Comments on Energy storage enhacements - straw proposal

1. Please provide a summary of your organization’s general comments on the straw proposal presentation for this initiative:

ACP-California appreciates the opportunity to comment on CAISO’s Straw Proposal in the Energy Enhancements initiative. We look forward to additional discussions on the innovative, new Energy Storage Resource (ESR) participation model. Additionally, we greatly appreciate CAISO’s proposal to address grid charging restrictions for Co-Located storage resources. We request that CAISO provide additional data and analysis around the proposed limitations on grid charging restrictions to help market participants better understand the frequency that the exception may apply. This additional data and analysis will help the CAISO and stakeholders better understand if the proposed exception is appropriate.   

2. Provide your organization’s comments on the proposed energy storage resource model, as described in the straw proposal:

ACP-California appreciates CAISO’s innovative approach to the energy storage-related concerns that have been raised by stakeholders. We look forward to additional discussion on the ESR model and how managing state of charge (SOC) through the proposed ESR model may be able to address these issues.  

3. Provide your organization’s comments on the proposed reliability enhancements for storage resources, as described in the straw proposal:

4. Provide your organization’s comments on the proposed co-located enhancements, as described in the straw proposal:

ACP-California appreciates that, through this initiative, CAISO is proposing a solution to help mitigate ITC (and property tax) related grid charging concerns for Co-Located storage resources. CAISO has proposed optional enhancements for Co-Located storage resources, which would only be available to those with tax related grid-charging constraints. With these enhancements enacted, Co-Located storage’s dispatch instruction could be limited so that “they are no greater than the forecast of the co-located renewable resource.” Additionally, when a Co-Located renewable resource is only able to produce less than forecast, the Co-Located storage resource would be allowed to deviate down from dispatch schedules (to prevent inadvertent grid charging of the storage resource). There would be some exceptions and implications for Co-Located storage under CAISO’s proposal.

Notably, CAISO has proposed that when there is economic curtailment of renewable resources on the system, Co-Located storage resources will be required to follow dispatch instructions. In these instances, storage may not always be instructed to charge at or less than the output from the Co-Located renewable resource. In other words, when the system is curtailing renewable resources, storage may be required to grid charge (presumably charging with renewable resources that would otherwise have been curtailed). While we understand the motivation behind proposing this exception, we seek additional data to better understand the frequency with which this system condition may occur to better understand its implications. Ultimately, it is critical that developers and offtakers can adequately manage their ITC recapture risks – which may occur when a storage resource grid charges (regardless of whether the CAISO system was economically curtailing renewable resources or not). CAISO can help the development and offtaker community understand the implications of this exception by providing analysis around how often this exemption would have kicked in historically and by walking through examples of how the exception would work in practice. Thus, we ask that, in the next proposal and stakeholder call, CAISO walk through data on the frequency with which this exception may apply and through several examples.

There may be significant impacts to resources that choose to use this functionality, including being required to submit outage cards and being subject to the Resource Adequacy Availability Incentive Mechanism (RAAIM). We look forward to further considering these changes in the context of new must offer obligations and other RA rules that are being considered in the RA Enhancements initiative.

While we appreciate the modification for Co-Located storage resources that CAISO has proposed, we also hope to continue to discuss whether any modifications are needed to the Hybrid Resource participation model to ensure those resources are afforded the same opportunity to address grid-charging restrictions as Co-Located Resources would be under this proposal.

Finally, ACP-California appreciates and support the additional functionality for pseudo tie resources that CAISO has proposed.

5. Provide your organization’s comments on the proposed EIM classification for this initiative, as described in the straw proposal:

1. Please provide a summary of your organization’s general comments on the straw proposal presentation for this initiative:

Boston Energy Trading and Marketing (BETM) appreciates the opportunity to provide feedback on the CAISO Energy Storage Enhancements (ESE) Straw Proposal. Generally, we’re supportive of continuing to improve the CAISO’s energy storage participation model.  We feel strongly that the current NGR model has served the CAISO well and should continue to be supported by the ISO and enhanced as needed.  Offering an alternative option for SC’s to bid in SOC increments rather than MW increments is an interesting concept and something that merits further discussion with stakeholders.  At this time, we have no issues with the ISO proposing the energy storage resources (ESR) option but feel the CAISO needs to provide more details as why it’s needed? Should the ESR model move forward, it should be viewed as an alternative to the NGR model not replacing it.  

Lastly, we strongly support the lost opportunity costs concept being proposed when energy storage resources are held back as a result of the minimum SOC constraint being imposed by the CAISO.  We request the ISO clarify in the next paper that this proposal would apply to energy storage resource participating in both the NGR and ESR models. 

Additonal Comments:

One area that BETM has discussed with the ISO in prior iterations of ESDER is expanding the number of ancillary service bid points.  We ask that the ISO consider once again expanding the number of points from 1 to something greater than 1 as part of this initiative.  Ideally the number of points would be consistent with energy, but BETM would be happy with a total of 3-5 bid points.  As we have expressed in the past additional bid point would allow energy storage resource to manage state of charge, diversify awards between energy and ancillary services as well as day-ahead versus real time, and provide the market solution with greater flexibility during the co-optimization process.

2. Provide your organization’s comments on the proposed energy storage resource model, as described in the straw proposal:

Boston Energy supports the ISO’s continued push to enhance energy storage participation in its markets.  We feel the NGR model developed by the CAISO is best in class and something that needs to continue to be supported and enhanced.  It should not be left behind because of the ESR model proposal.  While we don’t have any issues with the proposal from a conceptual standpoint, we don’t understand why some of the improvements discussed by the ISO in the paper cannot be readily applied to the NGR model.  BETM does not agree with the ISO’s statement that developing a new participation pathway obviates the need to improve upon the NGR model.

It would benefit all stakeholders for the CAISO to better explain the issues driving need for the ESR model and why such issues can’t be addressed using the NGR model.  On the surface bidding in increments of SOC versus MWs doesn’t seem like a reason for why the other modeling improvements discussed by the ISO can’t be incorporated into the NGR model.  We stress again that from our experience across ISO’s the NGR model is best in class and should continue to be treated that way going forward. 

Last, while model enhancements are always welcomed, they need to be balanced against complexity and impacts to market systems.  We ask that should the ISO move forward with the ESR model it provide an impact assessment on the solution times and solution accuracy of both the day-ahead and real-time markets. Lengthening solution times and reducing solution accuracy should be something to avoid at all costs.  It would be also helpful to understand rules/requirements for moving between NGR and ESR models.  Can a SC’s do this and what are the timing requirements?

3. Provide your organization’s comments on the proposed reliability enhancements for storage resources, as described in the straw proposal:

BETM is supportive of the concept of providing lost opportunity cost compensation for energy storage resources issued Exceptional Dispatches to hold SOC as a result of system conditions requiring them to hold a minimum SOC. Further details of the ISO’s proposal are required before BETM can provide full support, but as currently drafted the proposal is a step in the right direction as it recognizes that energy storage resource economics are severely affected by directives to retain SOC.

One important point that BETM would like to make at this juncture is that whatever lost opportunity cost methodology is developed, it should apply to energy storage resources participating in either the NGR or ESR models. 

4. Provide your organization’s comments on the proposed co-located enhancements, as described in the straw proposal:

BETM has no comments on the co-located enhancements at this time.  

5. Provide your organization’s comments on the proposed EIM classification for this initiative, as described in the straw proposal:

BETM has no comments at this time.  

1. Please provide a summary of your organization’s general comments on the straw proposal presentation for this initiative:

The California Community Choice Association (CalCCA) appreciates the opportunity to comment on the Energy Storage Enhancements Straw Proposal. In summary:

• CalCCA supports the California Independent System Operator’s (CAISO’s) proposal to develop a new energy storage resource model and looks forward to additional details in future iterations regarding how transition costs will be established and how market power mitigation will be applied;
• CalCCA generally supports the proposed reliability enhancements and offers a clarification on the ancillary services proposal; and,
• The CAISO’s co-located enhancements must allow storage resources to take full advantage of the federal program for investment tax credits (ITC) by allowing ITC-eligible resources to only charge from its on-site renewable.

2. Provide your organization’s comments on the proposed energy storage resource model, as described in the straw proposal:

CalCCA supports the CAISO’s proposal to develop a new energy storage resource model in which scheduling coordinators bid in terms of incremental state of charge (SOC) as an alternative to the existing non-generator resource (NGR) model that requires bids in terms of incremental energy. This model will allow for the better reflection of storage resource capabilities through separate hourly bids for charging and discharging, master file parameters to reflect upper and lower capacity limits and ramp rates dependent on SOC, and transition times and costs. CalCCA looks forward to additional details in future iteration regarding how transition costs will be calculated and verified by the CAISO and how market power mitigation will be applied to resources using this model.

3. Provide your organization’s comments on the proposed reliability enhancements for storage resources, as described in the straw proposal:

Ancillary Services

The Straw Proposal explains issues have been identified around the feasibility of storage resources to provide ancillary services awarded in the day-ahead market when the resource does not have sufficient SOC in real-time to deliver energy associated with the ancillary service award. The CAISO states that it may potentially propose in the future that all ancillary service awards for storage be accompanied with bids for energy, such that regulation up awards must be accompanied by a bid to charge, and regulation down awards must be accompanied by a bid to discharge. The CAISO should clarify in its proposal that to the extent necessary to satisfy their award, the storage must provide an energy bid with its ancillary service award. For example, if a storage resource with a Pmax of 100 megawatts (MW) receives a 5 MW regulation up award and the resource is operating at 80 MW, then the energy bid to charge is not needed to ensure the resource can deliver on their ancillary service award. On the other hand, if the same resource receives a 200 MW ancillary service award, then the resource would need energy bids from -100MW to 100 MW (i.e., charge and discharge bids) to deliver on its ancillary service award.

Exceptional Dispatch and Compensation to Hold State of Charge

The CAISO proposes new functionality to allow operators to dispatch storage resources to hold a certain SOC. The proposal would also compensate storage resources exceptionally dispatched to hold SOC using the realized prevailing locational marginal price (LMP) compared to the reference interval discharge price to represent the opportunity costs for exceptionally dispatching the resource. This proposal is a reasonable replacement for the minimum SOC requirement sunsetting in 2023, as it will provide operators the ability to instruct resources to hold SOC when they identify a need and compensate storage resources for the opportunity costs of holding that SOC.

4. Provide your organization’s comments on the proposed co-located enhancements, as described in the straw proposal:

The CAISO proposes enhancements to the co-located resource model to ensure co-located storage resources eligible for ITC can reflect their availability in the CAISO market. CalCCA appreciates the steps the CAISO has taken in this proposal to improve the current co-located model to consider the ITC. However, the CAISO’s proposal must take into account that the ITC program is a federal program and allow storage resources to take full advantage of such program.

The CAISO’s proposal would provide functionality to limit dispatch instructions for storage resources so they are no greater than the forecast of the on-site renewable. When the CAISO issues a dispatch instruction for the renewable to curtail, or cuts a renewable self-schedule, the CAISO will not reduce charging instructions to co-located storage resources.  This could result in grid charging.

Because of the way the ITC is designed, it is not possible for storage resources to fully reflect their cost of foregone ITC in the market through bids. When grid charging occurs, the ITC credits are fractionally reduced until the fraction of grid charging exceeds 25 percent. At that time, a storage resource would not be eligible for the ITC at all.  There is no way to financially represent when a resource is fully ineligible for ITC within a CAISO market bid because the cost far exceeds the bid cap. For this reason, some storage resources are designed to go offline to avoid grid charging when there is not sufficient energy from the onsite renewable to charge the storage. The CAISO must make an exception for ITC resources, so they are allowed to only charge from the renewable. Such resources should not be required to grid charge when the renewable output is below forecast or when the renewable is curtailed either through economically curtailment, exceptional dispatch, or self-schedule cuts.

5. Provide your organization’s comments on the proposed EIM classification for this initiative, as described in the straw proposal:

 No comments at this time.

1. Please provide a summary of your organization’s general comments on the straw proposal presentation for this initiative:

The California Energy Storage Alliance (CESA) appreciates the opportunity to provide feedback on the California Independent System Operator’s (CAISO or ISO) Energy Storage Enhancements (ESE) Straw Proposal. CESA recognizes the leadership of the ISO in addressing potential improvements to the modeling, treatment and optimization of storage assets. With approximately 4 GW of grid-connected storage expected by the beginning of 2022, CESA supports the CAISO’s foresight to enable storage assets to substantially contribute to advance decarbonization while maintaining reliability by absorbing excess renewable energy for later use, reducing reliance on emitting local resources, and meeting ramping needs, among other use cases and benefits.

In this context, while CESA welcomes several of the ISO’s proposals for storage assets, we recommend these should not be limited solely to a novel participation pathway, but are, to the extent possible, applied to the current non-generator resource (NGR) model as well. CESA also recognizes that the ISO’s intent to create a state-of-charge exceptional dispatch (SOC ED) instruction that accounts for energy market opportunity costs is a step in the right direction, yet it continues to underestimate the impacts such a directive would have on the economics of storage assets. Moreover, regarding co-located resources, CESA appreciates the ISO consideration of ITC rules within this initiative and welcomes the additional optionality the electable pathway described in the Straw Proposal would offer to resource owners and scheduling coordinators (SCs). As such, CESA’s comments can be summarized as follows: 

• The CAISO should recognize that all storage resources, not just a subset of technologies, experience variations in their marginal costs relative to SOC
  • New participation model is welcome but may create a disadvantage relative to NGR model
  • Both the NGR and the energy storage resource (ESR) models should offer the same level of granularity for the submission of bids, include representation of transition times, cycling limits and variable charge/discharge rates in the Masterfile
  • CAISO’s intent to minimize changes to the NGR model is reasonable, CAISO staff should develop a path to use the lessons learned from ESR to apply to NGR
• CAISO’s proposal to compensate for holding state of charge is a step in the right direction, but fails to capture full market conditions
  • Improving on the modeling of opportunity costs is urgent given the vast amount of storge expected to come online
  • Ad minimum, the CAISO should consider dispatch up to 24 hours past the SOC ED instruction to calculate opportunity costs
• Increased optionality for co-located resources seeking the ITC is welcome
• CESA is concerned with the lack of substantial proposals to address challenges related to multi-interval optimization (MIO) despite robust discussion with Market Surveillance Committee (MSC)
  • Ad minimum, the Bid Cost Recovery (BCR) mechanism should be revised either by revising the BCR formulation or the time periods by which it is calculated, to cover MIO until underlying issues with dispatch outside of resource bid curves are resolved

2. Provide your organization’s comments on the proposed energy storage resource model, as described in the straw proposal:

In the Straw Proposal, the ISO proposes the creation of a new storage participation pathway, the ESR model. The CAISO notes that this model would be available to storage assets in addition to the NGR model, which is currently used by most storage assets interconnected to the CAISO grid. CAISO staff notes that this model would address limitations of the NGR model that have been highlighted by the storage community in the last years; namely, the need to represent the impact state-of-charge (SOC) has on the marginal costs of storage assets.[1] In response to said feedback, the ISO proposes an ESR model in which storage asserts would be able to submit bids in terms on incremental SOC instead of traditional bids submitted in terms of incremental power output. This model would be operationalized by requiring assets to submit two sets of bid curves, one for charging and one for discharging, each with up to 10 bid segments.[2] In addition to this functionality, the ESR model would allow storage to:

• Indicate variable charging and discharging rates to represent the fact that these can degrade at both the high and low ends of SOC.[3]
• Enforce a minimum transition period, in minutes, to represent the time it would take a storage asset to go from charging to discharging, and vice versa.[4]

Importantly, CAISO states in the Straw Proposal that the development of this new model may obviate the need for some of the possible improvements to the NGR model, and requests comments on whether the ESR model would be attractive and if assets would prefer one model over the other.[5]

While CESA welcomes the innovative approach the ISO is considering to better incorporate energy storage assets to its markets, it is not readily obvious why some of the improvements the ESR model has over the NGR model cannot be readily applied to the latter. CESA understands that modifications to the fundamental bidding structure of the NGR model should be approached with caution as this is the current pathway most energy storage assets are set to use in the coming years. Nevertheless, to avoid creating disadvantages for NGR resources relative to ESR, the ISO should consider, ad minimum, the following modifications for the NGR model:

• Both NGR and ESR should allow bid curves with the same number of bid segments.
• Both NGR and ESR should include representation of transition times, cycling limits, and variable charge/discharge rates in the Masterfile.
  • As noted by the ISO, transition times would be 0 minutes for most storage assets participating under the NGR model; as such, this would be a clerical addition in most cases.
  • Reflecting cycling limits in the Masterfile for NGR resources is necessary and it is aligned with current resource adequacy (RA) reform discussions.
  • Representation of variable charge and discharge rates should be considered for NGR to minimize the likelihood of unfeasible dispatch instructions that may hinder system reliability.

If the ISO does not apply these changes for both participation pathways, CESA considers there would be clear advantages for ESR resources as they would be better positioned to represent their marginal costs and ensure unfeasible dispatch instructions are minimized. Finally, CESA requests that, if the ISO continues development of the ESR model, it should lay out a strategy to incorporate lessons learned from the ESR model to the NGR model. In essence, CESA does not agree with the ISO’s statement that developing a new participation pathway obviates the need to improve upon the NGR model.

[1] Straw Proposal, at 7.

[2] Ibid.

[3] Straw Proposal, at 9.

[4] Ibid.

[5] Straw Proposal, at 8.

3. Provide your organization’s comments on the proposed reliability enhancements for storage resources, as described in the straw proposal:

In the Straw Proposal, the ISO lays out a number of proposals set to enhance the reliability of storage operations. In this section, CESA focuses on the proposal to establish an SOC ED instruction. The ISO notes that developing this ED instruction is necessary as, today, the ISO is unable to instruct a storage asset to reach and hold an SOC.[1] In essence, this proposal seeks to replace the minimum SOC (MSOC) requirement which the ISO introduced in 2021 by creating a new type of ED and compensating energy storage resources for it through a calculation of lost energy revenues.[2]

Regarding compensation, the ISO proposes that resources issued ED to hold SOC will be compensated at the difference between the prevailing price during the exceptional dispatch and the reference interval discharge price.[3] The ISO notes that the reference interval discharge price will be the period when the storage resource discharges to sell energy, and that this period will have a time limitation.[4] As such, if the ISO issues an ED to a storage resource to hold SOC for an hour, and prevailing prices at that resource’s location are $100/MWh, and the resource sells energy later in the day, after the exceptional dispatch, for $80/MWh, the ISO will compensate the resource for the $20/MWh, or the difference between prices during the exceptional dispatch and reference interval

dispatch.[5]

CESA considers that the CAISO’s proposal is a step in the right direction as it recognizes that energy storage resource economics are severely affected by directives to retain SOC. While addressing potential revenue loss from the energy market is essential, CAISO’s proposal to compensate for holding state of charge fails to capture full market conditions. The ISO notes that re-running and generating new prices when a storage resource was prevented from discharging due to the exceptional dispatch to hold state of charge would be computationally difficult and burdensome for the ISO. As such, the Straw Proposal notes this is not something staff is willing to explore at this time.[6] CESA considers this hesitance seems to ignore the relevance and frequency of these analyses.

Improving on the modeling of opportunity costs for storage is urgent given the vast amount of storge expected to come online in the next decade. Planning processes across the State signal that as much as 14 GW of incremental energy storage assets will be needed by 2032, as such, the ISO must commence preparing its optimization and compensation algorithms for a system in which storage, not fossil-fueled assets, are the primary providers of capacity. Moreover, this significant volume of energy storage will most likely erode some of the challenges of retaining SOC for the peak-net peak period. This in turn is likely to mitigate the need for SOC ED instructions for system needs. As such, it can be assumed that these types of EDs will not be as frequent as to make it impossible for the CAISO to evaluate counterfactual prices for settlement. In contrast to system needs, it is more likely that SOC ED instructions would be issued to ensure sufficiency and reliability in local areas with limited transmission and/or generation assets. In these circumstances, by definition, there are few market participants. As a result of this lack of competitors, the issuance of an SOC ED could materially affect market conditions; thus, re-estimating prices would be essential to properly compensate the storage asset. Hence, CESA requests the ISO reevaluates and refines this proposal considering that the burden of these analyses may (1) not be as frequent, and (2) be essential in the context of local reliability areas.

CESA recognizes that some of the modifications enlisted above may require significant effort on part of the ISO. While the ISO considers pathways to better reflect opportunity costs related to the SOC ED, CESA requests that, ad minimum, the CAISO modifies this proposal so that settlement for SOC ED considers dispatch up to 24 hours past the SOC ED instruction in its calculating of opportunity costs. This modification is essential as resources might be instructed to hold SOC during the peak period for the purposes of meeting net peak needs. If this is the case, the ISO would be amiss if it only considered the actions of the storage asset in the last couple of hours of the day as reference price points. The economics of storage resources do not restart at midnight, as such, the arbitrary time limit proposed by the ISO should be revised.

[1] Straw Proposal, at 11.

[2] Straw Proposal, at 12.

[3] Straw Proposal, at 13.

[4] Ibid.

[5] Ibid.

[6] Straw Proposal, at 12.

4. Provide your organization’s comments on the proposed co-located enhancements, as described in the straw proposal:

In the Straw Proposal, the ISO proposes to implement a new electable co-located model to ease compliance with the federal Investment Tax Credit (ITC). Under this model:

• Storage would not dispatched above co-located renewable schedule
• Storage may deviate down to match solar, when less than forecast
  • Deviations will be subject to imbalance energy charges
• Storage would submit outage cards to signal when it has been depleted and has no ability to charge

Overall, CESA welcomes the increased optionality offered by the ISO through this electable model. CESA considers the application of this alternative model will better enable the ISO to obtain insights regarding the economics and participation of both hybrid and co-located assets.

5. Provide your organization’s comments on the proposed EIM classification for this initiative, as described in the straw proposal:

CESA offers no comments at this time.

1. Please provide a summary of your organization’s general comments on the straw proposal presentation for this initiative:

Please see DMM comments in attached PDF.

2. Provide your organization’s comments on the proposed energy storage resource model, as described in the straw proposal:

Please see DMM comments in attached PDF.

3. Provide your organization’s comments on the proposed reliability enhancements for storage resources, as described in the straw proposal:

Please see DMM comments in attached PDF.

4. Provide your organization’s comments on the proposed co-located enhancements, as described in the straw proposal:

Please see DMM comments in attached PDF.

5. Provide your organization’s comments on the proposed EIM classification for this initiative, as described in the straw proposal:

Please see DMM comments in attached PDF.

1. Please provide a summary of your organization’s general comments on the straw proposal presentation for this initiative:

CPUC staff would like to thank George Angelidis for his work and for being available to answer so many questions during the stakeholder call. Staff appreciated having someone with technical understanding of the proposal available to field questions and provide detailed explanations.

Staff appreciates the CAISO’s willingness to reframe the bidding structure of energy storage resources. At the same time, we caution that this proposal does not go far enough to efficiently and effectively manage a market composed primarily of storage and renewable energy resources, and therefore more changes will likely be necessary in the future. Staff believes that designing and implementing this new model can lead to improvements in market outcomes if the design is completed properly. Achieving the goals of the proposal will take a significant amount of work and consideration. CPUC staff is happy to work with the CAISO on designing this new system.

2. Provide your organization’s comments on the proposed energy storage resource model, as described in the straw proposal:

Staff understands that the CAISO’s new model ties bids to the resource’s State of Charge (SOC) rather than to the specific output of the resource at a certain point in time. We find that this approach has potential for improving market outcomes compared to the status quo. At the same time, CPUC staff still has questions about exactly how this new model is meant to work and looks forward to more detailed examples to help work through all the implications of this very new model. We are confident that with collaborative effort we can find the most efficient and effective design possible for this new paradigm.

3. Provide your organization’s comments on the proposed reliability enhancements for storage resources, as described in the straw proposal:

Staff suggests prioritizing the changes to Exceptional Dispatches, specifically the ability of operators to issue Exceptional Dispatches that instruct a storage resource to charge to a given state of charge (SOC) or to hold a given SOC. We understand these capabilities are within the current ability of the CAISO and therefore should be implemented more quickly than the rest of this proposal.

Staff understands that the CAISO’s proposal to design ‘internal tools for use to ensure local reliability’ would serve the purpose of allowing energy storage resources to satisfy Minimum Online Capacity constraints (MOC constraints). We understand that these are fairly static and predictable constraints. If this is the case, it may be feasible to negotiate something in the contract stage of the resource instead of leaving it to the market. In other words, if the CAISO knows where it will need this capacity, there may be a path to procuring that capacity from specific resources on a long-term basis rather than in the wholesale electricity market.

With both the Exceptional Dispatches and MOC constraint modifications for energy storage resources, compensation will be very important. Some of the examples provided by the CAISO in the proposal suggest that resources may be overcompensated for lost opportunity cost. In particular, on slide 16 of the presentation, CAISO states:

If an ED holds state of charge for 2 hours in the day-ahead market

when prices are $60/MWh and $100/MWh and sells energy after the

exceptional dispatch at $80/MWh, the ISO will offer compensation of an

additional $20/MWh to that resource.

This seems to suggest that the resource could have sold one hour at $60 and one hour at $100, but instead sold two hours at $80. The resource in this example has not lost any opportunity, as it earns the same revenue and profit in either case.

Additionally, staff believes that the CAISO should not assume that prices would be unchanged in all cases where storage resources could otherwise have been dispatched were it not for the Exceptional Dispatch or MOC constraint. The mechanics of measuring competitiveness for market power mitigation can help determine when and where a resource has the ability to alter price by its dispatch. The CAISO should carefully consider using that information to help keep the costs of Exceptional Dispatches and MOC constraints down. 

CPUC staff encourages stakeholders and the CAISO to consider the GHG impacts of routinely using charged energy storage for contingency planning in cases when that storage has been charged from fossil fuel powered resources.

4. Provide your organization’s comments on the proposed co-located enhancements, as described in the straw proposal:

CPUC staff cautions that changing the rules for hybrid and co-located resources would be best reserved for an initiative scoped for those types of changes. As it is, the CAISO seems to be reverting to allowing co-located solar to behave like an intermittent resource. At a minimum, the CAISO should consult with resource adequacy (RA) stakeholders and the CPUC to determine whether this will have implications for how those resources are treated in the RA program.

5. Provide your organization’s comments on the proposed EIM classification for this initiative, as described in the straw proposal:

Regarding the proposed governance classifications outlined in the straw proposal, CPUC staff seeks further clarification regarding the CAISO's statement on p. 7 that "This new model would be employed in the ISO's market software for both the day-ahead and real-time markets and could be used by participants in the energy imbalance market." Specifically, CPUC staff would like to better understand why a new model approved via joint authority would also be employed in the ISO's market software in the day-ahead market- a market in which EIM entities cannot currently participate. Further, it is not clear why joint authority is warranted regarding any elements outlined in the straw proposal, as the proposal appears applicable to all market participants and is not specific to EIM participants.

1. Please provide a summary of your organization’s general comments on the straw proposal presentation for this initiative:

The Public Advocates Office at the California Public Utilities Commission (Cal Advocates) supports the CAISO’s efforts in the Energy Storage Enhancements (ESE) initiative to develop market models that accurately represent the operational characteristics and costs of energy storage, ensure local reliability, and provide co-located energy storage and generation resource owners control over grid vs. on-site charging.  Incorporating accurate representation of energy storage costs and operational constraints into market models should result in efficiency improvements in the dispatch and operation of energy storage resources.  This will also enhance energy storage’s contribution to renewable integration and reliability.

Cal Advocates recommends:

• The CAISO should conduct market simulation studies and provide examples of how energy storage operations will change under the Energy Storage Resource (ESR) model.  In particular, the CAISO should evaluate how the ESR model will impact market efficiency, renewable integration, system reliability, and greenhouse gas (GHG) emissions.
• The CAISO should conduct market simulation studies for the proposed Local Capacity Requirement (LCR) reliability tools.  The CAISO should incorporate results from the LCR technical studies to evaluate the impacts of the LCR tools for various levels of energy storage procurement in local areas.  The results of the studies should be provided by the CAISO to guide procurement of local energy storage resources and the implementation of the proposed LCR reliability tools.
• The CAISO should consider potential market impacts of over-compensation of energy storage resources that are directed to hold SOC in response to exceptional dispatch (ED).  These impacts could distort market outcomes and may become more severe as energy storage penetration in CAISO markets increases.  The CAISO should conduct market simulation studies to design mechanisms to cap the compensation of ED dispatched storage resources.
• The CAISO should consider providing co-located resources the ability to provide real-time energy bids based upon the source of charging energy, if from the grid or from on-site generation.  Bid-based dispatches, rather than dispatches constrained by on-site generation availability, would give the CAISO greater flexibility in dispatching storage when it provides system benefits.

2. Provide your organization’s comments on the proposed energy storage resource model, as described in the straw proposal:

The proposed ESR model as described in the ESE Straw Proposal would allow storage resources to submit state-of-charge (SOC) based bid curves reflecting the marginal costs of moving from a one SOC point to another over a given dispatch interval.  The CAISO also proposes to implement dynamic limits on storage resources’ Pmax and Pmin values as a function of SOC as provided by the resources for the CAISO Masterfile.  Dynamic limits will help to ensure that dispatch instructions are feasible when storage resources are at high or low SOC.

During the December 14, 2021 ESE webinar, stakeholders recommended that the CAISO conduct market simulation studies of the ESR model, and  provide examples to stakeholders of how changes to energy storage operations will impact market efficiency, renewable integration, reliability, and GHG emissions.  Cal Advocates agrees with this recommendation.  The CAISO should study how scenarios with different bid cost curves for charging and discharging, dynamic limits, load, and conditions of system stress impact market outcomes.  Additionally, if the ESR is implemented, the CAISO should closely monitor ESR participating resources’ impact on these same market outcomes and compare operations of resources under the Non-Generating Resource (NGR) and ESR models.

3. Provide your organization’s comments on the proposed reliability enhancements for storage resources, as described in the straw proposal:

The CAISO proposes to implement local reliability tools that would result in energy storage dispatch in the day ahead market being constrained by monitored N-1-1 contingencies in addition to N-1 contingencies as is currently the practice.  Imposing N-1-1 contingency constraints may result in increased overnight energy storage charging and may increase both the cost of storage operations and GHG emissions when the resources are charged during periods with higher local and system marginal GHG emissions factors and higher Locational Marginal Prices (LMPs).  These impacts may be more pronounced in local areas that are more dependent on energy storage for reliability.   Before implementing the local reliability tools, the CAISO should determine how likely these outcomes are, and if there are ways of mitigating the consequences while maintaining reliability.

The CAISO has recently incuded analysis of charging limits for energy storage in local areas in its LCR technical studies.[1]  The CAISO indicates that back-stop procurement of other resources may be necessary if LSEs procure storage beyond LCR charging limits, which would decrease the effectiveness of storage for providing local reliability.[2]  However, it is not clear that the LCR studies are being used by the IOUs to guide selection of storage procurement in local areas, or by the CPUC to take charging limits into account when approving storage procurement.  As such, some local areas may be at risk of energy storage over-procurement.  Areas with levels of energy storage that exceed the CAISO LCR charging limits may be more significantly impacted by CAISO’s proposed LCR tools and potentially be subject to CAISO back-stop procurement.  The CAISO should account for the risk of over-procurement of energy storage in local areas when evaluating impacts of the proposed LCR reliability tools and provide guidance to the IOUs and the CPUC on the impacts of the LCR tools in local areas with significant energy storage penetration.

The CAISO also proposes to compensate energy storage resources that are directed through ED for reliability to hold SOC in the real-time market by calculating lost revenue from the dispatch of the resources in a later period.  However, due to computational limitations, the CAISO will not re-calculate LMPs that would have arisen if the storage resources had been dispatched in real-time.   Because real-time LMPs may have been lower if the resources had been dispatched, the CAISO could end up overcompensating the resources.  Instead, the CAISO could take the energy storage real-time bids during the ED period into consideration to determine the likelihood that the resources would have been dispatched in the absence of ED and cap the compensation based on the difference or some modified difference between the real-time bids and the LMPs in subsequent periods.   Cal Advocates recommends that the CAISO conduct market simulation studies to assess alternative mechanisms for compensating energy storage resources subject to ED, especially under conditions of high energy storage penetration in the CAISO market.

[1] CAISO 2022 Local Capacity Technical Study (CAISO LCR Study), pp. 24-25, April 30, 2021.

[2] CAISO LCR Study, p. 25.

4. Provide your organization’s comments on the proposed co-located enhancements, as described in the straw proposal:

The CAISO proposes to allow storage resources co-located with generation to deviate down from instructed CAISO charging dispatch to match any reduction in real-time generation from on-site generation.  These allowed deviations will help co-located resource owners limit grid charging to preserve investment tax credit benefits and to ensure that storage is charged by non-GHG emitting resources.  Deviations from instructed dispatch would still be subject to energy imbalance charges, which is appropriate because the CAISO will need to re-optimize dispatch in the real-time market to account for the deviations.  Cal Advocates supports this proposed solution.  The current CPUC RA counting rules for investment tax credit-limited co-located and hybrid resources should account for any discount in RA value due to the charging limitations and thus should be sufficient to reflect any reduced RA benefits under the new model.   

The CAISO should also consider how co-located resources could incorporate incremental costs of grid-charging vs on-site charging in their real-time energy bids.  Providing resources with the ability to adjust bids according to the source of charging energy could provide the CAISO with greater flexibility in dispatching storage resources when the dispatch would provide an overall system benefit.

5. Provide your organization’s comments on the proposed EIM classification for this initiative, as described in the straw proposal:

Cal Advocates has no comments on the proposed EIM classification at this time.

1. Please provide a summary of your organization’s general comments on the straw proposal presentation for this initiative:

CPA graciously submits the following comments on the Straw Proposal, and we look forward to achieving market design solutions that deliver benefits to energy consumers and storage owners of every configuration. ISO should reconsider and implement an enhancement that avoids ordering grid charging through co-located renewable curtailments because such orders will result in storage forced outages.

2. Provide your organization’s comments on the proposed energy storage resource model, as described in the straw proposal:

3. Provide your organization’s comments on the proposed reliability enhancements for storage resources, as described in the straw proposal:

4. Provide your organization’s comments on the proposed co-located enhancements, as described in the straw proposal:

Comment to Energy Storage Enhancements Straw Proposal Section 3.3.1 

(Enhanced Co-Located Functionality) 

Clean Power Alliance appreciates the careful consideration of co-located resource enhancements by CAISO staff in its Straw Proposal. CPA holds long term contracts for approximately 1150 MW and 680 MW of ITC-qualified co-located solar and energy storage resources, respectively. As one of the largest holders of energy storage contracts in California, CPA graciously submits the following comments on the Straw Proposal. We look forward to achieving market design solutions that deliver benefits to energy consumers and storage owners of every configuration.  

As mentioned in Straw Proposal, many energy storage contracts expressly prohibit grid charging of any kind. The Straw Proposal states that enhanced co-located functionality will not prevent storage resources from receiving instructions to grid charge during periods of curtailment – presumably including all of economic curtailment, self-schedule cuts, and exceptional dispatch curtailments (p. 17-18). ISO should reconsider and implement an enhancement that avoids ordering grid charging through co-located renewable curtailments because such orders will result in storage forced outages. Straw Proposal erroneously assumes that grid charging by co-located storage is “critical to help ISO match supply and demand” during curtailment periods. By making such assumption, ISO neglects to consider that prohibitions on grid charging are enforced through numerous mechanical, electrical, and digital devices and procedures put in place by developers to protect the expected ITC payments of their investors. If overlooked by ISO curtailment orders, these devices and procedures – known as “grid charge protection” – result in unplanned outages at storage facilities, which worsens power system conditions. Therefore, the magnitude of curtailment orders on co-located facilities should consider whether grid charging is prohibited, and ISO should limit the curtailment to the output level that zeroes-out facility exports to the grid rather than requiring grid charging. This would contribute to clearing the oversupply by exporting 0 MW to the grid while avoiding grid charging or attempted grid charging and its unintended consequences. 

Suppose that a co-located solar and storage facility is producing 100 MW and charging 50 MW when a system oversupply emerges. Under the Straw Proposal, ISO may order solar production down from 100 MW to 0 MW and assume that the 50 MW charging capacity will remain available to help clear system oversupply. However, because grid charge protection devices are in place, the curtailment order results in an attempt to send 50 MW of grid energy into the storage device, and triggers the feeder breaker, which detects the grid charge flow and disconnects the entire storage facility from the grid.  

ISO’s Energy Storage Enhancements should prevent this type of unexpected outage. While some co-located storage resources might be willing to grid-charge and clear oversupplies for the benefit of negatively priced charging revenues, others are physically prevented from doing so by grid charge protection. The Energy Storage Enhancements should implement the following minor recommendation demonstrated in Equations 1-3. Curtailment orders for co-located facilities should be limited to no greater than scheduled production minus scheduled charging, whereas greater amounts would attempt to mandate grid charging. 

Equation 1: Co-Located Facility Energy Balance 

Scheduled Production−Scheduled Charging−Curtailment=Export to GridScheduled Production−Scheduled Charging−Curtailment=Export to Grid

Equation 2: Maximum Curtailment when Grid-Charging is Prohibited 

Curtailment∗=(Scheduled Production−Scheduled Charging)Curtailment∗=Scheduled Production−Scheduled Charging

Equation 3: Recommendation for Maximum Co-Located Curtailment 

Scheduled Production−Scheduled Charging−Curtailment∗=0Scheduled Production−Scheduled Charging−Curtailment∗=0

ISO should consider the grid charging prohibitions of facilities when making curtailment orders to prevent unnecessary forced outages caused by attempted grid charging flows. The most elegant solution would be to curtail co-located renewables no further than the point where co-located storage is charging. Co-located facilities for which grid charging is prohibited are capable of helping clear system oversupplies by ceasing energy exports to the grid, but not to clear system oversupplies by charging grid energy. This contribution to clearing system oversupply is reasonable as it is no less than that of a curtailed renewable-only facility. Attempting to force a further system contribution by co-located storage only creates a worse situation with unplanned storage outages impacting resource availability both during the oversupply condition and afterward while the storage facility is restarted. 

ISO has the necessary resource information and schedules to avoid curtailment orders that result in attempted grid charging where it is prohibited. Curtailments at co-located facilities should reduce production by no more than what will completely fulfill scheduled charging demands. This information is readily available to ISO dispatchers, although CAISO may invite scheduling coordinators to flag which of their facilities have grid charging strictly prohibited. Co-located facilities using physical and digital grid charge protection cannot be coerced with curtailment orders into clearing a system oversupply. Failing to incorporate the available co-located information into the curtailment order merely creates unnecessary, unplanned outages without contributing to system stability.  

5. Provide your organization’s comments on the proposed EIM classification for this initiative, as described in the straw proposal:

1. Please provide a summary of your organization’s general comments on the straw proposal presentation for this initiative:

EDF-Renewables appreciates the CAISO’s time and effort dedicated to improving the CAISO market model for energy storage. EDF-Renewables is generally supportive of the CAISOs proposals at this time and requests the CAISO include in the next turn additional detailed examples and data. 

Request for an Energy Storage Enhancements Catalog to Track and Respond to all Suggested Topics 

EDF-Renewables is surprised about the scope of the initiative given the number and variety of topics presented and discussed at the stakeholder workshop in July 2021, CAISO addresses this in the proposal with the following statement “At this time, the ISO will continue to consider additional changes, but is not currently including them in the proposal. Please include comments on critical additional topics that are not covered in this proposal but should be considered in this initiative.” EDF-Renewables requests the CAISO clarify is ESE will be an ongoing (annual?) effort, or if some of those topics are being deferred to Hybrid Resource Evolution initiative.  

EDF-Renewables suggests that it that a public catalog and ranking of the ESE workshop proposals and needed other storage that have been suggested, a summary of any discussion had on the topic, and the CAISO’s determination to defer or to not take up the proposal, if applicable.  The CAISO’s policy initiatives roadmap does not currently go to this level of detail. As a matter of general comment, the CAISO’s abandonment of stakeholder comment matrix and response model used in stakeholder initiatives in years past. CAISO has moved to a commenting technology that increases transparency, but has not implemented a complementary functionality to track CAISO’s response to the comments. This could be done at the “Question Level,” for example: 

  EDF-Renewables also suggests that the verbiage “Please provide a summary of your organization’s general comments on" does not need to be included on each question, and more succinct titles would make the format easier to navigate. 

2. Provide your organization’s comments on the proposed energy storage resource model, as described in the straw proposal:

EDF-Renewables is optimistic about the CAISO’s Energy Storage Model concept proposal, but concerned that the complex implementation could lead to undesirable outcomes. EDF-Renewables looks forward to additional detail with respect to with Variable Charging and Discharging Rates. EDF-Renewables believes the max/min power output assumed in the dispatch needs to be on a predefined curve based on state of charge (SOC). EDF-Renewables supports WPTF, LSA, and SIEA’s request the CAISO provide empirical data to support the proposal. EDF-Renewables requests the CAISO provide at the stakeholder meeting, and in the next turn of the paper, some more detailed examples of how the model would work, and a comparative example of a set of ESR models vs current NGR configurations.  

3. Provide your organization’s comments on the proposed reliability enhancements for storage resources, as described in the straw proposal:

Ancillary Services: 

EDF-Renewables requests further discussion on this topic. It is unclear to EDF-Renewables at this time why storage resources should be subject to Ancillary Services accountability that is above existing testing and claw back rules in place for generators providing Ancillary Services, and if such disparate rules represent equitable treatment under the tariff. 

Exceptional Dispatch:  

EDF-R supports the proposed exceptional dispatch functionality, with some reservation about the complexity of implementing reference interval discharge price formulation.  

4. Provide your organization’s comments on the proposed co-located enhancements, as described in the straw proposal:

EDF-Renewables is following the grid charging functionality enhancement proposal closely. ITC rules can drive financial considerations and ITC requirements can appear in solicitation activities with potential off-takers. The approach presented in the paper provides generators a with enhanced functionality to meet ITC requirements and EDF-Renewables is optimistic about the direction of the discussion.  

5. Provide your organization’s comments on the proposed EIM classification for this initiative, as described in the straw proposal:

EDF-Renewables supports the classification. 

1. Please provide a summary of your organization’s general comments on the straw proposal presentation for this initiative:

GDS Associates, Inc. (GDS) appreciates this opportunity to comment on the Energy Storage Enhancements straw proposal.

• GDS supports the innovative new ESR model because it resolves the root cause of most storage market participation issues experienced today.
• GDS recommends the proposed ESR model be limited to 10 total steps that scheduling coordinators can use on either the charge or the discharge curve (not 5 each, but 10 in total).
• GDS recommends the CAISO pursue improvements to the exceptional dispatch tool in parallel to this stakeholder process and implement those improvements as soon as possible, without waiting for changes to settlement rules for exceptional dispatches to hold state-of-charge
• GDS recommends the CAISO investigate alternatives to the proposed settlement for exceptional dispatch to hold state-of-charge that would be more efficient and reasonable.
• GDS recommends that the proposed exceptional dispatch settlement should apply to all resources (not just energy storage resources) where an exceptional dispatch holds them back from a higher output when their offers are otherwise in-the-money.
• GDS recommends the CAISO use the proposed exceptional dispatch enhancements to the greatest extent possible to resolve local area reliability issues, rather than pursuing enhancements to the minimum online commitment constraint.
• GDS recommends the CAISO (a) clarify whether the minimum online commitment constraint proposal will be priced in the market, (b) discuss the potential for market power in the local area, (c) discuss how market power concerns are resolved, and (d) discuss the resource selection criteria operators will use and describe any potential for discriminatory treatment.

2. Provide your organization’s comments on the proposed energy storage resource model, as described in the straw proposal:

Energy storage resource model

The CAISO proposed a new “energy storage resource” model that should go a long way towards allowing asset owners and operators to accurately represent their operating costs to the market. GDS Associates, Inc. (GDS) supports this innovative new model because it resolves the root cause of most storage market participation issues experienced today. GDS is delighted that the CAISO decided to tackle this very important issue that we described during the July 2021 energy storage workshop.

The proposed bidding interface allows asset operators to accurately bid their marginal costs into the market and therefore will increase overall market pricing and dispatch efficiency. The proposed model (a) allows asset operators to more accurately reflect their true marginal costs to the market where the cost of an increment of energy varies depending on the resource’s state-of-charge, (b) allows asset operators to represent temporal opportunity costs in their offers in the real-time market, and (c) allows asset operators to more accurately reflect operating constraints due to ramp limitations and operating limitations at the extremes.  Additionally, and importantly for California, the new model has several features that give it flexibility to support a wide range of storage technologies expected to come online in the future.

• GDS recommends the model be limited to 10 total steps that scheduling coordinators can use on either the charge or the discharge curve (not 5 each, but 10 in total).

3. Provide your organization’s comments on the proposed reliability enhancements for storage resources, as described in the straw proposal:

Exceptional dispatch

The CAISO proposed new functionality that will allow system operators to dispatch energy storage resources to hold a certain state of charge, in addition to the traditional exceptional dispatch.

Any improvements to the operator’s out-of-market exceptional dispatch tool that are needed to efficiently control energy storage resources should be implemented without delay to bring the maximum reliability benefit to consumers as the number of interconnected storage resources increases. Any improvements should not be delayed as stakeholders explore compensation for exceptional dispatches to hold state-of-charge because the operators are already exceptionally dispatching energy storage resources to hold state-of-charge today.  Exceptional dispatch tool improvements will make the current practice more efficient and reduce the burden on system operators.

• GDS recommends the CAISO pursue improvements to the exceptional dispatch tool in parallel to this stakeholder process and implement those improvements as soon as possible.

Compensation for exceptional dispatch to hold state-of-charge

The CAISO proposed that resources issued exceptional dispatch to hold state-of-charge will be compensated at the difference between the prevailing market price during the exceptional dispatch and the reference interval discharge price.  As the number of energy storage resources on the system dramatically increases in the coming years and operators rely on exceptional dispatches, the proposed approximation technique will likely be grossly inaccurate and result in undue over-compensation.  Also, while the proposal directly discusses settlement prices, it lacks details on the dispatch quantity that the CAISO will pay those prices.  It’s not yet clear how the CAISO will determine the likely quantity that an energy storage resource would have been expected to provide absent the exceptional dispatch.  Finally, it is not clear why any settlement scheme developed in this stakeholder process shouldn’t also apply to any resource (not just energy storage resources) where an exceptional dispatch holds them back from a higher output when their offers are otherwise in-the-money.

• GDS recommends the CAISO investigate alternatives that would result in a more efficient and reasonable settlement for exceptional dispatches to hold state-of-charge.
• GDS recommends that the settlement should apply to all resources (not just energy storage resources) where an exceptional dispatch holds them back from a higher output when their offers are otherwise in-the-money.

Local area reliability

The CAISO proposed to enhance the minimum online commitment constraint to consider the energy that can be provided by energy storage resources.  It’s not clear how much more value this enhancement will bring over simply improving the exceptional dispatch tools for system operators.

Any proposal that could impact energy schedules or unit commitment should clearly state whether the proposal will be implemented in the market optimization or through out-of-market actions and whether the proposal will be priced in the market or not.  The current minimum online commitment constraint was built for unit commitment.  While it does tend to suppress prices in the local areas it is used, the resulting market prices still support the energy schedules and therefore do not send conflicting prices and dispatch quantities to scheduling coordinators.

GDS is concerned that using the minimum online commitment constraint to procure energy in addition to committing units will negatively impact the market unless the constraints are also priced into the market when binding.  If the CAISO prevents the constraint from impacting market clearing prices, scheduling coordinators will receive conflicting market prices and dispatch quantities which will incentivize scheduling coordinators to over or under produce. Unless priced, the constraint could also cause the market to publish prices that are inconsistent with the reliability need in the local area and muddy the important congestion management price signals.  Finally, if the constraint is designed to be priced in the market, the CAISO’s next proposal should (a) discuss the potential for market power in the local area, (b) discuss how market power concerns are resolved, and (c) discuss the resource selection criteria operators will use and describe any potential for discriminatory treatment.

• GDS recommends the CAISO use the proposed exceptional dispatch enhancements to the greatest extent possible to resolve local area reliability issues, rather than pursuing enhancements to the minimum online commitment constraint.
• GDS recommends the CAISO (a) clarify whether the proposal will be priced in the market, (b) discuss the potential for market power in the local area, (c) discuss how market power concerns are resolved, and (d) discuss the resource selection criteria operators will use and describe any potential for discriminatory treatment.

4. Provide your organization’s comments on the proposed co-located enhancements, as described in the straw proposal:

No comments at this time.

5. Provide your organization’s comments on the proposed EIM classification for this initiative, as described in the straw proposal:

No comments at this time.

1. Please provide a summary of your organization’s general comments on the straw proposal presentation for this initiative:

The Long Duration Energy Storage Association of California (LDESAC) appreciates the opportunity to comment on the straw proposal and would like to note that even though the storage proposal is broad enough in some areas, there are still opportunities to note the role, importance and differenation of long duration energy storage (LDES).  The LDESAC would like to ensure the model improvements also inclusive of the many attributes and services of the diverse range of LDES technologies and projects. 

As noted in the straw proposa, the puropse is "to include detailed solutions for resolving issues related to the integration, modeling, and participation of energy storage in the ISO’s market." And the LDESAC would like to ensure all aspects of long duration energy storage are included and identified. 

The LDESAC would be more than happy to assist with the creation and support of a long duration energy storage working group. 

2. Provide your organization’s comments on the proposed energy storage resource model, as described in the straw proposal:

The energy storage resource model proposed by the CAISO must have flexibility to allow for operators to manage longer durations of state of charge in the real-time markets. How does the model consider storage with 8-10hours of charge as well as multi-day/di-urnal and seasonal storage? 

The CAISO proposed energy storage resource model includes the ability to enforce a minimum transition period, in minutes, between charging and discharging, which should also be attributed to LDES technologies. 

The CAISO should make sure when storage resources were completely committed for ancillary services for multiple hours they consider not just short-term but long term benefits of LDES to still have the ability to charge or discharge over longer durations of time as well as different types of compenstation for exceptional dispatch.

The LDESAC looks forward to working wtih the CAISO and stakeholders on additional components to ensure LDES assets are included in the model appropriately.

3. Provide your organization’s comments on the proposed reliability enhancements for storage resources, as described in the straw proposal:

The LDESAC asks the CAISO to please consider the additional questions outling a long duration energy storage perspective: When the ESR bid curve submits a bid segment, are the segments limited to a number of hours or can each bid segment range from 4-100 hours? And how would this be accounted?  Would LDES have different credits for Pmin/Pmax state of charges as well as transition times between charging and discharging over longer periods of time? Is there compenstation for charging from what would have otherwise been curtailed renewable energy in emergency situations? Does the model allow for additional enhancements that could help storage scheduling coordinators improve their control over the state of charge for over eight hours and or multiple days? 

4. Provide your organization’s comments on the proposed co-located enhancements, as described in the straw proposal:

The LDESAC looks forward to more discussion on co-located storage and clean energy resources expecially concerning multi-day events and benefits of long duration energy storage resources. 

5. Provide your organization’s comments on the proposed EIM classification for this initiative, as described in the straw proposal:

The LDESAC looks forward to more conversations regarding both EIM and EDAM storage classificiations and how the CAISO envisions this initiative incorporating diverse long duration energy storage technologies. 

Thank you. 

1. Please provide a summary of your organization’s general comments on the straw proposal presentation for this initiative:

As with the Issue Paper and workshop presentations, LSA/SEIA’s comments here focus on Mixed-Fuel Resources (MFRs) combining Variable Energy Resources (VERs – solar or wind) and storage, in a Co-located Resource (CLR) configuration.  Our comments are summarized below.

• LSA/SEIA are delighted that the CAISO included these issues in the initiative scope:

• Grid-charge management for CLR MFRs

• Pseudo Tie eligibility for Aggregate Capability Constraints (ACCs) 

The Proposal includes solid market-design proposals in both these areas.  LSA/SEIA support these proposals, with some revisions and requested clarifications.

• LSA/SEIA are disappointed that the Proposal does not do the following:

• Address the other issues raised in our earlier workshop presentation, namely: (1) clarify other available tools for grid-charging management of storage CLRs under current market rules; or (2) consider additional tools for grid-charging management of storage CLRs.

• More generally, follow what used to be common practice in CAISO initiatives, i.e., acknowledge and respond to each comment made by stakeholders in the Proposal document.  As we stated in our last comments, lack of this CAISO feedback leaves stakeholders wondering whether the CAISO noticed or considered their input, e.g., why those suggested issues or recommendations (e.g., those mentioned in the bullet above) were not included in the initiative scope or addressed in the Proposal.  

LSA/SEIA again ask that the CAISO: (1) Provide the requested clarification of current market rules; and (2) explain whether their other reform suggestions were considered and, if so, why they were not included in the Proposal.

2. Provide your organization’s comments on the proposed energy storage resource model, as described in the straw proposal:

3. Provide your organization’s comments on the proposed reliability enhancements for storage resources, as described in the straw proposal:

4. Provide your organization’s comments on the proposed co-located enhancements, as described in the straw proposal:

LSA/SEIA comments below both: (1) Provide feedback for the specific proposals in the Proposal; and (2) request CAISO responses to earlier clarification requests for current market rules and LSA/SEIA reform proposals.

FEEDBACK ON SPECIFIC PROPOSALS IN THE STRAW PROPOSAL

As noted under #1 above, LSA/SEIA support the CAISO’s proposals for grid-charging management and Pseudo Tie eligibility for ACCs.  The reasons for this support, along with suggested modifications and clarifications for the grid-charging management proposal, are explained further below.

GRID-CHARGING MANAGEMENT FOR CLR MFRs

The Proposal contains a concept reflecting the CAISO’s understanding that, consistent with LSA/SEIA’s earlier comments, the ability to limit grid charging is absolutely critical to the economic viability of MFRs, due to the importance of the Investment Tax Credit (ITC) and property-tax exemptions in project financing and operations (both of which depend on such limits). 

The three main elements of this concept in the Proposal are excerpted below.

1. Real-time dispatch:  “The ISO proposes new functionality for co-located storage resources in the day-ahead and real-time markets…The ISO proposes an electable functionality to limit dispatch instructions for storage resources so that they are no greater than the forecast of co-located renewable resources.”

2. Exceptions:  “This functionality will not precent storage resources from receiving instructions to charge from the ISO in excess of dispatch instructions issued to co-located VER resources in all instances.  If the ISO issues dispatch instructions to economically curtail output from VER because there is more supply on the system than demand, the ISO will not reduce charging instructions to co-located storage resources." 

3. Real-time deviations:  “Finally, the ISO proposes that storage resources be allowed to deviate down from dispatch schedules during intervals when co-located renewables are only able to produce less than forecast…The storage resource may not deviate beyond the difference in scheduled and actual energy from the variable resource and is required to charge at the level of output from the VER resource when deviating from dispatch instructions.”

This concept would provide a degree of control to CLR owners to limit grid charging.  However, we have issues and questions, detailed below, with each of the three elements above, and more generally how this concept would interact with other current and proposed market-design features.

Real-Time Dispatch (element #1 above):  LSA/SEIA support this functionality but request the modifications and clarifications described below.

• “Electable functionality:”  CLR owners would have to elect to use the new concept, and the election would be associated with the storage CLR specifically (since it does not impact scheduling, dispatch, or settlement for the VER CLR).  The owner would have to provide:

…documentation that the associated storage resource is part of an energy project eligible and planning to apply for investment tax credits and the expected window that the facility will be eligible to receive investment tax credits (i.e. 5 years).  At that time the ISO will implement this logic for the specified eligibility timeframe of the investment tax credit.

LSA/SEIA have no problem with the electability feature in general, and the details of the required demonstration can probably be addressed in BPM changes.  However:

• The electability of this feature should be more granular, or contain a real-time override for the CLR owner or Scheduling Coordinator (besides the CAISO’s override in element #2 – see below).  The concept assumes that the grid-charging election is an all-or-nothing prospect, i.e., the storage CLR could elect only unlimited grid charging or none at all.  However, as the Proposal recognizes, limited grid charging could be economic under certain circumstances, and not all PPAs prohibit it.  (In fact, LSA/SEIA assume that the CAISO is hoping that offering this grid-charging management tool to prevent such prohibitions in future PPAs, and/or encourage already-contracted parties to loosen such restrictions via contract modifications.)

Thus, LSA/SEIA recommend that the CAISO include in the concept design some ability to disable this feature, e.g., on an hourly basis or based on market parameters (e.g., market energy prices below a specified level).

• The eligibility rules should also consider property-tax issues.  While the Proposal mentions property-tax issues at p.16, the eligibility requirements do not consider them. 

The Proposal says “The ISO would like to continue to understand these concerns better to develop the best policy possible to facilitate these resources and assess the prevalence for these kinds of tax implication.”  Rather than have the CAISO immerse itself in local property-tax issues, LSA/SEIA recommend eligibility-requirement modifications to allow participation extension beyond 5 years based on significant property-tax issues, perhaps with a materiality threshold.

• Forward scheduling issues:  The Proposal says the new concept would apply to the “day-ahead and real-time markets” but only mentions real-time operational and settlement issues, e.g., Dispatch Instructions, deviations from them, and resulting settlements impacts.  LSA/SEIA ask that CAISO clarify whether/how this proposal would apply to forward schedules in either Day Ahead or Real Time markets, e.g., how the Day Ahead market would be affected.

Exceptions (element #2 above):  The Proposal states that the market would override the VER-storage balancing concept when the CAISO is issuing Dispatch Instructions “to economically curtail output from VER because there is more supply on the system than demand.”  There are two reasons that the CAISO would be curtailing the VER CLR in real time.

The first is resource-specific, i.e., if the VER CLR is being curtailed pursuant to an economic bid submitted for the resource.  (This would include any Ancillary Services bids, though A/S certification is not common for VERs).  This type of curtailment is usually called “economic curtailment” in CAISO documents (e.g., presentations at Market Planning & Performance Forums).

The second is reliability-related, i.e., if the CAISO has run out of economic bids and is curtailing VER (and other) resources that submitted self-schedules, for either congestion or over-generation reasons.  This type of curtailment is usually called “self schedule” or “uneconomic curtailment” in CAISO documents.

However, based on the discussion at the stakeholder meeting, it appears that the CAISO is referring to the second kind of curtailment as “economic” for some reason, and that the concept does not address the first kind of curtailment at all.  The CAISO should provide this important clarification.

Finally, the CAISO should clarify whether the recently implemented Minimum State of Charge (MSOC) feature would provide another exception to exercise of this concept.  The MSOC ensures that storage CLR capacity is charged sufficiently to meet Day Ahead discharge schedules, so the CAISO should clarify whether the MSCO would override any charging reductions due to the proposed concept above.

Real-time deviations (element #3 above):  The Proposal says that the storage CLR “can only deviate down” “beyond the difference in scheduled and actual energy from the variable resource and is required to charge at the level of output from the VER resource.”  The CAISO should:

• Clarify that the meaning of “deviate down” here means reducing the level of charging.  (Some might call that “deviating up.”)

• Correct the language to say “the difference in dispatched and actual energy from the variable resource.” There could be a difference between: (1) the VER scheduled energy and the VER Dispatch Instruction; and/or (2) the VER Dispatch Instruction and the actual VER production.  This provision seems to refer to (2) and not (1).

PSEUDO TIE (PT) MFR ELIGIBILITY FOR ACCs

As stated above, LSA/SEIA appreciate the CAISO’s inclusion of this issue in the scope of this initiative.  We strongly support the CAISO’s proposal to allow PT MFRs in CLR configurations (PT MFR CLRs) the same access to ACCs as inside-CAISO resources, with the CAISO clarification that both Resource IDs “must be in the same BAA.”  (We interpret to mean that both the VER and storage CLRs are Pseudo Tied to the CAISO BAA, but CAISO should clarify that.) 

As noted in our Issue Paper comments and Workshop presentation, PT MFR CLRs have exactly the same need for ACCs – i.e., risks of “stranding” large amounts of capacity needed for both project economic viability and CAISO market needs – as inside-CAISO MFR CLRs.  Use of ACCs is completely compatible with PT firm-transmission requirements; that requirement is based on interconnection service capacity and maximum simultaneous output at the point of interconnection, not installed generation/storage capacity behind the interconnection.

In addition, this change is needed to correct a serious process violation.  The current prohibition against MFR PT Resource use of ACCs: (1) Was never addressed in the Hybrid Resource Initiative stakeholder process; and (2) was not prohibited in the tariff language, only mentioned in the FERC filing cover note.  LSA/SEIA believe that it therefore should never have been included in the filing cover note and support the CAISO’s proposed “fix” in this initiative.

CAISO RESPONSES TO OTHER LSA/SEIA CLARIFICATION REQUESTS AND RECOMMENDATIONS

The Proposal states in Section 3.4 as follows:

The ISO understands that there may be additional changes that stakeholders would like to be considered, but are not addressed in this proposal. At this time, the ISO will continue to consider additional changes, but is not currently including them in the proposal. Please include comments on critical additional topics that are not covered in this proposal but should be considered in this initiative.

With all due respect, stakeholders cannot be sure that the CAISO has noticed and/or seriously considered their proposals unless the CAISO acknowledges and responds to those proposals.  It is also important that stakeholders understand, not only the reasons for subsequent CAISO proposals, but also the reasons why the CAISO did not include those not accepted.  It is frustrating for stakeholders to develop proposals for CAISO consideration and then have no idea why they were not included. 

That is why we specifically included a request in our last comments for CAISO responses to “all points raised in stakeholder comments.”  The points raised below – requests for clarification of current CAISO policy, and suggestions for additional grid-charge management options – are important, and LSA/SEIA again request that the CAISO address them in this initiative.

LSA/SEIA’s EARLIER CLARIFICATION REQUESTS FOR CURRENT MARKET RULES 

As noted above, LSA/SEIA support the CAISO’s grid-charging management concept in the Proposal.  However, in their earlier workshop presentation, LSA/SEIA requested that the CAISO clarify whether certain grid-charging management tools that may be available now, under current market rules for MFRs in a CLR configuration; these questions were based on lack of clarity of past CAISO statements on this issue. 

LSA/SEIA summarize those requests below – modified slightly in light of the Proposal content – and ask again that the CAISO please provide the requested clarifications in this initiative.

• MFR CLR use of their own “limiting schemes” (software or physical limitations) to limit grid charging, based both on long-standing guidance below in the CAISO’s 2016 Technical Bulletin on MFRs and subsequent statements in the Hybrid Resources Initiative Straw Proposal and Revised Straw Proposal. 

• CAISO Technical Bulletin (2016):  Projects with multiple Resource IDs could have “all options,” including charging “from on-site generation only.” (p.12)  (Table also included in Hybrid Resource Initiative Revised Straw Proposal.)

• Hybrid Resources Initiative Straw Proposal & Revised Straw Proposal:  “Metering” sections included information for facilities configured as CLRs charging only from on-site generation, saying “A limiting scheme must be in place to prevent charging from the grid.”

• Aggregate Capability Constraint (ACC) minimum setting at zero.  As stated in LSA/SEIA’s last comments, this solution would allow storage CLRs to fully offer their entire positive and negative operating range in CAISO markets (even where not required by their Must-Off Obligations (MOOs)) without fear that doing so would expose them to large grid-charging risks.  This option can be accommodated within the current ACC functionality, without any tariff or software changes.

LSA/SEIA’s OTHER GRID-MANAGEMENT TOOL SUGGESTIONS  

LSA/SEIA recommended consideration of other tools as well, including (but are not limited to) those listed below.  LSA/SEIA again request that the CAISO consider these suggestions and respond to them, including explanations for why the CAISO did not include them in the Proposal.

• Additional Master File options, e.g., separate storage CLR Pmin parameters for physical limitations and market-dispatch limitations.  For example, the former could apply during System Emergencies and the latter could apply at all other times.

• Expanded storage CLR flexibility, since the Minimum State of Charge (MSOC) ensures availability for subsequent hourly schedules (and, presumably, any MSOC replacement would do the same).  For example, the CAISO could:

• Revise real-time dispatch software so that storage CLRs could elect to have CAISO Dispatch Instructions reflect the storage flexibility already allowed, i.e., automatically increase storage CLR charging or reduce discharging where real-time VER output is above schedule.

• Allow storage CLRs to exercise storage flexibility (in both directions) in intervals when providing A/S, subject to the MSOC. 

• Bid/payment “adders” where storage CLR grid charging would result in loss of ITC and other tax benefits.  These could be similar to greenhouse-gas adders, though possibly more complex to design.

5. Provide your organization’s comments on the proposed EIM classification for this initiative, as described in the straw proposal:

1. Please provide a summary of your organization’s general comments on the straw proposal presentation for this initiative:

• While MRP appreciates the CAISO's willingness to explore new market partipcaiton models for Energy Storage Resources (ESRs), MRP encourages the CAISO to consider a market partipation model that would better manage cycling and ESR mileage than the State Of Charge (SOC) model discussed in the straw proposal.  
• While MRP supports the CAISO's proposed reliabilty enhancements, MRP encourages the CAISO to ensure that CAISO market prices reflect the most valuable use of limited ESR SOC.
• MRP suports the CAISO's efforts to develop co-located resource functionality that helps manage grid charging.  MRP encourages the CAISO to coordinate the Resource Adedquacy implications of that functionality with other CAISO Resource Adequacy stakeholder efforts.  
• MRP supports the proposed EIM classification.

2. Provide your organization’s comments on the proposed energy storage resource model, as described in the straw proposal:

MRP appreciates the CAISO’s willingness to consider non-traditional market participation models for energy storage resources (ESRs) that better reflect ESR’s operating characteristics.  The CAISO’s proposed ESR model, which would allow Scheduling Coordinators (SCs) for ESRs to submit energy bids to charge and discharge that are a function of the ESR’s state of charge (“SOC”), would likely improve ESR participation in the CAISO’s energy markets.  The ESR model features that also allow for different ramp rates depending on the state of charge (“SOC”), would also improve ESR participation in the CAISO’s energy markets compared to the existing Non-Generator Resource market participation model. 

That said, MRP perceives that the proposed ESR model suggests “binary” (i.e., charging or discharging either at full capability or not at all) participation in the energy market based on the resource’s SOC.  In other words, MRP is not sure how the proposed ESR model would allow for different MW levels of charging or discharging based on the market price and the resource’s SOC.   MRP requests the CAISO clarify whether MRP’s perception is correct and, if it is, whether this is what the CAISO intends, or whether there is an aspect to the ESR model that MRP does not yet appreciate. 

Finally, while MRP appreciates the CAISO’s forward-looking thinking about a participation model, MRP offers that there an even more important storage operating characteristic on which the CAISO should focus in its quest for an improved market participation model – limitations on daily ESR cycles of energy storage systems.  Given that ESRs incur significant degradation based on how frequently, and to what depth, they cycle, MRP encourages the CAISO to consider a market participation model that would help limit how much a storage resource can be called on to charge and discharge over the course of a day,  In MRP’s experience, daily cycling limits are included in almost all Energy Storage Power Purchase Agreements, which means that off-takers will need to find ways to manage this limitation.  Unless the CAISO allows off-takers to include these limits in their resource master files, and the CAISO market software respects these limits, off-takers will need to find some way to include and enforce these limits by proxy.  This will likely result in highly sculpted CAISO market offers that overly limit ESR use and do not reflect ESRs’ true flexibility.  Ultimately, off-takers may resort to using outage cards to avoid violating the cycling limits in their PPAs.  Consequently, a better approach would be to allow ESR owners to use “mileage” as a variable to optimally manage ESR market participation.  As MRP understands, this model, consisting of a mileage counter and a mileage adder, has been used successfully in other RTOs, such as PJM.  A mileage counter would track an ESR’s charging and discharging over the course of the day.  A mileage adder would add (or perhaps subtract) a set $/MWh amount to the offer price to reflect the additional cost of further cycling the ESR.  MRP believes that such a model would prove even more valuable to storage developers and operators than models that base an ESR’s economic willingness to charge or discharge based on the resource’s SOC.    

Again, MRP appreciates the CAISO’s willingness to consider ESR market models outside of traditional models.  MRP supports the CAISO’s efforts to match the market model to the machine.  Market participation models that do not reflect ESRs’ non-traditional operating characteristics will result in SCs trying to manage those operating characteristics through what is likely to be suboptimal economic bidding, which, in turn, will result in both suboptimal market outcomes and resource performance. 

3. Provide your organization’s comments on the proposed reliability enhancements for storage resources, as described in the straw proposal:

MRP supports the CAISO having the ability to issue exceptional dispatch instructions for a resource to hold state of charge and developing an opportunity cost methodology to compensate ESRs for such exceptional dispatches. 

MRP also encourages the CAISO to consider what price formation enhancements may be needed to accompany this new functionality.  In other words, if the CAISO issues an exceptional dispatch instruction to an ESR to hold state of charge because the CAISO perceives a higher reliability value for that ESR’s energy or capability at a later time, but the prices at the later time do not reflect the higher reliability value for that energy or capability, the link between market prices and reliability value will be disconnected, to the CAISO’s and the market’s detriment.   

4. Provide your organization’s comments on the proposed co-located enhancements, as described in the straw proposal:

MRP supports the CAISO’s efforts to develop a co-located resource functionality that better helps the SC manage the grid-charging risks for the ESR.  MRP strongly agrees that the resource adequacy implications, including the must-offer obligation, resource counting, and RAAIM implications of the co-located resource functionality must be considered and coordinated with other affecting proposals being developed within the RA Enhancements initiative. 

5. Provide your organization’s comments on the proposed EIM classification for this initiative, as described in the straw proposal:

MRP supports the CAISO’s proposed classification.

1. Please provide a summary of your organization’s general comments on the straw proposal presentation for this initiative:

PG&E appreciates the CAISO’s effort of improving control over the state of charge for scheduling coordinators. [HT1] [WJ2] 

PG&E requests that the CAISO prioritize the urgent issues of reliability enhancements, specifically exceptional dispatch and ancillary services. PG&E finds the proposed ESR model could lead to significant complexities in implementation, which requires much more thorough development and iteration with market participants. Finally, PG&E requests clarification of the equal treatment of co-located resources and storage in the proposed reliability enhancements.  

 [HT1]@Wang, JK After reviewing the straw proposal, I think there are more than three components. One missing from our summary is compensation for ED to maintain SOC. I think we should consider removing this section and focus on our open concerns.

Removed as suggested. [WJ2]

2. Provide your organization’s comments on the proposed energy storage resource model, as described in the straw proposal:

PG&E requests more detail to understand how the proposed energy storage model performs in the market clearing process by addressing the concerns outlined below on dispatch uncertainty, computation infeasibility, and price formation impacts.

PG&E has the following concerns:

• Significant Implications of SoC Stage Transitions. Since market dispatch is based on the least-cost principle, batteries will be dispatched to charge at the lowest price and discharge at the highest price across an optimization span (e.g., 24 hours in the DAM). Therefore, battery trajectories are likely to cross multiple SoC stages (i.e., a segment of SoC) within one-hour intervals, unless specifically forbidden by the ESE model. Such SoC stage transitions have significant implications, including:
  • Dispatch uncertainties: Since the bid price depends on a battery’s SoC, a battery’s dispatch instructions could vary greatly between DAM and RTM. In the DAM, with the proposed model, each hour is only associated with a single SoC stage. There are two problems with this setup.
    • Firstly, a single SoC stage will not capture all stage transitions in the intervals within that hour in real-time (i.e., four 15-min intervals in FMM and 12-min intervals in RTM).
    • Secondly, it is not guaranteed that the battery will end at an SoC at the last interval of the hour in real-time, which is exactly the same as the SoC in DAM. Consequently, the SoCs at the beginning of all the subsequent hours in real-time will deviate from those calculated in the DAM.

PG&E worries these dispatch uncertainties could distort market decisions (e.g., unit commitment) and price signals in DAM and suggests the CAISO consider limiting the use of the model to RTD only.

• • Settlement complexities: For the reasons above, PG&E is concerned about the resulting settlement complexities and requests the CAISO to provide examples of how the batteries are settled.
  • A/S provision limitation: Does the ESR model require a transition (even a transition without a transition time or cost) between charging and discharging states?. If so, PG&E requests the CAISO clarify whether the resources would still be able to simultaneously provide reg up and reg down from a zero dispatch, which is allowed by the current resource models.

• Computational infeasibility. PG&E questions the computational feasibility of integrating the proposed model in the market optimization process.  The CAISO stated in the xx meeting that the ESR model is convex. This is not true. The implementation of the ESR model would require the market optimization to examine multiple segments of SoC bid prices in a single interval of optimization. Provided alongside other attributes in the proposed model (e.g., ramp rates change, discrete transitions between charge/discharge), PG&E is concerned the current DAM’s interval granularity would not permit such an optimization and cautions the CAISO against significant computational burden, if not infeasibilities.   

• Impact on Price Formation. PG&E requests formulation of the proposed model integrated into the current market clearing process, as well as the examples that help disseminate the price formation with the proposed model. The proposed ESR model changes the definition of LMP, by introducing a pricing component dependent on system marginal SoC. PG&E questions whether such a change is compliant with FERC requirements.

Finally, the Straw Proposal states:

The energy storage resource model would include two different incremental SOC bids, one for charging and one for discharging, each with up to 10 segments. Each bid curve will span a state of charge range from a biddable minimum state of charge to a biddable maximum state of charge. An energy storage resource will be scheduled to charge, discharge, or remain at the same state of charge according to the cost reflected by its charging and discharging bid curves.

We take the following characteristics of the proposed storage model (i.e., the ESR model):

1. Incremental and decremental bid curves apply to pre-defined storage segments: i.e., when SoC is between 100 MWh and 200 MWh, discharge energy is bid at $50/MWh (a bid to decrease SoC) and charge energy is bid at $30/MWh (a bid to increase SoC) for a specified market time interval. Those segments in the SoC bid curve are analogous to configurations in the Multi-Stage Generator (MSG) model, each of which contains an energy bid. 
2. Ramp rates may vary with SoC range.
3. Batteries can bid A/S. 
4. A discrete transition between charge and discharge states, possibly including a time required for transition.

PG&E requests that the CAISO confirm that the above understanding of the model is correct.

3. Provide your organization’s comments on the proposed reliability enhancements for storage resources, as described in the straw proposal:

PG&E recommends that the CAISO prioritize addressing the urgent issues of reliability enhancements for storage resources in Exceptional Dispatch (ED) and Ancillary Services (A/S). PG&E is concerned that the proposed reliability enhancements will not adequately replace the Minimum State of Charge Constraint and requests clarifications on the calculation of storage opportunity costs. In addition, PG&E thinks that the proposed enhancements for ancillary services could result in resources’ shortfall of Bid Cost Recovery (BCR) and potential gaming opportunities.

On Exceptional Dispatch

• PG&E requests clarification of whether the CAISO is eliminating the Minimum State of Charge Constraint (Minimum SoC). If so, PG&E is concerned that the proposed reliability enhancements are inadequate to replace Minimum SoC, which is critical for the system to automatically respond to emergency events (e.g., Summer 2021).

PG&E understands that the proposal of Exceptional Dispatch[HT1] [WJ2]  intends to address the compensation issue for storage resources. However, the proposed enhancement does not guarantee that the power system retains the amount of energy necessary to respond to system emergencies, and thus could lead to higher reliability risks.

Therefore, PG&E believes CAISO should retain the Minimum SoC requirements and supports the development of compensation methods in conjunction with the solution being developed.

• In addition, PG&E is concerned that the proposed use of EDfor SoC management is inconsistent with existing practices and could result in gaming opportunities. The proposal has two elements of DE[1]:

1. Expanding the ED authority to include holding state of charge (a.k.a., EDSoC)
2. Compensating ED to hold state of charge at opportunity cost.

Under current practice, units are compensated only when operators take out-of-market actions; they are not compensated if are not dispatched, even if the ED instructions prevented them delivering more power. The proposal (of compensating storage for holding SoC) deviates from the current practice. PG&E is concerned that market participants could bid strategically to get compensated by holding SoC and but avoiding dispatch.

• In addition, PG&E requests the CAISO address the following issues
  • Equal Treatment of the model. The proposed enhancement limits the discussion of holding SoC to batteries’ discharge. PG&E requests the CAISO clarify whether the outline of the concept will be extended to allow compensation for units that are prevented from charging by an EDSoC
  • Difference between EDSoC and an End-of-Hour SOC restriction. It is expected that an operator EDSOC instruction would take operational and financial precedence, if it induced unit behavior that was inconsistent with, or more burdensome than, an End-of-Hour SOC restriction. However, it is important for stakeholders to understand the distinction interaction between these two concepts. 
• PG&E requests the CAISO to provide further details on how the compensation of opportunity costs will be calculated for units under EDSoC instructions. Additionally, PG&E requests the CAISO to clarify:  
  • Definition of EDSoC “Quantity.” Since EDSoC instruction prevents the unit from responding to market signals, it is not straightforward for market participants to determine the appropriate MW quantity as it is during ED of energy.  PG&E requests the CAISO to provide scenarios of how to determine the final opportunity cost amount that a restricted unit will be eligible to receive.  PG&E identified a few starting questions towards establishing this eligible quantity:
    1. What if a unit was uneconomic during portions of the EDSoC instruction?
    2. What if the unit award Qty would have changed during EDSoC instruction because of market economics? For example, resources that are less expensive than storage are available for ED and storages are not economic to be called.  [HT3] [WJ4] 
    3. What if a unit fails to follow instructions to hold SoC?  Does there need to be a cost recovery disqualification process and, if so, what would the associated thresholds be?
  • Target price of opportunity cost. PG&E understands that re-running and generating new prices would be computationally difficult and very burdensome. It seems a reasonable starting point to apply market prices in calculating resources EDSoC opportunity cost.  However, PG&E cautions the CAISO that using the prevailing prices during the ED period may result in over-compensation to the storage resource. This pricing concern will become more problematic as the overall amount of SoC that could be held back from the market within the CAISO and EIM markets increases.

PG&E requests the CAISO consider the settlement complexities of this proposed process and ensure consistent cost calculation for different markets in future proposal development.

Finally, PG&E requests that the CAISO clarify whether the proposed reliability enhancements for ESR are applicable to co-located resources, as detailed in Comment 4.

On Ancillary Service

• PG&E is concerned the proposed reliability enhancement for Ancillary Service (A/S) could result in resources’ shortfall of Bid Cost Recovery (BCR) and potential gaming opportunities. In the proposal, ancillary service awards for storage resources are required to be accompanied by bids for energy. PG&E requests clarification on how the CAISO would dispatch a unit to adjust its SoC if these bids were consistently uneconomic.  For example,
  • If a storage resource, providing spin or regulation up reserves, submitted bids to charge only at -$100 or lower, how would this process work?
  • Likewise, assuming this unit has a more reasonable charging bid. However, it is never economic as it approaches its lower SoC limit. What would be the expected outcome?

[1] CAISO Market & Infrastructure Policy, “Straw Proposal of Energy Storage Enhancements,” December 9, 2021.

 [HT1]@Wang, JK We should be consistent with ED and A/S as capitalized terms throughout the document if that is the intent.

addressed [WJ2]

 [HT3]@Wang, JK I’m not sure I understand the question we are asking. Can we please rephrase?

Added an example. [WJ4]

4. Provide your organization’s comments on the proposed co-located enhancements, as described in the straw proposal:

PG&E requests the CAISO clarify, for co-located resources, whether curtailment of battery charging from on-site renewables is applicable to the scenarios of the reliability enhancement in the proposal.

The CAISO proposes that co-located resources may elect an operating mode that will prevent on-site storage from receiving dispatch instructions in excess of co-located renewable output. PG&E understands that this is due to ITC requirements that prohibit batteries charging more than the energy coming off from on-site renewables. However, the reliability enhancements of the proposal (e.g., ED to hold state of charge, local reliability charging requirements, and charging bids to support A/S) could all require charging from the grid, and not only from the co-located resource.  It should be pointed out along with the prohibition on curtailment of charging during reliability over-generation events.

5. Provide your organization’s comments on the proposed EIM classification for this initiative, as described in the straw proposal:

1. Please provide a summary of your organization’s general comments on the straw proposal presentation for this initiative:

We appreciate the CAISO’s commitment to understanding and addressing stakeholders’ concerns. Many of the proposed changes demonstrate that CAISO is rapidly improving it’s understanding of energy storage resource capabilities, particularly from an economic or contractual perspective.    

We want to ensure that CAISO recognizes and acknowledges that PNM and other entities will have contractual and economic constraints that it must respect when managing their energy storage resources.  

2. Provide your organization’s comments on the proposed energy storage resource model, as described in the straw proposal:

PNM is in favor of this new model.

3. Provide your organization’s comments on the proposed reliability enhancements for storage resources, as described in the straw proposal:

 PNM has no comments on this item at this time.

4. Provide your organization’s comments on the proposed co-located enhancements, as described in the straw proposal:

1) 3.2.3 - Based on the proposal, it is clear from the document that CAISO will have authority to instruct ESRs to hold state of charge and to compensate ESRs for lost opportunity for following this instruction.  It is also clear that the BAAs will have authority to instruction ESRs to hold SOC (section 3.2.3).  However, it is not entirely clear whether the BAA will have authority to compensate an ESR for lost opportunity when the ESR is following instruction to hold SOC based on a BAA’s exceptional dispatch instruction.  We are requesting additional clarification from CAISO on whether the BAA’s ED instruction to hold SOC will be treated as a CAISO EIM instruction and whether this will make the ESR eligible to recover its lost opportunity, as it would if it were a resource in the CAISO BAA getting an instruction from CAISO.

2) 3.3.1 – The Straw Proposal states “The ISO is not proposing any changes to the settlement system to accommodate these proposed rule changes. Storage resources that elect this alternate co-located model, and do not fully meet dispatch awards to charge will be subject to associated imbalance energy charges for those differences.” 

We would like to consider additional changes to ensure a resource could be held “cost neutral” if the reason for not fully meeting dispatch is only to follow a contractual requirement to charge from co-located solar only.  If there is no solution to prevent an ESR from losing money due to the grid charging limitation, the next best alternative would be if CAISO can minimize these imbalance charges. 

1. One approach may be to exempt ESR from UIE imbalance charges.  Most of the imbalance charges which could impact an ESR resource are likely to be in the UIE category.  This may be hard to accomplish without a modification to how CAISO is going to process the dispatch instruction to the resource.   Currently CAISO has an exemption for EIM entities from over scheduling charges if the EESC uses the forecast provided by CAISO.  An exemption for ESR resources from UIE imbalance charges due to forecast error may also be feasible.
2. Another approach could be modeling a hard constraint in the CAISO optimization engine which limits charging above solar output for units with contractual limitation.  Using the HSL (High Sustainable Limit) data may make it easier for CAISO to add such a constraint to the optimization.  The proposed constraint is based on the solar resource forecast.
3. A third approach may be to attempt to reduce the imbalance charges. For example, it may be possible to reduce the amount of imbalance charges if the forecast used in the 5-minute market is improved by reducing the time delay between the 5-minute forecast updates and the dispatch signal.  Or the ESR may be exempted from the first X% forecast error and only incur imbalance charges once the error exceeds some threshold.

3) 3.3.1 – For the proposal to solve the issue of grid charging, it needs to accommodate different grid conditions.  This includes the oversupply situation which is currently excluded from the proposal. ESR owner/operators cannot renegotiate contracts that have hard grid charging limitations. We don’t have exceptions for oversupply situations in our contracts. It would be important for our resources to have a solution that covers this case.

The over-supply scenario outlined in the straw proposal does not fully account for the actual economic, contractual, and technical limitations present in real-world ESRs. An instruction to charge from the grid with local solar curtailed, in many cases, would be infeasible by design in order to protect the investment of the asset owner (inclusive of ITC credit). A better solution would recognize this condition in the market optimization to avoid delivering infeasible dispatch instructions, which would only result in imbalance charges and not make any progress to stabilizing over generation conditions.

5. Provide your organization’s comments on the proposed EIM classification for this initiative, as described in the straw proposal:

PNM is in agreement with the current proposed classification though rule 2 and 3 could be more than just EIM advisory input depending on how the use of ED by an EIM BAA is allowed and impacts settlements/compensation

1. Please provide a summary of your organization’s general comments on the straw proposal presentation for this initiative:

REV Renewables (REV) appreciates CAISO’s work to enhance the operation and optimization of energy storage in the market. REV generally agrees with the direction of elements of the Straw Proposal, including proposals to fix high priority issues REV has previously identified of bid cost recovery (BCR) from exceptional dispatch (ED) and variable charging rates (addressed via the Energy Storage Resource [ESR] model).

However, REV is disappointed that the Straw Proposal does not include a proposal to address Multi-Interval Optimization (MIO), which is a key topic that REV has raised in previous comments and meetings. CAISO staff presented on MIO at the Market Surveillance Committee[1] on October 1, 2021, and showed an average 10-20% of intervals have dispatches that are out of merit for storage. CAISO staff also showed several MIO scenarios. REV understands and agrees with the scenarios where MIO holds back the storage resource due an Ancillary Service award obligations. However, scenarios 3, 4a, 4b, and 4c all show examples with out of merit dispatch due to MIO where advisory prices did not materialize, and MIO based off of these prices resulted in a loss to the resource relative to if real-time bids had simply been followed on binding interval prices. Additionally, BCR is zero dollars for the day even if money is lost due to MIO. Profits the resource would have earned are instead used to subsidize uneconomic dispatch outcomes, and risk is created for resources with Day Ahead schedules that cannot be confident CAISO will dispatch them to meet such schedules, regardless of bids. Any element of market design that makes full day ahead and real-time participation risky for a resource is not good, and CAISO’s current straw proposal ignores this risk.

REV strongly requests that CAISO include a proposal in response to MIO in its next straw proposal. While REV understands market predictions will never be perfect and system conditions change, there are solutions to alleviate negative MIO impacts. For example, at the Market Surveillance Committee meeting the members discussed weighting future intervals lower than nearer term intervals, which could help avoid out of merit dispatch in the binding interval for something it sees at the end of the horizon where uncertainty around price accuracy is highest. REV’s discussion with CAISO staff indicated support and interest in similar approaches, yet the current straw proposal does not include potential solutions.

At a minimum, CAISO should improve its BCR methodology to take account of out of merit and uneconomic MIO dispatch. The current BCR methodology looks at costs and revenues over the entire day, which misses these MIO losses. While each individual day may appear low, the frequency of MIO over days and months adds up to significant losses for all storage resources participating in real-time energy markets. BCR should be modified specifically for storage resources to factor in these losses. For example, the methodology could consider the lost opportunity cost of not dispatching during high priced periods because the resource was held due to advisory prices that did not materialize.

[1] CAISO Market Surveillance Committee, October 1, 2021 http://www.caiso.com/Documents/EnergyStorageEnhancementsMIO-Presentation-Oct1_2021.pdf

2. Provide your organization’s comments on the proposed energy storage resource model, as described in the straw proposal:

Although REV considers the NGR model pretty good in most respects, and indeed fixable with some of the concepts proposed in the straw proposal for ESR, REV supports the direction of the proposed ESR model and agrees it could be helpful to submit bids in terms of incremental state of charge. As described, this new model should resolve the issue of variable charging rates described in CAISO’s Issue paper, when a storage resource receives an infeasible dispatch when it is near full or near empty for reasons of technical limitations. REV has seen countless infeasible dispatch signals over the years and appreciates a solution to this issue. REV notes that the variable ramp rates as a function of SOC are less important; charge and discharge rates in MW as a function of SOC are what matters for alleviating infeasible dispatch signals.

REV looks forward to working closely with CAISO and stakeholders to develop additional details including how many SOC ranges can be submitted and how the multiple bid curves will interact with MIO.

3. Provide your organization’s comments on the proposed reliability enhancements for storage resources, as described in the straw proposal:

Ancillary Services

REV supports CAISO’s proposal that ancillary service awards for storage resources be accompanied with bids for energy. REV understands CAISO’s need to ensure sufficient state of charge to support the awards in the real time market.

Exceptional Dispatch

REV supports CAISO’s proposal to allow the ISO operators to dispatch storage resources to hold a certain state of charge (MWh), in addition to the traditional (MW) exceptional dispatch. Indeed operators already essentially can and do this type of signal, e.g., “charge your battery and then wait” type of ED’s have been received over the phone by our plants to the same effect. REV suggests that CAISO also ensure the current state of charge is also factored into the MW/MWh exceptional dispatch instructions to avoid unnecessary confusion and resource cycling.

Compensation for EDs to Hold State of Charge

REV agrees with the direction of CAISO’s proposal and appreciates the proposal to address this issue. In REV’s experience, lack of BCR after an ED has led to the most significant losses for resources, and this proposal is an important step to resolve this issue. REV generally supports CAISO’s proposed methodology that factors in the opportunity cost at the prevailing locational marginal price (LMP) compared to the reference interval discharge price.

REV requests further clarification and examples on how this compensation would occur. For example, the Straw Proposal notes that if the resource holds a state of charge and does not discharge later in the evening despite higher prices, then the reference interval discharge price will be set low at possibly $0/MWh. However, the resource may not discharge due to other conditions, such as low prices in the evening that are outside of the bid curve then the resource should receive compensation at the LMP for the time period the state of charge was held due to ED. Would the resource need to discharge by the end of the day in order to receive compensation? Or if low prices occurred would the BCR assume $0/MWh reference price and pay the difference with the time it was held due to ED? Additionally, REV requests an example of how compensation for EDs would occur in the case where the ED is to charge the resource, potentially at high prices instead of maintaining the SOC or charging at a lower priced period.

REV also requests that CAISO provide BCR for ancillary service awards that are voided as a result of exceptional dispatch and through no fault of the resource.

Tools for Local Areas

REV generally supports the direction of CAISO’s proposal to secure SOC for local needs in addition to system needs through the day-ahead market processes. REV requests that CAISO ensure the market process is transparent to the resource operators so that it knows it is procured for a local need. Additionally, REV requests clarification that resources will be compensated for the reliability service of holding a SOC. For example, would it receive compensation in the day-ahead market as a product? If the resource is withheld from the real-time market due to local area needs, would BCR similar to the ED methodology need to be implemented?

Additional comments on other issues to include in the next Straw Proposal

CAISO should reevaluate storage default energy bids for risk or opportunity cost of day-ahead awards

Default energy bids (DEBs) currently only allow for recognition of cycling costs in day-ahead energy bids. Because the majority of costs for day-ahead energy bids are in opportunity and risk costs, DEBs do not allow for accurate representation of costs in day-ahead bidding. In early examples of DEBs in action we have also noted seemingly sub-optimal awards, e.g., discharging at prices that are both far from the highest in the day and are outside of the resource bid curve. REV strongly suggests that day ahead DEBs allow pricing opportunity and other costs for the same reason that such costs are important in the normal bid formation. We would also appreciate additional transparency on the performance of DEBs in action.

The flexible ramp product has interactions with the FMM that lead to uncompensated out-of-merit energy dispatch for storage resources, and CAISO should address this issue

REV has experienced this issue with increasing regularity, and it is clearly a market design issue with negative effects on storage resources. In the fifteen-minute market (FMM), the flexible ramp product often prevents resources with flexible ramp up awards from selling energy in two consecutive intervals while only paying the resource for the opportunity cost of the first interval. This issue is pervasive for resources like storage that are assigned flexible ramp awards, affecting FMM dispatch and the ability to back day-ahead awards almost every day. It is most pervasive when FMM volatility is highest, i.e. when in-merit dispatch consistent with submitted real-time energy bids is needed most.

Revenues that should have accrued to resources through FMM energy awards are instead being used to subsidize provision of flexible ramp up, which is often a $0/MWh or lower-margin service than energy. REV has received confirmation from CAISO that this is the system correctly working as implemented, though REV struggles to believe this is what CAISO ultimately intended with the product. REV accepts that the ISO seeks to procure flexible ramping MWs and REV is willing and able to provide the service, but resources should be paid at least the energy opportunity cost of doing so. This should also be in line with the CAISO’s desire to ensure reliable and efficient outcomes; it intuitively does not make sense that resources are being forced into a service often priced at $0/MWh instead of one that is simultaneously often priced at $100s/MWh.

Similarly to MIO, issues with flexible ramp also increases the risk of participating in the day-ahead market for flexible resources. Because day-ahead awards are subsequently settled against FMM dispatch and prices, FMM dispatch out of line with bid curves introduces additional uncompensated risk to delivering day-ahead awards. When FMM prices spike and FMM energy dispatch is out-of-merit due to flex awards, resources are forced to financially buy back the day-ahead awards at these higher FMM energy prices even when they have the energy, power, and bid curve available to deliver them.

This issue is especially pressing because CAISO uses real-time energy bid curves to automatically calculate opportunity costs of providing flexible ramp. Because this calculation is both flawed and out of the resource’s control, there is an inaccurate representation of the cost of providing the service.

There are a number of potential solutions. These include releasing FMM flex ramp awards from the prior interval, providing BCR to account for the costs of providing flex ramp, and accurately reflecting the opportunity costs of energy in the flexible ramp price. As always, REV appreciates CAISO’s partnership and is happy to follow up with more detailed recent examples and conversation to better understand and resolve the issue.

For additional context, below REV shares snippets from several CIDI tickets with CAISO’s responses that illustrate specifics of what is occurring. Ticket 2 was submitted earlier than Ticket 1 but REV received both responses around the same time. The full examples provided to CAISO included additional data documentation and details.

Ticket 1, evening FMM interval:

• FMM energy price: $291/MWh
• FMM flex ramp up price: $0/MW
• FMM energy dispatch: 0MW (vs 156MW in-merit)
• Cost of out-of-merit FMM dispatch assuming same RTM dispatch: ~$10,000

Ticket text:

“We would like to understand why Gateway Energy Storage did not receive a DOT to discharge in the FMM market during HE19 period 4. The FMM LMP at Gateway was $291.19/MWh, by far the highest price of the day, but the award in the period was 0MW. Gateway’s real time bid curve supported discharging with full available power at this price; the battery was fully charged; and there were no awards that would have blocked it day-ahead or real-time regulation up, regulation down, or spinning reserve.”

CAISO’s response:

“Hour ending 19 intervals 4 Gateway Energy Storage received a fifteen-minute market (FMM) energy award of 0 MW and the LMP was $291.19. The resource did not receive energy awards above 0 MW because it had received a flex ramp award in the hour ending 19 intervals. This flex award from the prior FMM interval is reserved in the FMM buffer interval. As result, the resource energy award could not be higher than 0 MW.”

Ticket 2, morning FMM interval:

• FMM energy price: $337/MWh,
• FMM flex ramp up price: $0/MWh
• FMM energy dispatch: 2.4MW (vs 250MW in-merit)
• Cost of out-of-merit FMM dispatch assuming same RTM dispatch: ~$15,000

Ticket text:

“Gateway Energy Storage received fifteen-minute market (FMM) energy awards out of line with submitted energy bids. We believe this was in error. We believe this occurred because Gateway was incorrectly assigned FMM flexible ramp up awards instead of FMM energy awards. Can CAISO confirm the reason Gateway did not receive FMM energy awards?

…

In the first fifteen-minute market interval of HE3 (2:00AM-2:15AM), FMM energy prices at Gateway cleared at $337/MWh [Figure 1]. Gateway had both power and charge available to deliver energy... According to submitted bids, Gateway should have received 250MW of FMM energy awards [Figure 3]. Instead, it received just 2.4MW of FMM energy awards.

This appears to have occurred because Gateway was instead assigned FMM flexible ramp up awards, even though the unit’s opportunity cost of energy greatly exceeded the value of flexible ramp up awards. Gateway’s opportunity cost of energy was $247/MWh ($337/MWh price - $90/MWh bid) at the lowest offer tier and $137/MWh ($337/MWh price-$200/MWh bid) at the highest offer tier. The opportunity cost of energy at all offer tiers was higher than the value of flexible ramp up, which was priced at $0 [Figure 2].”

CAISO’s response:

“Hour ending 3 intervals 1 Gateway Energy Storage received a fifteen-minute market (FMM) energy award of 2.41 MW and the LMP was $337. The resource did not receive energy awards above 2.41 MW because it had received a flex ramp award in the hour ending 2 interval 4. This flex award from the prior FMM interval is reserved in the FMM buffer interval. As result, the resource energy award could not be higher than 2.41 MW.”

In plain language, in the examples above, the battery was being prevented from discharging at energy at prices of $291/MWh and $337/MWh for a flexible ramp service that was priced at $0/MWh, with no compensation for the opportunity costs of the out-of-merit dispatch. Had the resource sold day-ahead awards here, not only would the resource be uneconomically denied dispatch and revenues in line with its bid curve, the resource would also have been forced to uneconomically buy back its day-ahead award at these extreme prices.

4. Provide your organization’s comments on the proposed co-located enhancements, as described in the straw proposal:

REV has no comments at this time.

5. Provide your organization’s comments on the proposed EIM classification for this initiative, as described in the straw proposal:

REV has no comments at this time.

1. Please provide a summary of your organization’s general comments on the straw proposal presentation for this initiative:

As a general matter, the Six Cities support the CAISO’s Straw Proposal.  In particular, the CAISO’s proposals regarding how co-located resources may manage their compliance with Investment Tax Credit (“ITC”)-related requirements is noted and appreciated; this has been an important topic for a number of stakeholders, and the Six Cities acknowledge the CAISO’s efforts to address stakeholder concerns. 

While the Six Cities support the Straw Proposal at a conceptual level, there are several areas, identified below, where stakeholders would benefit from additional examples and information in order to fully assess the operational and implementation details of the CAISO’s proposals. 

2. Provide your organization’s comments on the proposed energy storage resource model, as described in the straw proposal:

The Six Cities generally support the CAISO’s proposal to establish the energy storage resource (“ESR”) model and, at this stage, the proposals for how resources using the ESR model would interact with the CAISO’s markets appear to be reasonable.  In its next proposal, the Six Cities request that the CAISO provide additional details and expanded examples demonstrating how the ESR model would operate within the CAISO’s markets.  In particular, a chart or graphic providing a comparison of the functionality and attributes of the proposed ESR model with the non-generator resource (“NGR”) model would assist stakeholders in evaluating the ESR model and enable stakeholders to comment meaningfully on the ESR proposal.  Additionally, examples depicting the bid structure and expanding or providing variants on Figure 2 in the Straw Proposal would likewise be useful. 

Specifically with respect to resource adequacy, the Six Cities note the CAISO’s statements at pages 3 and 18 of the Straw Proposal confirming that rules for end-of-hour constraints, must-offer obligations, resource counting, and application of the RA Availability Incentive Mechanism (“RAAIM”) for storage and hybrid resources will be addressed in the separate RA Enhancements initiative.  At this time, the Six Cities understand that the CAISO will issue its next paper in the Phase 2 RA Enhancements initiative in February 2022.  Given the CAISO’s proposal in this initiative to establish the ESR model, the Six Cities request that the next RA Enhancements proposal include specific discussion of RA-related topics for the ESR model so that stakeholders can evaluate this model in relation to the NGR model. 

3. Provide your organization’s comments on the proposed reliability enhancements for storage resources, as described in the straw proposal:

As with the CAISO’s ESR-related proposals, the Six Cities generally support the approaches in the Straw Proposal for reliability enhancements.  The Six Cities again urge the CAISO to consider providing additional detail and examples regarding (1) the proposal to consider requiring ancillary service awards to be accompanied by energy bids and the pros and cons of such an approach; and (2) the opportunity cost-based compensation method proposed for storage exceptional dispatch.  In particular, the Six Cities request that the CAISO provide an example showing how the opportunity cost compensation would work in the context of a resource that is exceptionally dispatched to increase its state of charge (“SOC”) for several intervals first and then exceptionally dispatched to hold the increased SOC for several intervals. 

The Six Cities also note that stakeholders raised the possibility of alternative ways to measure opportunity costs for resources that are exceptionally dispatched to hold SOC.  While conceptually supportive of the CAISO’s proposal to use opportunity cost-based compensation, the Six Cities acknowledge that there could be other ways of measuring opportunity costs that might offer improved accuracy.  The Six Cities suggest that if stakeholders provide comments proposing alternatives, the merits of these alternatives be addressed in the next version of the CAISO’s proposal. 

4. Provide your organization’s comments on the proposed co-located enhancements, as described in the straw proposal:

The Six Cities appreciate that the CAISO has developed a proposal to address ITC-based restrictions for co-located storage resource components and generally support the CAISO’s proposal for how resources may elect to manage grid-charging risks.  More details are needed, however, regarding the scenario identified at pages 17-18 of the Straw Proposal, which discusses solar curtailment situations when the CAISO will not permit storage resources to reduce their charging, even if the adjacent solar resource is curtailed, due to concerns about potentially exacerbating (or increasing) solar curtailment across the grid.  The CAISO’s concern is noted, but the Six Cities question if there is nevertheless a way to address grid charging risks even when curtailment is occurring. 

The Six Cities also request clarification on the permitted uses of outage cards – are outage cards intended to reflect only physical unavailability, or can they be used, as suggested at pages 18-19 of the Straw Proposal, to address a situation where resources “elect” not to charge from the grid?  What does physical unavailability mean in the context of co-located resources?  Finally, the Six Cities would like to understand how the CAISO will view co-located resources that have software-related or other equipment designed to prevent grid charging. 

5. Provide your organization’s comments on the proposed EIM classification for this initiative, as described in the straw proposal:

The Six Cities do not have comments on this topic at this time. 

1. Please provide a summary of your organization’s general comments on the straw proposal presentation for this initiative:

2. Provide your organization’s comments on the proposed energy storage resource model, as described in the straw proposal:

3. Provide your organization’s comments on the proposed reliability enhancements for storage resources, as described in the straw proposal:

4. Provide your organization’s comments on the proposed co-located enhancements, as described in the straw proposal:

5. Provide your organization’s comments on the proposed EIM classification for this initiative, as described in the straw proposal:

1. Please provide a summary of your organization’s general comments on the straw proposal presentation for this initiative:

Vistra appreciates the efforts of the CAISO to consider addressing concerns raised by stakeholders. Generally, Vistra is disappointed that the operational enhancements that we requested, which in our understanding do not require significant implementation and are low hanging fruit that should be addressed as soon as possible, are not being included in this new initiative.

Please include in the next iteration of the straw proposals the following elements that we requested:

• Adopt dynamic modeling of foldback impact on Pmin/Pmax in the Non-Generator Resource model: Resource modeling should reflect foldback impacts to minimum operating level (Pmin) and maximum operating level (Pmax) when battery is at the low or high end of its State of Charge capability.
  • Note, while the CAISO is proposing to address this in the new participation model it is unclear if the CAISO is also proposing to apply to NGR model. Please clarify in the next iteration it will apply to both models.
• Specify exceptional dispatch rules where requires specific treatment: Exceptional dispatch rules specific to out-of-market dispatches for batteries should be included in the Tariff recognizing unique characteristics of storage.
  • Note, while the CAISO is proposing improvements to include treatment for ED to hold SOC and its compensation, we still strongly believe more clarity on mitigating risks of infeasible ED being issued is critical to improve storage operations and will help CAISO grid operations ensure its tool best inform them on what is feasible.
• Improve Outage Management System to better reflect outages: Outage Management System should allow Scheduling Coordinators to better reflect conditions limiting battery operations. This is low hanging fruit and will have a meaningful improvement to operations both at the resources and for CAISO grid operators.
• Address lessons learned after Minimum State of Charge event: Minimum State of Charge enforcement should be communicated widely to the market prior day. There is de minimis cost to adding a notification requirement through market notifications and this is a missed opportunity to address this need if not taken up here.

Please see Vistra’s presentation from the July 2021 workshop for more details[1].

While we are disappointed that the immediate need items that we and others raised were not included in the straw proposal, we hope the next iteration will include these items. We will provide feedback on the specific elements of the straw proposal in the questions below.

[1] Vistra, Energy Storage Enhancements Workshop, July 2021, http://www.caiso.com/InitiativeDocuments/VistraPresentation-EnergyStorageEnhancementsWorkingGroup-Jul26-2021.pdf.

2. Provide your organization’s comments on the proposed energy storage resource model, as described in the straw proposal:

Vistra appreciates the effort and time that the CAISO has put into considering what enhancements that it could adopt to improve the modeling of storage assets. Our preference is that CAISO would focus on incremental enhancements to the existing participation model and operational rules, rather than making large structural changes such as an entirely new participation model for battery energy storage resources. That said, we support exploring whether this proposal has benefits that will exceed the non-trivial costs of building this new model and those costs that participants will incur for switching to the new model.

To evaluate the benefits of this model, Vistra requests the CAISO provide examples of what storage assets bids would be and what the market solution would look like to provide scenarios to stakeholders to consider the proposed new model. These scenarios should ideally compare how the bids would be submitted and cleared under Non-Generator Resource model versus the new model.

There will be a lot more work to be done to provide greater detail and transparency into what the new model would do. For example, here are some questions that need to be answered:

• What is the definition of “transition”?
• What cost components make up the transition cost?
• If there is no transition time, will the transition cost be required to be $0/transition or is this intended to approximate the charge-discharge spread the storage asset is willing to transfer between modes regardless of actual costs or need for transition?
• Would there be default energy bid curves for the charge curve versus discharge curve and when will there be the discussion of how the DEBs would be formulated?
• Will the CAISO continue to enhance both NGR and new model when modeling improvements are decided or is the CAISO effectively saying that it will set up the new model and that will be its preferred model that will continue to be enhanced over time?

Until there is more information and scenarios provided, Vistra neither supports nor opposes this straw proposal. It will be important that support for the benefits it would produce can be provided analytically before we can support the proposal. Please provide any scenarios and information and begin to consider what simulations can be done in the policy phase prior to taking this size of a proposal to the EIM Governing Body and Board of Governors for approval.

3. Provide your organization’s comments on the proposed reliability enhancements for storage resources, as described in the straw proposal:

Vistra appreciates the CAISO addressing one of its concerns with exceptional dispatches and explicitly proposing a compensation rule for the exceptional dispatches to hold a state of charge. We strongly support these rules being added. At this time, we do not have a position or view on the other elements being proposed. Vistra requests the CAISO provide more information on:

• Size of the issue the AS rule would address.
• How the CAISO envisions the tool for local area considerations would “weigh trade-offs between starting gas and charging storage”.
  • This sounds like a tool to be used for operations for out-of-market actions, but the straw proposal implies that this is “enhancing logic for the N-1-1 constraints”. Please confirm if this is an out-of-market action or contingency modeling enhancement that is being proposed?
  • If the tool can be used for out-of-market actions, what steps would operators take to implement the decisions the tool identifies and what settlement rules would apply to the gas and storage resources because of any operator action?
  • If this is a proposal for implementing a version of contingency modeling enhancements, please confirm that and provide details on what elements from CME would be implemented including the pricing formation elements?
  • Please explain whether contingency modeling enhancements should be re-examined for implementation with the addition of explicitly holding SOC if economic? If not, explain your rationale for not implementing CME and how this would differ?

4. Provide your organization’s comments on the proposed co-located enhancements, as described in the straw proposal:

Vistra opposes allowing contract limitations to be used to limit physical capability. The CAISO has an existing policy on not allowing limitations that impact contracts to be considered viable use limitations for a resource. This proposed policy is effectively saying there are limits to the resource’s use as result of Investment Tax Credits or property tax implications. This is improper as these are all economic considerations that are elements that should be included in economic offers. In instances like this, the CAISO has in the past argued that the price-based offers submitted to the CAISO reflect these types of risks. Further, the CAISO has taken a strong position that “Contracts limits that provide for higher payments when start-up, run hour, or Energy output thresholds are exceeded are not qualifying contractual limitations.”[1]

Vistra thinks it is instructive to revisit the rationale of why contract elements that impose economic considerations are not appropriate to be limits on uses of resources. The policy approved in the Commitment Cost Enhancements Phase 3 initiative on the CAISO treatment of contract limitations:

“Generally, the ISO maintains its longstanding position that economic limits like limitations originating from contracts such as power purchasing or tolling agreements are not acceptable limitations… These limitations exist not as a result of restrictions imposed by external statutes or regulations, but rather reflect economic trade-offs made by the contracting parties…if the ISO were to accept contractual limitations to deem a resource eligible for an opportunity cost, it would provide market participants the ability to both physically and economically withhold resources from the market while bypassing the market power mitigation processes in place. This in turn could lead to market inefficiencies and market power concerns that would go unmitigated.”[2]

This policy was implemented and reflected in the Tariff Section 30.4.6.1.1 referenced above.

We find it instructive because before the CAISO could implement the proposed policy, it will need to support why it is appropriate for co-located storage to have the flexibility to use contract limitations to change how its use is modelled by the CAISO, while all other resources that have contract limitations imposed on them that could also drive changes to their economics are not modelled in this way. This on face appears unduly discriminatory and preferential to co-located resources.  Vistra therefore opposes this proposal.

[1] CAISO Open Access Transmission Tariff Section 30.4.6.1.1, Use-Limited Resources Criteria.

[2] Commitment Costs Enhancements Phase 3, Draft Final Proposal, Section 5.3 Contractual Limitations, February 17, 2016, Page 17, http://www.caiso.com/Documents/DraftFinalProposal-CommitmentCostEnhancementsPhase3.pdf.

5. Provide your organization’s comments on the proposed EIM classification for this initiative, as described in the straw proposal:

Vistra recommends the following classifications and rationale:

In summary, while EDAM is in motion it is critical to provide EIM Governing Body joint authority on both day-ahead and real-time elements that would be items that would impact the EDAM/EIM entities.

1. Please provide a summary of your organization’s general comments on the straw proposal presentation for this initiative:

WPTF would like to thank the CAISO for continued work on better integrating energy storage resources into wholesale market optimization and dispatch. WPTF is supportive of the Energy Storage Enhancements (ESE) initiative and effort. WPTF believes this is an important step forward to integrating storage resources into the broader market.

As we consider market design changes to better optimize energy storage resources in the market, WPTF requests the CAISO evaluate and clearly present to stakeholders the problems Scheduling Coordinators (SCs) experience in trying to optimize energy storage in the market and then connect these to the limitations of the non-generator resource (NGR) model. WPTF believes it is important to evaluate and define the problem(s) SCs experience in trying to optimize energy storage resources before we design solutions. CAISO states a goal of the initiative is to explore additional enhancements that could help storage SCs improve their control over state-of-charge (SOC), and CAISO states in the proposal the real-time market time horizon can make it more difficult to capture periods when it is critical for resources to meet a desired SOC. It would be very helpful for the CAISO to clearly define what prohibits SC’s from managing their SOC (said another way: optimizing a storage resource) today. WPTF suspects that it is not just the model limitations that make SOC and profit maximization challenging, but also fundamental market issues related to the multi-interval dispatch advisory and binding pricing and systemic load biasing.

It would be helpful to see real-world examples of the issue we are striving to solve. WPTF requests CAISO provide an assessment of a storage resource over time (identity masked) and show the actual dispatch compared to the ideal dispatch and then explain why the ideal dispatch is not achievable under the current model. This assessment will allow for important discovery and discussion on barriers for SCs and energy storage resources in achieving ideal dispatch. The discrepancy between the actual dispatch and the ideal dispatch could be the result of a bidding strategy, the advisory prices diverging significantly from binding prices, incorrect modeling of physical capabilities, or something else. CAISO walking stakeholders through some examples would be incredibly helpful as we move forward with this effort.

WPTF also requests the new energy storage resource (ESR) participation model be explained in less technical terms and with accompanying examples to demonstrate the participation model. The idea of allowing for different incremental costs at different states of charge is interesting and something WPTF would like to explore more. It would be very helpful to have a less technical description and some examples, particularly, as we discuss below, on the implications on both the day-ahead and real-time markets.

The figure in the straw proposal is hard to understand, even with a verbal explanation. WPTF also suspects this may be a complicated way to bid so examples would greatly help understand the value of this proposed participation model.

Finally, WPTF is disappointed that the CAISO did not take up any of the recommendations made in our presentation related to price formation and the need for increased transparency around advisory pricing. We ask the CAISO include these topics in the next proposal. 

2. Provide your organization’s comments on the proposed energy storage resource model, as described in the straw proposal:

WPTF supports the idea of enhancing the existing NGR market participation model and looks forward to digging into the details of the proposed ESR model. The figure provided in the straw proposal; however, is hard to understand exactly how the model will work and the expectation of how participants will bid. It would be very helpful to have a less technical description and some accompanying examples, particularly a comparison of the NGR model and ESR model in day-ahead and real-time.

WPTF hopes the examples would indicate what identified issues this new participation model will solve. WPTF is unclear this market model will solve what we understand to be the primary challenge to profit maximization for energy storage resources in the real-time market – a suboptimal dispatch arising from advisory and binding price divergence. WPTF requests CAISO outline how this market participation model will enhance energy storage optimization, or state of charge management, in the real-time market if the advisory prices continue to diverge significantly from the binding prices. At a high level it seems the ESR model may run into the same issues as the NGR model. This is where some examples will be very helpful.

Finally, just based on our initial understanding of the ESR model, we are concerned the model would lead to systemic price differences between the day-ahead and real-time whenever a battery was the marginal resource. It is our understanding that in day-ahead the price/SOC pair would be static for an hour, whereas in the fifteen-minute and five-minute market the bid price would increase as the SOC increased in each interval. Thus, a storage resource producing a static MW amount across an hour in day-ahead would have a fixed price but would have an increasing price over that same hour in real-time, even with the same bid curve. WPTF asks the CAISO to evaluate this potential in more detail along with other potential price formation, bid cost recovery, and gaming potential in the model.  

3. Provide your organization’s comments on the proposed reliability enhancements for storage resources, as described in the straw proposal:

WPTF does not believe these should be described as reliability enhancements. It is our understanding that the proposal could force uneconomic charging or discharging of batteries to preserve A/S capabilities. WPTF believes this is discriminatory compared to the no pay rules the rest of resources face and instead recommends the CAISO consider incorporating an expected AS/energy usage rate (and lower/higher SOC) up front in the day-ahead AS awards in the first place.

4. Provide your organization’s comments on the proposed co-located enhancements, as described in the straw proposal:

WPTF appreciates and supports CAISO acknowledging the ITC and property tax limitations are built into contracts. In some ways, tax issues are more akin to an air permit (regulatory) limitation rather than a pure contractual decision based on economics and so are appropriate to include as physical constraints. It is the government (regulatory) that decides the tax laws. Therefore, it seems reasonable these limitations then are built into contracts and that co-located battery software converts these tax-based contractual limitations into a physical limitation prohibiting grid charging.

5. Provide your organization’s comments on the proposed EIM classification for this initiative, as described in the straw proposal:

WPTF supports the CAISO’s classification.