Please provide your organization’s feedback on the valuation and operational processes for variable-output demand response:
CLECA appreciates that CAISO will continue work with the CPUC on the qualifying capacity proposals for demand response.
CLECA appreciates the effort by the CAISO to exempt demand response (DR) from RAAIM penalties as it does for other weather-sensitive resource adequacy resources, and allow them to bid a variable amount based upon availability as opposed to a fixed qualifying capacity value. This would resolve one barrier to including DR on supply plans. Allowing variable bids without penalty would avoid having to discount DR’s true capability on supply plans to meet the 1 in 2 peak in order to avoid RAAIM penalties for weather-sensitive DR programs. When DR’s true capability to meet the RA peak is discounted, then the shortfall is replaced with other less preferred resources. If DR’s value is artificially devalued, then the CPUC might reduce incentives, which would reduce DR participation. Under the current rules, the impact of placing DR on supply plans and being subject to RAAIM would create additional unnecessary replacement cost. The result is contradictory to California policy to procure energy efficiency and demand response prior to other resources, including renewable resources.
While CAISO appears to offer a proposal to resolve the supply plan and RAAIM issue, it makes it conditional on the CPUC’s adoptions of its DR Effective Load Carrying Capability (ELCC) proposal. Based upon CAISO’s DR ELCC study, which contains flaws (discussed in more detail below), many DR programs would be subject to reductions to their qualifying capacity value despite being able to provide higher load shed during a 1 in 2 peak event such as occurred in August and September. This would result in reduced DR program incentives and therefore DR participation, which would be replaced by less preferred resources.
CAISO’s offer of a requirement of placing DR on a supply plan under the current must offer rules versus the CPUC adopting DR ELCC and being exempt from RAAIM poses an unnecessary dilemma. Based upon CAISO’s flawed ELCC results to determine qualifying capacity, either option will lead to a non-optimal outcome which is the loss of participation in demand response programs. Both result in reduced demand response which is contrary to California policy.
The Supply Slide Working Group report discussed developing a DR forecast, either derived from the Load Impact Protocols (LIP) or other approaches, and using that forecast as the measurement in a must offer requirement. This would appear to resolve CAISO’s concern about DR bidding in what is actually available and having a must offer requirement.
It appears CAISO is proposing ELCC because it is used for wind and solar. However, the requirement of using ELCC for wind and solar in the CPUC’s RA program is due to state law and not because ELCC was determined to be superior to other counting methodologies for Resource Adequacy.
The Load Impact Protocols (LIP) should not be replaced with another approach until it has been properly vetted and found to be superior to LIP and is an appropriate fit in an RA accounting program. Using ELCC for DR has not been shown to be superior or a good fit for the RA program. Indeed, several issues with using ELCC for DR have been raised, notably by CLECA.
The DR ELCC results presented by the CAISO in its May proposal suffer from several fundamental flaws. First, the study used the RA qualifying capacity values which are grossed up for the planning reserve margin and losses against bids that do not contain any gross up. This is comparing apples to oranges and produces misleading results about DR performance and the LIP. Second, SCE identified that the use of the CAISO’s own bidding rules prevented resources from bidding their full capability. Again, this error also results in misleading results about the DR performance and the LIP.
In the Market Surveillance Committee’s (MSC) opinion on the DR ELCC proposal, it commented that modeling ELCC has become very complex due to the correlations between weather, load, solar, wind, and battery operations. The MSC members mentioned that the effort is a good start, that but more work is required. CLECA agrees. If the modelling is not performed correctly, it produces scenarios that may be unrealistic and, if improperly weighted, gives misleading results. The impact of this error could result in mis-valuing the ability of resources to avoid loss of load.
The August and September heatwaves indicate that the time of system stress was during the peak during the month. The times of the peak resulting in Stage 2 Emergencies were mostly between 4 pm – 8 pm. If the ELCC is not showing those times as periods of shortfall, then there is a problem with the modeling. However, the LIP for qualifying capacity averages the values from 4-9 pm, which covers the period during most of the Stage 2 Emergencies. There is no reason to conclude that the hours of most concern are outside of a peak event during the hours of 4 – 9 pm.
 CAISO ESDER 4 proposal at 44.
 There may still be problem for the CPUC’s Resource Adequacy Procedures if a DR program is included on a supply plan. This is because the benefit of utility demand response programs is provided to other load serving entities as they are still responsible for paying for demand response related costs.
 CAISO ESDER4 final proposal at 44.
 See Supply Side Working Group Report (June 28,2019) at 19-30
 CAISO ESDER4 final proposal at 45.
 Market Surveillance Committee, Sep 3, 2020, Opinion on Energy Storage and Distributed Energy Resources Phase 4, at 25.