive Officer of the CAISO reported that because of the “bountiful hydro conditions expected this year and significant additional solar installations both in the form of central station and on rooftops” in California, the CAISO “expects to see significant excess energy production this coming spring.” As a result, the CAISO is forecasting that it may “need to curtail from 6,000 MW to 8,000 MW.”

Based on the CAISO’s Monthly Market Performance Reports, it doesn’t appear that there were any significant curtailments prior to a few isolated days in the Spring of 2015, the Spring and Fall of 2016, and this Winter. This stands in marked contrast to the scale of curtailments that appear to be expected for this Spring. Moreover, in 2014 the CAISO reported that by 2024 it expects maximum hourly curtailments of over 13,000 MW in California under a scenario where the Renewables Portfolio Standard (RPS) targets 40 percent of retail sales by 2024. (This RPS requirement was enacted in October 2015.)

CAISO Graphic depicting renewable curtailment by resource type

By Michael Gergen and David E. Pettit

On January 19, 2017, the Federal Energy Regulatory Commission (FERC or Commission) issued a new policy statement entitled “Utilization of Electric Storage Resources for Multiple Services When Receiving Cost-Based Rate Recovery” (Storage Policy Statement or Policy Statement), which clarifies that electric storage resources may receive cost-based recovery for certain services, such as transmission or grid support services, while also receiving market-based revenues for separate services, such as selling electric energy, capacity and ancillary services in the organized wholesale markets, so long as adequate protections are in place to address potential abuses. The Storage Policy Statement suggests potential new revenue opportunities for electric storage resources that can provide multiple or stacked services, some of which are cost-based and some of which are market-based.

Storage Policy Statement Clarifies Prior Precedent

The Storage Policy Statement specifically aims to clarify questions left open by FERC’s prior decisions in Nevada Hydro[1] and Western Grid.[2]  In Nevada Hydro, the Commission rejected a proposal by The Nevada Hydro Company, Inc. to treat an advanced pumped hydroelectric storage project as a transmission facility and allow its costs to be recovered through the California Independent System Operator’s (CAISO) transmission access charge. The company also proposed to have CAISO assume operational control over the project such that CAISO would have to determine when and how to charge and discharge electric energy from the storage project. 

By Michael J. Gergen, Eli Hopson, and Andrew H. Meyer

The California Independent System Operator (“CAISO”) is moving forward with a stakeholder initiative to examine issues with connecting energy storage facilities to the CAISO controlled grid under the CAISO’s existing interconnection rules, and to develop new policies as needed to clarify and facilitate interconnection of energy storage. 

By Michael J. Gergen, Jared W. Johnson, and Andrew H. Meyer

The California Independent System Operator (“CAISO”) has taken a significant step toward proposing a new ancillary service known as the “Flexible Ramping Product” as part of its market design.  With increasing levels of variable energy resources on the CAISO-controlled grid, maintaining power balance requires increased ramping capability, as the variable outputs of the renewable resources may increase the magnitude of 5-minute to 5-minute net load changes.  In a Straw Proposal issued June 2, 2014, the CAISO proposes to use the Flexible Ramping Product to address these emerging operational challenges relating to maintaining power balance in real-time dispatch.  In doing so, the CAISO emphasized that while its existing regulation service product could be called upon to address forecast uncertainties, procuring more regulation service is problematic from an economic and market efficiency perspective both because the generating capacity of some resources must be reserved to provide regulation service and because more real-time dispatch prices will be compensated at administratively-set penalty rates.  The CAISO stated that its Flexible Ramping Product is designed to deal with uncertainties that are realized before the binding real-time dispatch using a market-based design to procure ramping capacity in the CAISO’s day-ahead market, fifteen-minute market and real-time dispatch.