Comments on Final proposal

1. Please share your organization’s overall position on the final proposal:

Co-Located Resource Enhancements

The California Community Choice Association (CalCCA) supports the proposed enhancements that would provide co-located resources with optional functionality to only charge from the on-site renewable. The California Independent System Operator’s (CAISO’s) final proposal makes a necessary modification that would allow the market to use renewable forecast data to inform storage charging in the day ahead in the event co-located renewables are not bid into the day-ahead market. Storage resources will likely utilize this functionality less frequently now that the inflation reduction act has passed, and the investment tax credit (ITC) is no longer limited to storage resources with onsite renewables. However, resources with existing contracts signed before the passage of the inflation reduction act will still need this functionality. CalCCA thanks the CAISO for incorporating stakeholder feedback relative to co-located resources and supports this element of the final proposal.

Ancillary Service Reliability Enhancements

The CAISO’s final proposal includes two proposals related to storage resources with ancillary service awards. The first would update the state-of-charge equation to recognize the impact of regulation awards using hourly multipliers. CalCCA supports this change, as it would more accurately anticipate how ancillary service awards will affect the resources’ available energy. The second would require real-time energy bids to accompany ancillary service awards to ensure day-ahead ancillary service awards over multiple consecutive hours are feasible in the real-time market. CalCCA continues to request, as it has in previous comments,[1] that the CAISO only apply this bidding rule when it is needed given the storage resource’s state-of-charge (SOC) at the time of the regulation award.

Exceptional Dispatch Reliability Enhancements

CalCCA supports the CAISO’s proposal to enable exceptional dispatches on storage resources to hold SOC and compensate resources for those exceptional dispatches based on their opportunity costs of holding SOC.

Day-Ahead Default Energy Bid

CalCCA supports the CAISO’s proposal to update the day-ahead default energy bid to include an opportunity cost adder.

[1]             CalCCA Comments on the CAISO’s Second Revised Straw Proposal (Aug. 3, 2022): https://stakeholdercenter.caiso.com/Comments/AllComments/6211a605-5db0-45c7-a959-3b1df57bb7ba#org-08e0efa3-a8e8-4a2c-8bd2-1103f0a11638

2. Please provide comments on the EIM Governing Body classification

CalCCA has no comments on the EIM Governing Body classification at this time. 

3. Please provide any additional input not included above related to the final proposal.

 CalCCA has no additional comments at this time.

1. Please share your organization’s overall position on the final proposal:

The California Energy Storage Alliance (CESA) generally supports the direction taken by the California Independent System Operator (CAISO or ISO) in the Final Proposal (FP) relative to the Energy Storage enhancements (ESE) initiative. CESA commends the ISO for its efforts in developing an electable co-located functionality that twill ease compliance with federal investment tax credit (ITC) and local property tax requirements. Moreover, CESA is supportive of the ISO’s proposed state-of-charge (SOC) exceptional dispatch (ED), a timely substitute of the current minimum SOC (MSOC) requirement. This being said, CESA has some reservations regarding the ISO’s proposals relative to ancillary services (AS).  

Overall, CESA is strongly supportive of the ISO improving the SOC formulae to better reflect the effects of regulation on storage resources. These improvements will minimize the likelihood of unfeasible dispatch, providing greater reliability, minimizing the need for out-of-market actions, and incremental AS procurement in the real-time (RT) market. As such, CESA supports the ISO in pursuing improvements to the SOC formulae that govern awards in the RT market. Specifically, CESA supports the ISO defining a methodology to establish hourly μ values per month. CESA considers that this proposal will largely mitigate the AS-related concerns and issues identified in the FP. Importantly, the ISO should commence a process to determine the μ value methodology as soon as possible since this change will materially affect the expected regulation revenue storage assets within the CAISO footprint might plan for over their lifetime.  

While the CAISO has significantly reformed its bidding requirement proposal, this option is still not preferred by CESA. This is because, unlike the SOC formulae reform proposal, this requirement does not get at the quid of the issue itself. If despite stakeholder opposition to the proposal, the ISO moves forward with this bidding requirement, CESA requests the CAISO properly document how the 50% requirement was defined and commit to revising this percentage on an ongoing basis, at least every year.

2. Please provide comments on the EIM Governing Body classification

CESA offers no comments at this time.  

3. Please provide any additional input not included above related to the final proposal.

CESA offers no comments at this time.  

1. Please share your organization’s overall position on the final proposal:

Please see DMM comments in attached PDF.  DMM comments will also be posted in the following location, under the heading "2022 comments on policy initiatives": http://www.caiso.com/market/Pages/MarketMonitoring/MarketMonitoringReportsPresentations/Default.aspx#comments

2. Please provide comments on the EIM Governing Body classification

Please see DMM comments in attached PDF.  DMM comments will also be posted in the following location, under the heading "2022 comments on policy initiatives": http://www.caiso.com/market/Pages/MarketMonitoring/MarketMonitoringReportsPresentations/Default.aspx#comments

3. Please provide any additional input not included above related to the final proposal.

Please see DMM comments in attached PDF.  DMM comments will also be posted in the following location, under the heading "2022 comments on policy initiatives": http://www.caiso.com/market/Pages/MarketMonitoring/MarketMonitoringReportsPresentations/Default.aspx#comments

1. Please share your organization’s overall position on the final proposal:

LSA’s comments are summarized below and explained further under item 3.

Reliability enhancements for storage resources 

LSA understands the general rationale for the CAISO’s proposal but believes that:

• The CAISO should more fully share the results of its Regulation non-compliance investigation.

• The CAISO should plan an expedited stakeholder process, similar to that used for revisions to the Deliverability Assessment Methodology, to develop details of the new multiplier approach.

• The CAISO should provide additional illustrative multiplier data, beyond the earlier-provided March-May 2021 period

• The CAISO should consider use of the proposed approach more widely, e.g., for Operating Reserve and Energy market awards.

Co-located Resource (CLR) enhancements – grid charging option 

LSA appreciates the CAISO’s retention of this option, which is still needed despite the possible removal of grid-charging limitations in the recent Inflation Reduction Act (IRA).

LSA appreciates the CAISO’s inclusion of our recommendation that the Day Ahead Market element allow charging schedules for storage even if generation is not scheduled in that market timeframe, through the use of generation forecasts.  However, there are still some open questions about the source of these forecasts, e.g., whether resources could submit their own.

CLR enhancements - Dynamic Transfer (DT) resources 

As noted before, LSA strongly supports the extension of the Aggregate Capability Constraint (ACC) option to Pseudo Tie resources, and we appreciate the CAISO’s adoption of our clarification request that such resources would qualify also for the new grid-charging management option. 

However, the CAISO did not respond to LSA’s earlier comment, which we have made twice before and repeat here, that both the ACC and grid-charging management option should be available to Dynamically Scheduled resources as well, i.e., to all Dynamically Transferred resources.  We repeat that recommendation here.

2. Please provide comments on the EIM Governing Body classification

LSA has no position on this issue.

3. Please provide any additional input not included above related to the final proposal.

Reliability enhancements for storage resources

LSA has several comments concerning the Proposal:

• The CAISO should more fully share the results of its Regulation non-compliance investigation.  The Second Revised Straw Proposal noted, anecdotally, some instances of Regulation non-compliance by storage resources and proposed a “multiplier” to reduce such awards.  The Proposal apparently concludes that such non-compliance is due to lack of recognition in CAISO market algorithms of changes in State of Charge (SOC) when storage resources are dispatched in real-time to provide Regulation.

LSA agrees that the lack of recognition of SOC changes from Regulation provision is a design shortcoming that should be fixed, but was that the only problem?  The CAISO should share more details of its more detailed research and disclose if there were any other contributing factors and, if so, if it intends further action to address those.

We made this comment before, but the CAISO has yet to provide a response.  We ask again that the CAISO share this information.

• The CAISO should plan an expedited stakeholder process, similar to that used for revisions to the Deliverability Assessment Methodology, to examine formulations and process for the new multiplier approach.  For example, if changes are made seasonally, will the CAISO just use the “raw” data from the same season the year before to set the multiplier the next such season (e.g., Spring 2023 data to set the Spring 2024 multipliers), and will the data be adjusted in some way to normalize weather and/or reflect load growth? 

The proposal represents a potentially significant reduction in Regulation awards to energy storage resources, and a hasty and inaccurate methodology could harm both the resources involved and system reliability generally.

• The CAISO should provide additional illustrative multiplier data.  The CAISO only provided estimated multiplier data based on the March-May 2021 period.  It seems likely that the (1) these data are only for March-May (Spring); (2) it will take months for tariff- change filing/approval, and for BPM changes with actual factors to be determined; and (3) storage developers need data sooner to for financial modeling.

• The CAISO should consider using this approach more generally in the market optimization.  For example, SOC changes could impact resource availability for Operating Reserve and Energy market awards, and not just Regulation.

Co-located Resource (CLR) enhancements – grid-charging management option 

LSA appreciates the CAISO’s:

• Clarification that the option applies both to forward scheduling and real-time operations. 

• Clarification that this option can be elected separately for the Day Ahead (DA) and Real-time (RT) Markets. 

• Decision that this option can be elected in the DA Market using a forecast for CLR generation not scheduled in that market.  (See more on this feature below.) 

• Decision to implement this option in a flexible manner (e.g., by activating an hourly flag or “toggle”) instead of inflexible and cumbersome elections through Master File changes.

• Retention of this option even though Inflation Reduction Act changes may reduce the need for it somewhat. 

LSA has one additional recommendation, related to the CAISO adoption of the DA Market option to use a forecast for generation not scheduled in that market.  The forecast would limit the charging schedule awarded, with the storage CLR charging schedule adjusted in the RT Market once the solar/wind CLR schedules are submitted.

However, the CAISO should clarify whether resources would have an option to submit their own forecasts, or whether the CAISO would use the Day Ahead advisory forecast provided by the CAISO.   

CLR enhancements – Dynamic Transfer (DT) resources 

As noted above, LSA strongly supports the CAISO’s extension of the Aggregate Capability Constraint (ACC) option to Pseudo Tie resources, and we appreciate the CAISO’s clarification that such resources would qualify also for the new grid-charging management option. 

However, the CAISO did not respond to LSA’s earlier recommendation (made twice before) that eligibility for both the ACC and the grid-charging management option be extended to Dynamically Scheduled (DS) resources as well, i.e., to all DT resources.  DS resources that are Mixed-Fuel Resources have the same need for these features as internal CAISO and PT resources, and as long as both resource types are included in the DS/DT arrangement.

1. Please share your organization’s overall position on the final proposal:

The Final Proposal includes six changes to ensure reliable storage operation and modeling. As expressed in its comments to the Draft Final Proposal, PG&E still supports the following changes:

• Improved accounting for state of charge (SOC) while providing regulation.
• Exceptional dispatch tools for storage resources to hold SOC and opportunity cost compensation.
• Enhancements to co-located model: electable mechanism to prevent ‘grid charging’ and extension of the co-located model to pseudo-tie resources.
• Improvements to the storage default energy bid: add an opportunity cost component into the day-ahead default energy bid.

However, PG&E is still concerned with the energy bidding requirement for storage resources providing ancillary services (AS). PG&E requests that the CAISO ensure that energy storage resources providing AS are eligible for bid cost recovery.

In its previous comments to the Second Revised Proposal and the Draft Final Proposal, PG&E has requested the CAISO provide clarifications on how the bidding requirement will work in practice and in which market timeframe it will apply. In the Final Proposal, the CAISO clarifies the requirement for bids will apply only in the real-time market. In the future, the CAISO also could consider tailoring this requirement to specific hours or specific conditions (presentation page 5). However, the CAISO didn’t specify how the energy bids intended only to support regulation can be differentiated from economic energy bids and if the energy bids in real time would be inserted by CAISO if not provided by participants awarded regulation.

PG&E has concerns regarding the recent Tariff amendments the CAISO submitted at FERC (FERC Docket No. ER22-2281-000). Based on these proposed Tariff amendments, there will be periods when storage bids will not be subject to bid cost recovery and market participants will not receive the revenue that they are represented in their bids. Additionally, it is unclear how the CAISO will distinguish whether the storage resource is dispatched in order to maintain feasibility or for economic reasons and it is unclear whether bids inserted for storage providing regulation will be subject to cost recovery for any portion of the bid.

PG&E recommends that the proposed Tariff changes in the recent CAISO filing at FERC (Docket No. ER22-2281-000) be sunsetted upon implementation of the ESE initiative

PG&E understands and agrees with the CAISO that a stakeholder initiative is necessary to address the issues identified in the recent FERC filing. However, these issues are intrinsically linked to the content of the ESE Final proposal and therefore deserve acknowledgment (and direction) within this initiative. Specifically, the two provisions designed to ensure storage availability (updated SOC equation and real-time energy bids alongside AS awards) should prevent the AS SOC constraint from being frequently violated, which is the premise of the proposed Tariff changes. Once the ESE changes are implemented, PG&E believes there should be no need for the proposed Tariff changes, which create periods of BCR ineligibility for storage resources providing AS. After ESE implementation, the extent to which the AS SOC constraint is still being violated (or forecast to be violated) for storage resources should be considered the responsibility of CAISO in its deployment of regulation. Market participants should not be held accountable (at risk of not recovering their costs) for limitations or inaccuracies in CAISO’s enhancements. For these reasons, the CAISO should plan to sunset the proposed Tariff changes alongside ESE implementation.

2. Please provide comments on the EIM Governing Body classification

None.

3. Please provide any additional input not included above related to the final proposal.

None.

1. Please share your organization’s overall position on the final proposal:

REV Renewables supports the Final Proposal and thanks CAISO for its continued work to improve storage resource participation and performance in the market. 

• REV strongly supports including an opportunity cost component in the day-ahead default energy bid (DEB). REV agrees with CAISO that including an opportunity cost in the day-ahead DEB should better align dispatch to higher priced hours when storage is needed most.
• REV supports the proposed bid cost recovery enhancements for exceptional dispatch. The proposed changes better reflect the opportunity costs of being withheld from the market and should compensate the resource appropriately.
• REV supports the proposed ancillary service enhancements. REV suggests that CAISO be transparent in the formulas used, historical data that drives regulation deployment, and in implementation of the proposed enhancements.

As CAISO implements these changes, REV suggests that CAISO closely monitor impacts to ensure there are not unintended consequences in dispatch or on market prices, and that the desired outcome is occurring.

2. Please provide comments on the EIM Governing Body classification

REV has no comment at this time.

3. Please provide any additional input not included above related to the final proposal.

REV has no comment at this time.

1. Please share your organization’s overall position on the final proposal:

Vistra opposes the CAISO progressing the Final Proposal in its entirety to the next step of this process – Western Energy Imbalance Governing Body and Board of Governors approval. Vistra can only support the proposal if the Ancillary Service elements are deferred.

When filed at FERC, the CAISO proposals are expected to be non-severable from each other. This necessitates Vistra to take a position on the effort in its entirety. As a whole package, the CAISO proposal is expected to be detrimental to the ability of Scheduling Coordinators, as well as CAISO operators, to manage the storage fleet. We request the CAISO pause the forward progress and instead allow for storage owners, operators, or scheduling coordinators to come to the table collaboratively with the CAISO in the new working group model. Working group meetings, including in-person meetings, will allow CAISO staff, operators, and stakeholders to discuss the technical issues affecting scheduling coordinators and grid operators to allow a robust development of the problem statements that need to be addressed with new functionality or rules.

The CAISO’s Final Proposal states: “The goal of this initiative is to explore enhancements that could help storage scheduling coordinators better manage resource state of charge and continue to ensure efficient market outcomes”[1]. At its near conclusion, the CAISO has failed to produce a proposal that can be supported because instead this proposal has only raised concerns with how it will reduce, potentially harmfully, the ability of storage resources to be managed through the market. Further, the CAISO has shown a resistance to develop the appropriate scope to address challenges facing storage operations felt by the storage owner, operator, or scheduling coordinator. It is also clear that stakeholder input has not been incorporated into the iterative development of these proposals.  

The CAISO has failed to facilitate a robust, open stakeholder process. Instead, this effort has steadfastly pushed forward proposals that only CAISO staff supports, and for which CAISO staff has failed to adequately define the problem being solved or demonstrate whether the proposals will provide benefits. If the CAISO heeds stakeholder feedback, we can correct the course and work collaboratively on arriving to the appropriate scope and associated proposals that further storage operations, instead of harming its operations.

Vistra is disappointed to reach a point in the proposal, where the CAISO has not addressed our concerns such that we must oppose the Final Proposal. We believe there are elements of this proposal that Staff did develop and that should be advanced to the Western EIM Governing Body and Board of Governors for approval and approved for filing at FERC under Federal Power Act’s section 205 filing rights. Alternatively, the CAISO has failed to sufficiently establish a record to support submitting the Ancillary Service proposals and should not advance these to the Western EIM Governing Body and Board of Governors for approval, let alone filing at FERC under Federal Power Act’s section 205 filing rights. The remainder of our comments will address these two categories of proposals.

Vistra opposes the CAISO progressing the Ancillary Service proposals to the Western Energy Imbalance Governing Body and Board of Governors approval and will oppose the entire proposal if not these elements are not deferred.

The Ancillary Service proposed elements have not been sufficiently supported and Vistra believes could lead to infeasible or inefficient market dispatches for storage. CAISO states, “if a storage resource has insufficient state of charge, the real-time market will force a buy back of an ancillary service award and rescind the day-ahead ancillary service payment… This can result in incremental ancillary services procurement”.

Vistra agrees with the CAISO that the Ancillary Service (“AS”) State of Charge (“SOC”) constraint will drive energy awards for charge or discharge depending if there is either too much or too little state of charge on the asset to meet the AS SOC requirements in the real-time market. We are not yet convinced the CAISO has found it is not able to issue these energy awards to meet the State of Charge such that there are real-time AS buy backs subject to no pay performance and subsequent incremental AS awards. The limited instance for which the market would be challenged in using the AS SOC constraint to resolve this concern is in the instance that a storage asset does not submit energy offers in real-time to support these awards. This can only be the case for non-Resource Adequacy storage. Vistra believes the amount of non-RA storage is de minimis. The CAISO has not provided data to quantify the concern and we do not believe this is a significant problem confronting operators.  

The least desirable outcome arises from the AS proposal, where the CAISO proposal, rather than resolving known issues, is anticipated to create at best inefficient and at worst infeasible market dispatches. CAISO proposes to revise the SOC calculation that will be used in the AS SOC constraint, and other applicable constraints, to include an assumed usage of regulation up and down in the SOC constraint in the day-ahead and real-time markets. However, the CAISO does not then propose a necessary change to the AS SOC constraint to require a different SOC level after the assumed usage has been removed. By failing to fully develop the proposal, the CAISO has formulated a proposal that only partially addresses the stated problem and in doing so will lead to infeasible market outcomes. This proposal cannot be advanced as formulated.

The CAISO’s proposal for energy bids is expected to lead to more inefficient and suboptimal market dispatches rather than to improve market outcomes. While Vistra believes the market will be able to avoid market infeasibilities that the prior proposal risks, the current proposal appears to limit the offers made available to the market such that less flexibility is made available to the market. Flexibility is an attribute sought after by the CAISO and it would be imprudent to limit the ability of the market to choose the optimal market outcome. Further, as we note above, RA resources are required to submit energy offers, economic or self-schedules, into real-time. We expect most, if not all, storage operating today and in the near future will be RA, such that we believe the CAISO’s concerns are unsupported. Vistra believes the CAISO is in good faith trying to address a concern communicated to the CAISO ESE team, but lacks a deep understanding of the drivers such that this proposal is unnecessary and potentially harmful by limiting flexibility to the market. For instance, if the CAISO is concerned with regulation signals being sent to storage resources when other regulation resources are available to receive that signal, then the problem is the logic used for regulation signal in the Automatic Generator Controls, not the offers submitted to the market.

Vistra does believe there are challenges with the interplay between AS and energy offers and awards, but that in failing to work collaboratively with storage owners, operators, and scheduling coordinators the CAISO has missed an opportunity to understand the issues facing market participants and CAISO operators and to work towards solutions that resolve these concerns. We support the need to investigate and develop a problem statement that should be addressed in a future stakeholder effort and ask the CAISO to defer these scope items for continued development.

Vistra would support the CAISO progressing the Exceptional Dispatch and Co-Located proposals to the Western Energy Imbalance Governing Body and Board of Governors approval with the caveat that additional review is needed.

Vistra believes the CAISO is proposing the exceptional dispatch (“ED”) for a hold SOC ED to be compensated based on opportunity costs and the proposals to allow co-located scheduling coordinators to identify projects that do not want to charge from grid energy because of reasonable concerns raised by storage owners, operators, or scheduling coordinators. While we can support these proposals as put forward in the Final Proposal, we believe that it will be important to monitor the use of the new ED and co-located model and any impacts to market efficiency.

For instance, if hold SOC ED are frequently being used by CAISO operators to manage the grid and compensated through out-of-market payments this raises broader questions about the market’s ability to integrate storage resources. If the new ED becomes a tool relied on regularly or results in significant, persistent out-of-market payments then Vistra requests the CAISO allow for working groups to explore whether a more durable, in-market solution can be put forward. We remind the CAISO that out-of-market dispatches should not be overly relied upon, to the detriment of market efficiency.

Vistra’s hesitation with the co-located model proposal is that we are still evaluating impacts of the Inflation Reduction Act on storage as an asset class whether stand-alone, co-located, or hybrid. As lessons are learned about how the IRA impacts developers’ decisions on how to build storage assets it will likely be necessary to review these assumptions in the near future. We also note that we believe this proposal may trigger the need to revisit other market rules that assume contract limitations or financial considerations are not appropriately reflected in the physical availability of conventional assets to ensure that conventional resources that also seek to reflect market-based parameters in their availability are not unduly discriminated against. Vistra supports advancing this proposal to distinguish between market-based and design-based parameters through opting into this co-located model and extending this proposed policy change to all resources.

Vistra recognizes the CAISO is unlikely to be willing to separate these elements with merit from the proposal in its entirety. However, if the CAISO were willing to do so and only advance these proposals for approval, then Vistra would support the proposals. We are disappointed that the success of these proposals is in question because they are bundled with the AS proposal that cannot be supported as just and reasonable.

[1] Final Proposal at 5.

2. Please provide comments on the EIM Governing Body classification

Vistra supports the Joint Authority classification.

Vistra noticed that the description of this initiative pre-dates the decision to remove the Energy Storage Resource model from this initiative. We request the CAISO revise the description to remove the reference to the ESR item that is no longer in scope.

3. Please provide any additional input not included above related to the final proposal.

The CAISO struggled to consistently provide feedback on questions and feedback provided by stakeholders. Vistra lacks confidence that the CAISO considered stakeholder feedback in this effort in a meaningful way. Further, the CAISO failed to respond to stakeholder requests for analysis or discussions on technical questions in a meaningful way.

Our concerns were shared by other stakeholders at the April workshop, and communicated in such force that Vistra and other stakeholders were successful in convincing the CAISO to provide a stakeholder comment matrix with responses on May 24, 2022. Since May, the CAISO has issued a second revised straw proposal and draft final proposal with limited responses to stakeholder feedback and questions. At the August 25, 2022 stakeholder call on the Draft Final Proposal, Vistra and others again asked the CAISO to please respond to our comments by answering stakeholder questions and by identifying how requests made by stakeholders have or have not impacted the Draft Final Proposal. We appreciated others urging the CAISO to be responsive and recognize that the format can be flexible, but the point is we should have confidence our comments have been read, responded to, and factored into the process to have confidence in the stakeholder process.

Vistra requests the CAISO review its processes going forward and to formally incorporate stakeholder comment responses in its policy efforts. For a well-functioning stakeholder process, an integral part of the ISO’s governance model, it is crucial the CAISO strive to meaningfully engage with stakeholders rather than focus on establishing an appearance of doing so.