Comments on Issue paper and working group discussion

1. Please provide a summary of your organization’s general comments on the working group presentations and the scope of issues for this initiative:

ACP-California appreciates CAISO’s interest in enhancing energy storage’s participation in the CAISO markets by undertaking this initiative. As part of this initiative, we strongly encourage CAISO to address concerns around grid-charging for the storage component of Mixed Fuel Resources (MFRs) through this initiative.

While CAISO has indicated a willingness within this initiative to evaluate and consider tools for controlling grid charging for Co-Located storage, CAISO should also evaluate those tools for Hybrid Resources. This is imperative given that the Hybrid Enhancements initiative has been delayed and, as illustrated by the presentation on behalf of the Large-Scale Solar Association (LSA) and the Solar Energy Industries Association (SEIA), there is a significant lack of clearly available tools to control grid charging (and prevent loss of the Investment Tax Credit). This lack of clarity and dearth of available tools could delay the addition of these resources onto the grid and may drive up ultimate ratepayer costs. While we recognize the need to ensure reliability and support CAISO’s efforts to do so, tailored approaches can and should be designed to meet the needs of the grid and ensure reliability, while also ensuring low cost, reliable power can be delivered to customers and that the owners of these resources are provided with some level of assurance that their grid charging can be minimized, which is critical to successful project financing of both types of MFRs.

We encourage CAISO to, through the Energy Storage Enhancements initiative, take up clarifying which tools are available to control grid charging and evaluate additional tool to control grid charging for both Hybrid Resources and Co-Located Resources with an energy storage component. 

2. Provide your organization’s comments on the presentations provided by stakeholders at the working group:

ACP-California and its members have struggled with the lack of clarity and lack of tools available to control grid charging of storage resources, which were highlighted and summarized in the presentation from LSA/SEIA. ACP-California supports the inclusion of evaluation and clarification of grid-charging tools, for both Hybrid Resources and Co-Located Resources, as part of this initiative. LSA-SEIA also advocated for addressing the lack of availability of the Aggregate Capability Constraint (ACC) for pseudo-tied resources. ACP-California echoes LSA/SEIA’s request for CAISO to address this prohibition and evaluate ways it can be removed, in the near-term.

3. Provide any additional comments on the working group, or any additional scope items your organization feels should be included for this initiative. You may upload examples and data using the “attachments” field below:

As discussed above, ACP-California encourages CAISO to evaluate new tools and clarify existing tools that are available for both Co-Located Resources and Hybrid Resources with a storage component to control grid charging. Addressing these issues in a single stakeholder initiative will be helpful for stakeholders and would likely also be valuable for CAISO and its policy team. Addressing the issue in different stakeholder initiatives, taking place on different timelines, could create confusion and may also result in unwanted incentives for resource developers to choose one configuration or another. Thus, we urge CAISO to comprehensively address gird charging tools for all Mixed Fuel Resources with an energy storage component within this initiative.

ACP-California also looks forward to the additional discussions around other energy storage enhancements that can be implemented and which will provide CAISO with the certainty it needs in order to allow the Minimum State of Charge (MSOC) requirement to sunset as currently scheduled and to improve energy storage resource’s interaction with the market.

1. Please provide a summary of your organization’s general comments on the working group presentations and the scope of issues for this initiative:

California Community Choice Association (CalCCA) appreciates the opportunity to submit comments on parties’ presentations during the Energy Storage Enhancements working group. As storage resources continue to make up an increasing portion of the resource mix, it will be critical to ensure the market can utilize this unique resource in an efficient and reliable manner.

CalCCA offers the following comments on the working group presentations: 

• CalCCA supports NGR modeling and bidding parameter enhancements to include operational characteristics of new technologies and to allow for reflection of marginal costs as a function of cycling or state-of-charge;
• The CAISO should demonstrate existing market signals are not sufficient and create a need for a new market product to ensure state-of-charge product before proposing a replacement to the minimum state of charge requirement; and 
• CalCCA supports the CAISO providing advisory real-time price data transparency such that scheduling coordinators (SCs) have more information about potential prices in later intervals.

2. Provide your organization’s comments on the presentations provided by stakeholders at the working group:

NGR Model and Bidding Parameter Enhancements

CalCCA supports enhancements to the NGR model and bidding parameters to include operational characteristics of new technologies and to allow for reflection of marginal costs as a function of cycling or state-of-charge. WPTF’s presentation indicated that long-duration storage technologies have unique operational characteristics that require additional bidding parameters, including transition times, start-up times, and multiple amp rates.^[1]  Modeling resources’ operational characteristics correctly ensures the market dispatches them consistent with their physical operating capability.

CalCCA also supports bidding parameter enhancements to allow resources to better reflect marginal costs in their bids. CESA and GDS Associates discussed two potential enhancements to storage bidding functionality that would better reflect marginal costs, which can vary subject to state-of-charge and cycling levels. The first would allow storage resources to submit multiple bid curves to reflect marginal costs as a function of state-of-charge or cycle. The second would allow storage resources to submit updates to their bids closer to the dispatch interval to reflect changes to state-of-charge or cycle. Either approach will improve storage resources’ ability to reflect marginal costs most accurately, enabling more efficient market operation.

In addition to bidding parameter enhancements, the CAISO should seek additional understanding about marginal costs for new storage technologies in order to represent them accurately. The CAISO should seek input from the Department of Market Monitoring (DMM) and storage resource owners about how to quantify such marginal costs. Additionally, the CAISO should consult with load-serving entities (LSEs) contracting with storage resources as marginal costs are likely currently reflected through the contracts between LSEs and resources given marginal costs cannot yet be fully reflected in bids.

Ensuring State-of-Charge

Several parties discussed how to ensure storage resources are charged and available to provide energy when needed. PG&E presented a state-of-charge firming ancillary service product.[2]  CESA highlighted modifications the CAISO could make including a longer real-time look ahead, scarcity pricing, an energy shift product, and a biddable state-of-charge product.[3] GDS Associates[4] and WPTF suggested market prices should ensure storage resource availability during times of greatest system need.[5]  While storage resources are and will continue to be a key contributor to system reliability, it is not clear the market requires an additional product to preserve state-of-charge to ensure storage resource availability.

The CAISO should demonstrate existing market signals are not sufficient and create a need for a new market product to ensure a state-of-charge product before proposing a replacement to the minimum state-of-charge requirement. The CAISO has expressed significant concern about the potential for the day-ahead market to schedule storage to meet net load peaks only to have this schedule undone by the real-time market resulting in reliability concerns. However, this scenario has not yet proven to be a systemic issue and ignores the fact that storage resource will respond to price signals in a way that maximizes their profits. It also introduces a new reliability concern in which the CAISO constrains a resource’s flexibility so it is unable to respond to another reliability event, such as a contingency in a local area. Before proposing a new product to ensure state-of-charge that restricts storage resources’ flexibility, the CAISO should analyze recent battery market participation to evaluate if storage discharging at inopportune times is a systemic issue that needs to be addressed by a new product. If market prices provide appropriate signals that reflect grid needs, resource providers will make the best decisions on how to address such needs to maximize profit. The CAISO has not yet demonstrated that market prices do not provide sufficient incentive for storage resources to be charged for the most critical hours and as GDS Associates notes, it is not clear why the market would manage storage resources differently from other use-limited resources.

Prior to proposing a new product, the CAISO should first identify a need for one that exists by evaluating recent storage resource participation to determine if they systemically discharge during times that adversely impact reliability. The CAISO should specifically consider storage participation during this summer, given the significant amount of storage that has come online in recent months.

Publishing Advisory Price Data

CalCCA supports the CAISO providing advisory real-time price data transparency such that scheduling coordinators (SCs) have more information about potential prices in later intervals.

Publishing advisory real-time price data would provide beneficial information about expected prices later in the day to allow storage resources to make better-informed decisions about if and when to deviate from their day-ahead award when real-time prices are trending significantly higher than day-ahead prices. With advisory price data, storage resources will be able to better determine if the high prices in real-time will be sustained throughout the day or due to a temporary price spike. If high prices are sustained throughout the day, it may be more profitable for the resource and reliable for the system for the resource to wait until the net peak to discharge. If a price spike is to address a temporary reliability need, it may be more profitable for the resource and reliable for the system for the resource to deviate from its day-ahead schedule to meet a temporary reliability need. Access to advisory price information will allow storage resources to better assess the reliability needs of the grid in the absence of a longer real-time market look-out horizon.

[1]              WPTF Presentation, July 26, 2021, at 5: http://www.caiso.com/InitiativeDocuments/WPTFPresentation-EnergyStorageEnhancementsWorkingGroup-Jul26-2021.pdf.

[2]              http://www.caiso.com/InitiativeDocuments/PG-EPresentation-EnergyStorageEnhancementsWorkingGroup-Jul26-2021.pdf

[3]              http://www.caiso.com/InitiativeDocuments/CESAPresentation-EnergyStorageEnhancementsWorkingGroup-Jul26-2021.pdf

[4]              http://www.caiso.com/InitiativeDocuments/GDSPresentation-EnergyStorageEnhancementsWorkingGroup-Jul26-2021.pdf

[5]              http://www.caiso.com/InitiativeDocuments/WPTFPresentation-EnergyStorageEnhancementsWorkingGroup-Jul26-2021.pdf

3. Provide any additional comments on the working group, or any additional scope items your organization feels should be included for this initiative. You may upload examples and data using the “attachments” field below:

CalCCA has no additional comments at this time.

1. Please provide a summary of your organization’s general comments on the working group presentations and the scope of issues for this initiative:

The California Energy Storage Alliance (CESA) appreciated the opportunity to present at the stakeholder meeting on July 26, 2021, along with a number of other presenters. With over 1.8 GW of grid-connected storage expected by September 2021, CESA continues to support the importance of this initiative to make the enhancements needed for energy storage participation in a market designed for conventional assets. Storage is poised 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. Importantly, CESA stresses that any method to preserve state-of-charge (SOC) to meet system needs must:

• Be a market-driven solution dependent on prices
• Properly compensate storage resources for their SOC and opportunity costs
• Balance the need for certainty with the need for fast and flexible capacity

Having presented at the July 26, 2021 workshop and reviewing other stakeholders’ presentations, CESA summarizes our comments as follows:

• Energy storage should be able to represent variable charging rates in the Masterfile and be allowed to submit multiple real-time bid curves that are dependent on SOC and cycle.
• CESA supports proposals to dispatch and compensate storage resources in accordance with their bid curves, including in calculating bid cost recovery (BCR) compensation.
• CESA favors investigation into ways to fully capture the demand for energy in market prices ahead of implementation of an additional market product.
• If there is no feasible way to fully capture the demand for energy in market prices, CESA favors the development of a Biddable Energy Shift Product to replace the minimum state of charge (MSOC) requirement; as details are developed and Summer 2021 operational data is reviewed, CESA supports a priority focus on Phase 1 market enhancements regarding multi-interval optimization (MIO), BCR, and exceptional dispatch (ED).

2. Provide your organization’s comments on the presentations provided by stakeholders at the working group:

Marginal costs and variable charging rates

Marginal costs are affected by multiple factors (cycling, charging costs) – many of which have been explored to some degree in other initiatives, such as ESDER 4 and the Variable O&M Review Initiatives. However, the current market bidding functionality does not allow batteries to precisely reflect cycling costs, even if additional cycling could be economic to meet reliability needs. At the workshop, CESA thus recommended that energy storage be allowed to submit multiple real-time bid curves that are dependent on SOC and cycle, in lieu of a proposal that would allow storage to update its bid curves at every five-minute interval, which the ISO explained in its Issue Paper as being infeasible in the near term.

In addition, CESA supports the various recommendations by GDS, LS Power, and Vistra to have storage operators have the ability to represent their marginal operating costs as a function of SOC, whereas the ISO currently requires a constant rate of charge in the Masterfile. As presented by storage operators, battery storage resources have variable charging rates that depend on the SOC range, particularly as the resource approaches 100% SOC. As a physical characteristic that the ISO has historically considered in a resource’s bidding parameters, this represents a reasonable and near-term fix to enable more efficient market participation of battery storage resources and avoid less efficient outcomes such as oversizing energy storage resources to be able to represent a constant charge rate.

Multi-interval optimization (MIO) and spread bidding

As highlighted in examples presented by LS Power, CESA agrees that the ISO must fundamentally revise its RT market structure to properly represent the bid curves submitted by asset operators in order to mitigate risks of uneconomic dispatches due to the expected spread, informed by future advisory prices. The MIO software’s operation can lead to undesired discharge in intervals prior to the evening peak, potentially causing reliability concerns similar to the ones the ISO sought to mitigate with the MSOC. Resources with day-ahead obligations would carry the additional loss of an undelivered day-ahead award in the same example. In order to address the limitations of MIO, CESA supports recommendations to: (1) link real-time dispatch (RTD) instructions directly to the binding interval and not the advisory intervals; or (2) reduce the number of advisory intervals for NGRs from 13 to two or three.

Considering MIO and spread bidding are linked in many ways, CESA believes that these issues and solutions should be addressed in tandem. While some stakeholders have expressed concern with applying different rules or processes for storage as compared to other resource types, the unique characteristics of energy storage as an arbitraging resource as opposed to a pure load or pure generation resource warrants such different considerations.

Bid cost recovery (BCR)

Opportunity costs are essential as storage is energy-limited. However, currently, BCR is calculated using settled cost and revenue values from the DA and RT markets and netted across the day (24 hours) for the RT market, often leading to no need for compensation to be determined. As presented by LS Power, CESA recommends that BCR be calculated based on NGR settlements had they been dispatched on actual bids and binding prices, undoing financial damage caused by MIO. A fix to BCR by netting all costs to charge the resource with the revenue from discharging would also address many of the issues with ED and the MSOC, which as currently constructed do not compensate in-market storage resources with the lost opportunity costs of being held to a specific charge or held back for ED purposes. Compensation via BCR is needed for losses incurred due to the MIO, ED, or MSOC relative to if dispatch had been determined by bids and on binding interval prices. As such, fixing BCR, along with other elements of the ISO’s current optimization and usage of energy storage assets, should be a priority of this initiative.

Exceptional dispatch (ED)

In addition to the various improvements to more efficiently operationalize ED for energy storage resources (e.g., reflecting physical limits, accounting for manual processes), CESA agrees with LS Power on the importance and need for storage resources subject to ED to be made whole with compensation for their lost opportunity costs in line with their day-ahead schedules. This modification of ED rules would need to be aligned with the updated formulation of BCR for storage assets. In the meantime, the ISO should continue to collect data and publicly report on the instances and conditions during which ED is triggered for storage resources to inform this initiative and solutions developed herein.

Hybrid and co-located resources

WPTF discussed how hybrid resources are currently limited in their range for regulation, which is only limited to the battery storage component, not the full range that includes both the storage and generation range. Due to current market models turning market participants toward sub-optimal practices to control grid charging for ITC and property tax exemption compliance, LSA and SEIA proposed that bids should be allowed to be structured so that the storage resource ID charging schedules and dispatch are lower than VER resource ID production. CESA generally agrees with these concerns and adds that developers need clarification on how MSOC successors would interact with hybrid and co-located storage, particularly as it relates to the aforementioned concerns around charging from the grid.

Long-duration energy storage

WPTF and SDG&E recommended that long-duration storage and hydrogen storage technologies should be considered within this initiative since many of them have lower roundtrip efficiency and require additional bidding parameters (e.g., transition times, startup times, multiple ramp rates) and have multiple uses in the case of the latter. CESA agrees that this initiative should consider various market enhancements that provide clarity on market participation parameters for these resources, which have been directed for procurement by the CPUC.

Biddable Energy Shift Product, Biddable Stored Energy Product, and SOC Firming AS Product

Under a potential Biddable Energy Shift Product, CESA proposed that the ISO procure energy in the day-ahead market from the storage fleet at a specific bid price. This product would internalize the opportunity cost of storage retaining SOC for later periods. After storage clears for this product, a requirement would be imposed in real-time to prevent discharging below a certain shifting amount. The daily quantity purchased by the ISO could be based on the potential shortfall identified within the RUC analysis. CESA explained that this option is promising since it aligns with developments in the RA framework, is tradeable, eases contracting, provides assurances regarding the behavior of storage, and does not inhibit co-optimization of other services in RTD. By contrast, the Biddable Stored Energy Product could be developed as a real-time market product would have a constraint in both markets imposed on the energy storage resource based on the needed SOC inferred by the ISO. The requirement would specify a total amount of SOC in MWh based on bids for the SOC. While this option is workable, it may be more complex as it would require owners to internalize their opportunity cost in a higher number of bids. Moreover, this solution might require the inclusion of deliverability considerations to align with other ancillary services.

As explained in our presentation, among the two products, CESA favors the development of a Biddable Energy Shift Product to replace the MSOC. It is less complex and potentially addresses some of the ISO’s concerns that led to their development and implementation of the MSOC in the first place. CESA sees some advantages for the Biddable Energy Shift Product in allowing owners to internalize their opportunity costs in hourly bids that would be seen as self-schedules by the ISO, not affecting co-optimization of other services in RTD, and providing advanced assurances regarding the behavior of storage. CESA considers this product definition also minimizes the risks associated with paired storage assets, be it in a hybrid or co-located configuration, charging from the grid despite their intention to claim the ITC.

Whichever MSOC replacement that the CAISO deems necessary, CESA recommends that it should be tradeable in the Day-Ahead and Real-Time markets. This would ensure having market flexibility and efficiency in the current economic dispatch model, thus avoiding any undue financial burden on ratepayers.

At the same time, CESA recommends that the ISO prioritize the Phase 1 market enhancements on MIO, BCR, and ED because the MSOC is in place over the next two years, such that continued discussion and development of the details of any additional product can be targeted for mid-2022 to timely replace the MSOC before the sunset of the interim MSOC measure. CESA looks forward to collaborating with the ISO on whether and how a Biddable Energy Shift Product would affect existing market products (energy and ancillary services), be co-optimized across products and time horizons, maintain flexibility for storage operations, and interact with RA requirements and obligations. Furthermore, with several months of operational data on the use of the MSOC requirement along with Phase 1 enhancements to be considered, the ISO, CESA, and other stakeholders will have a better understanding of the magnitude and frequency of the critical reliability concerns of storage SOC, dispatch, and real-time market operations. This data may reveal whether additional products are necessary.

Finally, CESA appreciated PG&E’s presentation on its proposed SOC Firming AS Product. At this time, CESA has no position on this product and looks forward to further detail on the mechanics of this proposal.

3. Provide any additional comments on the working group, or any additional scope items your organization feels should be included for this initiative. You may upload examples and data using the “attachments” field below:

As expressed in previous comments, CESA reiterates our recommendations to divide this initiative into two phases, summarized below:

• Phase 1: Energy Storage Management, Operation, and Compensation (targeting December 2021 Board of Governors meeting)
  • Reflection of SOC and cycling within marginal costs
  • Revision of the MIO tool
  • Spread bidding revision
  • Revision of the BCR mechanism
  • Revision of variable charging rates
  • Revisions to exceptional dispatch
• Phase 2: Ensuring State-of-Charge (targeting Q1 2022 Board of Governors meeting)
  • Understanding the challenges of extending the RT market’s optimization horizon
  • Scoping the energy shifting product

In sum, CESA again recommends that the ISO assess potential MSOC replacements once revisions to other market elements are considered. It is important to focus on the immediate term on the day-to-day operational enhancements for energy storage resources given the volume of storage projects that are already online or are coming online in the next few months.

1. Please provide a summary of your organization’s general comments on the working group presentations and the scope of issues for this initiative:

Please see DMM comments at following location: 

http://www.caiso.com/Documents/DMM-Comments-on-Energy-Storage-Enhancements-Working-Group-Aug-10-2021.pdf

2. Provide your organization’s comments on the presentations provided by stakeholders at the working group:

Please see the link to DMM comments in response to question 1.

3. Provide any additional comments on the working group, or any additional scope items your organization feels should be included for this initiative. You may upload examples and data using the “attachments” field below:

Please see the link to DMM comments in response to question 1.

1. Please provide a summary of your organization’s general comments on the working group presentations and the scope of issues for this initiative:

GDS Associates, Inc. (GDS) appreciates that the CAISO is committed to engaging stakeholders on market issues prior to formalizing its’ own issue papers.   GDS is pleased to provide this feedback.

Ensuring that the market compensates asset owners and operators based on performance and efficiency true to resources’ real marginal costs will encourage developers to design lower cost systems with the capabilities that the CAISO needs.  Developers are constructing battery systems with long-term contracts where delivering certainty on project proforma is key to providing sustained services. Many asset owners and operators are gaining experience with managing the health of large-scale batteries through the proper design and management of battery health parameters. Developers are deploying an increasing variety of energy storage technologies in large numbers, which may have unique operational parameters and system health factors to manage. The costs of operating an energy storage system depends on how it is used as systems are typically designed to provide a planned number of cycles over a specific service life.  Asset owners and operators must be able to predictably manage the long-term health of their assets.  Such management is aligned with the common goal of CAISO’s market to signal its needs through its energy prices.

GDS focuses these comments on two broad concerns that impair CAISO’s ability to operate energy storage systems efficiently through its markets.

• The minimum state-of-charge constraint impairs the real-time market from efficiently operating energy storage resources true to their real marginal costs.  Such a constraint is not necessary because the short real-time dispatch horizon will not cause chronic discharge early in the day.  The CAISO should consider retiring this constraint early and focus on enhancing its exceptional dispatch tools to be used only when necessary.
• The current bidding interface impairs asset owners and operators from representing their resource’s actual marginal costs to the market, which spoils efficient market dispatch and pricing.  The bidding interface also impairs asset owners and operators from efficiently managing the long-term health of their assets.  The CAISO should focus on reforming the bidding interface for energy storage resources.  The CAISO should prioritize this important work over bid-cost recovery side-payment designs because its market should incorporate real marginal costs into market clearing prices.

2. Provide your organization’s comments on the presentations provided by stakeholders at the working group:

3. Provide any additional comments on the working group, or any additional scope items your organization feels should be included for this initiative. You may upload examples and data using the “attachments” field below:

Consider retiring the minimum state-of-charge constraint early

GDS recommends that the CAISO consider retiring the minimum state-of-charge constraint early and focus on enhancing its exceptional dispatch tools to be used only when necessary.

The CAISO should reconsider its premise that the short real-time dispatch horizon would leave energy storage resources empty prior to the most critical and highest priced times of day.  The real-time dispatch will tend to charge and hold charge as prices rise throughout the day, rather than discharging energy storage resources prior to the evening.  In general, the real-time dispatch optimization treats energy storage resources like other resources in the market.  That is, for the most part, energy storage resources will charge when the charge bid is in-merit and the energy storage resource will discharge when the discharge bid is in-merit.  The only difference that causes the real-time dispatch to treat energy storage resources differently than other resources is that it must additionally respect upper and lower state-of-charge limitations.  These resource constraints effectively add conditional limitations that apply only when resource bids are in-merit. As such, under particular circumstances, they may cause the resource to hold charge rather than discharge even while the discharge bid is in-merit.  On the other hand, they may cause the resource to hold charge rather than charge even while the charge bid is in-merit.  The net effect of these limitations is that the real-time dispatch will tend to charge and hold charge on these resources as prices rise into the most critical time of the day, regardless of the length of the market horizon.

The real-time dispatch, with its 65-minute market horizon, will cause energy storage resources to follow one of three “behavioral patterns” at any given point in time: (1) normal use, (2) picky charger, or (3) picky discharger.[1]  The upper and lower state-of-charge constraints only impact resource dispatch if the resource is operated within 65 minutes of its upper or lower state-of-charge limitation. 

1. The normal use behavior is observed when the resource is more than 65 minutes from either limitation.  When this happens, the constraints are not binding, and the real-time dispatch will dispatch the energy storage resource just as it would any other resource: the energy storage resource will charge when charge bid is in-merit and discharge when the discharge bid is in merit.[2]
2. The picky charger behavior is observed when the resource is within 65 minutes of its upper state-of-charge limitation. When this happens, the upper state-of-charge limitation can be binding over the 65-minute horizon.  As such, when the resource’s charge bid is in-merit, the optimization must also decide if the dispatch interval is among the cheapest times to charge.  As the state-of-charge approaches full capacity, the optimization will become more and more “picky” about when to charge.  If prices are rising throughout the market horizon, the first interval will be the cheapest time to charge and the real-time dispatch optimization will charge the resource when its charge bid is in-merit.
3. The picky discharger behavior is observed when the resource is within 65 minutes of its lower state-of-charge limitation.  When this happens, the lower state-of-charge limitation can be binding over the 65-minute horizon.  As such, when the resource’s discharge bid is in-merit, the optimization must also decide if the dispatch interval is among the highest priced times to discharge.  As the state-of-charge approaches empty, the optimization will become more and more “picky” about when to discharge.  If prices are rising throughout the market horizon, the first interval will be the lowest priced time to discharge, and the real-time dispatch optimization will hold the last portion of energy until this becomes the highest priced time to discharge. This means that resources will hold charge until prices begin to approach the crest of the day’s real-time price curve in the evening.  Then, as they discharge into this crest, they will get more and more “picky” about its discharge intervals, thus saving energy for the latter half of the critical evening period.

Since resource adequacy requirements have been established to ensure energy storage resources bring more megawatts online than expected retirements of other resources, the behavioral patterns discussed above plus the additional storage capacity being added to the system can be shown to be sufficient to ensure enough energy is available when it is needed, regardless of the relatively short real-time market horizon.

Focus on reforming the bidding interface for energy storage resources

GDS recommends that the CAISO focus on reforming the bidding interface for energy storage resources. The current bidding interface creates unique challenges for energy storage to represent real marginal costs to the market. To unlock better market efficiency and more flexible operation, the CAISO should design a biddable “bid-adder matrix” to incorporate real marginal costs into market clearing prices rather than increasing reliance on non-transparent uplift charges.  The CAISO should also allow energy storage resources to bid as close to the binding market interval as possible.

To the extent that the current bidding interface prevents asset owners and operators from directly representing marginal costs to the CAISO, they must incorporate costly assumptions into their bids that impair the CAISO’s ability to efficiently dispatch participating resources and disrupts competition between various energy storage technologies in the market.

Asset owners and operators balance installed costs and operational costs to deliver the lowest overall lifetime costs. The operational costs have a variable component which can be expressed as the marginal cost of providing energy storage services and is primarily represented by the costs of battery degradation, charging energy, and auxiliary loads. Asset run-hours also impact major equipment, such as inverters and HVAC equipment, resulting in marginal costs due to maintenance requirements or replacements over the life of the asset.

Degradation of energy capacity is one of the most important operational and maintenance factors to consider for the useful life of the battery asset. The degradation of the batteries occurs when the battery cycles, but also during idle periods, which is called calendar degradation. Degradation characteristics can be complex and contractual energy capacity guaranties require asset owners and operators to navigate operational conditions. The primary variables of a battery degrading are (1) depth of discharge, (2) number of cycles, (3) temperature, (4) state-of-charge, and (5) current. Most energy capacity warranties will specify the annual cycles and energy per cycle although other parameters are used such as average state-of-charge and current limitations.

CAISO’s markets create uncertainty in the lifecycle management process because charging and discharging based on market costs and evolving grid circumstances may change the way the asset is used over its life.  Asset owners and operators currently employ advanced monitoring and controls systems that predict market prices, and these systems will tend to charge energy storage resources into the evening hours. The marginal costs of charging at this time may also represent a higher value so in this respect charging, or discharging, decisions could be further tuned to reduce marginal costs during the overnight cycle.

GDS recommends the CAISO account for these marginal costs directly by allowing market participants to bid in their throughput marginal cost curve and a “bid-adder matrix” that the market would use to consider the cost implications of various uses of the asset. Asset owners and operators would provide a bid-adder to be applied as a function of a resource’s average state-of-charge and depth-of-discharge over the market horizon.  The bid adder matrix would include a cost figure for each realistic combination of average state-of-charge and depth-of-discharge value.  As discussed, marginal costs are a function of degradation and other variables such as major equipment maintenance that should be considered.  Figure 1 is a snapshot of how degradation varies depending on use in percent degradation per hour which could be converted to a cost (in dollars) per market horizon based on the cost to replace batteries.

Figure 1 Typical Energy Capacity Cycle Degradation Per cycle under different circumstances (%/hour)

An additional way CAISO can make its markets more efficient would be to allow asset owners and operators to submit these bids as close to the operating interval as possible. This reform would remove much of the remaining costly assumptions that asset owners and operators must currently incorporate into their bids.  As discussed above and in our presentation, more uncertainty requires asset owners and operators to incorporate more costly assumptions into their bids to ensure full cost recovery through the market. Such necessary assumptions decrease the overall market efficiency and decrease the energy storage resource flexibility.

Other operational limitations

There are other operational limitations which impact the way an asset owner or operator is able to bid into the market. For instance, many batteries require a reduced current rate in some state-of-charge windows resulting in a net de-rate to the system. This derating issue is also known as “foldback” which can be somewhat managed through outage cards or by making compromises in the way the energy storage system is constructed and operated. Furthermore, some technologies may require irregular operation, such as taper charging, on a regular basis for both reaching upper state of charge and for the purpose of maintaining the health of the asset.

The solution to these issues lies in understanding the marginal costs of energy storage systems in different operational scenarios and using that information to increase the cost effectiveness of grid services. A bidding strategy with the ability to express these marginal costs will steer energy storage systems to be used in the most efficient way based on their performance capabilities.

[1] Most current and future energy storage installations have 4-hour durations. A very small number of resources with less duration may find that the real-time dispatch will cause their resource to fall into both a picky charger and picky discharger behavioral pattern.  The resource would experience additional conditions on the optimization's charge and discharge decision when the charge or discharge bid is in-merit.

[2] Any other observed dispatches can be attributed to the normal and usually economic decisions that apply to all resources. For instance, the real-time dispatch optimization may decide to dispatch a resource out-of-merit if it intends to re-coup those revenues through a far in-merit dispatch later.

1. Please provide a summary of your organization’s general comments on the working group presentations and the scope of issues for this initiative:

The LDESAC supports:

-Increasing transparency of data

-Refining regulation for stand-alone storage

-Refining regulation for hybrid resources

-Improving real-time prices throughout the day and in day ahead markets

-Extending the look ahead window in the real-time market

-Developing an energy shift product

-Enforcing specific requirements that incorporate LDES attributes to ensure state of charge is equitable to all types of storage in the real-time market

2. Provide your organization’s comments on the presentations provided by stakeholders at the working group:

The LDESAC agrees with CESA that “storage is participating in a market designed for conventional assets.” Expanding the parameters for marginal costs and opportunity costs to allow for the multiple benefits that all types of storage can provide will ensure storage contributes to reliability of the grid.

For example, Gridwell outlined the existing state policies where LDES is part of the resource mix and in the market today.  As noted, in the LDESAC table and in Gridwell comments “many of these technologies have a lower round- trip efficiency and require additional bidding parameters (transition times, start-up times, multiple ramp rates)” (slide 5).

Publishing advisory price data can help address optimization timing challenges. The LDESAC agrees transparency solves a lot of problems.

The LDESAC also agrees with WPTF on expanding the market signals for efficient storage participation allowing for flexibility for short-term and long-duration energy storage projects to provide the best service to address different system needs. Evaluating market prices with dispatch tools is needed to examine the varying state of charge parameters.

And the LDESAC agrees with CESA on compensating storage both short and long duration for their state of charge and opportunity costs. The LDESAC agrees with CESA on coordinating and aligning the developments in the resource adequacy framework to ensure proactive flexibility (as noted by GDS Associates in unlocking better market efficiencies) (slide 2). 

As mentioned by CESA, LS Power and others, the LDESAC supports clarification on how “minimum state of charge successors would interact with hybrid and co-located storage facilities.” Existing attributes from the Federal Investment Tax Credit (ITC) as well as CA state taxes (CESA slide 14) provide positive attributes with grid-charging impacts, ancillary benefits and energy sources.

LSA and SEIA also note the importance of ITC availability and LDESAC agrees the ITC is critical for financing today, but is an asset and not a liability.  Additional tools should be considered to ensure both benefits of projects supplying solar and wind as well as storage are included and given full credit for all the grid attributes they provide such as exercising storage flexibility with MSOC in intervals when providing ancillary services (slide 12).

LS Power also suggested aligning exceptional dispatch with day ahead schedules and making non-generator resources whole for gross and opportunity costs, which LDESAC supports and encourages the CAISO to consider the role of long duration energy storage with diurnal and seasonal attributes (slide 2).

LS Power also raises compensating storage based on the “storage spread” and the difficultly that arises when participating in real-time and ancillary services bids, and the LDESAC asks the CAISO to consider the multi-hour, multi- day and seasonal nature of long duration energy storage can provide in the marketplace. 

PG&E highlights (slide 7) the need for future applications of state of charge and payments are possible by maintaining long duration energy storage. The LDESAC would like to explore this more with the CAISO and agrees with PG&E on using multi-day RUC to determine procurement needs.

As Vistra describes in detail about the need to change the Pmin/Pmax state of charge level restrictions as well as broaden the feedback provided so different storage projects can perform. Vistra specifically recommends, establishing resource characteristic potentially as either (1) Pmin/Pmax given SOC or (2) foldback rate given SOC (slide 5). The LDESAC supports this to ensure the benefits and A/S are signaled appropriately and given credit for the grid services provided.

3. Provide any additional comments on the working group, or any additional scope items your organization feels should be included for this initiative. You may upload examples and data using the “attachments” field below:

In closing, LDES provides diverse types of storage to maintain grid reliability, resiliency and decreases emissions while providing economic, reliable, and environmental benefits. LDES also addresses the variability of all types of generation and responds rapidly to large fluctuations in demand. LDES also allows the grid to be more responsive with black start capability and reducing the need to build backup power plants. Lastly, LDES ensures flexible and efficient use of least-cost renewable energy resources while also providing important ancillary services to the grid and should be compensated fairly in the marketplace.

LDESAC appreciates the opportunity to comment and looks forward to working with the CAISO in focused working groups and stakeholder forums. LDES provides a need and a solution in the marketplace and creating a level playing field for all the grid services long duration energy storage provides is essential to ensuring a successful marketplace and reliable grid.  

Thank you very much for your work on energy storage.

Respectfully submitted,

August 9, 2021                                                /s/     JULIA PROCHNIK_______

Julia Prochnik

Executive Director

Long Duration Energy Storage

Association of California

1520 15^th Street, Suite 6

Sacramento, CA 95814

E-mail: julia@storageenergyca.org

1. Please provide a summary of your organization’s general comments on the working group presentations and the scope of issues for this initiative:

LS Power thanks CAISO for hosting the July 27 workshop and stakeholders for presenting issues and recommendations. In the workshop, stakeholder presentations shared common themes of needing to prioritize operational issues that impact storage resources today, compensating storage for maintaining a state of charge (SOC), and keeping the initiative open to evaluate issues and potential redesign if needed. LS Power agrees with this phased approach, and proposes the following list of prioritized issues.

• Phase 1 – LS Power suggests CAISO should prioritize current market operation issues:
  • Multi-interval Optimization (MIO)
  • Exceptional Dispatch (ED)
  • Bid Cost Recovery (BCR)
  • Variable Charging Rates
  • Outage Management System (OMS)

These are areas of immediate concern affecting storage resources and CAISO grid operators today. CAISO should aim to finish this phase by December 2021. Successfully implementing these Phase 1 solutions could also reduce the need to address some of the issues noted below in Phase 2 and 3, which is another reason we support a phased approach.

• Phase 2 – LS Power suggests the second phase focus on ensuring adequate SOC. Storage operators already have strong financial incentives to ensure that their SOC is sufficient to meet Day Ahead schedules, so effectively addressing market issues identified in Phase 1 should help resolve concerns over SOC. LS Power also thinks that the end-of-hour (EOH) SOC tool, to be implemented in Fall 2021, could help ensure adequate SOC. Additional data on actual resource performance this summer combined with evaluation of the EOH SOC tool and Phase 1 solutions should be considered when evaluating the need for and design of any additional SOC-focused products. Stakeholders have already posed potential solutions, such as an ancillary service SOC product and energy shift product. LS Power believes that any potential solution should be transparent and price-based, compensate storage for the costs of SOC limits, and balance the preservation of SOC against the need for flexible capacity in the real-time market.
• Phase 3 – Stakeholders raised several other ideas in presentation, such as reforming the bidding interface for storage, revising the Bids Submission Timeline, submitting a real-time bid curve dependent on SOC, and End of Horizon Opportunity Costs. These are scoping issues that would likely improve market outcomes but are not as high priority, and solutions may be influenced by successful resolution of Phase 1 and Phase 2 topics. New issues may also emerge as more storage resources come online in 2021. Therefore, LS Power suggests CAISO keep this initiative open to re-evaluate issues to be included in Phase 3.

LS Power provides further information on specific issues and proposed solutions in the sections below. LS Power’s Issue Paper Comments from May 19 and July 26 presentation provide more background and explanation of issues, which will not be repeated here.

2. Provide your organization’s comments on the presentations provided by stakeholders at the working group:

Phase 1 Issues

Multi-Interval Optimization (MIO)

As explained in prior comments, MIO is a high priority issue area that CAISO should include in Phase 1. As currently implemented, MIO produces real-time dispatch outside of bid curves for storage resources, often when reliability risk for CAISO and financial risk for resource owners is highest.

MIO is a design aspect of the Real Time market that estimates market conditions several intervals in the future, known as the advisory intervals, to generate dispatch signals for resources in the immediately following interval, known as the binding interval. This tool works well for starting and ramping up slower traditional generators, but is not necessary for storage resources, which can ramp up and down instantaneously. Storage is fundamentally different from generation and the same algorithm does not work equally well across such different resource types. Because MIO in real-time does not consider awards in prior market runs and bases dispatch on expectations for future prices, MIO frequently creates adverse outcomes for storage resources, with negative impacts for system reliability and financial losses for the resources.

Western Power Trading Forum (WPTF) also recommended prioritizing known needed refinements to the Non-Generator Resource (NGR) model and energy market, including addressing real-time MIO challenges and publishing advisory prices. As we note below, if CAISO allows storage to be dispatched on only the binding interval prices, publishing advisory prices would no longer be useful for this issue.

LS Power offers the following recommendations on MIO:

• LS Power’s primary recommendation is to dispatch storage resources on only binding interval prices. This would align dispatch with resource bid curves and costs and the prices on which operations are financially settled. This would eliminate ‘phantom’ arbitrage that locks resources into binding losses based on advisory prices that often do not materialize. It would also reduce reliability risk where a unit’s SOC is lowered in anticipation of future lower prices. If it is not possible to dispatch only on the binding interval, then LS Power suggests limiting the MIO look-ahead for storage to fewer intervals of advisory prices (e.g., 2 or 3 intervals, i.e. 10-15 minutes).
• Bid Cost Recovery should cover MIO until underlying issues with dispatch outside of resource bid curves are resolved. Resources need to be made whole for both gross and opportunity costs that result from MIO dispatching resources outside of their bid curve.
• If an elimination or reduction of advisory intervals in storage dispatch is not possible, CAISO should publish advisory prices and comprehensive documentation of spread bidding and MIO. However, publishing advisory prices would become irrelevant for this issue if storage was dispatched only on binding interval prices.
• LS Power agrees with CAISO that extending real-time market lookout horizon is not a desirable solution, even if it were technically feasible. Uncertainty and inaccuracy increases the further out advisory prices extend into the future. This also does not address the issue that advisory prices appear to be most volatile and inaccurate during and immediately prior to extreme volatility, where MIO presents the greatest financial and reliability risk of adverse outcomes, which has been the experience of storage resources dispatched in CAISO in recent years.

Exceptional Dispatch (ED)

LS Power thinks ED is a high priority issue and should be included in Phase 1. ED takes storage out of the Real Time market, with grid operators losing the resource’s ability to quickly and flexibly respond to reliability needs. In LS Power’s experience, grid operators sometimes need to exceptionally dispatch storage resources’ opposite day-ahead schedules, which impairs resources’ ability to deliver day-ahead awards. For these situations, the resources should be compensated for any monetary losses, including gross and opportunity costs of ED. Upon review of CAISO settlement statements for days with ED, there is no evidence of the resource being made whole for losses resulting from ED. The normal settlement logic flows through for all charge codes. In theory BCR is supposed to make a resource whole, but BCR does not work in this or any other scenario for energy storage as currently implemented.

ED Recommendation:

• Exceptional dispatches should seek to align the unit with its day-ahead schedule. CAISO operations desk personnel should have more information about resource schedules (e.g. day-ahead awards), operating limitations, and bids. This would mitigate the risk that EDs disrupt the ability to deliver day-ahead awards.
• Settlement rules for use of ED should be reviewed under this stakeholder initiative. A storage resource on ED should be made whole for any lost opportunity costs and imbalance charges due to ED. For instance, EDs that empty the resource ahead of day-ahead discharge awards or hold it back from delivering day-ahead awards during evening peak can produce huge financial losses for which resource owners should be made whole.

Bid Cost Recovery (BCR)

Because BCR currently only compensates NGRs for net revenue losses over an entire day, it rarely compensates resources for out-of-market grid operator actions under the current methodology. In LS Power’s direct experience, it has never made a storage resource whole for even substantial MIO or ED related losses incurred within a day.

LS Power would like to emphasize that BCR for storage currently does not work in even what should be the most clear-cut examples. BCR settlements even in the most extreme cases are typically $0. In a recent example from July 2021, CAISO put a unit into ED with cascading effects throughout the day. The ED disrupted economic charging and then charged the unit to charge during some of the highest prices of the day. The unit was exceptionally dispatched to prices that were hundreds of $/MWh outside the submitted bid curve. CAISO then voided and clawed back the unit’s evening regulation up awards despite maintaining the headroom required to satisfy them. There was $0 in BCR for any of: 1) the disruption in economic charging, 2) the ED charge during price spikes, 3) the voided regulation awards, or 4) the headroom that was still preserved for voided regulation awards that would have otherwise been dispatched into real-time energy.

BCR Recommendation:

On BCR, LS Power recommends CAISO compensate resources based on settlements that would have resulted had resources been dispatched on actual bids and binding prices. Bid cost recovery should cover ED, MIO, and MSOC restrictions, all three of which can and do produce dispatch that disregards resource bids and marginal costs. This calculation would ‘undo’ any financial damage from MIO, ED, or MSOC requirements, inclusive of day-ahead, fifteen-minute, and real-time market runs and awards. Alternatively, CAISO could compensate resources based on the volumes and prices by which bids were violated in each interval. To be clear, in either scenario, if dispatch follows a resource’s bid cost curve throughout the day, LS power does not believe any BCR should occur.

LS Power does not recommend using specific cycle or hours to revise BCR as suggested by some other stakeholders. Compensating storage only if there are net revenue losses over narrower (e.g., 8 hour, as suggested by others) windows rather than an entire 24 hours will work only for resources following the simplest day-ahead energy-only schedules, for the same reason that looking at net revenue losses over an entire 24-hour period fails to make storage whole now. The entire evening peak, where most financial exposure occurs, fits within a fraction of that time. Additionally, compensating storage based on if a ‘cycling spread’ has been met also forgoes the opportunity cost of net revenues had bids been followed and would be uniquely discriminatory to storage. A resource held back from discharging at prices above its bids would receive no compensation under this scheme. Another practical problem with this proposal is that a ‘cycle’ becomes difficult to define when resources are participating in real-time and ancillary service markets.

Variable Charging Rates

This problem is pervasive, affecting every battery storage project that is operating at a near full or near empty SOC due to simple technical limitations. In particular, as identified in the Issue Paper, LS Power notes the primary issue is CAISO sending high power charge commands when a battery is almost full, which is an infeasible dispatch (ID) the resource cannot follow. Vistra also flagged this issue as a high priority and similarly suggested that dispatch charge and discharge limits be constrained based on SOC. LS Power agrees with Vistra on the priority and general direction of the solution given that this is a known physical limitation for all lithium-ion batteries.

LS Power agrees with other stakeholders that oversizing the battery fleet to resolve this issue is impractical and should not be considered. Given that the effect kicks in around 85-90% SOC for most batteries, oversizing would mean forcing every project to  buy 10-15% more batteries as a workaround for this issue. With thousands of MWh of battery capacity coming onto the CAISO grid, this would put unnecessary costs onto resources and their off-takers that could quickly mount into the hundreds of millions of dollars in additional burden to California ratepayers.

Variable Charging Rate Recommendation:

There are no fixes for this that can be implemented on the project side alone, there must be coordination between CAISO and plant telemetry. LS Power suggests two possible fixes.

1. Allow NGRs to upload a MW vs. SOC piecewise curve as part of the master file. This curve could be used for a simple check against the SOC each time a DOT is being calculated. The curve would look much like the figure below. For an example project of 100 MW, if SOC was 0-88% of the Maximum Energy, the plant’s PMin/Max Charge Rate is 100 MW, but if SOC is 99% of Maximum Energy the plant’s PMin/Max Charge Rate drops to ~1 MW or so.

Available real power to charge and state of charge at an LS Power battery

• Use of AGC telemetry in RT dispatch: LS Power’s understanding is that there are two telemetry points, an Upper Operating Limit and a Lower Operating Limit, which are used by the AGC system for dispatching units that are providing Regulation. CAISO could additionally make use of those points for projects that are not providing regulation. The plant could keep the telemetry points updated at all times with its current Max Charge Rate for the Lower Operating Limit, or the current Max Discharge Rate for the Upper Operating Limit based on the current SOC level and CAISO can use these to make DOT decisions. These points have the same units (MW) already, so it should be a fairly straightforward implementation on the CAISO side to constrain awarded DOTs in the fifteen and five minute periods to be less than or equal to the Upper limit and greater than or equal to the Lower limit.

Outage Management

LS Power agrees with Vistra that CAISO should also implement improvements to its outage management system to better reflect resource availability. These are non-generator resource (NGR)-specific issues that would be helpful to include in this initiative rather than the Resource Adequacy Enhancements initiative.  

LS Power supports Vistra’s outage management recommendations, including:

• Allow battery to submit overlapping outage cards across Pmin, Pmax, or Max Energy and that allow use of various nature of work (NOW) outage card types.
• Clarify NOW expectations in the CAISO Business Practice Manual (BPM) to improve outage reporting and consistent use, including specification of which NOW should be used for inverter failures and for foldback impacts until a market solution is implemented.
• Enhance outage cards for unit testing to reflect battery withdrawals prior to Commercial Operation Date (COD).

Phase 2

LS Power suggests the second phase of the Energy Storage Enhancements Initiative focus on ensuring SOC. Storage operators already have strong financial incentives to ensure that their SOC is sufficient to meet Day Ahead schedules. Fixing issues with dispatch outside resource bid curves in Phase 1 effectively should help resolve this issue. LS Power agrees with WPTF that the end-of-hour (EOH) SOC tool, to be implemented in Fall 2021, could have a significant impact on ensuring SOC and that stakeholders should work together to make sure it is implemented effectively.

Pacific Gas & Electric (PG&E) and California Energy Storage Association (CESA) posed potential solutions, including an ancillary service SOC product and energy shift product. LS Power agrees with WTPF and other stakeholders that actual data on resource performance combined with changes in Phase 1 should guide decisions when evaluating the need for and design of a SOC tool. LS Power welcomes further discussion on these potential products, which would both provide compensation for a storage resource providing the market service of holding a SOC in order to meet reliability needs.

LS Power offers the following preliminary thoughts for consideration on an SOC product:

• Any product should be transparent and price based, compensate storage resources for the cost of preserving SOC, and balance the value of preserving SOC against the need for flexible ramping capacity that storage can provide.
• LS Power suggests any SOC product procured day-ahead and enforced in real-time should be enforced similar to ancillary service SOC constraints, i.e., constrained throughout each interval in the hour. LS Power does not suggest enforcement as in the current minimum SOC requirement or the EOH SOC tool, where a resource can be economically discharged and then uneconomically charged back up to the target SOC at any price. LS Power believes end-of-hour constraints could lead to a pattern of correlated uneconomic charging at the back ends of hours which would be desirable for neither CAISO nor resource owners relative to a constraint across each interval.
• If a product is procured in the Real-Time market, storage resources must be able to internalize and represent the costs of providing such a service. Prices for such a product should use bids from resources, not theoretical opportunity costs of real-time energy calculated by CAISO.
• SOC firming should not be part of an SOC-managed resource’s RA must offer obligation. PG&E raised this question, LS Power believes that this should not be retroactively imposed on existing contracts.

Phase 3

Stakeholders raised several other ideas in presentation, such as reforming the bidding interface for storage, revising the Bids Submission Timeline, submitting a real-time bid curve dependent on SOC, and End of Horizon Opportunity Costs. These are issues that would likely improve market outcomes but are not as high priority, and solutions may be influenced by successful resolution of Phase 1 and Phase 2 topics. Additionally, new issues may emerge as more storage resources come online in 2021. Therefore, LS Power suggests CAISO keep this initiative open to re-evaluate issues to be included in Phase 3.

Of the Phase 3 issues identified, LS Power is particularly interested in allowing storage resources to update real-time bids any time prior to the real-time market run. This solution would be preferred over a piecewise bid curve solution as it provides more flexibility to respond to market signals. Additionally, ERCOT has already implemented the ability for storage to update bids any time prior to the real-time market run, demonstrating that such a system is feasible at scale.

Currently, CAISO dispatches resources based on real-time bids that can be up to two hours old by the time that dispatch is determined. There are several compelling reasons to allow storage resources in particular to update bids closer to the real-time market run. Because NGRs have limited duration to charge and discharge, their costs can fluctuate drastically between when bids are submitted and when they are dispatched. Updating bids closer to dispatch would allow storage to more accurately represent marginal costs depending on how full or empty the battery is at any given time. More concretely, this would improve reliability by giving storage resources better control over SOC, the most important scenario being ensuring that resources are full enough to deliver during the evening peak. If implemented, this would be the most powerful tool available to manage resource SOC. This would also allow the CAISO to benefit from the full range of storage ramping flexibility. With greater control over SOC, storage resources could offer more capacity both up and down to the market at lower cost.

3. Provide any additional comments on the working group, or any additional scope items your organization feels should be included for this initiative. You may upload examples and data using the “attachments” field below:

LS Power does not have additional comments at this time.

1. Please provide a summary of your organization’s general comments on the working group presentations and the scope of issues for this initiative:

LSA and 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.  LSA and SEIA continue to urge the CAISO to include the topics below in the scope of the Energy Storage Enhancements (ESE) initiative.

• Grid-charging management for MFR CLRs:  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.  CAISO has addressed this issue inconsistently; as noted in our Workshop presentation, market uncertainty is causing developers and others to take sub-optimal actions that may undermine the considerable benefits from MFRs with energy storage.

Specifically, the CAISO should:  

• Clarify/confirm tools that are available now; and

• Consider additional tools that are needed. 

• Aggregate Capability Constraint (ACC) applicability to MFR Pseudo-Tie (PT) Resources:  These resources have the same need for ACCs as inside-CAISO MFRs, and extension of this feature can be safely implemented without undermining the firm-transmission requirements. 

• Hybrid Resource Initiative (HRI) clean-up issues:  The CAISO should clarify a number of unexplained statements on important topics from that prior initiative.

Since the Workshop, LSA and SEIA have been contacted by other entities “attending” the workshop thanking us for having raised these issues, and we believe that there is considerable stakeholder support for their inclusion in the ESE scope.

2. Provide your organization’s comments on the presentations provided by stakeholders at the working group:

The CAISO should include grid-charging management for MFR CLRs in the scope of this initiative. 

This argument was the main focus of LSA and SEIA’s comments on the ESE Issue Paper.  Those comments are incorporated here by reference, and LSA and SEIA urge the CAISO to read and consider those extensive arguments.  LSA and SEIA provide additional input here based on the Workshop presentation and discussion, and subsequent conversations with their members.

Under this topic, the CAISO should clarify/confirm tools that are available now, for example:

• Whether these resources could use a “limiting scheme” or tool to limit grid charging, based both on long-standing guidance in the CAISO’s 2016 Technical Bulletin on MFRs and subsequent statement in HRI Straw Proposal and Revised Straw Proposal. 

• If so, the type of limiting scheme or tool, e.g., software algorithms preventing or controlling the maximum amount of grid charging (and reflected in the Master File), or Aggregate Capability Constraint (ACC) minimum setting at zero.

The option to set ACC minimums at zero is a particularly elegant solution.  It 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 would require no tariff or software change, and LSA and SEIA strongly urge the CAISO to confirm that this it is available now.

The CAISO should also consider in this initiative additional tools that are needed.  These could include (but are not limited to):

• (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:

• Allow storage CLRs to reduce charging, to the extent that real-time VER output is below schedule when charging is occurring.  This suggestion would be the “flip side” of the currently allowed flexibility to increase charging or reduce discharging where VER output is above schedule, to prevent VER curtailments.

• Revise real-time dispatch software so that storage CLRs could elect to have CAISO Dispatch Instructions reflect allowed storage flexibility, i.e.: (1) Automatically increase storage CLR charging or reduce discharging where real-time VER output is above schedule and the additional VER CLR energy would otherwise be curtailed; and/or (2) automatically reduce storage CLR charging where real-time VER CLR output is below schedule and meeting the storage CLR schedule would result in grid charging, subject to the MSOC.

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

The CAISO declined to consider these suggestions in the HR initiative out of fear that the resulting lower-than-expected storage state of charge (SOC) might cause storage CLRs to be unable to fulfill Ancillary Services and/or Energy schedules in later hours.  However, the MSOC feature (and, presumably any approved successor mechanism) would address this issue by allowing use of these flexibility features only to the extent that they do not impair storage CLR ability to meet later schedules.

• 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.

The CAISO should include ACC applicability to MFR PT Resources in the scope of this initiative. 

As noted in our Issue Paper comments and Workshop presentation, these resources 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 MFRs.  The prohibition against MFR PT Resource use of ACCs was never addressed in the HR stakeholder process and is not clearly prohibited in the tariff language, and it was very poor stakeholder-process management for the CAISO to include it in the FERC filing cover note without that stakeholder-process consideration.

The CAISO has expressed concerns in subsequent discussions about ACC compatibility with PT firm transmission requirements.  As noted in our Issue Paper comments, the firm-transmission requirement is associated with actual schedules and output of PT Resources, not installed capacity, and in any case does not exceed Interconnection Service Capacity (ISC). 

For example, a solar project with 100 MW of ISC and 110 MW of production capacity (i.e., excess inverter capacity to account for potential unavailability due to maintenance and/or forced outages) must limit output to 100 MW, and it is only required to acquire 100 MW of firm transmission service, not 110 MW.

If this 100 MW resource was instead an MFR with 100 MW of solar capacity and 50 MW of storage capacity, the ACC would constrain its total output to 100 MW, and its firm-transmission requirement would still be 100 MW.

Thus, the ACC framework can be safely extended to MFR PTs without undermining the PT firm-transmission requirements. 

The CAISO should include HR initiative “clean-up” issues – e.g., clarification of a number of unexplained statements in that initiative on important and relevant topics – in the scope of this initiative. 

These issues and statements, listed in our Workshop presentation, relate to important topics like compensation mechanisms for loss of ITC, other market bidding mechanisms, and MFR Default Energy Bids.  Market Participants need to understand the CAISO’s meaning, and any reflection of CAISO positions in current tariff language and market rules.

3. Provide any additional comments on the working group, or any additional scope items your organization feels should be included for this initiative. You may upload examples and data using the “attachments” field below:

LSA and SEIA repeat their request to the CAISO that the stakeholder process in this initiative – and others going forward – conform to previous CAISO practices not evident in some recent stakeholder initiatives.  This includes CAISO response (e.g., in stakeholder comment matrices) to all points raised in stakeholder comments, and exclusion from FERC filings of issues not raised in the stakeholder process.

LSA and SEIA also support WPTF’s call for CAISO production of data and other information to support its assertions in this stakeholder process.  This includes CAISO provision of information supporting CAISO statements, e.g., that certain market conditions are “rare” or unusual (or are expected to be in the future).

1. Please provide a summary of your organization’s general comments on the working group presentations and the scope of issues for this initiative:

2. Provide your organization’s comments on the presentations provided by stakeholders at the working group:

3. Provide any additional comments on the working group, or any additional scope items your organization feels should be included for this initiative. You may upload examples and data using the “attachments” field below:

The CAISO’s interconnection request and modification process requires equipment manufacturers provide system modeling information that is often either unavailable or technically insufficient.  This, in turn, challenges and disadvantages new projects in the CAISO's interconnection process.  MRP encourages the CAISO to work with Battery Energy Storage System/Inverter manufacturers to establish secure protocols to obtain sensitive and proprietary manufacturer information required in the interconnection processes so that access to this information is limited to CAISO and the informaion is not publicly available.  MRP also recommends that the CAISO provide a prequalified list of equipment vendors before a Queue Cluster window is opened.

1. Please provide a summary of your organization’s general comments on the working group presentations and the scope of issues for this initiative:

PG&E applauds the CAISO for organizing a diverse set of stakeholder perspectives during the July 26^th Energy Storage Enhancements (ESE) workshop.  The issues raised in the presentations spanned multiple topics, and PG&E prepared its comments according to common themes and/or topics:

• Data & Analysis for the ESE Initiative
• Multi-Interval Optimization (MIO) & Market Signals
• Variable Costs, Real-time Bidding Enhancements, Spread Bidding
• Ancillary Services, SOC Firming Product, Foldback Constraints
• Bid Cost Recovery (BCR)
• Overlapping Initiatives

In addition to the subjects above, PG&E would like to express the importance of ensuring adequate functionality of the CAISO’s Outage Management System (OMS) in regards to Non-Generator Resources (NGRs). In July 2021, the CAISO implemented an OMS software fix which allows for overlapping outages to be entered for NGRs experiencing de-rates to PMax. However, outages with impacts (or de-rates) to the Load Max, Min/Max Energy and AS Availability fields still cannot be entered as overlapping in the system. This is an urgent fix which the CAISO should address within the ESE initiative (if not sooner) in order to prevent unintended consequences of manual workarounds. NGRs should be guaranteed the same outage reporting functionality and/or tools that are available to traditional generators.

2. Provide your organization’s comments on the presentations provided by stakeholders at the working group:

Data & Analysis for the ESE Initiative

PG&E generally agrees with other stakeholders that the ESE initiative should be “data-driven” and analysis and modeling is needed to reinforce any market design enhancements.  PG&E suggests that a partnership of CAISO, stakeholders, and one or more consultant organizations, partner with the CPUC and/or CEC (who are also stakeholders) to formulate a clear plan of analysis to be performed over the next year. Considering the total operational storage capacity in the CAISO has exceeded 1,000 MW, 2021-2022 data would prove invaluable to this effort.

In regards to stakeholders’ suggestion to publish advisory price data, PG&E agrees that this action may help build confidence in CAISO storage optimization. However, given the large volume of data involved, PG&E asks whether it would be preferable to publish advisory prices on an ad hoc basis (as has been done, to some extent, with mileage accuracy data for regulating resources) rather than creating standard publication reports. With respect to the impact advisory prices have on Bid Cost Recovery (BCR), PG&E addresses this topic in the BCR section of its comments.

Multi-Interval Optimization (MIO) & Market Signals

PG&E’s assumption is that storage’s energy and ancillary service values are maximized by participation in the day ahead market, and that marginal changes in real time, although they will add value, will not dominate battery bidding strategy. Gridwell/WPTF’s presentation made the assertion that “rational” real time market prices maximize the value of storage.  PG&E disagrees with Gridwell/WPTF’s principle that prices along are enough to guarantee reliable system operations in a system with marginal cost signals not based on thermal heat rates. 

In response to LS Power’s concerns about MIO, it might be possible to use SOC management in day-ahead optimization and then not in real-time.  In effect, such a resource model would treat batteries as hybrids in real-time, but would use SOC management to establish robust cycling schedules based on the more predictable arbitrages in a day.  Resources would have to manage to risk of no SOC management in the same way that hybrids do, through their bidding and possibly using a dynamic limits tool, but the “thirty minute buffer” CAISO requires for regulation awards might be sufficient for the purpose.   This resource model would not allow for MSOC or target SOC management in real-time.  Because dispatch would not involve cross-temporal effects (i.e., future forecast prices would not affect the current hour’s schedule) using this model, BCR and scheduling would be unaffected by MIO.

Another option, certainly not feasible within the current scope of market enhancements but possibly appropriate for addressing the issue, would be to run binding multi-interval optimizations for successive intervals of multiple hours.  At one time the California electricity markets included a six-hour Day-Of Market, and there’s no reason that approach couldn’t be used to minimize uneconomic instruction due to the rolling MIO horizon.  Under this option, there would be reduced impact of nonbinding future schedules (more along the lines of the day ahead market, where day 2 RUC can influence market results but only on the margins), and BCR would be calculated for the Day-Of horizon, with residual FMM and RTD instructions likewise having reduced impact on commitments and battery cycling.

Variable Costs, Real-time Bidding Enhancements, Spread Bidding

In their presentation, CESA asserts that current market bidding functionality does not allow batteries to precisely reflect cycling costs, even if additional cycling could be economic to meet reliability needs. PG&E doesn’t understand this assertion since battery cycling costs are fundamentally a calculation of long-term future opportunity costs versus an equally uncertain profile of long-term battery degradation. Therefore claiming that batteries know enough to precisely reflect cycling costs in their bidding is questionable. The variable cost component of the battery Default Energy Bid provides a way of agreeing on a single dollar value with CAISO, modifiable on an ad hoc basis if evidence is available that the component’s value has changed; this value allows a trade off in the market between additional cycling for reliability and battery preferred usage profiles.

CESA also requests for the CAISO to allow storage to submit multiple RT bid curves that are dependent on SOC/cycle. PG&E offers the following comments on this proposal:

• The CAISO cannot dynamically change bids based on SOC within the market processes, so changes in SOC as a result of optimization cannot cause changes in the bids used. If  CESA is proposing that SOC ranges be treated as “configurations” like those of MSG resources,  such a discretization would tend to unduly restrict flexibility in the real-time use of batteries.
• The CAISO could, however, choose one bid curve from a set of multiple RT bid curves, based on initial SOC or cycles in the day so far.  This would be an increase in the size of the RT bid set to be validated, and would require clear bidding rules as to how bids for the “in-between” SOC levels (e.g. state of charge levels that are between multiple bids) would be determined. Additional rules would have to be establish regarding which default bids to be used in case SOC telemetry was lost or SOC was outside the range of the bid curves submitted.
• PG&E recommends a possible alternative to this approach: using some form of the Dynamic Limit tool that is adapted for SOC NGR. This method would allow for more frequent bid updating capabilities (in line with CESA’s request) and be more feasible in terms of implementation compared to the multiple bid curve approach.

In their presentation, GDS proposed an enhancement which would allow energy storage resources to update market bids as close to the fifteen-minute market execution as possible.  PG&E has the following comments on this proposal:

• Real time bidding enhancements in the CAISO markets should allow for quantities that are offered to be modifiable, subject to constraints on economic withholding (Note: this assumes RA dollars and requirements will act as sufficient incentive to prevent such withholding). Bid prices, however, should not be modifiable unless all market participants have the same ability to modify their prices on a given timeline.  If it’s possible to enforce this principle, PG&E sees no reason not to support the proposal by GDS “in principle.”
• It may not be possible to support this principle in cases where changing the upper or lower range of a bid effectively causes the market to clear on a different bid segment, as this may have the effect of allowing changes in bid price in cases where not everyone has the ability to modify their bid price.
• The enhanced timing of bid submission needs to be robust enough to handle large numbers of bids being processed by SIBR closer to the market process run, so this proposal should be based on a “worst case” in which all bids are resubmitted to SIBR on a nearer to market timeline. In other words, the time required to process all bids in SIBR, at least when there are no market-breaking business process rule violations, should set the minimum time before market that bids may be submitted.
• Depending on SIBR processing times, it may make sense to enable fifteen and five minute bids to be resubmitted into the CAISO markets on the same timeline as that of the first FMM run currently (something like twenty-seven minutes before market run, rather than the current seventy-five).  However, one implication of such an enhancement that must be looked at closely is whether LMPM will then need to be re-run every fifteen minutes, rather than only once per hour.

GDS also proposed an enhancement to allow energy storage resources to provide a cost adder that is a function of average state-of-charge and depth-of-discharge over the market horizon.  PG&E has the following comments on this proposal:

• If this is a proposal for an adder that changes dynamically within the optimization based on average state-of-charge and depth-of-discharge over the market horizon, such a proposal is not feasible using the current market optimization algorithm, because it introduces a nonlinear interaction between the adder and the battery schedule within the market algorithm.
• If this is a proposal for a real time adder based on day-ahead market results, this would arguably be a topic for discussion in enhancing the Default Energy Bid calculation.
• If this is a proposal for post-market cost recovery, this would arguably be a topic for discussion in enhancing Bid Cost Recovery for batteries; but it would also imply that battery bids inherently cannot account for such costs, even though other resource types are subject to similar costs that cannot be expressed exactly through bid curves but are able to participate without issue in the markets.  Moreover, it would imply that the market solutions themselves would be suboptimal even prior to the additional cost recovery provided to batteries.  Because batteries can adjust their bidding over time, PG&E doesn’t believe either of these implications to be true.

LS Power proposed in their presentation to make spread bidding optional for storage, given the MIO “promises” a spread but may not realize it in the market.  The second motivation for the proposal is that despite common belief, a single spread bid doesn’t actually capture a spread for any pair of charge and discharge prices.  PG&E agrees with this concern.  Because charging costs must be divided by the roundtrip efficiency factor to get the effective charging cost per MWh of increased SOC, the arbitrage required at different charging cost levels differs.  Additionally, the anticipated mitigation of discharge bids will override any spread component of market participant bids.

PG&E recommends that one solution to this concern is for the CAISO to offer an NGR model without SOC management for participants who don’t want their charge/discharge bids to have any resemblance to spread bids.

Ancillary Services, SOC Firming Product, Foldback Constraints

PG&E shares the concern that Gridwell/WPTF raised with respect to the definition of regulation range for hybrid resources.  PG&E has long noticed this issue would hamper regulation and spinning reserves being provided by solar resources.  PG&E is interested in the idea of a range not held to absolute maximum and minimum levels; however, such an approach requires a method of testing that would allow the CAISO to have confidence in a dynamic regulation range based on the level of solar production by the hybrid or solar resource.  Perhaps a series of tests could be used to demonstrate such capability.

The concern that Gridwell/WPTF raised regarding infeasible regulation awards, however, is not shared by PG&E.  First, CAISO has implemented a requirement that batteries have a thirty-minute energy buffer in order to provide regulation in the constrained direction, which should prevent most such infeasibilities from occurring except under unusual circumstances.  Second, any risk that remains can be incorporated into bids just as regulation energy take can be priced into bids.

PG&E’s proposal for an Ancillary Service SOC Firming Product addresses many of stakeholders concerns regarding limited market horizons and the replacement of the MSOC. Opportunity costs of shifting energy from DA awarded hours to other hours (captured through price arbitrage for other energy-limited resources) cannot presently be compensated for SOC-managed resources. CAISO’s management of SOC imposes limits on dispatch awards beyond those contained in bids alone. PG&E’s described the following proposal for its SOC Firming Product in its presentation, but reiterates them here for emphasis:

• In the current market timeline, SOC firming can reasonably be procured only in the day ahead market.
• SOC firming requirements must thus be defined in advance of, and so independent of, day ahead market awards on SOC-managed resources.
• SOC firming imposes a minimum SOC on awarded resources. This minimum SOC must be consistent with market awards, and should be published along with market awards.
• For SOC-managed resources, an SOC firming award will be enforced in the real time market processes (using the existing MSOC logic). Enforcement may result in uneconomic charging, which may or may not be subject to BCR. PG&E’s straw proposal is that uneconomic charging should be not subject to BCR as long as SOC firming  bids are compensated.

PG&E views an SOC Firming Product as preferable to an Energy Shift product (proposed by CESA) because the Energy Shift could be interpreted as a payment for maintaining a MSOC.  Thus, batteries that receive “awards” have absolute market power to charge any price they like (in theory).  It is therefore likely that there would be administrative limits on the product’s price, and those limits would effectively set the price, since there would be no benefit to a battery in offering the shift product for anything less.  There would also be no need to impose an additional self-scheduling requirement if the MSOC logic is functioning correctly.

Gridwell/WPTF’s assessment is that use of the end-of-hour (EOH) state of charge parameter will potentially obviate the need for CAISO procurement of a storage product, or at least imposition of constraints similar to MSOC in the future.  PG&E asserts that the horizons of decision-making by market participants and CAISO are always going to be different enough that market participants will not be able to simultaneously satisfy their own and CAISO’s objectives.  Moreover, the EOH SOC parameter has a major “weakness” (actually it’s a feature) in that it disqualifies significant portions of the real-time operating horizon from BCR.

While PG&E is sympathetic to Vistra’s expressed need for CAISO to represent foldback limits in its modeling of batteries, it is doubtful that such modeling can be introduced without making significant changes to the basic SOC management model. This kind of effort would require a stakeholder process (along with other battery model change requests) as well as be vetted against computational tractability.  Thus, PG&E does not support modeling changes to support foldback constraints in the time frame of the next year.

Bid Cost Recovery (BCR)

The topic of BCR is crucial to the ESE initiative since it will determine whether the unique aspects of energy storage resources warrant different rules for compensation compared to traditional resources, and if so, how those rules will be structured.

In their presentation, LS Power emphasized the point that nonbinding prices are being used to determine (uneconomic) binding awards.  While the same issue affects all CAISO supply to some degree, the question the ESE initiative needs to address is: are SOC-managed NGRs significantly more impacted by this than traditional generators?  Certainly, other generators do not have states of charge and/or receive charging awards. But before making a fundamental change to market design, (i.e. by removing or limiting multi-interval optimization (MIO) for storage) more data and analysis should be solicited by the CAISO.

A more feasible solution would be to guarantee BCR for binding instructions based on the advisory schedules used to generate the instructions.  As an example, suppose a battery was charged at $30 based on a $40 bid based on an optimization that discharged the battery at $60 based on a $50 bid in a nonbinding interval.  The recoverable cost associated with the instruction, assuming the discharge instruction was reversed when the optimization was run for its binding interval, would be $30 (the lost opportunity cost in the market algorithm) versus the current calculation of -$10, a reduction in BCR even though the charging was not used.  A later binding discharge instruction would effectively reduce that BCR at any price above $60, and add to recoverable costs at any price below the $50 bid.  This approach would require the following: (1) CAISO to publish all advisory schedules and prices associated with binding intervals, (2) a BCR calculation that would move through the window of real time optimization horizons and (3) significantly more complex calculations than current BCR calculations.

A similar but simpler option would be to enable real-time BCR to be calculated over successive battery cycles, defined as successive points at an identical state of charge with significant amounts of charge and discharge occurring over the interval.  All batteries necessarily see such cycles in their daily operations, and they could be identified based on either a midpoint SOC or an initial SOC for a given day.

A third option would be to base BCR for NGRs on discharge revenues netted over the day, minus actual charging costs, minus any loss due to charging at above the charge bid level.  In this calculation, there would be no offset specifically for actual charging costs being below the charge bid level, on the assumption that the benefits of this “profit” can only be realized when the battery discharges.  Comparing this method to BCR for thermal generators, there are no adjustments made for generators who happen to have bought gas at below the CAISO’s index. This approach could also be used with exceptional dispatch BCR, based again on actual charging costs compared to default energy bid charging costs. (Note: the term “default energy bid charging costs” refer to the charging costs used in calculating the default energy bid (DEB), along with roundtrip efficiency and cycling or degradation costs.)

PG&E has several questions on CESA’s proposal to “Net all costs to charge the resource with the revenue from discharging to ensure bid spread recovery”:

• Does this proposal imply that real-time and day-ahead charging and discharging costs would be combined in the calculation of BCR?
• If a battery starts at SOC point A and ends the BCR calculation at point B, how are these points incorporated into the BCR calculation?  Is a charging cost imputed to initial state of charge?  If there’s a charging cost to move the battery to point B, is that cost recoverable even though it hasn’t yet been used for discharge?
• Would BCR potentially be calculated across days?
• How would self-schedule or target state of charge hours be removed from this calculation?

Overlapping Initiatives

As several stakeholders mentioned during the Workshop, there are other CAISO initiatives which will likely overlap, or be combined, with the ESE initiative.  Two examples are the ESDER and Hybrid Evolution initiatives. PG&E urges the CAISO to be adaptable in its policy development to handle such overlaps. Specific topics that came up at the workshop include:

• Long Duration energy storage—PG&E agrees with Gridwell/WPTF that long duration energy storage should be incorporated into the Energy Storage Enhancements (ESE) initiative on a 2-3 year timeline. Even four hour batteries take on attributes of long duration storage if there are enough of them in the system, in that there’s a need to account for arbitrages beyond the market model horizon, whether it be 24 hours or one of the real time market horizons.

• Batteries with discrete transition decisions and costs—PG&E agrees with Gridwell/WPTF that enhanced modeling of batteries with discrete transition decisions and costs (based on real physical operating characteristics, not strategic bidding considerations) will be valuable for incorporating post-lithium ion storage technologies into the markets.  PG&E also suggests investigating whether the pumped storage model can be used as a basis for such modeling, as it already includes some features of this sort and is less constrained by state of charge modeling that may not be valid for some new storage technologies.

SDG&E’s hydrogen storage system appears to be similar in some ways to pumped storage, in that there is neither a need for the CAISO to manage the resource to a fixed maximum SOC (as this could easily change, with hydrogen being a reservoir of fuel energy constrained only the number of tanks available to store its production), nor a true continuous transition between discharging and charging.  The hybrid model is certainly one approach to modeling the resource.  It is important to note that fuel cells have not typically been treated as continuously dispatchable resources previously in the CAISO markets.  This type of storage resource may point to a larger category of non-SOC managed resources that would include pumped storage and other technologies with no clearly defined storage reservoir, and possibly discrete state changes with associated costs.

3. Provide any additional comments on the working group, or any additional scope items your organization feels should be included for this initiative. You may upload examples and data using the “attachments” field below:

1. Please provide a summary of your organization’s general comments on the working group presentations and the scope of issues for this initiative:

The working group meeting was a constructive forum to hear various ideas from stakeholders, including those that have begun dealing directly with the CAISO’s operational and market rules as their storage resources have entered commercial operation.  These entities have insights to share regarding the current state of the CAISO tariff and business practices for storage and mixed fuel resources that are important to consider in this stakeholder process given expectations for significant storage resource deployment in the coming years.

The Six Cities’ comments provided below express support for the CAISO’s commitment to consider proposals that will enable mixed-fuel resources to manage grid charging restrictions related to the Investment Tax Credit (“ITC”).  As discussed during the working group meeting, it is critical to ensure that resource owners are able to mitigate grid-charging risks.

The Six Cities likewise support exploration of operational improvements identified during the working group meeting that will enhance the ability of storage resources to provide services in the CAISO markets. 

Finally, the Six Cities support the CAISO’s consideration of phasing within this initiative to allow measures that can be adopted relatively quickly, are of central importance, and/or are not controversial, to be implemented promptly while allowing additional time for development of solutions to issues that are especially complex, interact with other initiatives, or require significant threshold analysis.   

2. Provide your organization’s comments on the presentations provided by stakeholders at the working group:

Investment Tax Credit Compliance

The Six Cities strongly support the CAISO’s commitment to engage with stakeholders regarding ITC compliance issues.  As discussed by LSA/SEIA during the working group meeting, this issue is likely of central concern for many mixed fuel resources that include storage and will enter commercial operation in the near term.  Unfortunately, the evolution of the CAISO’s positions regarding the participation of ITC-eligible resources in its markets has created uncertainty and introduced unnecessary risks for these resources, particularly those that may come online within the next year or two, before this initiative may be complete.

At this time, the Six Cities do not have an affirmative position as to which measures the CAISO should adopt to ensure that co-located resources are not required to engage in grid-charging, although the Six Cities agree with LSA/SEIA that attempting to manage ITC restrictions through bidding alone is sub-optimal.  It appears that development of software-based limiting schemes may offer significant assurance that grid charging restrictions can and will be managed, and the Six Cities support further consideration of software-based measures as one possible solution. 

The Six Cities also reiterate that use of the Master File to implement charging restrictions, while not the CAISO’s preferred approach in that the CAISO reserves Master File information for physical, rather than contract-based, restrictions, might nonetheless provide a viable temporary solution while more permanent measures are evaluated.  It is important to bear in mind that the ITC-based restrictions are applicable only on a temporary basis, so any waiver of Master File rules to permit ITC-based restrictions to be reflected would not need to be permanent for any resource.  It may also be feasible to implement such a waiver of Master File rules only for resources under development prior to this initiative, during the roughly 2016-2021 period when the CAISO’s policy regarding the interaction with and participation of ITC-based resources in its markets became uncertain. 

Operational Refinements

In the Six Cities’ view, this initiative provides a valuable opportunity for the CAISO and stakeholders to learn from market participants that currently have storage resources deployed and are utilizing the CAISO’s initially-developed approaches for market participation by storage projects.  Without taking any affirmative positions on these proposals at this time, from a process standpoint, it would be beneficial for the CAISO and stakeholders to more fully consider the nearer-term operational enhancements suggested by stakeholder representatives during the working group meeting. 

Opportunity Costs

Issues relating to the recovery of opportunity costs and any applicable bid adders by storage resources entail particular complexity and may be controversial.  While the Six Cities agree with requests to address these topics in this initiative, as discussed below, issues that are especially challenging or may take more time to consider and resolve should not hold up the prompt implementation of solutions to problems that are either susceptible to an expedited solution or are important, threshold issues, such as ITC compliance.

3. Provide any additional comments on the working group, or any additional scope items your organization feels should be included for this initiative. You may upload examples and data using the “attachments” field below:

Given the quantity of storage and mixed fuel resources within the CAISO’s interconnection queue and expected to reach commercial operation in future years, the CAISO must move expeditiously to shape its policies and market rules so that these new resources do not encounter undue barriers to market participation or limit the CAISO’s ability to deploy these resources to aid in managing what have already proven this summer to be very challenging and dynamic grid conditions.  For this reason, the Six Cities continue to support phasing within this initiative. 

With respect to timing for resolution of ITC-related concerns, the Six Cities perceive that market participants with significant concerns are those whose resources are expected to enter commercial operations in the near-term, because these parties would have executed power purchase agreements or other development agreements at a time when the CAISO anticipated the dominant storage participation model would be the co-located model (or a model closely resembling what has become the co-located model).  Given the evolution of this participation model and the changes in the CAISO’s rules and requirements that have since been adopted through the Hybrid Resources initiative, the CAISO may need to consider both short and longer term measures.  If there are shorter-term, albeit imperfect, solutions that can be implemented on a relatively rapid timeframe and will address concerns about grid-charging risks, the CAISO should adopt such solutions, while continuing to consider whether longer-term alternatives are preferred. 

1. Please provide a summary of your organization’s general comments on the working group presentations and the scope of issues for this initiative:

2. Provide your organization’s comments on the presentations provided by stakeholders at the working group:

3. Provide any additional comments on the working group, or any additional scope items your organization feels should be included for this initiative. You may upload examples and data using the “attachments” field below:

1. Please provide a summary of your organization’s general comments on the working group presentations and the scope of issues for this initiative:

Vistra appreciates the time and efforts of all stakeholders to bring to the stakeholder community a diverse set of issues affecting energy storage resources. It is clear from the number of presenters there is a keen interest in identifying practical issues and collaboratively exploring enhancements that will advance the CAISO’s already best-in-class storage participation model. Unfortunately, it seemed to us that time allowed mostly for the CAISO or its Market Surveillance Committee representative to engage a speaker but not for further dialogue. We think it is important that a working group session include breakout sessions or time for stakeholder dialogue to be most productive. Vistra requests the CAISO consider holding another workshop. This will provide stakeholders another opportunity to publicly engage with each other and the CAISO on the proposals put forward at the July 26^th workshop.

2. Provide your organization’s comments on the presentations provided by stakeholders at the working group:

Vistra appreciates the work that presenters put into developing and presenting their views. More work is needed to explore the issues raised to identify which issues should be within scope of the potential three phased policy projects. We are committed to that work. We look forward to engaging with the stakeholder community on the issues raised during this process.

3. Provide any additional comments on the working group, or any additional scope items your organization feels should be included for this initiative. You may upload examples and data using the “attachments” field below:

Vistra is concerned the CAISO may have misunderstood Vistra’s proposal to phase this initiative. Vistra is proposing three separate policy phases so that immediate needs are not delayed by market design efforts that will a longer lead time to stakeholder and implement. In our presentation, Vistra proposed the following three policy phases with proposed target implementation dates. We have added three notes in red to provide more context on our initial thinking.

During the discussion, it appeared the CAISO may have misunderstood our request to refer to phasing the implementation. We believe separate policy processes need to be pursued sequentially where only after the prior policy effort is complete with a Final Proposal, EIM Governing Body vote, and Board of Governors decision. The storage operators need solutions in the operational horizon as soon as possible and at a minimum before summer 2022. Delaying these solutions will only make storage operators and CAISO operators ability to manage their resources during tight conditions more difficult – potentially harming reliability. Consequently, Vistra proposes three distinct policy efforts to address three separate categories of issues as a function of how quickly the solutions are needed.

Vistra provides an illustrative timeline below that shows a picture of Vistra’s ask. We are asking the CAISO to pursue an approach that is consistent with the goals of this timeline. An approach that mirrors this proposal will allow for immediate needs to be implemented as soon as possible. It will allow additional time for the CAISO to work with stakeholders on mid-term needs to the Non-Generator Resource Model, such as enhancements to replace the Minimum State of Charge sunset provisions prior to the June 1, 2023 expiration date. Finally, if the stakeholder community still finds a need to explore holistic, market-wide reforms such as expanding the real-time market horizon then Phase 3 affords sufficient time to explore more complex redesigns for a 2024 implementation. Vistra respectfully urges the CAISO to adopt a phased policy approach that accomplishes these goals illustrated below.

1. Please provide a summary of your organization’s general comments on the working group presentations and the scope of issues for this initiative:

WPTF would like to thank the CAISO for hosting a very informative working group meeting to kick-off the Energy Storage Enhancements (ESE) initiative.  Presenters shared good information, ideas, and examples. And WPTF appreciated the opportunity to present our position. 

WPTF believes it is important to take a step back and define- what is the problem? We must have a well-defined problem, agreed upon by the stakeholder community, that is also supported by data before we can endeavor to design solutions.  We have launched into this extensive and important initiative, but WPTF is concerned we are hastily jumping into solution mode when we haven’t agreed upon and defined the root problem. As outlined in these comments, WPTF offers a potential process improvement that can be implemented for all CAISO initiatives described further in response to Question No. 3.

The CAISO’s focus in the ESE effort seems to be pursuing the idea that energy storage resources don’t show up when needed.  WPTF’s guess is CAISO is concerned energy storage resources will not actually be charged and ready to discharge when market operators need them.  But we do not have data to back up this notion. It is simply a looming fear and not a proven fact.

WPTF emphatically supports a data analysis step before we go any further in developing market products and design.  Until we can all look at the same set of data and discuss a rooted analysis of the problem, we run the risk of designing to an unclear problem statement and seeking potential outcomes that don’t effectively and efficiently address the root issue.

WPTF reiterates its concerns with regulation services awarded to energy storage resources and the issues with how this award is accounted for in various aspects of the market. We outlined these concerns with examples in our previous set of comments submitted on the Issue Paper.  At a high level, some of the concerns raised include:

• The day-ahead market not taking into account, when awarding regulation to energy storage resources, how the actual use of the regulation is expected to impact the state of charge
• The conflict between the real-time state of charge constraint and MSOC
• How the market does not fully access the regulating capabilities of hybrid resources due to the current application of the regulation range

WPTF also raises the issue that the MSOC has been implemented but there is little information about when it is enacted at present and impact it is having on energy storage. First, we respectfully request that the CAISO increase transparency around when the MSOC is enforced in the market. For example, this could easily be accomplished through including a notification through Market Notification Systems for operational uses, in the daily CAISO Market Notices that are circulated, and in the biweekly market update call reports. Additionally, WPTF is concerned that the current use of MSOC doesn’t provide additional reliability in practice, and we respectfully ask for additional transparency on these issues. For instance, there is a lack of transparency on whether the market outcomes produce the expected, desired results for energy storage resources that have binding state of charge constraints at the same time that MSOC is enforced. Another example is that several energy storage resources have charging restrictions imposed on them by the utility whereby they are unable to charge during certain days and hours. These days and hours may directly conflict with the days/hours the MSOC, when enforced, is constraining the resource to a specific state of charge driving both charges and limiting discharges. So, while the market expects the resources to maintain a state of charge per MSOC enforcement, in reality, the resources are unable to charge. Generally, these restrictions are managed through market bids but the MSOC is essentially overriding the bids and producing infeasible dispatch instructions.

2. Provide your organization’s comments on the presentations provided by stakeholders at the working group:

WPTF appreciates the work done by presenters on variations of an MSOC type product. However, WPTF urges CAISO to take a step back and define the problem before trying to design market products. Without this clear definition, the stakeholders striving to propose a better solution than status quo may not be addressing the need.

WPTF emphatically supports a data analysis step before we go any further in designing market products.  Until we can all look at the same set of data and discuss an analysis of the CAISO’s problem statement, we run the risk of designing a solution to an unclear problem statement and seeking a disparate range of outcomes.  

Energy storage resources are the perfect arbitrage resource. To ensure energy storage resources show up, it is imperative incentives are aligned. WPTF proposes strong price signals, better modeling/accounting of regulation awards, and improving real time information used in forecasting will all support the CAISO being able to better respond to real time conditions. All of this together obviates the need for a product to compensate for a minimum state-of-charge (MSOC) and enhances energy storage’s ability to support the market needs.

WPTF cautions the creation of an MSOC type product. As outlined, we don’t believe it is needed in an efficient market. Market awards and incentives should be enough to achieve the desired performance from energy storage resources. Additionally, the MSOC as implemented for summer 2021 reliability was applied as a constraint to energy storage resources. Now we are looking at translating that into a market-based product. But FERC cannot approve a market-based product specific to one resource type, especially where other resource types could provide the service. Market based products must not be unduly discriminatory or preferential to be approved at FERC. When looking at compensating a resource for providing a service, in this case a battery to hold a minimum state-of-charge, the market must design the product such that all technology types can participate and benefit from the potential product payment/market revenue.

An MSOC product is a market-based product to achieve a desired state-of-charge to be available to market operators in real time.  Market prices and the incentives to perform to a day ahead schedule should be sufficient for an energy storage resource to do so. If an energy storage resource receives a day ahead award, just like every generator, they face the penalty of buying back their schedule in the real time market.  Energy storage operators inherently have incentives to manage their resource to show up for their day ahead schedule or any real-time incremental instructions.  The incentive to provide the expected energy to the grid decreases as real time prices decrease. Basic economics tell us lower market prices mean there is sufficient supply to meet demand. Intuition follows that a minimum state of charge is not necessary for well supplied conditions. However, if the pricing does not reflect the actual conditions on the system, the lower market prices are not reflecting actual supply-demand dynamic when undersupply conditions are the actual conditions. Instead of constraining resources to a specific state of charge, the CAISO should evaluate whether its scarcity pricing paradigm can be refined to send more precise signals in line with actual operating conditions to produce the desired result.

3. Provide any additional comments on the working group, or any additional scope items your organization feels should be included for this initiative. You may upload examples and data using the “attachments” field below:

WPTF urges analysis of data before we proceed any further in this initiative. Until we can all look at the same set of data and discuss an analysis of the problem, we run the risk of designing to an unclear problem statement and seeking a disparate range of outcomes. CAISO may want to reference PJMs stakeholder process of producing a Problem Statement that outlines the source of the issue or concern paired with an Issue Charge which includes the scope of work including tasks, deliverables, and timelines.

For example, within this initiative, if we were to look at the issue paper, an “issue” seems to be “Stakeholders do not like MSOC.” This was also how it was framed on the stakeholder call. By framing the issue this way, one asks, how can we make stakeholders like MSOC?  And this is leading to the CAISO and stakeholders trying to find a way to make MSOC more palatable, primarily by creating a new real-time product and thus paying storage to have an additional constraint.

But the Problem Statement by PJM standards would be, “the CAISO is concerned storage resources will be unable to discharge during real-time peak needed hours.” Further, the Issue Charge would include as potential key work activities education on status quo and education on other market designs. In our minds framing the problem and scope this way leads to very different outcomes. It leads one to ask, why is the CAISO concerned? How large is this concern from an empirical perspective? If there is no evidence this is a problem today, can the CAISO monitor and report on energy storage behavior? If it is a problem today, what in the market design is leading to energy storage not being available when needed? Most importantly, this process allows these documents to be created jointly by the market operator and stakeholders. By approaching the problem statement and issue charge collaboratively and mindfully it almost forces the need for the CAISO and the stakeholder community to look at the problem from an empirical perspective rather than jumping to a solution.

Over the years, the CAISO frequently puts out simultaneously issues and solutions only to have to backtrack later to better defining the problem the initiative is trying to solve. We think putting the problem statement and issue charge step first including education and analysis, while it may be initially more work, will ultimately lead to saved time and effort as well as lead to better market outcomes.