Comments on 2023 draft policy initiatives catalog

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APS supports consideration of 6.1.23 Use-Limited Gas Resource Default Energy Bid to be incorporated into the roadmap. This initiative is for how use-limited gas resources default energy bid can include bilateral opportunity costs along with daily limits in the CAISO market. This initiative could provide an opportunity to reflect relevant costs incurred to gas generation owners in terms of fuel procurement and fuel transportation costs into the default energy bid. It could also expand in scope include potential enhancements to the reference level change request process currently in place and other relevant mechanisms for gas generation as entities consider participation in EDAM. Entities considering EDAM are evaluating the impacts of that participation to their ability to plan and procure necessary gas supplies. APS appreciates the dialogue on this topic within the EDAM initiative and consideration of a separate initiative if the policy development in the EDAM proposal leaves outstanding items to be addressed. 

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• 6.1.14 Transmission Access Charge Structure Enhancements

CDWR asks the CAISO to provide an update on the status of changing the billing determinant to both volumetric and monthly peak demand.  It appears that the initiative’s draft final proposal had broad support from the CAISO stakeholders.  Will it be implemented as part of the EDAM initiative?

 CDWR continues to highly support these catalog initiatives:

• 6.1.22 Pumped Storage with Multiple Pumping Levels

CDWR supports the CAISO’s exploration of ways to further accommodate pumping resources with limitations in the CAISO’s markets.

• 6.1.23 Aggregated Pumps and Pumped Storage

Along with 6.1.22, CDWR fully supports CAISO in conducting a study on what improvements could be made to participating load functionality and to explore this untapped potential that can benefit grid reliability.

• 6.2.2 Congestion Revenue Rights Revenue Sufficiency

CDWR recommends the following new text to replace the existing text:

Existing text:

CRR Allocation. CDWR requested this initiative in a previous catalog process that the CAISO introduce revise the Counter-flow CRR methodology used for allocating CRRs sourced at the trading hubs, as the current methodology is insufficient and contributes to revenue imbalance of the CRR balance account.

New proposed text:

CRR Allocation. CDWR requests the CAISO to revise the Counter-flow CRR methodology used for allocating CRRs sourced at the trading hubs, as the current methodology is insufficient and contributes to revenue imbalance of the CRR balancing account.

• 6.3.2 Resource Adequacy Enhancements

CDWR appreciates the CAISO proposal to address local RA obligation capping issue in the Central Procurement Entity Implementation initiative.  CDWR anticipates that CAISO will address the second RA issue with flexible RA allocation attributed to negative load ramps.

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CESA appreciates the opportunity to submit comments on the California Independent System Operator (CAISO or ISO) Draft 2023 Policy Initiatives Catalog. CESA will continue to be actively engaged in several ongoing stakeholder initiatives, including the Energy Storage Enhancements (ESE), Energy Storage Resource (ESR) Model, Price Formation Enhancements (PFE), and Day-Ahead Market Enhancements (DAME), among others, where continued enhancements to bid cost recovery (BCR) and multi-interval optimization (MIO) for energy storage resources and development of the imbalance reserve product will be critical to their efficient and reliable operation.

In addition, we are pleased to see two other planned initiatives included:

• Frequency Response Measures is a planned initiative with a yet-to-be-established timeline and schedule, but CESA strongly supports the development of a market-based frequency response product rather than one relying on continued transfers between balancing authorities. The Transmission Planning Process (TPP) has begun to conduct some of the long-term frequency response need that can be provided, for example, from battery storage resources, but as we see even higher penetrations of inverter-based resources and lose inertia on the system, we believe a market-based product will more efficiently procure in-market the frequency response capabilities, commitments, and deliveries that can be co-optimized with other CAISO services.
• Energy Storage Distributed Energy Resources (ESDER) Enhancements is another planned initiative without a set timeline and schedule, but it will be important to continue to enhance the market participation of distribution-connected resources, such as energy storage interconnected under the Wholesale Distribution Access Tariff (WDAT) and the operational limits placed on them by utility distribution companies (UDC), as well as to consider broader T&D coordination issues. This initiative could also support any needed further implementation of Order No. 2222 requirements.

Finally, CESA strongly supports the inclusion of Reform of the Deliverability Assessment Methodology in the draft catalog but requests that the CAISO prioritize this discretionary initiative given the potential for reforms to energy storage dispatch modeling assumptions in freeing up near- and mid-term deliverability, which will thereby support incremental capacity additions as the state faces shortfalls. With energy storage being a dispatchable resource and the majority of their deployments being energy-limited in nature (i.e., 4 hours), it is important to reassess our core assumptions around how energy storage should be modeled in these deliverability studies. Especially in light of the California Public Utilities Commission’s (CPUC) recent adoption of slice-of-day (SOD) reforms, the CAISO should launch this new initiative tasked with developing comprehensive reforms that fit within these new constructs where energy storage resources can be shown across different periods of the day. In addition, the deliverability reform initiative should consider: (1) the appropriateness of n-2 contingency assumptions in all cases; (2) the location of storage resources; (2) how to incorporate long-duration energy storage (LDES) resources and how assumptions may need to differ; and (3) how behind-the-meter (BTM) storage aggregations can be considered in these studies when accounting for the fact that their export capacity is more likely to be consumed by local loads than to be delivered to the bulk power system.

Along these lines, CESA recognizes that a one-off stakeholder call was held on the June 6, 2022 regarding On-Peak Generation Deliverability Study Generation Dispatch Assumptions, which proposed and adopted changes to the level of storage dispatch relative to their maximum capacity, which is more consistent with expected storage behavior during the High System Need (HSN) and Secondary System Need (SSN) Scenarios, respectively. However, CESA also believes that the Reform of the Deliverability Assessment Methodology should revisit these dispatch assumptions and the hours included in each of the HSN and SSN scenarios should be revisited using additional event data. As it stands, the CAISO has determined to use incidental market dispatch of storage on a specific day at HE18 (which was at 80%), such that, when it comes to system reliability, energy storage will always be operating at 80% nameplate for the SSN scenario for the foreseeable future. In our view, this observed dispatch is an operational and market dynamic consideration rather than a reliability issue. As such, as the CAISO embarks on comprehensive methodology reform in this initiative, we request that, in parallel, the CAISO more closely reexamine this near-term assumption for storage resources using a wider dataset to not just capture a single day of dispatch but a subset of days where storage was needed for reliability.

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CalWEA obviously supports item 6.3.1 of the draft policy initiatives catalog -- Reform of the Deliverability Assessment Methodology, which CalWEA submitted jointly with CESA.  Here, we briefly explain why CAISO should immediately address this item, summarize the reforms that we believe require discussion, and summarize our concerns with the truncated stakeholder process that the CAISO held in June to consider reform of its storage dispatch assumptions; we urge CAISO to reconsider these assumptions.

Deliverability methodology reform should be an immediate CAISO priority

CalWEA believes that the CAISO’s deliverability assessment methodology is inappropriately conservative and is therefore preventing resources that could provide RA capacity during the vast majority of hours, including during the critical evening net-peak-load period, from interconnecting to the system and providing RA capacity.  The substantial reforms that we advocate would, we believe, allow the grid to immediately handle more than 10 GW of additional wind, solar and storage capacity.

Re-evaluating this methodology warrants the CAISO’s full and immediate attention, given the CAISO’s and state elected officials’ concerns about mid-decade reliability, which are so high that $1.6 billion in state funds are being loaned to PG&E in hopes of extending the life of Diablo Canyon.  In addition, reform is necessary for the same reason that the CPUC is restructuring its Resource Adequacy (RA) program: to ensure that energy needs are met in all high-risk hours, particularly in all evening summer peak hours, not under the very rare and extreme conditions that are represented in the CAISO’s current deliverability methodology. 

Moreover, the CAISO/PTO reassessment reports recently received by many developers are causing significant delays for many projects that were scheduled to come online in the next few years, which will compound the state’s mid-decade reliability challenges. 

Finally, and very importantly, making more efficient use of the existing grid will enable a large volume of resources to interconnect and provide RA capacity without network upgrades.  In turn, this will assist load-serving entities in meeting their RA requirements, help the state achieve its SB 100 goals, reduce environmental impacts, and substantially reduce costs to ratepayers by reducing transmission upgrade costs and increasing competition in the RA market.

Summary of assumptions that require re-evaluation

The assessment methodology that the CAISO uses to determine whether a resource qualifies for FCDS or PCDS is exceedingly conservative.  We note that the CAISO, CPUC and Energy Commission stated in their January 13, 2021, letter to the Governor regarding the rolling outages in August 2020, that “there was no single root cause of the August outages, but rather, […] the three major causal factors contributing to the outages were related to extreme weather conditions, resource adequacy and planning processes, and market practices.”  There was no N-2 condition, unusual dispatch conditions or extensive resource curtailments – basically, there was a shortage of resources available in the evening hours which has rapidly become the most critical period for resource adequacy and should be studied with a relevant slice-of-day deliverability assessment. 

A more reasonable methodology would remove a major hurdle that could enable a substantial number of projects – those that are in advanced stages in other aspects of their development – to complete development by mid-decade.  In addition, existing projects with Energy Only status could attain the deliverability status that they deserve.

The specific assumptions that we recommend be evaluated in a stakeholder process are as follows:

• The CAISO’s High System Need (“HSN”) operating scenario unreasonably includes three system conditions that are assumed to be occurring simultaneously: 
  • an N-2 condition;
  • system dispatch conditions where all generation in a particular area is operating at near-maximum Net Qualifying Capacity (“NQC”), and
  • a “peak-net-load condition,” where the system is most likely to experience a generation shortfall.

The CAISO should invite stakeholders to consider whether these extreme simultaneous conditions are appropriate in the context of a portfolio that is now increasingly centered around variable energy and use-limited storage resources, rather than the dispatchable generation resources that the present methodology was designed for. 

• The CAISO’s Secondary System Need (“SSN”) operating scenario represents similar assumptions; however, this scenario has much less to do with delivering resources to load at the time when RA capacity is really needed – during the evening net-peak-load condition as represented by the HSN scenario. The SSN scenario is, instead, focused on avoiding renewable generation curtailment during times of high gross system load and high production from variable energy resources when system need for this RA capacity is not critical.  Hence, applying the SSN condition is preventing resources that could provide RA capacity at the time of real system need from attaining deliverability status based on potential resource curtailment during times when such curtailment is not a system concern. The CAISO should invite stakeholders to consider whether eliminating the SSN scenario in the deliverability assessment is warranted.
• The CAISO’s process for granting resources local RA credit. Currently, a resource located in a Local Reliability Constrained Area (LCRA) is required to qualify as a system RA resource before it is qualified to provide local RA.  Qualifying as a system RA resource could require transmission upgrades to deliver energy from, say, a battery project in the Los Angeles Basin LCRA to the Bay Area LCRA, preventing it from providing local RA capacity in the Los Angeles LCRA. 

The CAISO should invite stakeholders to consider whether the requirement for local resources to attain system RA status should be eliminated. (Local resources would need to be studied under a local deliverability scenario to obtain a local RA capacity qualification.) 

CAISO should revisit its storage dispatch assumptions

CalWEA appreciates that CAISO held a brief stakeholder process in June (one stakeholder meeting and one round of comments) to consider only its storage operations assumption in its deliverability assessment methodology.  CalWEA and CESA were joined by several other stakeholders in recommending that storage be assumed not to be discharging at all when solar is still operating at 6 p.m. in the summer, but CAISO decided only to reduce storage output levels from 100% to 80%.  Even this small change has resulted in several more projects obtaining FCD status. 

We do not feel that CAISO staff adequately or properly responded to the points we (and several other parties) raised during its very limited stakeholder process on this issue.  CAISO did respond to our, and others’, comments in its traditional matrix. But CAISO did not respond to the main points of our comments.  To briefly summarize, the CAISO did not respond to the following three points: 

• CAISO finds a "demonstrated risk" of supply shortages during the gross-peak (low-risk) SSN study only because it has moved hour-ending 18 (HE18) to the SSN window.  HE 18 properly belongs in the High System Need (HSN, net peak) window, where it has resided in all previous CAISO deliverability assessments.  Further, CAISO relies on information only from HE-18 for one sample day (ignoring HE15 to HE17, which have always been SSN hours) to support its proposal.
• The need for the SSN test is itself questionable.  As CAISO has indicated, it focuses mainly on the local curtailment of supply resources, which does not translate to lack of system reliability since other system resources are available to meet load.  
• It is not reasonable to assume that future energy storage resources will operate as do the limited existing storage resources on the system today.  Storage is required to follow CAISO’s optimal/secure dispatch to shift solar production to the hours of maximum need, which will guard against discharging when solar is producing at high levels. 

We encourage CAISO to more fully consider whether greater reforms to its storage assumptions are warranted.

1. Please submit comments on the draft 2023 catalog. You may upload documents using the "attachments" field below:

Please see attached comments. 

1. Please submit comments on the draft 2023 catalog. You may upload documents using the "attachments" field below:

PG&E appreciates the opportunity to provide the following comments on the 2023 draft policy initiatives catalog. 

Time and resources did not permit a thorough review of all 60-plus proposed initiatives in the catalog.  This is emblematic of the challenge PG&E and other stakeholders face when seeking to participate in the policy initiative catalog and roadmap process and use it to identify current market design challenges and needs for eventual treatment via a new initiative.  Simply put, there are too many proposals already languishing in the queue, and too little visibility on the pathway to successfully teeing up a new stakeholder-proposed initiative within a meaningful timeframe.

In light of the above, PG&E would like to offer the following process suggestions:

1. CAISO should conduct a one-time cleanup to disposition the extensive backlog of previously submitted initiatives languishing in the catalog. Many of the 60-plus initiatives sitting in the catalog now were proposed years ago and the issues they were intended to address may have already been resolved elsewhere, found a workaround, or simply been superseded by changing market dynamics.  Therefore, PG&E requests that – perhaps as an initial step in the Governance Review Committee’s proposed Roundtable process[1] – CAISO staff conduct a one-time review of the entire catalog to disposition each proposed initiative as either: a) No longer relevant and should be removed; or b) Still relevant and should be prioritized for inclusion in a future stakeholder process. 
    
2. For those initiatives that are still relevant and need to be prioritized, CAISO should estimate the implementation effort level.  A secondary bottleneck to the policy development process, beyond the resource bandwidth required to run the stakeholder process and bring new policy before the board(s), is the CAISO technical staff and resources needed to implement new initiatives, and test and bring changes into the production IT environment.  In recent years, implementation has suffered from long waits, hiccups in simulation and testing, and last-minute delays, as the volume of policy initiatives has grown faster than the resources and time available for implementation. PG&E recognizes that – like policy staff – implementation resources are inherently scarce and there will always be challenges keeping up with the rapid pace of innovation in CAISO markets.  All the more reason, therefore, that in making recommendations with regard to which initiatives to move forward through the policy design process, CAISO should attempt to identify the expected level of implementation effort (perhaps on a simple: easy, medium, hard scale), in order to better inform the prioritization conversation.  Stakeholders (and Board and Governing Body members) can then evaluate whether, for example, an initiative that has a certain level of expected benefits may be rated a lower priority, due to a high implementation cost burden, as compared with some other proposal that may have somewhat lower benefits but can be implemented quickly, with relatively little strain on implementation resources.  This exercise would also inform the annual budget process, to the extent some stakeholders may wish to advocate for increasing the resources available to pursue the ever-expanding list of policy priorities.
    
3. As part of dispositioning and prioritizing the initiatives in the catalog, CAISO staff should propose logical groupings of related stakeholder-submitted proposals.  PG&E observes that when CAISO staff promulgate new initiatives, they often include multiple related design changes under a single topical heading, such as Resource Adequacy Enhancements, Energy Storage Enhancements, Price Formation Enhancements, etc.  By contrast, multiple stakeholders may submit related proposals, such as the four initiatives in the catalog related to Multi-Stage Generator Model Enhancements (6.1.24, 6.1.33, 6.1.38, 6.1.53).  Assessed individually, none of these proposals may individually rise to the top of the priority list.  However, collectively, there could be sufficient stakeholder interest in the broader topic to prioritize addressing these issues under a single initiative.
    
4. CAISO should identify as each new initiative launches, where it came from and why it received priority to move forward.  While the catalog distinguishes certain categories of initiatives as completed, underway, discretionary, CRR, or RA-related, it is less obvious to stakeholders when a new initiative launches why it was prioritized for immediate action (often ahead of the many other initiatives in the queue).  Staff exert considerable discretion in prioritizing the launch of new initiatives, often in ways that are opaque to the stakeholder community.  CAISO asserts, for example, that the recently-launched Washington WEIM GHG initiative was a “compliance” obligation, due to recent legislation in Washington State.  Similarly, the initiative completed last year to accommodate the circumstances of another potential WEIM participant with multiple BAAs under a single WEIM entity appeared with little fanfare and was not a high priority for other stakeholders.

While PG&E does not doubt that these initiatives were important priorities for their proponents, we would appreciate greater transparency when new initiatives suddenly appear to “jump the queue” past the 60+ other initiatives which were, at least at some point in the not too distant past, a priority for some other stakeholder. With a potential EDAM market covering many states, each with its own competing policy priorities, PG&E is concerned that CAISO resources will be stretched thin.  CAISO Staff must provide a level of transparency as to how it will prioritize and allocate scarce resources – both in the new role as the EDAM Market Operator, and in service of its continuing critical responsibilities as the BAA Operator, with an essential role to maintain electric reliability for PG&E’s and CAISO’s shared California customers. 

[1] See GRC Phase 3 Straw Proposal, pp. 24-25, “Prioritizing Initiatives – the Process for Developing the Policy Roadmap,” http://www.caiso.com/InitiativeDocuments/EDAM-Governance-Straw-Proposal-WEIM-Governance-Review-Committee-Phase-3.pdf.

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Ancillary Services De Minimus Regulation Awards

In Section 3.2 of the Draft 2023 Policy Initiatives Catalog, Draft2023PolicyInitiativesCatalog.pdf (caiso.com) the ISO precluded SCE’s submission “Pay for Performance Accuracy Calculations.”  This was the reason given:  “This initiative was included in the previous update to the catalog. It is included in Section 6 Discretionary Initiatives. The initiative is titled “Ancillary Services de minimus Regulation Awards.”

Unfortunately, the “Ancillary Services de minimus Regulation Awards” proposal only addresses one of the issues currently present in Pay for Performance.  SCE submitted its proposal for the 2023 catalog to address some of the missing elements which are highlighted in the table below:

SCE also notes that a proposal from SDG&E “Fractional Megawatt Regulation Awards” is also similar to the “Ancillary Services de minimus Regulation Awards” proposal.

Please include SCE’s proposal into the 2023 catalog or add the additional elements into one of the existing similar proposals.

Evaluating and addressing market rule inconsistency among 5/15/60 min bid options for Demand Response resources

The CAISO should revisit and address apparent inconsistency in market rules applying to demand response resources, including Reliability Demand Response Resources (RDRR). Today, when a RDRR resource is participating under 15-minute or 60-minute bidding options, the start-up time registered in the RDT is ignored and instead a hard-coded start up time will be used in market clearing and generating dispatch. The start-up time will be respected under the 5-minute bidding option. This inconsistency discourages resources from participating under the 15-minute or 60-minute options, even if the 15-minute or 60-minute bidding option would be more appropriate for the resource otherwise. Also see SCE comments submitted on this issue under ER22-2700 (https://elibrary.ferc.gov/eLibrary/filedownload?fileid=0ACC3C1B-CEE1-C0CC-9F86-833386700000) for additional information on this issue. Given the important role of demand response resources for the reliability and under stressed system conditions, the CAISO should ensure market rules are consistent and workable for demand response resources by addressing the issue identified herein.

Discrete cap & exception criteria for Reliability Demand Response Resources should be modified

The discrete cap & exception criteria from the recent CAISO proposal pose unnecessary restriction and burden to RDRR resources that are above 100MW. In particular, the exception criteria are difficult (if not impossible) to realistically meet for those resources. The CAISO should consider eliminate the cap and address any concern thereof; alternatively, the CAISO should change the exception criteria in order for discrete RDRR resources above 100MW to participate in the CAISO market without unnecessary restrictions.  Also see SCE comments submitted on this issue under ER22-2700 (https://elibrary.ferc.gov/eLibrary/filedownload?fileid=0ACC3C1B-CEE1-C0CC-9F86-833386700000) for additional information on this issue. Given the important role of demand response resources for the reliability and under stressed system conditions, the CAISO should ensure market rules are workable for demand response resources by addressing the issue identified herein.

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Salt River Project Agricultural Improvement and Power District (SRP) appreciates the opportunity to comment on the California Independent System Operator (CAISO) Draft 2023 Policy Initiatives Catalog. SRP understands that the CAISO’s policy focus is on tariff changes to initiatives that have the most impact and are needed to maintain system reliability, efficient market functionality as well as compliance with regulatory requirements. SRP supports the CAISO’s prioritization of impactful and high-profile initiatives such as the Extended Day-Ahead Market (EDAM), WEIM Resource Sufficiency Evaluation (RSE) Enhancements, and Transmission Service and Market Scheduling Priorities (TSMSP).

In addition to the incorporated and active policy initiatives, SRP encourages the CAISO to reconsider the prioritization of the precluded ‘Use-limited Gas Resource Default Energy Bid’ (6.1.23) policy initiative. This policy initiative may have the potential to resolve concerns that stakeholders have with respect to energy limited resources and provide support to the CAISO EDAM. This initiative has the potential to allow participants to offer a greater amount of diverse generating assets that may otherwise be prohibited from participating in EDAM due to operating constraints. SRP encourages the CAISO to consider development of a Gas Resource Default Energy Bid framework that is similar to the use of the Hydro Resource Default Energy Bid methodology, or other similar methodologies that allow gas energy limited resources to participate in the market equitably.

SRP recognizes initiatives require significant time from CAISO staff and interested stakeholders. However, SRP is concerned with the growing backlog of discretionary initiatives and the absence of a plan to consider these incremental improvements to the CAISO’s existing markets. SRP requests that the CAISO provide resources to evaluate two to five smaller initiatives each year. The discretionary initiatives list includes potentially valuable suggestions made by diverse members of CAISO’s stakeholder community. The CAISO’s inattention to these initiatives may discourage future active stakeholder engagement. SRP would like to see the CAISO implement an inclusive and transparent stakeholder process for ranking discretionary initiatives to be considered each year.  Due to the concerns identified above, SRP requests that CAISO consider the stakeholder initiative process be revised where it is driven by stakeholders and not solely by CAISO staff.

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Terra-Gen respectfully urges CAISO to immediately implement reform to its Deliverability Assessment Methodology by addressing item 6.3.1 of the draft policy initiatives catalog.

Terra-Gen is proud to be a leading renewable energy developer that operates over 2 GW of wind, solar, and energy storage facilities in California.  Just this year, we’ve completed 947 MW of new solar generation and 957 MW/ 1,747 MWh of energy storage, all delivering services into CAISO’s territory. Terra-Gen also has a pipeline of over 5 GW of wind and solar and 16 GWh of battery storage under development in CAISO territory – that pipeline is threatened by what we see as a deliverability crisis in the CAISO system. 

Recently, Terra-Gen has been unable to secure deliverability on hundreds of MW’s of renewable and battery storage projects that are entitled, ready to begin construction and provide important clean, reliable energy services California.  Had these projects received deliverability, they would be on-line now or by the end of the year.   

Terra-Gen believes that the CAISO’s methodology, designed around extremely rare operating conditions during the system peak, actually reduces the CAISO’s reliability in most likely scenarios when resources are needed most. 

In doing so, CAISO can more effectively use the existing electric grid without affecting its load serving capability and enable the CAISO to meet its significant near term resource adequacy requirements. It is a fact that we will not be able to address the amount of additional deliverability needed with new transmission upgrades.  Without reform, CAISO Resource Adequacy requirements, California’s entire Clean Energy Plan and its goal to decarbonize the electric grid simply cannot be accomplished. 

Reform is needed now. 

Terra-Gen believes it is imperative that the CAISO immediately launch a new initiative to develop and implement comprehensive reforms to the deliverability assessment methodology that will free Gigawatts of deliverability.  As CALWEA and CESA have indicated in their June 2022 comments related to the deliverability issue, adopting a more reasonable methodology would remove a major hurdle to project implementation and would enable a substantial number of projects, in advanced stages of development and ready for construction, to provide resource adequacy services to the CAISO grid.  Importantly, these reforms can be implemented without jeopardizing grid reliability.

Terra-Gen believes that the CAISO should consider the specific reforms to the deliverability methodology identified by CALWEA and CESA. We won’t waste your time detailing the specific issues for consideration, please refer to CALWA and CESA’s comments.  They are the following:

• The CAISO should consider reforming its High System Need (“HSN”) operating scenario as outlined by CALWEA and CESA.
  • Elimination of N-2 contingency
  • Updating system dispatch conditions
• The CAISO should consider reform its Secondary System Need (“SSN”) operating scenario as outlined by CALWEA and CESA.
  • Elimination of SSN or zero storage dispatch under SSN
• It is important that the CAISO consider the location of storage resources and their ability to address resource adequacy conditions locally and regionally.  Among other considerations, the CAISO should consider eliminating the system-RA requirement for resources providing local RA capacity and allocate NQC to such local capacity.

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The following comments pertain to discretionary initiative 6.1.4 in the Draft 2023 Policy Initiative Catalog. This initiative, titled, “Collapse Spinning and Non-Spinning Reserves into a Single Product,” originated last year as a suggestion by Voltus during the Day-Ahead Market Enhancement proceedings. Voltus thanks the CAISO for incorporating this submission in the 2023 Initiatives Catalog update and asks that this innovative market change be prioritized in the 2023 Policy Roadmap to allow for its efficient development concurrent with 2023 EDAM filing and implementation activities. 
 
At present, CAISO procures spinning and non-spinning reserves in roughly equal quantities in order to achieve, in aggregate, operating reserves compliant with WECC and NERC standards. While both reserve types must be able to provide their full reserved capacity within ten minutes of operator dispatch, resources providing spinning reserves must also be frequency responsive.¹ Today, this additional requirement creates barriers to market entry that outweigh the benefits it provides.
 
First, as the CAISO itself suggests in the 2023 Initiatives Catalog, the requirement that half of operating reserves be frequency responsive is superfluous, because under current operating practice, spinning reserves are not typically used for frequency regulation. In contrast, the Regulation Up and Regulation Down products are precisely targeted to frequency response, not least because operators may dispatch them directly through the AGC system. Removing the frequency response requirement for spinning reserves resources would take economic advantage of current practice while creating a cleaner separation of functions between the RegUp/RegDown products and operating reserves. In making this change, the CAISO would modernize its practice in line with other ISOs/RTOs that have eliminated the frequency response requirement for spinning reserves.
 
Second, the inessential frequency response requirement imposes a market barrier that disproportionately affects emerging, cost-effective resource types like load and energy storage. Removing this burdensome technical requirement will attract new, clean resources critical to meeting the reliability challenges of the next decades without resorting to carbon-intensive technologies like those used to avoid blackouts during the September 2022 emergency heat wave conditions.² On the other hand, maintaining archaic limitations to market participation is inconsistent with CAISO’s commitment to building a modern, resilient grid powered by a diversity of resources and economically optimized across the entire Western Interconnect.

Meanwhile, the advantages of maintaining a single operating reserves product are clear. In 2020 and 2021, spinning reserves clearing prices in the day ahead market were roughly three times non-spin clearing prices.³ The implication is that CAISO pays a significant premium for a frequency response capability that it does not use. By maintaining a single reserves product, the CAISO would avoid overpaying for reliability.

Additionally, the proposed simplification is timely given that CAISO is currently considering the creation of new ancillary services products, such as the fast regulation / fast frequency response products noted in section 5.10 of the 2023 Initiatives Catalog.⁴ A clear delineation of function and a better alignment of product with function will help ancillary services providers correctly allocate their resources to the most appropriate product types. Moreover, if implemented before the Extended Day-Ahead Market goes live, the collapse of spinning and non-spinning reserves would improve operational capacity at a time when the CAISO is absorbing additional responsibility within the Western Interconnect. Finally, if the CAISO designates the revision to a single contingency reserves product as an official initiative in the 2023 Policy Roadmap, it could note this market modernization in its report to FERC in Docket AD21-10, Energy and Ancillary Services in the Evolving Electricity Sector.

¹ CAISO, Fifth Replacement FERC Electric Tariff Appendix K § B 1.2 (June 17, 2022), https://www.caiso.com/Documents/Conformed-Tariff-as-of-Jun17-2022.pdf.

² U.S. Energy Information Administration, California Fuel Mix Changes in Response to September Heat Wave (Sept. 21, 2022), https://www.eia.gov/todayinenergy/detail.php?id=53939.

³ CAISO, 2022 Annual Report on Market Issues & Performance 176 (July 27, 2022), https://www.caiso.com/Documents/2021-Annual-Report-on-Market-Issues-Performance.pdf.

⁴ CAISO, Draft 2023 Policy Initiatives Catalog § 5.10 p. 19 (Aug. 11, 2022), http://www.caiso.com/InitiativeDocuments/Draft2023PolicyInitiativesCatalog.pdf.