Provide a summary of your organization’s comments on the on-peak deliverability assessment methodology, as described in the issue paper.
NLE, an independent developer of solar and energy storage, appreciates the thoughtful responses that CAISO staff has presented in its May 31, 2023 Deliverability Assessment Methodology Issue Paper (“Issue Paper”) to the ideas put forward by stakeholders. In these comments, NLE makes two proposals: first, that Local Resource Adequacy (“RA”) projects should be prioritized in the transmission planning deliverability (“TPD”) allocation process; and second, that distribution factors (“DFAX”) should be utilized in the TPD allocation process.
NLE acknowledges that the CAISO has directed consideration of TPD allocation process changes to the Interconnection Process Enhancements (“IPE”) initiative. However, because the IPE is considering so many complex and detailed issues that are due to be resolved on an extremely fast timeline, NLE raises them for consideration in this initiative as well. NLE is agnostic as to which initiative addresses the details of TPD allocation process (the IPE may indeed be more appropriate) but wants to ensure that the issues get due consideration in time to be reflected in the next TPD allocation cycle, which will apply to the significant Cluster 14 capacity and reflect 2022-2023 Transmission Plan approvals of significant new capacity. Also, there is a substantial amount of overlap between the topics of the two initiatives.
The Deliverability Assessment Methodology initiative was launched in response to stakeholder feedback that the CAISO’s study processes were too conservative and that it is possible to reliably award more TPD to much-needed RA resources onto the CAISO system within the existing transmission infrastructure by changing only the CAISO’s processes for determining the amount of TPD available. NLE believes that both of the policy recommendations presented here support that goal.
In addition to the two proposals put forth by NLE, we would like to express support for the ideas advanced in the Issue Paper regarding Interim Deliverability Status (“IDS”), namely allowing projects to receive some form of IDS while (1) waiting for n-2 deliverability upgrades to be completed (in cases where no reliability concerns exist) and (2) waiting for Participating Transmission Owners (“PTOs”) to complete Network Upgrades. These measures would meaningfully increase the pool of projects that could viably compete in LSE solicitations, including in the Mid-Term Reliability (“MTR”) procurements, which would benefit ratepayers and ensure that reliability is maintained.
- Prioritize Local RA Resources in the TPD Allocation Process
It is critically important that the CAISO explore how its TPD allocation processes may overlook the importance of prioritizing the development of Local RA resources, especially energy storage resources, which are reliable and non-emitting, and whose small footprints are well-suited to development in the largely denser and more developed Local Capacity Areas (“LCAs”).
- Overlap with the CAISO’s Target Zones: There is a strong geographic overlap between the LCAs and the transmission planning zones that the CAISO wants to target for resource development. Resources developed in these areas have the double benefit of serving local load and best using CAISO resources in the interconnection study process, and thus should be prioritized.
- Ratepayer Benefits: Increasing the pool of Local RA resources will benefit ratepayers by enhancing competition, reducing the market power of existing generators, and ultimately bringing down costs for ratepayers.
- 1. Local RA Generally Commands Higher Prices – Local RA has historically been more expensive than System RA. In 2021, the average price of System RA was about $0.29 per kilowatt (“kW”)-month higher than the average price of Local RA.
- 2. Local RA Can Reduce Reliance on RMR Contracts – When capacity is tight in LCAs due to insufficient Local RA resources, there is a higher likelihood of the CAISO needing to secure Reliability Must Run (“RMR”) contracts, which are very expensive, to supply that local need. For example, in 2018, due to a resource deficiency, the CAISO assigned the Metcalf gas plant an RMR designation. The FERC-approved contract was for $5.97/kW-month. By contrast, at that time, 85 percent of capacity in Metcalf’s LCA (the Greater Bay Area LCA) was priced at or below $3.00/kW-month – nearly half the cost of the Metcalf RMR contract. Prioritizing Local RA over System RA resources will provide a clear path forward for projects within local pockets and decrease the reliance on RMR contracts.
- 3. Local RA Can Reduce Reliance on CPM Purchases – The Capacity Procurement Mechanism (“CPM”) Soft Offer Cap is $6.31/kW-month. Resources can get prior FERC permission to offer at a higher price if they can show that their costs are higher. Thus, the cost could be higher (if set by a resource allowed to bid) or lower (if there are competitive bids lower than the cap). However, the Soft Offer cap is often a benchmark (e.g., for PPA RA Deficiency Penalties).
- 4. Local RA Can Avoid Transmission Costs – Local RA resources are an alternative to transmission upgrades to serve load in LCAs. Therefore, Local RA investments avoid transmission costs.
- Meeting State Goals: Much of the state’s thermal generation fleet is located in LCAs. The retirement of these polluting resources is critical to meeting the state’s greenhouse gas reduction goals. However, their forecasted retirement heightens the need to focus on the procurement of Local RA resources. New Local RA resources are available and in the interconnection queue, but they will need TPD in order to be commercially viable and come online.
- Load Growth is in LCAs: It is likely that much of the state’s anticipated load growth due to electrification of the transportation and building sectors will occur within LCAs, which are generally more densely developed and populated, putting more of a strain on the existing fleet of Local RA resources. New generation should therefore be targeted to those regions.
- Less Fungible than System RA: Under the current construct, all deliverable resources in LCAs could bid into LSE solicitations as either System RA or Local RA, while generators outside of LCAs can only bid as System RA. Local RA is thus less fungible, scarcer, and equally (if not more) necessary for reliability.
In the January 4, 2023 comments on the CAISO’s December 13, 2022 Update Paper, NLE was one of many stakeholders including CESA, LSA, and CalWEA, to advocate for the CAISO to consider creating separate deliverability study processes for Local RA and System RA resources. In the Issue Paper, the CAISO defends the current study construct, which requires that all generation receiving TPD be deliverable to “the aggregate of load.” NLE appreciates the CAISO’s willingness to consider (though in the RA Enhancements initiative) LSA’s suggestion that some portion of the Local RA requirement may be served by resources that are deliverable within the LCA but not to the aggregate of load.
However, the CAISO remains concerned with how changing the deliverability study rules and resource qualification criteria on a going-forward basis could impact existing generators with TPD awards. The CAISO is also concerned about scenarios where Local RA resources must be available to serve load outside their LCA under certain conditions.
In response to these concerns, and in consideration of the complexity of the original proposal that NLE and others advanced to create separate Local and System deliverability study processes, NLE presents a new idea that would be administratively easier to implement, fit well with other reforms being considered in the IPE initiative, and facilitate the speedy development of needed new Local RA resources.
Rather than overhaul the study processes, NLE proposes that the CAISO modify the TPD allocation process in its tariff to prioritize Local RA resources. Currently, in the CAISO’s processes, there is no distinction made between Local and System RA; a resource only qualifies as Local RA based on its location within an LCA and could bid in LSE solicitations as either Local or System resources. NLE proposes that the CAISO should determine whether the resource is located in an LCA and then prioritize allocating TPD to those resources.
If there are more projects in a given TPD allocation group than TPD available to award, the CAISO already uses a scoring system to determine which projects should receive that TPD. Points are awarded based on how advance the project is through permitting, how close it is to a Power Purchase Agreement (“PPA”), and how much site exclusivity it has. NLE proposes that there should also be significant points awarded to projects that are located in an LCA.
- Prioritize Generators with the Lowest DFAX in the TPD Allocation Process in Order to Maximize the Use of Existing Transmission
NLE proposes a second modification to the TPD allocation process scoring system. DFAX, which the Issue Paper reviews thoroughly, play a critical role in how much TPD the CAISO awards over the same transmission infrastructure. NLE encourages the CAISO to incorporate DFAX into its methodology for assigning points within a given group during the TPD allocation process. Prioritizing generators with lower DFAX will result in larger MW quantities of awarded TPD on the same poles and wires.
Along with these comments, NLE is confidentially submitting Attachment A: Case Study Illustrating the Value of Utilizing DFAX in TPD Allocation, which utilizes data that is subject to the CAISO Market Participant Portal Non-Disclosure Agreement. This case study quantifies the positive impact of applying DFAX to the TPD allocation process, illustrating how deliverability can be maximized by allocating TPD to projects with minimal DFAX impacts on the limiting contingency. Doing so would allow the CAISO to prioritize the projects that do the least harm on the system, from a reliability perspective, increase the amount of resources that can participate in the RA program without transmission system upgrades, and maximize the RA benefit from new approved upgrades.
NLE acknowledges that this idea was floated in the IPE Track 2 Discussion Paper, and NLE made supportive comments. However, given the cross-pollination between these two stakeholder initiatives and the extensive coverage of DFAX in the Issue Paper, NLE wishes to build on this idea here in the Deliverability Assessment Methodology context as well.
 Issue Paper, p. 27.
 CAISO Deliverability Challenges: An ISO Update (December 12, 2022), p. 3, available at: http://www.caiso.com/InitiativeDocuments/Update-Paper-Generation-Deliverability-Methodology-Review-Dec132022.pdf.
 Issue Paper, p. 4.
 2022 Local Capacity Area Technical Study (January 15, 2021), p. 5, available at: http://www.caiso.com/InitiativeDocuments/2022LocalCapacityRequirementsFinalStudyManual.pdf.
 CAISO Board-Approved 2022-2023 Transmission Plan (May 18, 2023), p. 4, available at: http://www.caiso.com/InitiativeDocuments/ISO-Board-Approved-2022-2023-Transmission-Plan.pdf.
 2023 Interconnection Process Enhancements Track 2 Discussion Paper (May 31, 2023), p. 11-15, available at: http://www.caiso.com/InitiativeDocuments/Discussion-Paper-Interconnection-Process-Enhancements-2023-Track%202-May312023.pdf.
 CPUC 2021 Resource Adequacy Report (March 2023), p. 26, available at: https://www.publicadvocates.cpuc.ca.gov/-/media/cpuc-website/divisions/energy-division/documents/resource-adequacy-homepage/2021_ra_report.pdf.
 See Metcalf Energy Center, LLC, 162 FERC ¶ 63,028, ¶ 10 (Mar. 27, 2018) (converting to $ per kW-month ($43,000,000/(600 MW * 1,000)/12 months = $5.97/kW-month)), available for download at: https://elibrary.ferc.gov/eLibrary/filelist?accession_number=20180327-3043.
 CPUC RA Workshop (February 22, 2018), p. 47, available at: https://www.cpuc.ca.gov/-/media/cpuc-website/files/legacyfiles/c/6442456634-current-trends-ra-ed-staff-working-draft-proposal.pdf.
 CAISO Tariff Section 43A.4.1.1
 SB 100 (de León, 2018) increases the RPS to 60% by 2030 and requires all the state's electricity to come from carbon-free resources by 2045. Available at: https://leginfo.legislature.ca.gov/faces/billNavClient.xhtml?bill_id=201720180SB100.
 California Energy Storage Alliance (“CESA”) comments (January 4, 2023) (“CESA believes that it would also be a good time to consider whether local-only deliverability studies could be developed, conducted, and implemented.”), available at: https://stakeholdercenter.caiso.com/Comments/AllComments/4c7edbc6-5c17-4c7d-8e9a-fe31a4a557ad#org-1c4586fc-f6fa-435b-ae66-4b153ed24b35.
 Large-Scale Solar Association (“LSA”) comments (January 4, 2023) (“LSA believes that the CAISO should consider in the upcoming initiative whether some portion of the LCR requirement could be satisfied by resources passing a test to be deliverable only to their LCAs.”), available at: https://stakeholdercenter.caiso.com/Comments/AllComments/4c7edbc6-5c17-4c7d-8e9a-fe31a4a557ad#org-fb4bbe73-60c5-4370-ada7-d3830b30b191.
 California Wind Energy Association (“CalWEA”) comments (January 4, 2023) (“As a result, we propose, CAISO and stakeholders consider, in the upcoming process, whether resources in locally constrained load areas should be qualified to provide RA capacity in the local area (only) but not allowed to provide system RA capacity, hence freeing existing RA resources in the constrained area to provide RA capacity to LSEs all over the system.”), available at: https://stakeholdercenter.caiso.com/Comments/AllComments/4c7edbc6-5c17-4c7d-8e9a-fe31a4a557ad#org-0a308017-827f-48dc-9680-291f35dcd574.
 Issue Paper, p. 26.
 Deliverability Assessment Methodology Stakeholder Call Slides (June 8, 2023), p. 28.
 Issue Paper, p. 26. (“Automatically assuming a resource in a local capacity area should be deliverable ignores that an existing resource immediately outside the LCA may have been awarded deliverability because of its proximity to the LCA, and that the existing resource would lose deliverability.”)
 Issue Paper, p. 26. (“[…] LCRs must be available to serve load outside their LCAs under some conditions.”
 CAISO Business Practice Manual: Generator Interconnection and Deliverability Allocation Procedures v33 (April 26, 2023), Section 220.127.116.11.2 (p. 107-109), available at: https://bpmcm.caiso.com/Pages/BPMDetails.aspx?BPM=Generator%20Interconnection%20and%20Deliverability%20Allocation%20Procedures.
 Issue Paper, p. 11-12.
 Interconnection Process Enhancements Track 2 Discussion Paper, p. 12-13. (“The projects with the smallest distribution factor on the binding constraint will be selected sequentially to be given full allocations of TPD, or partial allocation if available capacity is insufficient for the last project selected.”)
 NLE comments (June 14, 2023), available at: https://stakeholdercenter.caiso.com/Comments/AllComments/6abf35dc-2f05-4e36-9002-794ded46653a#org-912303ab-5f1d-40a4-a23e-85a0964335d9.