Comments on Revised straw proposal

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

ACP-California appreciates the opportunity to comment on CAISO’s Revised Straw Proposal in the Energy Storage Enhancements initiative and looks forward to additional discussions on the new Energy Storage Resource participation model. While we appreciate that CAISO previously proposed a new mechanism to help address grid charging restrictions for Co-Located storage resources (through the proposed “Co-Located Enhancements”), we have significant concerns regarding the restrictions that CAISO has proposed to place on use of these tools in the Revised Straw Proposal. The Co-Located Enhancements provide an essential solution to help mitigate grid charging concerns for resources that have signed contracts which prevent grid charging and are subject to ITC recapture risk. But the proposal that these accommodations only be allowed for resources already on the system by the time this policy is implemented in untenable. We request CAISO implement a different “grandfathering” or “cutoff” date for eligibility under this policy, which is based around contract signature date, rather than online date.

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

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

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

ACP-California appreciates that, through this initiative, CAISO is proposing a solution to help mitigate ITC (and property tax) related grid charging concerns, and associated tax credit recapture risk, for Co-Located storage resources. In the Revised Straw Proposal, CAISO outlines a new proposed end date for these accommodations. In principle, ACP-California does not oppose a cutoff date for these accommodations. However, we believe CAISO's proposal needs revision to meet its stated objectives and to avoid adverse impacts to projects which may have been contracted for years ago but will not be online by the time this policy is implemented by CAISO, either by design or due to a variety of issues that are delaying project commercialization which are outside of developers' control.

In the Revised Straw Proposal, CAISO has proposed that the Co-Located Enhancements will be allowed only for resources already on the system (i.e., resources which have reached commercial operation) by the time this policy is implemented (likely in 2023). While we understand the motivation behind this proposal, we believe the cutoff timeline overlooks practical considerations of how these contracts are signed and executed. Many projects that have already signed contracts with these provisions may not be able to come online by the time this policy is implemented, often for reasons beyond a developer’s control. For instance, developers are seeing supply chain-related delays which may cause projects significant challenges in meeting a 2023 online date. And, in some instances, the delays to construction of transmission projects/upgrades may delay the commercialization of generation/storage resources and these delays are also beyond the control of the developers. CAISO should recognize these realities and provide a cutoff date that accommodates delays in project commercialization. Additionally, some projects with signed and executed contacts with these provisions may never have been intended to come online by 2023. These projects should still be eligible for the Co-Located Enhancements that CAISO has proposed, rather than arbitrarily being excluded from eligibility.

ACP-California recognizes that CAISO’s desire to ensure this policy has limited application and its desire to prevent future contracts from being signed with provisions that entirely restrict grid charging. However, the proposed cutoff dates for the policy enhancements to address ITC and property tax issues proposed in the Revised Straw Proposal are unreasonable and are likely to negatively affect projects that signed contracts years ago, but may not be online by the time which CAISO chooses to implement these enhancements. We request that CAISO extend the timeline for which projects would be eligible to use the Co-Located Enhancements tools in order to better align with the limitations and contractual requirements these resources face. Thus, as an alternative to help meet CAISO’s interest in limiting use of these enhancements, ACP-California suggests a cutoff date should be based around when the contract was signed, rather than a near-term cutoff based on project online dates and policy implementation. ACP-California suggests that CAISO consider utilizing the date at which the next proposal is published as the date by which contracts must have been signed in order to be eligible for this treatment, so as not to implicate contracts which have already been signed that include these provisions.

We look forward to working with CAISO to refine this proposal and ensure that it the cutoff date ultimately utilized does not unnecessarily harm fairly mature projects and pre-existing contractual arrangements.

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

6. Attachments

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

AES appreciates the opportunity to provide feedback on the California Independent System Operator’s (CAISO) Energy Storage Enhancements (ESE) Revised straw proposal. AES recognizes the leadership of the ISO in addressing potential improvements to the modeling, treatment, and optimization of storage assets. With more than 4 GW of grid-connected storage expected to be in operation in 2022, AES supports the CAISO’s foresight to enable storage assets to substantially advance decarbonization while maintaining reliability by absorbing excess renewable energy and ramping meeting needs, among other use cases and benefits.

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

The CAISO introduced the NGR model in 2012, which paved the way to integrate storage resources into the CAISO’s resource mix. However, there are specific issues identified by storage participants as it relates to charging rates when the storage resource state of charge is more than 90 percent of its maximum State of charge[1]. The CAISO’s proposed Energy Storage Resource (ESR) model does address this issue by providing an ability for the resource to submit incremental SOC bids, one for charging and another for discharging. The CAISO’s presentation on March 21, 2022, also states that scheduling coordinators will have the ability to specify charge and discharge rates based on the state of charge. Furthermore, the CAISO also provided some simple numerical examples during the straw proposal and the March 21, 2022, presentation, highlighting how the market software would interpret incremental SOC charging and discharging bids. However, these numerical examples fall short of providing all the interactions between resource dispatch, incremental SOC bids, and other resource-level constraints, including dynamic ramp rates, ancillary service, flexible ramping awards, etc.

So, we request CAISO to provide additional details regarding the ESR model similar to the NGR modeling details included in the CAISO's Market operations BPM[2]. The CAISO has provided similar details in other straw proposals like flexible ramping products, energy imbalance market etc. These details are extremely important for market participants to determine if they should switch from the existing NGR to the new ESR. Once the CAISO introduces the ESR model and if the scheduling coordinators choose the ESR model, can the scheduling coordinator revert back to the NGR model? Finally, AES views the dynamic charging and discharging rates based on SOC as the key benefit of the ESR model, and so requests the CAISO discuss whether this could also (or alternatively) simply be added to the existing NGR model instead.     

Bid-Spread

The straw proposal also notes that market participants can leverage the bid spread using the ESR model because the ESR model consists of a charge and discharge bid for the same SOC. However, the straw proposal does not explain how the ESR model is interpreted differently from the NGR model. Based on CAISO’s past presentations, the NGR model does include an implicit bid spread. AES requests a specific comparison of the models and how the market optimization will treat the implicit bid spreads under both the NGR and ESR models. 

Variable Charging and Discharging Rates

Storage resources have diminishing charge rates when charging above 90% of their maximum state of charge. Similarly, the storage resource has very low discharge rates when discharging below 10% of its state of charge. So, this would require storage resources to have the ability to provide separate charging and discharging rates. We request the CAISO to support separate charging and discharging rates for ESRs and the NGRs. How will dynamic charge rates impact ancillary services and regulation awards? Will the CAISO use the same simplified ramping rules for thermal generators with dynamic ramp rates for the storage models? Would the Ancillary or regulation awards be rescinded if a resource receives a regulation award in the day ahead that no longer supports the SOC charging and discharging rates?

[1] IssuePaper-EnergyStorageEnhancements.pdf (caiso.com) – Page 15 – Variable charging rate

[2] https://bpmcm.caiso.com/BPM%20Document%20Library/Market%20Operations/BPM_for_Market%20Operations_V79_clean.doc– section 6.6.2.3 Storage Energy Management

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

Reliability Enhancement

Ancillary Service

The CAISO’s straw proposal fundamentally changes the bidding requirement for storage resources. Based on the CAISO’s rules, when a resource receives a regulation award, the market reserves enough State of charge to deliver continuous energy for 30 minutes[1]. The straw proposal states that “the 15-minute market runs 38 minutes prior to the start of an operating interval, and a storage resource may have a depleted state of charge at the actual time it is providing the ancillary services.” Would the existing rule reserve the SOC for 30 minutes not avoid this situation, and if the resource no longer has SOC, then the market would rescind the AS payment? The straw proposal is requesting the resource to submit an energy bid for charging when the resource has a regulation up award, and it appears the market may charge the resource to maintain the State of charge to support the regulation award and may not consider the resource bids. Could CAISO provide additional details about the specific scenario when the resource state of charge does not support regulation award, but the resource LMP is above the charging bid. This rule change could have a significant financial impact on storage resources, so we recommend CAISO provide details about the sub-optimal dispatch and settlement.

Does the issue mentioned in the straw proposal state that storage resource SOC does not support the AS award from the day-ahead market because the Day-Ahead market assumes SOC is not consumed when storage resource provides regulation service? Then AES recommends that the CAISO consider SOC consumed in the day-ahead market rather than require scheduling coordinators to submit bids in real-time, resulting in sub-optimal dispatches.

Exceptional Dispatch

AES requests clarification of whether the CAISO plans to eliminate the Minimum State of Charge constraints (Min SOC) after the CAISO implements the changes to exceptional dispatch as proposed in the straw proposal. Currently, the minimum SOC functionality used during the summer essentially holds the SOC similar to an Exceptional dispatch. In the future, will the CAISO remove the minimum SOC constraint and use-Exceptional dispatch? AES understands that the proposal of Exceptional Dispatch addresses the compensation issue for storage resources. Since the minimum SOC has the same effect as exceptional dispatch, naturally, the exceptional dispatch settlement should apply to a storage resource when the minimum SOC constraint constrains its SOC.

Tools for Local Areas

The CAISO has stated a growing need to rely on storage resources to manage local areas' N-1 and N-1-1 conditions. Currently, the CAISO may depend on the minimum online constraints in the market to ensure against further losses, which do not impact prices or congestion. The CAISO is proposing to enhance the logic for the second-tier constraints such that energy is available from storage resources to maintain reliability if a key grid element is lost to meet local reliability needs. We request the CAISO provide more details about how the CAISO plans to implement these tools. Would this implementation be done as exceptional dispatch in both the day-ahead and real-time markets? How will the CAISO notify scheduling coordinators when the CAISO implements these tools to manage local reliability? Suppose the CAISO restricts the discharge ability for storage resources to meet local area needs either manually or by using constraints in the market application during those intervals. Would the storage resource get compensated for lost opportunity costs similar to cases when the storage resource is exceptionally dispatched?

[1] https://bpmcm.caiso.com/BPM%20Document%20Library/Market%20Operations/BPM_for_Market%20Operations_V79_clean.doc – Stored Energy Management for NGR Resources in Real-time

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

Co-Located Enhancements

The Investment Tax Credits (ITC) and property tax credits have provided significant financial incentives for solar plus storage projects. The CAISO's current Hybrid model provides the ability for scheduling coordinators to manage their charging restrictions from the grid to meet the Investment Tax Credit requirements. AES appreciates CAISO providing flexibility to represent the various operating constraints for the projects supported by ITC and property tax credits. By introducing the flexibility to represent ITC, developers can build confidence in financing future projects. The ISO is proposing that those storage resources that use the co-located feature to manage their ITC could be required to submit outages if the resource cannot charge from the grid, which may limit its discharge ability in the future. However, there is no similar restriction on the hybrid model. We request that the CAISO provide similar functionality with the co-located and hybrid resource models to manage ITC. If there are reasons to treat co-located resources with ITC restrictions different from hybrid resources, we request the CAISO to provide additional details.  At the same time, the CAISO is also proposing that this functionality will not be available to other projects after this policy is implemented. The CAISO's position to eliminate these features in the future is very concerning to storage developers for several reasons. First, the storage developers make financial decisions several years before a project goes into commercial operation. From the straw proposal, it is unclear how the CAISO will determine the sunset provision and how much lead time is provided to the storage developers to incorporate this decision into financing the project. Second, the CAISO does not offer details about the impact of storage resource charging limitations on grid reliability. Since the ITC can be a significant portion of the project finances, it is unclear why CAISO would discontinue a market feature driving the energy transition.

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

No comment on this section.

6. Attachments

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

The California Community Choice Association (CalCCA) appreciates the opportunity to comment on the Energy Storage Enhancements Revised Straw Proposal (Revised Straw Proposal). In these comments, CalCCA recommends:

• Adopting the California Independent System Operator (CAISO) proposed model that allows storage operators manage state-of-charge (SOC) and reflect other operating characteristics; CalCCA requests clarification on how bids would be submitted in the day-ahead market considering the initial SOC is unknown;
• Adopting a robust market power mitigation mechanism for storage resources operating under the energy storage resource (ESR) model;
• The CAISO clarify its ancillary service proposal would only apply to resources using the non-generator resource (NGR) model, not the ESR model, to the extent necessary to satisfy their award;
• The CAISO further explain the rationale behind the time horizon proposed to calculate the counterfactuals used to establish the opportunity costs associated with exceptional dispatches (EDs) to hold SOC; a different lookout period, such as 24 hours or all hours of the day following the ED, may be more appropriate given every increment of state of charge is dependent on the previous state of charge;
• The CAISO consider the use of the proposed tools for local areas and their impact on market prices in the Transmission Planning Process (TPP) when evaluating whether or not to approve transmission upgrades that would alleviate local area constraints and reduce reliance on the use of this tool; and
• The CAISO expand its co-located enhancements proposal to allow the functionality to apply to all co-located resources, legacy or new resources, that are eligible for the Investment Tax Credit (ITC) and property tax benefits regardless of when the contract was executed relative to CAISO’s proposal.

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

CalCCA generally supports a model that would allow storage resource operators to manage SOC and reflect other operating characteristics but is concerned the ESR model would make it difficult to construct bids into the day-ahead market given the initial SOC going into the day would not be known when bids are submitted. CalCCA requests clarification or an example on how bids would be constructed for day-ahead, given the SOC going into the first hour of the day will not be known when bids are submitted at 10 a.m. the day prior. This is especially important; how the resources bid will likely depend on the SOC of the resources at a defined starting point, which could vary significantly from the time bids are submitted for day-ahead to the beginning of the day.

CalCCA supports requests by stakeholders on the call for the CAISO to provide more examples that explain how the CAISO will model variable ramp rates.

With respect to the CAISO’s proposal on market power mitigation, CalCCA supports a robust market power mitigation mechanism for storage resources operating under the ESR model. The CAISO’s proposed methodology generally includes the correct set of costs for storage to buy energy, cycling costs, and real-time opportunity costs. In the next iteration of the proposal, the CAISO should consider what happens if the mitigated bids to discharge are below the bids to charge, given the ESR model will have separate bids to charge and discharge.

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

Ancillary Services

CalCCA understands why this proposal would be useful to CAISO operators when operating storage resources using the NGR model. However, this is likely not applicable to resources using the ESR model because the resources can bid SOC to ensure they can meet their AS awards. The CAISO should clarify this proposal would only apply to resources using the NGR model. The CAISO should also clarify in its proposal that to the extent necessary to satisfy their award, the storage must provide an energy bid with its ancillary service award. Storage resources may be situated in real-time in such a way that they can meet their AS award without requiring energy bids. For example, if a storage resource with a maximum capacity (Pmax) of 100 megawatts (MW) receives a 5 MW regulation up-award and the resource is operating at 80 MW, then the energy bid to charge is not needed to ensure the resource can deliver on their ancillary service award. On the other hand, if the same resource receives a 200 MW ancillary service award, then the resource would need energy bids from -100MW to 100 MW (i.e., charge and discharge bids) to deliver on its ancillary service award. In this case, the CAISO does not need to enforce this requirement.

Exceptional Dispatch

CalCCA supports the CAISO implementing new functionality to allow operators to ED storage resources to hold SOC and compensating storage exceptionally dispatched to hold SOC using an opportunity cost methodology. CalCCA requests the CAISO further explain the rationale behind the time horizon proposed to calculate the counterfactuals used to establish the opportunity costs, which is currently the length of the ED plus the duration of the battery. A different lookout period, such as 24 hours or all hours of the day following the ED, may be more appropriate given every how a resource would choose to bid each increment of SOC is dependent on the previous SOC.

Tools for Local Areas

CalCCA does not oppose the CAISO’s proposal to schedule energy storage resources in day-ahead through the market when operators identify challenging constraints in local areas. The CAISO should, however, consider the use of these tools and their impact on market prices in the TPP when evaluating whether or not to approve transmission upgrades that would alleviate local area constraints and reduce reliance on the use of this tool.

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

Co-Located Enhancements

CalCCA appreciates the CAISO taking steps to enhance the ability of co-located resources to utilize solely on-site renewables to charge storage to take full advantage of the ITC. CalCCA supports the proposed electable functionality to limit dispatch instructions, so they are no greater than the forecast of the co-located renewable. However, CalCCA opposes the CAISO’s proposal to limit this functionality to resources that have contractual ITC implications or property tax implications in place prior to this policy being implemented. The CAISO must expand its proposal to allow the functionality to apply to all co-located resources, legacy or new resources, that are eligible for the ITC and property tax benefits regardless of when the contract was executed relative to CAISO’s proposal. This functionality should extend for the length of the ITC or property tax benefit eligibility, rather than being limited to five years. Resources unavailable due to grid charging restrictions should be required to submit outage cards but the outage should be exempt from RAAIM if the outage is due to charging restrictions and the inability to charge from onsite renewable.

The CAISO should not develop a policy that would require asking one federal agency (Federal Energy Regulatory Commission) to approve a policy that would directly contradict that of another. The ITC is a federal benefit offered by the Internal Revenue Service to incentivize pairing storage with renewable resources. The CAISO must not implement policies that contradict federal programs or diminish market participants’ ability to take full advantage of them. The ITC is a federal benefit that could potentially extend beyond its current five-year timeframe in the future. The CAISO’s proposal would create an unnecessary roadblock to market participants looking to participate under the co-located configuration, which by design is meant to allow for a more flexible utilization of the battery. Therefore, the CAISO must extend this electable functionality to all resources eligible for the ITC.

A significant reason so many storage resources are being developed is that they can be financed using ITC and receive property tax benefits. The CAISO should avoid policies that would stand in the way of developing these resources, especially during a time when the state needs to procure significant amounts of new capacity to meet procurement orders and support grid reliability. CalCCA understands the CAISO intends to be able to fully utilize the battery component of co-located resources, above their renewable output, through grid charging. This must only occur after the phaseout of ITC and property tax benefits. Only applying this functionality to existing resources with contracts signed before Energy Storage Enhancements implementation (i.e., 2023) creates both uncertainty and new challenges for co-located resources coming to market, since new resources will have uncertainty around the ITC it can expect to receive.

Further, while the CAISO states its proposal, “should incentivize owners to bid more charging capability into the market, as charging would always be compensated, including incidental costs from grid charging,”[1] compensation through the CAISO market cannot offset foregone ITC payments. While it may be possible to reflect some of these costs through bids prior to reaching the 25 percent threshold, as the CAISO outlines in its proposal, storage is not eligible for ITC at all if the percentage of charging that occurs via the grid rather than the onsite renewable exceeds 25 percent. These costs significantly exceed those that can be reflected through bids. This is exacerbated by the foregone property tax benefits that are lost by any amount of grid charging.

Finally, CalCCA requests clarification on the process by which market participants would have the ability to request the functionality be added or removed. CalCCA understands that the New Resource Implementation (NRI) process can take a considerable amount of time, and if the process for adding or removing this functionality is similar to the NRI process, it may impact decisions around which model (hybrid or co-located) to use.

Optimized Curtailment of Co-Located Resources

CalCCA supports the comments from Clean Power Alliance (CPA) submitted to the Revised Straw Proposal regarding the curtailment of co-located resources. CPA’s proposal would adjust curtailment orders on co-located resources so that renewables can continue to charge on-site batteries as scheduled, rather than having the renewable resource curtailed such that the storage cannot fully charge. Given co-located resources are prevented from charging from the grid, when the CAISO issues a curtailment instruction, the resource can curtail such that it provides 0 MW of export onto the grid but should be able to produce energy such that it can continue to charge the storage component. Curtailing the renewable resource further such that it provides no energy to the grid and also cannot fully charge the battery would only result in the CAISO having less energy available from the storage component to dispatch at a later time.

[1]             Revised Straw Proposal at 23.

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

CalCCA has no comments at this time.

6. Attachments

CalCCA has no comments at this time.

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

The California Energy Storage Alliance (CESA) appreciates the opportunity to provide feedback on the California Independent System Operator’s (CAISO or ISO) Energy Storage Enhancements (ESE) Revised Straw Proposal. CESA recognizes the leadership of the ISO in addressing potential improvements to the modeling, treatment and optimization of storage assets.

Overall, CESA welcomes several of the ISO’s clarifications regarding their proposals energy storage resource (ESR) participation pathway. While detail on the default energy bid (DEB) formulation for ESR assets is welcome, CESA considers that some of the inputs used for that calculation merit revision. In addition, CESA continues to recommend that the improvements included in the ESR model should not be limited solely to a novel participation pathway, and should, to the extent possible, be applied to the current non-generator resource (NGR) model as well. Moreover, CESA requests additional clarity on how the ESR participation pathway would co-optimize ancillary service clearing bids and issue corresponding power dispatch instructions. CESA also recognizes that the ISO’s intent to refine its proposed state-of-charge exceptional dispatch (SOC ED) instruction by better accounting for energy market opportunity costs but offers recommendations on how to more fairly assess the impact of SOC EDs on project economics. Finally, regarding co-located resources, CESA appreciates the ISO consideration of ITC rules within this initiative and welcomes the additional optionality the electable pathway offers, noting how eligibility for this framework should be revised to ensure equitable outcomes. As such, CESA’s comments can be summarized as follows:?

• The proposed DEB formulation does not properly recognize the impact of SOC on the costs of an ESR and should be refined with consideration of historical prices.
• While CAISO’s intent to minimize changes to the NGR model is reasonable, the new participation model is may create a disadvantage relative to NGR model.
• The ISO should provide more clarity on how the ESR model will co-optimize bids for products other than energy and issue the corresponding power dispatch instructions.
• The proposed method to calculate the opportunity costs of storage assets that have been subject to a state-of-charge exceptional dispatch (SOC ED) instruction merits improvement, particularly with regards to the number of hours it considers.
• The eligibility restrictions and limitations recommended for the co-located electable functionality are overly exclusive and have the potential to induce market uncertainty.

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

In the Straw Proposal, the ISO proposes the creation of a new storage participation pathway, the ESR model. The CAISO notes that this model would be available to storage assets in addition to the NGR model, which is currently used by most storage assets interconnected to the CAISO grid. In the revised Straw Proposal, the ISO describes how market power mitigation will be applied to ESR assets. The ISO proposes a DEB for energy storage resources that includes the energy costs (i.e. the cost for storage resources to buy the energy used for charging), cycling costs (determined based on Masterfile data, as for NGR assets) and opportunity costs. Importantly, to represent the fact that ESR resources have different marginal costs depending on their state-of-charge (SOC), the ISO recognizes that DEB for ESR assets must be sloped in some way rather than constant across the different SOC points. As such, the ISO proposes to use prices from the integrated forward market run of the day-ahead market to establish a sloped DEB, with the slope being determined by the difference between the highest-priced hour of the day and the nth highest priced hour of the day, where n corresponds to the duration of the storage resource.

CESA recognizes that the efforts of the ISO seek to utilize the existing NGR DEB framework to the greatest extent possible, while realizing the benefits of the ESR framework by deriving a sloped DEB. Nevertheless, CESA believes that, as currently formulated, the ESR DEB proposal does not accurately recognize the impact of SOC on the costs of assets. During the stakeholder call held by the ISO to discuss the revised Straw Proposal, stakeholders noted that the proposed DEB structure for ESR may not serve the CAISO’s goal of recognizing the impact of SOC in marginal costs as it derives the slope solely using market prices from the integrated forward market (IFM) run. CESA agrees with these concerns, as the current formulation could arbitrarily set the DEB for the highest segment of the discharge bid curve based on values that do not relate to the marginal costs, including opportunity costs, of the ESR asset. To this end, CESA agrees with the recommendations made by Pacific Gas & Electric (PG&E) to consider historical data to inform the slope, rather than only IFM values.

In addition, CESA continues to urge the ISO to consider the merits of applying several of the proposed characteristics of the ESR model to the NGR model. While CESA welcomes the innovative approach the ISO is considering to better incorporate energy storage assets to its markets, it is not readily obvious why some of the improvements the ESR model has over the NGR model cannot be readily applied to the latter. CESA understands that modifications to the fundamental bidding structure of the NGR model should be approached with caution as this is the current pathway most energy storage assets are set to use in the coming years. Nevertheless, to avoid creating disadvantages for NGR resources relative to ESR, the ISO should consider, ad minimum, ensuring that both the NGR and ESR models allow for representation of transition times, cycling limits, and variable charge/discharge rates in the Masterfile. If the ISO does not apply these changes for both participation pathways, CESA considers there would be clear advantages for ESR resources as they would be better positioned to represent their marginal costs and ensure unfeasible dispatch instructions are minimized.

Finally, considering that the ISO has framed the ESR participation pathway as one that optimizes dispatch instructions in terms of SOC, CESA requests additional information regarding how this model would deal with bids for other products, such as ancillary services, that are currently bid in terms of power. Will ESR assets be able to bid for these products with similar granularity? Will dispatch instructions be in terms of power or energy? Would co-optimization work as it currently does for NGR assets? CESA urges the ISO to provide more clarity on these matters prior to the issuance of a Final Proposal within this initiative.

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

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

In the Revised Straw Proposal, the ISO has substantially modified its SOC ED compensation recommendation. The Revised Straw Proposal provides details on how opportunity costs would be determined for storage resources that are exceptionally dispatched to hold state of charge via an SOC ED. The ISO notes that for each exceptional dispatch issued to a storage resource to hold state of charge, the ISO will compute two counterfactual values:

1. The revenue maximizing energy dispatch the resource would have received if there was no exceptional dispatch in place.
2. The revenue maximizing energy dispatch that the resource would have received if the exceptional dispatch was still in place.

After calculation of both counterfactual values, the ISO will compare them and, if the resource would have been able to make additional revenue if the exceptional dispatch was not in place, then the resource would be awarded the difference between the counterfactual revenue earned without the exceptional dispatch in place and with the exceptional dispatch in place. Importantly, the Revised Straw Proposal notes that the time horizon for these counterfactuals will start from the first interval where the exceptional dispatch to hold state of charge is in place, and it will include the entire horizon of the exceptional dispatch and an additional period of time equal to the duration of the storage resource at the conclusion of the exceptional dispatch.

CESA considers that the duration of the horizon utilized to calculate the counterfactuals is unduly restrictive. First, CESA disagrees that the horizon should commence from the first interval where the exceptional dispatch to hold state of charge is in place. This is not adequate in the case in which the storage asset was first instructed to reach a SOC and then hold it. In this case, the horizon should commence when the initial instruction to charge was issued. Second, CESA disagrees that the horizon should be arbitrarily limited to the duration of the SOC ED plus the duration of the storage asset. The economics of storage resources are not restarted every number of hours, they are the result of a continuous set of iterative decisions. As such, an SOC ED instruction will have ripple effects beyond the immediate hours after it. In this context, CESA recommends the CAISO considers all the hours remaining in the day of the SOC ED when calculating the counterfactuals. CESA considers that this is an adequate middle ground as (1) it is likely that these types of EDs will be used in the peak-net peak period of the day, when a limited number of hours remain in the day; and, (2) it would be computationally challenging to look beyond the day of operations to capture a 24 hour period for counterfactual calculations.

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

As stated in comments to the Straw Proposal, CESA appreciates the CAISO’s consideration of the issues faced by resources that are pioneering paired participation pathways within this initiative. Optionality for co-located resources that envision capturing ITC benefits is particularly welcome considering the importance of this revenue stream for both existing paired resources, those in development, and standalone generation assets that seek to add energy storage. In this context, while CESA welcomes the additional clarity provided by the CAISO, we find some of the recommended restrictions and limitations to be overly exclusive and potentially induce market uncertainty.

In the Revised Straw Proposal, the ISO notes that the electable co-located functionality would be available for resources that have contractual obligations not to charge from the grid, noting that market participants will be required to provide documentation that the associated storage resource is part of an energy project eligible and planning to apply for investment tax credits. CESA does not believe that contractual obligations should be necessary for an asset to use the electable functionality as the intention of applying for ITC compensation and its compliance falls squarely between the project owners and the Internal Revenue Service (IRS). The intention to apply for ITC accreditation is directly related to the revenue streams the project assumes in the financing phase. As such, intending on applying for ITC will be captured in the costs of a project when bidding into a specific contract, although the charging restrictions themselves may or may not be explicitly recognized in the contract itself. For example, a project could have an RA-only contract with a load-serving entity (LSE) which would not address charging limitations, but the price of the contract itself may be reflective of full ITC capture. For these reasons, CESA recommends that eligibility for the electable model is not limited to any specific contract language but to the asset’s intention to apply for investment tax credits.

The Revised Straw Proposal also indicates that the electable functionality will only be available to assets that are online by the time of the implementation of this policy, noting that resources that strike contracts prohibiting grid charging or resources that begin participating in the ISO market after this policy goes live will not be eligible for this functionality. CESA does not consider that this limitation is reasonable considering the difficulties related to commencing commercial operations in recent years. Given the multitude of interconnection issues assets looking to participate in the CAISO have faced in recent years, it is evident that the date in which a resource is able to come online is not solely up to it project owner but to a host of factors. These factors extend beyond the jurisdiction of the ISO, touching upon the processes that must be completed by participating transmission operators (PTOs) as well as issues related to supply chain difficulties. In this context, CESA advises against limiting access to the electable functionality only for assets online by the time of implementation, instead recommending that eligibility should be tied to ITC eligibility, as demonstrated by the asset owner.

Finally, CESA requests clarity regarding the duration of the electable functionality once an asset is able to select it. Both the Revised Straw Proposal and the presentation materials used for the most recent stakeholder call suggest that resources will only be eligible for this electable functionality for a 5-year period upon joining the grid, effectively eliminating the possibility of older standalone generation assets that wish to add storage to be eligible. CESA does not believe that this limitation is reasonable as the 5-year period may not be adequate for all assets: it may be too short for projects that will still need to go through testing and commissioning while it may too long for projects that started their ITC period prior to policy implementation. As a result, CESA recommends the elimination of this provision.

For the arguments outlined above, CESA requests the ISO to revise the eligibility considerations that have been included in the Revised Straw Proposal. Overall, CESA considers that these limitations undermine the spirit of the electable co-located functionality as first included in the Straw Proposal. As such, if the ISO decides to retain any of the aforementioned eligibility restrictions for the electable co-located functionality, it should, ad minimum, include an explanation on why the restrictions and their potential market effects are reasonable.

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

CESA offers no comment at this time.  

6. Attachments

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

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

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

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

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

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

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

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

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

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

6. Attachments

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

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

The Public Advocates Office at the California Public Utilities Commission (Cal Advocates) comments are focused on the CAISO’s proposed co-located energy storage enhancements.  Cal Advocates recommends that the CAISO develop durable (as in reasonably compatible with future policy changes and resource growth) and comprehensive market practices to accommodate energy storage resources that utilize local, state, and federal incentives for renewable-only or grid-limited charging.  Allowing existing and future energy storage resources to optimize incentives for renewable charging while providing needed grid reliability services will provide the greatest value for California ratepayers.

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

Cal Advocates has no comments on this issue at this time.

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

Cal Advocates has no comments on this issue at this time.

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

The CAISO frames the co-located enhancements proposal by first noting stakeholders’ request that the CAISO develop mechanisms to ensure that storage resources can recover contract costs, property tax credits, or Investment Tax Credit (ITC)[1] losses that result from CAISO-directed grid charging.[2]  The CAISO suggests that such a mechanism may reduce grid charging limitations in future contracts and may result in more operational flexibility if resources can reflect the costs of grid versus renewable charging.[3]

The decision to charge a storage resource from the grid or from a co-located generating resource is fundamentally an economic decision that should be based on the marginal costs of charging and discharging the resource, including contract costs and the potential loss of tax credits and other incentives for renewable charging.  Allowing co-located resources to bid marginal costs that reflect any lost value from grid-charging will provide market incentives for “clean charging” of the resources, while also providing needed resource flexibility to the CAISO.  The CAISO should develop a comprehensive solution to ensure that the operation of co-located storage resources can be optimized in the CAISO market.  Such operation will provide greater value for ratepayers while optimizing the reliability value of the resource.

However, the CAISO’s co-located enhancements proposal falls short of this larger optimization objective.  The CAISO’s enhanced co-located functionality proposal would create “an electable functionality to limit dispatch instructions for storage resources so that they are no greater than the forecast of the co-located renewable resources.”[4]  The functionality would essentially limit CAISO   charging dispatches of the storage to the level of the CAISO dispatch of the paired generation.[5]  The CAISO proposes to provide the tools only for existing resources and for resources that will be operational before the co-located enhancements are implemented, and only during their 5-year ITC periods.[6]  At the end of the resource’s 5-year ITC period, and after the implementation of the policy for new resources, the CAISO will be able to direct co-located resources to charge from the grid without limit.  While enabling this functionality for existing resources is a needed first step to ensure that storage does not lose expected incentives, it does not go far enough to optimize market participation of the resources to provide ratepayer value and needed reliability services.

At a minimum, the same tools should be available for all ITC-eligible projects during their initial five-year ITC periods and the tools should not be restricted to co-located resources that are interconnected to the CAISO grid before the functionality is implemented.[7]  The CAISO should provide the same functionality for storage resources benefiting from any future incentives for renewable-only or limited grid charging.  The CAISO’s tools should also accommodate resources’ property tax incentives as long as the incentives are extant.

As a next step, the CAISO should develop a durable and comprehensive policy to accommodate energy storage resources that utilize current and future state and federal incentives for renewable-only charging, while facilitating operational flexibility and contributing to reliability by reflecting the costs of grid-charging versus on-site charging in market bids.

[1] For a description of the ITC, please see: National Renewable Energy Laboratory, Federal Tax Incentives for Energy Storage Systems, Retrieved 23 March, 2022.  Available at: https://www.nrel.gov/docs/fy18osti/70384.pdf.  See also CAISO, Energy Storage Enhancements Revised Straw Proposal, March 9, 2022 (Revised Straw Proposal), pp. 23-24.

[2] “Some contracts expressly prohibit ‘grid charging’ for storage resources because grid charging can reduce the revenue stream for a storage or co-located project.” Revised Straw Proposal, p. 23.

[3] Revised Straw Proposal, p. 23.

[4] Revised Straw Proposal, pp. 25-26.

[5] Revised Straw Proposal, p. 26.

[6] Revised Straw Proposal, p. 25.

[7] The ITC was recently extended to include certain credit components for resources commencing construction for 2024 and beyond.  Department of Energy, Guide to the Federal Investment Tax Credit for Commercial Solar Photovoltaics, January, 2021, Retrieved 23 March, 2022, pp. 1-2.  Available at: https://www.energy.gov/sites/prod/files/2021/02/f82/Guide%20to%20the%20Federal%20Investment%20Tax%20Credit%20for%20Commercial%20Solar%20PV%20-%202021.pdf

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

Cal Advocates has no comments on this issue at this time.

6. Attachments

Cal Advocates does not provide attachments to these comments.

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

As mentioned in CPA’s comments on the initial Straw Proposal, structuring market dispatches to avoid co-located storage grid charging – including times of renewable curtailment – is the best choice for efficiency and reliability. The CAISO market should do everything reasonable to accommodate ITC restrictions because it is the US government’s single largest clean energy incentive program that has driven GWs of recent installations, making the clean energy transition more affordable to all Californians. Many co-located storage facilities are equipped with mechanical, electrical, and digital devices designed to prevent grid charging. ISO dispatches that effectuate a grid charge at one of these facilities cannot improve efficiency or reliability because grid charge prevention devices will disconnect the resource, causing a forced outage with negative impacts to the grid beyond the immediate intervals when grid charging was instructed. Including all curtailment scenarios within the scope of the co-located enhancement is therefore critical.

CPA recommends that ISO adopt a procedure to attenuate its exceptional dispatch curtailment orders to co-located facilities. Curtailment should be ordered to the extent no greater than the output level that will permit co-located storage to fulfill its complete market-awarded charging schedule. This will achieve all the desired objectives. It will guarantee that co-located resources do all they can to clear system oversupplies. And it will maximize value-capture by the power system from incremental SOC in future intervals. ISO may consider whether the recommendation is appropriate for self-schedule cuts, although market participants have the option to minimize their exposure to self-schedule cuts by submitting economic bids.

Revised Straw Proposal suggests that co-located enhancements would be available as an option to all resources which are online by the time the policy goes into effect. While CPA understands ISO’s desire to limit the application of the enhancement, it would be more reasonable to allow the enhancement for ITC-qualifying resources with contracts signed by the time the policy goes into effect. The proposed qualifying period will face challenges from resources whose Commercial Online Dates (CODs) are delayed beyond policy implementation in 2023 and other resources which begin construction by Jan 1, 2023 but are not online by the policy implementation date. It would not be fair or reasonable to deny use of the enhancement to resources that meet Internal Revenue Service (IRS) qualifications for large ITCs and make all good-faith efforts to meet their timelines.

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

N/A

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

N/A

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

See attachment

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

N/A

6. Attachments

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

The proposed ESR bidding model will improve storage profitability and utilization compared to the prior power bidding model by around 5% to 10% according to my group's research results. 

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

Modeling energy storage bids dependent on the SoC not only follows intuition to avoid deep discharge cycles and maintain storage SoC levels. This bidding model also has a rigorous theoretical foundation based on dynamic programming which my group has been focusing on. The opportunity value of stored energy in energy storage is also a function of storage SoC - the lower the SoC the higher the marginal opportunity value. My group has developed algorithms to calculate the storage opportunity value based on price series as a function of SoC (see attached), these tools will help CAISO to generate default bids using physical storage parameters, including nonlinear efficiency, power rating, and degradation cost. The tool will also help CAISO to monitor market power of storage participants, and conduct market price and efficiency analysis with increasing storage share.

Slides: https://bolunxu.github.io/assets/files/Xu_Storage_CAISO.pdf

Paper: https://arxiv.org/pdf/2201.03421.pdf

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

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

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

6. Attachments

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

EDF-Renewables appreciates the CAISO’s time and effort to improve the energy storage resource participation in the CAISO energy and AS markets. EDF-Renewables is generally supportive of the CAISO’s proposal direction but does not support moving to a draft final proposal as significantly more work needs to be done to explore the benefits and potential downsides of the different aspects of the proposal. EDF-Renewables requests the CAISO include in the next turn additional detailed examples and data.

Additionally, we repeat our request that the CAISO clarify that Energy Storage Enhancements (ESE) will be an ongoing (annual?) effort, and that the CAISO keep a catalog of the ESE workshop and other stakeholder proposals and issues, including the CAISO’s determination to defer or not take up the suggestion, if applicable. 

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

 EDF-Renewables is optimistic that the energy storage resource (ESR) model will improve storage participation, but still does not understand exactly how it will do so. We request detailed examples on how this model will lead to better energy arbitrage outcomes or make bidding in a spread easier for scheduling coordinators. We do not believe that the ESR model will obviate the need for improvements to the non-generator resource (NGR) model. As proposed, the ESR model does not address the reduced charging and discharging capability while near state of charge (SOC) limits as the physical constraint causes the inability to hit the nameplate power rating at those SOC levels, and not the fact that the energy is more or less valuable which is what the ESR model works to allow.

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

We generally support the items as needed improvements to the CAISO. We support the proposal made by the Western Power Trading Forum on day-ahead regulation awards and rather than forcing uneconomic charging or discharging, to instead limit the day-ahead regulation awards by incorporating an estimated deployment rate into the day-ahead regulation scheduling logic.  

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

EDF-Renewables supports the CAISO directly acknowledging that most resources taking advantage of the ITC will be designed to not be able to grid charge either due to a physical lock-out scheme, interconnection agreement, or software. The ITC is a federal tax incentive and the ability to finance projects that take advantage of this tax treatment (and thus lower costs for ratepayers) has required many developers and off-takers to agree to contracts that expressly prohibit grid charging for 5 years after COD. Thus, the storage design itself does not allow grid charging. This is not a contractual limitation, but a cost/benefit consideration inherent in the storage resource’s initial building consideration. The CAISO should not mandate contract renegotiation or higher cost storage resources without justification.

Since the CAISO last considered hybrid and co-located resource rules, the CPUC has an explicit Qualifying Capacity formula for hybrid resources that do not grid charge due to the ITC. Therefore, this restriction is already baked into the resource adequacy (RA) program and there is no obvious justification at this point to require grid charging. Furthermore, the CAISO is suggesting grandfathering resources under different rules based on COD date. This is inherently discriminatory and typically FERC requires significant justification for allowing this practice.

EDF-Renewables believes the CAISO should more fully consider this aspect of the proposal and requests additional clarification on some of the details. The revised straw proposal states, “Outage cards submitted because the resource cannot generate because there is no state of charge and no ability to charge would be subject to the ISO’s resource adequacy availability incentive mechanism (RAAIM).” We would like additional clarification on this sentence. The issue is not that resource cannot generate, but that when receiving a charging schedule, it cannot charge above the renewable amount. The CAISO receives batteries SOC through SCADA for all NGRs and the market optimization consider that when making dispatch decisions. It could be that the CAISO observed SOC is different than the battery SOC, but this would be a different issue that could not be resolved through outage cards.

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

 EDF-Renewables support the classification.

6. Attachments

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

The Joint CCAs, Silicon Valley Clean Energy (“SVCE”) & Central Coast Community Energy (“CCCE”), appreciate the opportunity to comment on the Energy Storage Enhancements Straw Proposal (ESE Straw Proposal).

In summary, the Joint CCA’s recommend the following:

• The Joint CCAs support the new energy storage resource model that recognizes that incremental costs to charge and discharge are different at different levels of state of charge.
• The Joint CCAs support CAISO’s proposal to subject resources using the energy storage resource model to market power mitigation, and to provide access to a new default energy bid. However, Joint CCAs request that CAISO consider and describe in the final proposal how its proposed market power mitigation approach will adequately address the potential for exercise of market power for required charging of storage resources in local areas. 
• The Joint CCAs also urge the CAISO to expedite the NRI process for switching between hybrid to co-located resource models, so that market participants have the ability to easily switch models in case there are unforeseen consequences of one model vs. another.
• The Joint CCAs support CAISO’s proposal for compensating storage resources for holding state of charge based on an opportunity cost methodology that captures the revenues that the resource would have received had it been optimally participating in the market during the exceptional dispatch and for a period of time after the exceptional dispatch.
• The Joint CCAs support CAISO’s proposal to enhance the logic for second tier constraints in local areas to ensure that capacity is available from traditional resources and that energy is available from storage resources to maintain reliability in the event a key grid element is lost to meet local reliability needs.
• The Joint CCAs urge the CAISO to modify its proposed co-located enhancements to allow all storage resources to take full advantage of the federal program for investment tax credits (ITC) by allowing ITC-eligible resources to only charge from its on-site renewable for the duration of their contractual commitments regardless of the contract execution and online date. Any limitations should balance the benefits to be gained by removing grid charging restrictions against the costs to consumers of losing ITC and property tax benefits.

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

The Joint CCAs support the requests made by stakeholders for the CAISO provide functionality & capability to manage state of charge and appreciate the ISO working expeditiously to create the new Energy Storage Resource (ESR) model. The capability for market participants to access a well-designed model that will allow storage resources to reflect incremental costs to charge and discharge at varying levels of state of charge is incredibly important. 

The Joint CCAs also support CAISO’s proposal to subject resources using the energy storage resource model to market power mitigation, and to provide access to a new default energy bid. We are concerned, however, that particularly for energy storage resources within local capacity areas, the proposed default energy bid may not sufficiently mitigate energy storage charging bids. That is, could there be instances in which a local energy storage resource has been discharged in real-time, and thus needs to be charged (at any price) to meet local capacity area reliability requirements? It isn’t obvious to the Joint CCAs whether the CAISO’s proposed market power mitigation will adequately address the potential for exercise of market power for required charging. Joint CCAs request that CAISO consider and describe in the final proposal how its proposed approach would address this concern.

 The Joint CCAs also urge the CAISO to expedite the NRI process for switching between hybrid to co-located resource models. Because the impacts of the different models will not be fully known prior to implementation, it is imperative that market participants have the ability to easily switch models in case there are unforeseen consequences of one model vs. another.

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

The Joint CCAs support CAISO’s proposal for compensating storage resources for holding state of charge based on an opportunity cost methodology that captures the revenues that the resource would have received had it been optimally participating in the market during the exceptional dispatch and for a period of time after the exceptional dispatch. CAISO’s simplified counterfactual approach appears to be a reasonable methodology, though as CAISO notes it won’t capture the impacts that might have occurred had the resources’ bids been incorporated into the market results. Joint CCAs urge the CAISO to monitor the results of its proposed approach and to perform an assessment, after a reasonable period of time, of the efficacy of its approach and to identify whether changes are warranted.

The Joint CCAs support CAISO’s proposal to enhance the logic for second tier constraints in local areas to ensure that capacity is available from traditional resources and that energy is available from storage resources to maintain reliability in the event a key grid element is lost to meet local reliability needs. As noted in item 2 above, Joint CCAs request that CAISO consider and describe in the final proposal how its proposed market power mitigation approach will adequately address the potential for exercise of market power for required charging of storage resources in local areas.  

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

In the Straw Proposal, the ISO further clarifies the plan to implement a new electable co-located model to ease compliance with the federal Investment Tax Credit (ITC).

Under this model:

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

The Joint CCAs appreciate the concept & application of this alternative model that respects the restrictions placed on resources that have relied on the federal ITC and state property tax benefits to lower the capital costs of the storage resources. This alternative model will enable consumers to benefit from lower capital costs derived from the federal ITC and property tax treatment and will allow projects with grid charging restrictions to choose the more efficient co-located resource model without fear of violating contractual prohibitions on grid charging.

However, in the latest straw proposal published by the CAISO on March 10, 2022, it appears that the CAISO will only allow this electable function to be present for “legacy” resources. The Joint CCAs have strong concerns regarding this treatment. First, only allowing this treatment for resources that are connected to the grid as of the date of implementation of the ESE Straw Proposal (expected in 2023) fails to recognize that there will be projects subject to signed agreements executed prior to ESE Straw Proposal implementation that may not yet be connected to the grid as of that date.  Second, ISO appears not to have considered whether the increased costs to consumers resulting from the loss of ITC will be fully offset by increased benefits resulting from removing the ITC grid charging restrictions. Responsibility for considering such costs and benefits rests with the regulatory authorities with jurisdiction over the procuring entities, but CAISO’s proposal will preempt that decision making authority. CAISO also does not appear to have considered the diminishing returns associated with removing ITC grid charging restrictions. For example, could 5% or 10% of the co-located storage resources having no grid charging restrictions provide sufficient flexibility to meet ISO’s needs at a reasonable cost of lost ITC? The Joint CCAs urge the ISO to allow this electable functionality to be provided towards all co-located resources for the duration of their ITC & property tax commitments. Before establishing a cutoff date for continued recognition of ITC and property tax restrictions on grid charging, the CAISO should conduct studies demonstrating that the benefits realized from removing grid charging restrictions from all co-located storage resources, rather than a smaller subset of resources, outweigh the lost ITC and property tax benefits. At a minimum, the cut-off date such apply to resources with contracts executed as of that date, not just those connected to the grid as of that date and should apply for the duration of the grid charging restrictions. The ITC is a federal tax benefit intended to provide incentive to bring renewable generation to market, and as a result continued support and accommodation for tax incentives will continue to aid in achieving California’s goal of 100% clean energy by 2045 under SB 100.

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

 No comments at this time.

6. Attachments

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

As the IPCC report said today we must work harder to build a more efficent, equitable and affordable energy system, and long duration energy storage is essential to ensuring we have more renewable energy working 24/7.  

The Long Duration Energy Storage Association of California (LDESAC) is focused on promoting long duration energy storage technologies that are needed to meet the state’s climate and clean energy goals. The LDESAC works closely with other renewable, clean energy, storage, and allied organizations to advance our shared priorities.    

The Updated Energy Storage Enhancements paper (paper) does an excellent job outlining the “unique characteristics of energy storage resources compared to traditional energy generation or load resources, new market rules and changes to the ISO’s existing energy storage optimization models may be needed to fully integrate these resources into the market, to leverage the flexibility of these resources to maintain grid reliability, and to maximize their use and effectiveness to achieve clean energy goals.”

As noted, a principal concern expressed and supported by the long duration energy storage community is “a lack of compensation during critical periods when the ISO must retain state of charge on some energy storage devices, precluding their active participation in the real-time markets.” The traditional bid structure must change and adapt to provide credit and or cost recovery for charging and discharging short and long duration energy cycles.  

The LDESAC storage technologies currently include pumped hydro, compressed air, liquid air, zinc-air batteries, flow batteries, flywheels, molten salt and thermal energy, electrolytic hydrogen, and repurposed gravity wells. These technologies can be deployed in projects ranging from a few hundred kilowatts to several gigawatts. Some involve site-specific applications, while others can be deployed virtually anywhere. Some, such as pumped storage and concentrating solar thermal, are fully mature and have been deployed around the world for years, while others, like liquid air and zinc, are only now becoming commercially available and require public and market support to advance their deployment. 

The LDESAC seeks to promote the development of long duration energy storage to complement short duration storage technologies and enhance California’s ability to achieve its climate goals, while operating a safe and reliable energy grid and appreciates the leadership of the California Independent System Operator. 

In response to the concern expressed regarding limited time horizon, the LDESAC encourages the CAISO to consider a range of options giving the flexibility needed to ensure the many grid services and characteristics of LDES are permitted in the marketplace. 

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

The LDESAC is encoraged by the modeling improvements and look forward to the dialogue and additional thoughts to improve the state of charge cost and credit optimization.  

When considering new advisory intervals to dispatch storage resources, the LDESAC suggests expanding the scenarios to look at multi-hour needs and multi-day peak needs to address the duration curves (e.g., caused by multi-day weather events or grid instability over 8 eight hours).

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

As mentioned before, the LDESAC would like to expand the three areas and broaden the terms to address duration and seasonal attributes in each category as well as the diversity of state of charge from different types of long duration energy storage. 

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

LDES projects allow for scalability and hybridization.  System operators should develop a robust, enduring framework for capacity accreditation that both captures differences in storage duration and evolves as storage penetration grows and the overall system's loads and resources change. Periods where storage, especially LDES is critical will become more frequent as storage penetration increases and traditional resources retire. 

There must be enough flexibilty in the marketplace to account for the diverse benefits.  In a recent Nature article, the authors expressed their “findings show that energy storage capacity cost and discharge efficiency are the most important performance parameters.”  https://www.nature.com/articles/s41560-021-00796-8 

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

6. Attachments

The LDESAC supports

1) extending the look ahead window in the real-time market, understanding the technology limitations, but would like to revisit the metrics in the tools and parameters to consider the diverse technologies and attributes of LDES, 

2) developing an energy shift product could be really helpful and LDESAC looks forward to participating in more discussions, and 

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

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 and including long duration energy storage.

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

As with earlier events in this initiative, LSA’s comments here focus on Mixed-Fuel Resources (MFRs) combining Variable Energy Resources (VERs – solar or wind) and storage, in a Co-located Resource (CLR) configuration.  Our comments are summarized below and explained under Q4 below.

• LSA supports the concept of providing grid-charge management options for MFR CLRs and is happy to see an option included in the Revised Straw Proposal (Proposal).  Similarly, LSA can live with the mechanics of the proposed framework.

• LSA has significant concerns with the CAISO’s new restrictive and contradictory proposed eligibility rules, as well as the potential inflexibility of the election.  While the Revised Straw Proposal eligibility criteria covered any project with ITC-related charging limitations, the new Proposal seems to limit participation to projects with such limitations, but only if they have PPAs prohibiting grid charging.  The need to limit or forego grid charging stems from the ITC provisions, not from PPAs per se, and this serious eligibility reduction will severely reduce the benefits from the Proposal.

Other eligibility restrictions are even more unclear, e.g., whether a project must already be operating now, or operating when the option is implemented, or just needs to have an executed contract with the limitations described above by one of those dates.

Also, the Proposal (like the Revised Straw Proposal) mentions grid-charging limitations from property-tax restrictions but then ignores them in the eligibility criteria.  The new 5-year “hard” limit in the Proposal exacerbates this deficiency.

More generally, LSA understands the CAISO’s discomfort with this proposed feature, but it is somewhat schizophrenic to offer this option and then restrict it so much that almost no projects can use it. 

More broadly, the CAISO’s “market efficiency” concerns are narrow and unrealistic.  The federal ITCC policies are enabling a tremendous expansion of energy storage on the CAISO system and nationally, without which the financial feasibility of these installations would be highly questionable.  The short-term “efficiency” tradeoffs will likely be small compared to this larger efficiency benefit, and in any case, the federal tax structure is not under CAISO jurisdiction or developer control.

• LSA supports the proposed Pseudo Tie MFR CLR eligibility for Aggregate Capability Constraints (ACCs).  The requirement that CLRs in an ACC be in one BAA is reasonable.

• LSA continues to be disappointed that the Proposal still does not do the following:

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

• Include an acknowledgement and response to each earlier stakeholder comments on the Revised Straw Proposal.  As we stated in our last comments, and as we and GridSME said in the stakeholder meeting, lack of this traditional CAISO feedback leaves stakeholders wondering whether the CAISO noticed or considered their input, and, if the CAISO did those things, why the CAISO may have rejected it.    

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

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

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

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

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

FEEDBACK ON SPECIFIC PROPOSALS IN THE REVISED STRAW PROPOSAL

Grid-charge management for CLR MFRs - mechanics

As noted under #1 above, LSA mainly supports the mechanics of the CAISO’s proposal for grid-charging management.  The reasons for these positions, along with suggested modifications and clarifications, are explained further below.

The proposed mechanism would have the following elements, for participating MFR CLRs:

1. Storage CLR charging schedules will not be set above VER CLR output schedules

2. Storage CLRs real-time charging may deviate down from scheduled/dispatch levels to match VER CLR real-time output, to the extent that the latter is less than the “forecast”

3. Deviations by both CLRs would be subject to Imbalance Energy charges

4. Storage CLRs must submit outage cards indicating unavailability when they are depleted and unable to charge based on renewable CLR output levels (subject to RAAIM provisions)

This framework seems reasonable generally, but LSA suggests clarifications and modifications below.

Element #1:  The CAISO should clarify how this provision will work if the storage CLR bids into the Day Ahead Market (as it is required to do, if it is a Resource Adequacy (RA) Resource) but the VER CLR does not schedule until the real-time market (as it is not required to do even if it is an RA Resource).

Element #2:  This element is ambiguous.  It would make sense if the reference was to the scheduled or dispatch levels, but the reference to the “forecast” is not clear.  For one thing, the MFR resource owner or Scheduling Coordinator might not know the “forecast” output for the VER CLR if the renewable CLR is in the Participating Intermittent Resources Program (PIRP), since the CAISO forecasts output levels for such resources and adjusts them during the hour in real time. 

Also, the treatment of downward dispatches of the renewable CLR pursuant to real-time economic bids is not clear.  The CAISO should not discourage such real-time economic bids from VER CLRs, so the storage CLR should be allowed to reduce real-time charging activity to match any VER CLR dispatches downward resulting from real-time economic bids.

Element #3:  LSA does not have any comments.

Element #4:  LSA does not understand how this approach would be practical.  For example, the VER CLR output may be insufficient to support storage CLR charging in one interval but then increase in the next interval to allow such charging.  This element requires more detail to show that it is feasible, or modification to make it so.

Grid-charge management for CLR MFRs - eligibility

LSA has significant concerns about the CAISO’s new proposed eligibility requirements and recommends revisions in this area. 

The earlier Straw Proposal included an election mechanism, with eligibility based on:

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

The eligibility criteria in the Proposal are much more stringent and narrower, and internally inconsistent.   The Proposal also does not acknowledge or respond to LSA comments on that proposal, which related to granularity of the election and failure to address the property-tax issue.    

Below, LSA first addresses concerns with the new eligibility requirements and then repeats its concerns and suggestions about the last proposal that are still applicable to this one.

New eligibility requirements

The Proposal states, at p.25:

This functionality will only be allowed for resources that have contractual investment tax credit implications or property tax implications, that were in place prior to this policy being implemented.  Eligible resources must be participating on the grid prior to this time.  Resources that strike contracts prohibiting grid charging or resources that begin participating in the ISO market after this policy goes live, will not be eligible for this functionality.  This functionality will not be made available to any resource that has been participating on the grid for five years or more.

The Proposal requires “contractual investment tax credit implications or property tax implications” and otherwise references “contracts prohibiting grid charging.”  It appears that resources with ITC limitations on grid charging would only be eligible if they have a PPA prohibiting grid charging, and not to the more general situation as in the Straw Proposal.  (See further discussion of property-tax issues below.) 

The CAISO should allow a resource to qualify under the more general ITC provisions in the Straw Proposal, i.e., remove the “contractual” and “contracts” provisions from this proposal.  Resources with ITC limitations have such limitations even if their PPAs do not explicitly prohibit grid charging, or if they do not have a PPA at all.  These resources are largely dependent on the federal ITC for their financial feasibility, and the CAISO’s disagreement with the federally established ITC policies does not justify practices that would undermine them.

Moreover:

• The new Proposal now has a strict 5-year limit, instead of the more flexible Straw Proposal framework allowing a demonstration of the required timeframe.  The CAISO should reinstate the former framework, to avoid federal or state rules that could modify tax rules going forward.

• The new Proposal is internally inconsistent, referring to eligibility based on:

• “Contractual implications” “that were in place prior to this policy being implemented,” with resources “that strike contracts prohibiting grid charging…after this policy goes live” ineligible for the new option; and

• “Participat[ion] on the grid prior to” implementation of this policy, with “resources that begin participating in the ISO market after this policy goes live” ineligible for the new option.

These statements are muddled at best, i.e., it is not clear whether eligibility is based on contracts executed before the new policy is implemented, project operation (Commercial Operation?) before the new policy is implemented, or both.  LSA opposes a contractual condition for eligibility, as discussed above, but any policy that includes a contractual eligibility condition must recognize that contracts are executed many years before a project begins operating. 

Prior comments that continue to apply to the CAISO’s proposal

LSA’s comments on that proposal are still applicable here and thus repeated below.

• The electability of the new option should be more granular, or contain a real-time override for the CLR owner or SC (besides the CAISO’s override in element #2 – see below).  The concept assumes that the grid-charging election is an all-or-nothing prospect, i.e., storage CLRs can elect only unlimited grid charging or none at all. 

However, as the CAISO’s proposals have recognized, limited grid charging could be economic under certain circumstances, and not all PPAs prohibit it.  (In fact, LSA assumes that the CAISO is hoping that offering this grid-charging management tool to prevent such prohibitions in future PPAs, and/or encourage already-contracted parties to loosen such restrictions via contract modifications.)

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

• The eligibility rules should also consider property-tax issues.  While the Proposal (current and earlier versions) mention property-tax issues, the eligibility requirements do not consider them. 

Rather than have the CAISO immerse itself in local property-tax issues, LSA recommends eligibility-requirement modifications to allow participation extension beyond 5 years based on significant property-tax issues, perhaps with a materiality threshold.

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

• Exceptions:  The Straw Proposal said the market would override the VER-storage balancing concept when the CAISO is issuing Dispatch Instructions “to economically curtail output from VER because there is more supply on the system than demand.”  This statement is confusing, because ere are two reasons CAISO would be curtailing the VER CLR in real time.

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

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

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

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

Pseudo Tie (PT) MFR eligibility for ACCs

As noted above, LSA supports the proposed Pseudo Tie eligibility for ACCs.  The reasons for this support, along with suggested modifications and clarifications for the grid-charge management proposal, are explained further below.  The Proposal would allow PT MFRs in CLR configurations (PT MFR CLRs) the same access to ACCs as inside-CAISO resources, with the CAISO clarification that both Resource IDs “must be in the same BAA.”  (We interpret to mean that both the VER and storage CLRs are Pseudo Tied to the CAISO BAA, but CAISO should clarify that.) 

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

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

CAISO RESPONSES REQUESTED TO OTHER LSA CLARIFICATION REQUESTS AND RECOMMENDATIONS

LSA’s earlier clarification requests for current market rules 

In LSA’s earlier workshOp presentation, LSA requested that the CAISO clarify whether certain grid-charging management tools that may be available now, under current market rules for MFRs in a CLR configuration; these questions were based on lack of clarity of past CAISO statements on this issue. 

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

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

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

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

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

LSA’s other grid-charge management tool suggestions 

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

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

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

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

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

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

6. Attachments

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

Marin Clean Energy (MCE) appreciates the opportunity to provide feedback on CAISO’s Energy Storage Enhancements initiative. Below is a summary of MCE’s comments:

1. The CAISO should provide additional explanation and examples comparing the proposed Energy Storage Resource (ESR) model to the Non-Generator Resource (NGR) model to show how the ESR model works in practice.
2. The CAISO should conduct further discussions with stakeholders on the proposed Ancillary Services (AS) modeling that will require storage resources to accompany AS awards with energy bids.
3. Lastly, it is critical the CAISO extend the functionality to restrict grid charging for all co-located resources utilizing the Investment Tax Credit program (ITC) and/or having property tax implications irrespective of when these resources come online and remove the five-year limit on how long these resources can take advantage of this functionality.

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

The CAISO should provide additional explanation or examples on how the Energy Storage Resource (ESR) model works in practice and compares to the existing NGR model. MCE supports the CAISO’s efforts, however, at this time, MCE is still seeking to understand how it works in practice to improve energy storage arbitrage. 

As MCE explored contracting with innovative resource technologies, it determined many non-lithium-ion batteries have additional physical limitations that cannot be modeled in the NGR model. For example, there are limits on moving between charge and discharge, transition times, transition costs, and varying ramp rates at different megawatt (MW) and megawatt hour (MWh) levels. MCE asks that the CAISO incorporate these constraints into the existing NGR model and continue to work with stakeholders to develop the ESR model.

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

At this point, MCE does not support the Ancillary Services (AS) proposal as it may put at risk energy storage resource revenues when providing regulation. Because depletion is not accounted for in the day-ahead AS awards, we would expect energy storage resources would likely be frequently forced to uneconomically dispatch to support the award. The CAISO should provide an estimate of these costs prior to moving forward with this aspect of the proposal. CAISO should conduct further discussions with stakeholders on this issue before adopting any changes related to this enhancement.    

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

MCE appreciates CAISO’s efforts to enhance energy storage modeling to restrict grid charging for co-located resources to maximize the benefits of the Investment Tax Credit (ITC) program and minimize property tax implications. However, it is critical that CAISO reconsider the proposal with the following recommendations:

1. CAISO should not restrict this functionality only to resources that have contractual ITC implications or property tax implications that were in place prior to this policy being implemented. Instead, this functionality should be extended to all co-located resources that will have grid charging limitations because of the ITC and/or property tax implications that may come online before or after the implementation of this policy.
2. The CAISO should not restrict this functionality to only five years from when resources come online. This functionality should be extended to all impacted resources as long as needed in order to take advantage of the various tax incentives.

The relevance of the ITC on the success of California’s energy transition and related contractual considerations are detailed below:

1. ITC and reduced property taxes are critical incentives for development of storage resources paired with renewables and is needed for development of these resources irrespective of the online date.

The Investment Tax Credit program has been instrumental in incentivizing development of storage resources paired with renewables in California and is needed for continued development of these resources to meet grid reliability. If resources are not able to take full advantage of these tax incentives, it would likely have a significant impact on the development of resources that are needed for grid reliability and to meet the recent procurement orders from the California Public Utilities Commission (CPUC). MCE urges the CAISO to make sure that the functionality to restrict grid charging for co-located resources is extended to all storage resources irrespective of their online date. Many of these resources already have signed contracts that are expected to come online after 2023. Removing the certainty for these projects to claim tax incentives would jeopardize the economics of those agreements. It would also have a chilling effect on the business models of developers that currently rely on those tax incentives. These impacts will lead to higher costs and uncertainty in meeting state goals for incremental build. This can have a significant impact on grid reliability during times when we are seeing extremely tight conditions on the grid.  Therefore, it is critical that the CAISO extend this functionality to all eligible resources irrespective of their online dates.

2. ITC program rules may change over time and therefore, CAISO should not adopt a five-year limit on extending the functionality to restrict grid-charging for co-located resources.

The ITC is a federal program and the rules for the program can change in the future. Under current rules, co-located resources are restricted from charging from the grid for up to five years. The current design of the program, however, may be modified in the future where the five-year rule may change and/or there may be a different set of rules. The CAISO should avoid imposing a five-year limit on restricting grid charging for all resources but rather allow these resources to utilize this functionality for as long as necessary to take advantage of the various tax incentives (ITC, property taxes etc.).

3. Contractual limitations are important for optimized resource performance and financing and therefore should be modeled as physical limitations.

The CAISO should consider what “physical” characteristics mean in terms of battery storage resources. Contractual limitations are typically put in place to optimize resource performance and/or comply with the resource financing agreements. In the case of co-located battery storage resources, contractual limits can include physical limitations in order to comply with the financing agreement that the particular resource may have in place. Even though the operational limitations detailed in the contract may not represent what the resource can do physically, they are necessary for the resource to secure financing and maximize the benefits offered by the various tax incentive programs. These limitations should be treated the same as any other physical limitation that exists for other resource (e.g., a combined cycle generator may be able to ramp faster than the contractual ramp rate or maybe able to start-up faster than the contractual start-up time). These contractual limitations can prevent resources from incurring excessive maintenance costs or voiding warranties which underly the financing agreements. A physical limitation should not reflect maximum resource performance at any cost, but what the resource has been designed to do under its financing agreement.

Furthermore, the CPUC has created specific Qualifying Capacity rules for hybrid and co-located resources that do not grid charge. Since it is accounted for in the Resource Adequacy (RA) rules, there is no reliability reason for the CAISO to mandate grid charging at any point in time for resources taking advantage of the ITC. The CAISO’s Resource Adequacy Availability Incentive Mechanism (RAAIM) penalty on charging availability would be double penalizing a resource under the existing rules.

In conclusion, MCE supports the CAISO’s efforts to enhance the co-located storage modeling to accommodate ITC and property tax implications and urges the CAISO to adopt the following recommendations:

1. Extend the functionality to limit grid charging for all co-located resources that are taking advantage of the ITC or have property tax implications irrespective of when they come online.
2. CAISO should not restrict this functionality to be only available for five-years and extend it to the resources as long as needed to continue receiving tax benefits, including the ITC and property.

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

6. Attachments

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

• Middle River Power LLC  ("MRP") appreciates the CAISO clarifying how the proposed Energy Storage Resource (“ESR”) model would set operating levels through a resource’s bids.  MRP reiterates that, while the ESR model is an improvement over the current functionality, the CAISO should also strive to incorporate what MRP believes to be more important functionality (addressing cycling/mileage limitations) in the ESR model.
• MRP supports the CAISO’s proposal for compensating resources that have been exceptionally dispatched to hold State of Charge (“SOC”), but notes that the proposal counterfactual model is likely to overstate the compensation because it does not account for prices that would have resulted from dispatching the storage resource instead of holding it for SOC.  MRP is also intrigued by the CAISO’s proposal for dealing with local capacity and energy constraints and incorporating those actions into market prices, but also recalls the painful history of the Contingency Modeling Enhancements initiative, which purported to do something similar.  
• MRP supports the CAISO's efforts to develop co-located resource functionality that helps manage grid charging.  MRP continues to encourage the CAISO to coordinate the Resource Adequacy implications of that functionality with other CAISO Resource Adequacy stakeholder efforts.  
• MRP supports the proposed EIM classification.

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

In earlier comments, MRP requested that the CAISO clarify whether, under the CAISO’s proposed ESR model, charging and discharging dispatch levels would be binary (i.e.,the model would dispatch the resource to charge or discharge at either the resource’s Pmax or Pmin).  MRP appreciates from the discussion in the RSP (page 12) that the storage resource will be dispatched at either its maximum charging or discharging level if the resource is inframarginal, but the resource could be dispatched to charge or discharge anywhere in its applicable operating range if the resource is marginal. MRP requests the CAISO correct MRP’s understanding of how the ESR model will dispatch the storage resource if that understanding is incorrect. 

MRP reiterates its earlier comments that, while the proposed ESR model allows a market participant to express an economic willingness to charge or discharge that is a function of the resource’s state of charge (“SOC”), such functionality will not address what MRP believes to be the most affecting or limiting characteristic, namely, a storage resource’s cycling and mileage limitations. Again, while the SOC-based ESR model is an improvement on the current functionality, MRP believes that the CAISO must incorporate a better way to manage cycling and mileage within its ESR model.  Otherwise, storage resources’ Scheduling Coordinators are likely to seek to manage those significantly affecting limitations through highly sculpted energy offers, which may lead to suboptimal results.  

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

MRP appreciates the CAISO’s discussion of how it intends to compensate a storage resource for its lost opportunity cost through a counterfactual calculation of revenues that the resource would have received if it not been exceptionally dispatched to hold SOC. 

The CAISO notes that, for the purposes of the counterfactual dispatch, the CAISO must use actual market prices, not the market prices that would have resulted if the storage resources had been allowed to participate instead of holding the state of charge.  MRP offers that the actual prices used to calculate the proposed compensation are likely to be higher than the counterfactual prices would be if the CAISO had accounted for the energy storage’s dispatch, because the energy storage’s output was effectively withheld from the solution when it was instructed to hold SOC, forcing the CAISO to go farther up the supply stack and increasing the clearing price.  While this is a good thing for the storage resource receiving the exceptional dispatch compensation, it is not for the market participants that will bear the uplift charges. 

The CAISO also proposes to enhance the logic for “second tier constraints” to ensure that capacity is available from conventional resources, and energy is available from storage resources, to maintain reliability within a local area in the event a key grid element is lost (RSP at page 23).   While MRP is encouraged that the CAISO offers that procurement of such capacity/energy to meet “second-tier” constraints will be factored into market prices, MRP remains somewhat skeptical about that outcome.  MRP notes that the CAISO shelved a previous effort to ensure sufficient resource commitment and available capacity to address N-1 contingencies – the CAISO’s Contingency Modeling Enhancements (“CME”) initiative - even though the CAISO’s Board of Governors approved moving forward with the recommendations from that initiative in December 2017.[1]  MRP looks forward to the CAISO’s discussion about enhancing the “second tier” constraints and incorporating the actions into market prices, but, given the results of the CME initiative, is circumspect about the prospects for this discussion yielding positive results. 

[1] See Board materials at http://www.caiso.com/Pages/documentsbygroup.aspx?GroupID=0EAED199-45A3-40AA-A890-92D77E874C3E.  The CAISO had agreed to purse the Contingency Modeling Enhancements initiative as part of a settlement related to the September 2011 disturbance.  In February 2021, the Federal Energy Regulatory Commission approved the CAISO’s September 2020 request to lift the requirement to implement the Contingency Modeling Enhancements project. 

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

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

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

MRP supports the CAISO’s proposed classification.

6. Attachments

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

CAISO states that the Non-Generator Model (NGR) is sufficient yet is still proposing a complex new Energy Storage Resource model (ESR). NCPA asks CAISO to present further analysis comparing and contrasting the models under various similar strategies and conditions in an effort to determine if one outperforms the other and the market can settle on the superior model. NCPA is concerned that maintaining two storage models will be too cumbersome and could result in market result publication delays and settlement issues. NCPA supports other stakeholders’ comments that further working group meetings are necessary to better understand the ESR details.

NCPA is concerned that exceptionally dispatching an RA resource to hold a state of charge could be an issue due to an oversimplified counterfactual calculation that would potentially result in compensation greater than realized opportunity costs. NCPA asks CAISO to resolve the issue of energy awards that encroach into A/S capacity and make it unavailable to provide that product when needed without inhibiting the SC’s ability to fully cooptimize the bids with all certified products. CAISO should not overly rely on regulation that could drain the SoC and make it unavailable.

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

NCPA wishes to see a more thorough comparison of the two models such as how they perform under similar conditions and strategies. Why would a storage resource SC pick one over the other? How much effort would be involved for CAISO to maintain two battery models? How do the ESR model state of charge bids give a resource more control over the state of charge than NGR bids where the SC effectively controls the state of charge through pricing signals?

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

NCPA currently does not support imposing further constraints on A/S bids. NCPA would like to better understand the root cause of energy market results conflicting with A/S market results resulting in a state of charge that is unable to support the A/S obligation.

NCPA is concerned that exceptionally dispatching an RA resource to hold a state of charge could be an issue due to an oversimplified counterfactual calculation that would potentially result in compensation greater than realized opportunity costs. Paying them for exceptional dispatch could result in a duplicate reliability charge to load since these resources are already compensated for reliability purposes.

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

NCPA supports CAISO offering additional flexibility to existing co-located resources with grid charging restrictions associated with ITC and property tax benefits.

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

No comments at this time.

6. Attachments

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

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

NV Energy appreciates the opportunity to comment on the Energy Storage Enhancements and the CAISO’s effort in providing a new resource model for energy storage resources. During this stakeholder initiative energy storage scheduling coordinators have indicated that it is difficult to manage and position the energy storage resources in the real-time market with the current non-generator resource model. The new energy storage resource model appears to provide a solution for those issues by allowing the scheduling coordinator to bid the state of charge.  However, it is unclear whether these proposed enhancements address the issues stated by participants.  It would be helpful if CAISO could provide examples that compare the two resource models to explain how the new resource model affords better energy storage management for the scheduling coordinator.  

One of the aspects that CAISO has indicated that would be beneficial with the new resource model is that it allows the optimization to consider commitment costs when deciding to transition the resource from charging to discharging. NV Energy requests that CAISO provide more information about the commitment costs rules for this resource model. Specifically, would the commitment costs be subject to a cap, would they be allowed to change in price at different states of charge, or could the price increase for different hours throughout the day?  

Finally, it is well known that battery energy storage resources incur additional costs when cycled more frequently than the contract limits that must be managed by scheduling coordinators. These costs are not only penalties but add additional wear and tear to the resource. Therefore, it is important that this resource model allows the scheduling coordinator to manage this limitation. NV Energy would support a market model limitation that applies a constraint to prevent the market from cycling the resource above these limitations.  Short of that modeling enhancement, could CAISO explain how scheduling coordinators could use this resource model to meet those limitations or reflect those additional costs if incurred.  

In conclusion, NV Energy cannot provide an opinion on this new resource model until more examples are provided and additional details are designed for the resource's commitment costs.  

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

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

CAISO proposes to add an additional option for co-located resources that have a contract to only allow the energy storage resource to charge with the co-located renewable resource rather than the grid. CAISO’s proposal would allow these co-located resources to apply for a market modeling constraint to prevent grid charging for a period of 5 years for legacy resources. NV Energy does not support this proposal and proposes that CAISO reconsider the 5-year period because it may restrict the ability for this resource type to participate within the EIM.  It is important to note that the Investment Tax Credit (“ITC”) has incentivized this type of contract which is written for longer terms than 5 years. Additionally, there are several co-located energy storage projects being brought online within the EIM footprint that have these restrictions. The CAISO’s proposed 5-year period could have an impact on the ability for these resources to participate in the EIM.  

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

6. Attachments

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

PG&E appreciates the CAISO’s efforts to improve the ESE proposal. PG&E continues to request the CAISO prioritize the time-critical issues of reliability enhancements. The proposed ESR model could lead to significant complexities in implementation, which requires much more thorough development and iteration with market participants. PG&E finds the CAISO has not responded to many of our concerns and questions in previous comments.[1] We reiterate some of our concerns here and again request the CAISO address these issues in future proposals and stakeholder events. 

[1] PG&E’s comments detailing the issue was submitted on Jan 12, 2022 https://stakeholdercenter.caiso.com/Comments/AllComments/8fac1e22-3deb-4986-a27b-7cdfe3a44d87#org-50b66748-64dc-4da0-9224-48bd8991526a

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

PG&E recognizes the CAISO’s improvements to the proposal’s clarity and the inclusion of examples. However, CAISO has not addressed concerns raised in PG&E’s previous comments. Finally, PG&E defers further comment on Market Power Mitigation (MPM) to when more ESR model details are available.

1. The proposed model allows for SoC stage transitions, which have significant implications. PG&E again requests the CAISO respond to our concerns listed below:[1].

1. Dispatch uncertainties: Since the bid price depends on a battery’s SoC, a battery’s dispatch instructions could vary greatly between DAM and RTM. PG&E is concerned that these dispatch uncertainties could distort market decisions (e.g., unit commitment) and price signals in DAM and suggests the CAISO consider limiting the use of the proposed ESR model to RTD only.
2. Settlement complexities: PG&E is concerned about the resulting settlement complexities and requests the CAISO provide examples of how the batteries will be settled.
3. A/S provision capability: PG&E requests the CAISO clarify (i) whether a resource can provide regulation up and down simultaneously; and (ii) how the A/S capability is defined under the proposed model.

2. PG&E requests the CAISO provide full formulations that show how the ESR model is integrated into the market optimization. PG&E believes the formulations are necessary to explain the model’s impact on price formation as well as why the CAISO believes the ESR model is computationally feasible.  PG&E supports the concerns and requests from SCE listed below:[2]
   1. Provide an example showing how a bid constructed based on SOC under the ESR model would translate to a bid formulated under a traditional bid construct.
   2. How will the bid curve of its full range for a resource be used in the market optimization?

3. Finally, PG&E defers comment on MPM to when better clarification of the proposed ESR model is available.

[1] [1] Ibid.

[2] SCE’s comments submitted on Jan 12, 2022 https://stakeholdercenter.caiso.com/Common/DownloadFile/eff042e4-f120-4782-b934-20869cdca916

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

PG&E requests the CAISO split the initiative into two tracks, wherein Track 1 prioritizes urgent issues of reliability enhancements. The CAISO has not addressed PG&E’s concerns and questions of the Minimum State of Charge constraint (Min SoC), compensation for Exceptional Dispatch that requires batteries hold SoC (ED SoC), and Ancillary Service (A/S) requirements. PG&E reiterates those questions and concerns. Finally, PG&E requests more details on the enhancement to internal tools. 

1. PG&E requests the CAISO prioritize urgent issues of reliability enhancements for storage resources in Exceptional Dispatch (ED) and Ancillary Services (A/S). PG&E finds the proposed ESR model could lead to significant complexities in implementation, which requires much more thorough development and iteration with market participants. PG&E, therefore, continues to request the CAISO split the initiative into two tracks. Track 1 would focus on immediately addressing time-critical issues of reliability enhancements, specifically minimum SOC, exceptional dispatch and ancillary services. Remaining issues could be addressed in Track 2 after Track 1 is implemented. PG&E believes the two-track structure would allow CAISO to address urgent issues quickly but also provide sufficient time for the CAISO and stakeholders to clearly define and understand the details of the ESR model, including its market integration, price impact and settlement.    
2. PG&E continues to caution the CAISO regarding the potential gaming opportunities from the proposed EDSoC and A/S enhancements.

1. PG&E is concerned that the proposed EDSoC has loopholes allowing for profit-seeking batteries to bid strategically. Under current practice, units are compensated only when operators take out-of-market actions resulting in incremental dispatch; they are not compensated for orders not to dispatch, or to reduce dispatch. The proposal (of compensating storage for holding SoC) deviates from the current practice. Under the proposal, a profit-seeking battery, which is awarded EDSoC, could make high profits through market payment or the proposed EDSoC compensation, regardless of whether it is discharged to the grid. PG&E will follow up with the CAISO on this issue.
2. The proposed enhancement for Ancillary Service (A/S) could result in resources’ shortfall of Bid Cost Recovery (BCR). PG&E requests clarification on how the CAISO would dispatch a resource to adjust its SoC if its bids were consistently uneconomic.  For example,
   1. If a storage resource, providing spin or regulation up reserves, submitted bids to charge only at -$100 or lower, how would this process work?
   2. Likewise, assume this resource has a more reasonable charging bid but is never economic as it approaches its lower SoC limit, what would be the expected outcome?

3. PG&E requests the CAISO ensure consistent cost calculation for different markets in future proposal development. PG&E understands that re-running and generating new prices would be computationally difficult and very burdensome. It seems a reasonable starting point to apply market prices in calculating resources’ EDSoC opportunity cost.  However, PG&E cautions the CAISO that using the prevailing prices during the ED period may result in over-compensation to the storage resource. This pricing concern will become more problematic as the overall amount of SoC that could be held back from the market within the CAISO and EIM markets increases.
4. PG&E believes the Minimums State of Charge (Min SoC) constraint plays an important role in today’s day-ahead market. [1] PG&E continues to request the CAISO clarify the following:

1. Is the CAISO eliminating the Minimum State of Charge Constraint (Minimum SoC)? If so, PG&E is concerned that the proposed reliability enhancements are inadequate to replace Minimum SoC, which is critical for the system to automatically respond to emergency events (e.g., Summer 2021).  The CAISO needs to provide a more detailed model and prove it is feasible to implement for multiple batteries.
2. Could the proposed counterfactual compensation method be applied to Min SoC, instead of accompanying the new EDSoC?  The CAISO uses the Min SoC constraint as an intermediate measure for exceptionally dispatched storage. PG&E understands that the CAISO is proposing ED SoC to address the challenge of compensating storage for holding SoC for ED. The Revised Straw Proposal also outlines a method, which compensates the batteries based on the difference between the revenues of their EDSoC and counterfactual dispatch[2]. Following question a above, it seems applying the proposed method to the existing ED, which is based on Min SoC, would result in fair compensation to the batteries, and there is no need to develop a whole new ED SoC. PG&E requests the CAISO consider the possibility.  

5. PG&E is concerned that the proposed Ancillary Service enhancement would reduce the potential regulation value of batteries. The CAISO proposes to restrict battery regulation awards by requiring “unencumbered” energy bids equivalent to the capacity awarded, in the opposite direction of the award.  This restriction is proposed only to address the condition that available storage capacity in the required regulation direction goes below 30 minutes of energy. PG&E believes this condition, however, could only happen in the five-minute market, given that day-ahead awards are assured of meeting this requirement, and 15-minute awards can be adjusted to meet this requirement. PG&E requests the CAISO confirm this understanding is correct.  

If so, imposing the proposed rule would halve the potential regulation value of batteries in all hours and markets. Therefore, PG&E suggests that requiring “encumbered” energy bids that can be used as needed by CAISO operators (i.e., can be inserted into the bid stack when needed, while regulation awards overlapping the inserted bids can be rescinded in the corresponding periods and directions only) might be an acceptable compromise addressing the issue.

6. PG&E finds the proposed counterfactual compensation method for ED SoC is incomplete and could incur inappropriate payments to batteries. PG&E continues to request the CAISO clarify the details of the proposed method by clarifying the following:

1. Will the proposed method be extended to allow compensation for resources that are prevented from charging (versus discharging) by an EDSoC?
2. What if a resource was uneconomic during portions of the EDSoC instruction?  During the March 21^st stakeholder call the DMM commented that the provided example did not consider resource bid prices when calculating the resource’s opportunity costs. PG&E agrees with DMM and believes that the proposed methodology would not result in appropriate economic compensation, based on the example provided. PG&E will follow up with the CAISO on this issue.   
3. What if the resource’s award quantity would have changed during EDSoC instruction because of market economics? For example, resources that are less expensive than storage are available for ED and storage resources are not economic to be called. 
4. What if a resource fails to follow instructions to hold SoC?  Does there need to be a cost recovery disqualification process and, if so, what would the associated thresholds be?
5. How to ensure technology-agnostic equal treatment in the markets? The CAISO does not currently compensate resources for exceptional dispatch instructions that prevent a unit from producing energy, even when such instructions have a direct cost to the unit. PG&E wonders if a successful opportunity cost recovery process for ED would need to be expanded to other resource types and situations, to ensure compatibility of treatment in similar situations.  This consideration would also be important as storage technology advances to where resources are able to provide reliability over multiple days. PG&E believes it would be best for the CAISO to prioritize working on the proposed counterfactual compensation method within the proposed implementation timeline but reserve the possibility of expanding such an opportunity cost recovery process for ED in future initiatives.

7. PG&E requests more information of enhancement to internal tools for use to ensure local reliability. The enhancement proposes that storage could be used in the planning horizon for local areas to meet reliability needs. However, PG&E cautions the CAISO that the commercial batteries are different from distributed storage units, which are installed for reliability purposes, in the sense that commercial batteries will respond to market signals and could be highly uncertain in availability. The CAISO should also be aware of the high opportunity costs for the commercial batteries to provide reliability service by holding SoC. Given the proposed timeframe, PG&E is concerned whether those challenges can be addressed before implementation. 

PG&E believes details such as below are necessary for discussion of the enhancements in future proposals.  

1. What planning timeframes are considered and how they will interact with market inputs?;
2. How are storage resources modeled, e.g., as individual units or aggregation, their physical constraints, and responsiveness?;
3. What is the compensation mechanism which should capture the opportunity costs of batteries reserving capacity?

[1] [1] Ibid.

[2] CAISO, Energy Storage Enhancements Revised Straw Proposal, March 2022, https://www.caiso.com/InitiativeDocuments/RevisedStrawProposal-EnergyStorageEnhancements.docx

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

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

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

PG&E requests the CAISO clarify the role of the WEIM Governing Body on the proposed reliability enhancements. PG&E believes some part of the enhancements, for example, the enhancements on internal tools to ensure local reliability, are limited to day-ahead market applications and the WEIM GB should not have joint authority over them.

6. Attachments

PG&E requests that the CAISO provide a response to comments submitted by PG&E on August 10, 2021[1]. These comments were related to ensuring adequate functionality of the CAISO’s Outage Management System (OMS) in regards to NGRs. Follow up conversations with CAISO technical staff indicated that these concerns would be addressed in the Energy Storage Enhancements initiative.  However, there is no mention of OMS or outage management functionality in the Revised Straw Proposal. An excerpt of these comments is provided below:

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.

[1] California ISO - All comments (caiso.com)

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

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

PNM would like the CAISO to define the process for transitioning a resource from an NRG to the new resource type.  Would these resoureces have to re-register, or will the CAISO allow a transition outside of the registration process? 

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

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

Please see attachment.  Thank you.

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

6. Attachments

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

REV Renewables (REV) appreciates CAISO’s continued efforts on market enhancements for energy storage. The revised straw proposal improves on the previous iteration in some areas, such as on compensation for exceptional dispatch that more closely reflects costs of removal from the market.  

REV suggests the Energy Storage Resource (ESR) model still requires much more detail and revisions before finalization. REV would want to ensure resolution of both outstanding conceptual questions and implementation details before considering using the ESR model. In particular, REV is concerned that the ESR model completely removes the ability to express bids in terms of power (incremental MW). REV also believes CAISO should explain how the ESR model would function in the day-ahead or fifteen-minute markets and in the context of ancillary service awards, prior to moving to a draft final proposal. Further, REV also believes changes are needed to the ESR ramp rate and dynamic capacity limits to avoid unnecessarily curtailing energy storage flexibility. REV suggests that CAISO prioritize incremental changes to the existing non-generator resource (NGR) model, which supports operating resources and reliability today, over a new untested model still in development. REV remains eager to work with CAISO and other market participants to improve the ESR and NGR models.

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

Energy Storage Resource (ESR) Model

Given the volume of outstanding questions still surrounding the ESR model, REV suggests that CAISO provide additional explanation and incorporate additional market participant feedback in a second revised straw proposal before moving to a draft final proposal. More detailed examples in the next iteration would be helpful to illustrate how the ESR would operate in practice, including in the day-ahead market.

REV has several concerns and questions with the ESR model described in the revised straw proposal.

• Bid curves should incorporate both power and energy – REV strongly suggests that energy storage bids should allow resources to offer both in terms of incremental power and incremental state of charge. While it is useful to submit bids in terms of state of charge, it should not come at the expense of the ability to submit bids in terms of incremental power. The ESR model as currently outlined appears to only allow storage to dispatch at Pmin or Pmax (other than to account for dynamic capacity limits, as discussed below, or to account for ancillary service limits, which have not yet been discussed). Energy storage resources need to be able to submit bids in terms of incremental MW for the same reasons that other generators do—to manage risks and reflect costs of buying and selling incremental power across the day-ahead and real-time markets. We suggest that CAISO allow resources to submit tiered bids in terms of incremental MW for each tier of bids of incremental state of charge. Incremental power bids are an important feature of the market model to allow resources to, for example, better align MW output with day-ahead awards and account for risks across the fifteen-minute market and five-minute market. For example, a 100MW resource with a 50MW day-ahead award needs to be able to bid in terms of incremental power—and not as a full 100MW block—to effectively reflect both the commitment and financial exposure of its day-ahead award. This ability would allow battery storage to more accurately reflect the incremental cost of additional MWh allowed in the ESR model without losing the ability to reflect the cost of incremental MW included in the NGR model.
• Dynamic capacity limits should reflect resource capabilities. Separate charge and discharge dynamic capacity limits are required to accurately reflect physical capabilities of battery resources. Energy storage resources can charge at maximum power when empty and can discharge at maximum power when full, a dynamic which does not appear recognized in the current draft proposal. A single parameter symmetrically limiting power output in both directions when the battery is near full or near empty would dramatically and unnecessarily limit energy storage resource flexibility. This is an important distinction that must be factored into the model in order for the full capability of the storage assets to be available to CAISO. Details included in the March 21 presentation and discussion but not in the written draft proposal should be included in the next draft proposal to allow for more detailed review; these include slides and discussion on dynamic capacity and ramp rate limits.
• Addressing the variable charge rate problem requires power (dynamic capacity) limits, not ramp limits. Ramp rates are not a material contributor to the variable charge rate problem. Variable charging (and discharging) rates should be reflected in dynamic capacity limits. To the extent that ramp rate limits are used, they must also include individual charge and discharge limits to reflect actual energy storage resource capabilities, similar to the issues highlighted above with dynamic capacity limits. REV strongly suggests that resource owners be able to set dynamic capacity and other parameters by resource to accurately reflect their resource capabilities.
• CAISO should provide additional analysis of realistic examples, including the day-ahead market and ancillaries. The current proposal does not include explanation on how the model would work in the day-ahead market or day-ahead optimization with an ESR model. REV would especially like to see a discussion of how ESR energy awards are co-optimized with ancillaries. There is no mention of the fifteen-minute market in the proposal, where REV also assumes this model will dictate energy storage dispatch. These details will be essential for addressing the problems that ESR improvements are designed to solve.
• CAISO should continue to evaluate improvements to the NGR model. Fixing the variable charging rate problem alone would be a significant and important improvement to the NGR model. CAISO notes that developing the ESR model may obviate the need for enhancements to NGR. We respectfully disagree--the NGR model is a known quantity whose real-world shortcomings and risks are largely known, and whose operation is largely trusted by resource operators. REV believes that incremental changes to an existing model present less risk and a smoother transition for CAISO and resource operators than introducing a new, untested model. REV requests CAISO stay open to changes to the NGR model and the potential to include ESR model features into the NGR.
• REV is interested in how the ESR model functions under multi-interval optimization (MIO), which produces uncompensated out-of-merit dispatch for NGR resources. The counterfactual tool for exceptional dispatch discussed elsewhere in this revised proposal could help CAISO appreciate the magnitude of the problem MIO creates for energy storage resources under NGR and ESR models.

Market Power Mitigation - CAISO should reevaluate storage default energy bids for risk and opportunity costs of day-ahead energy

REV strongly suggests that day-ahead DEBs allow pricing opportunity and risk costs for similar reasons that such costs are important and recognized in real-time energy storage bid formation. Default energy bids (DEBs) currently allow for recognition of risk and opportunity costs in the real-time market, but not the day-ahead market. Because they exclude these costs, current day-ahead DEBs do not allow for accurate representation of costs in energy storage day-ahead bidding.

The majority of battery costs for day-ahead energy are in opportunity and risk costs of participating in the real-time market, where all day-ahead awards are delivered and ultimately settle. Bids are the primary tool available with which to control not only day-ahead MW power output but also day-ahead MWh energy commitments. As more MWh are committed day-ahead, it becomes increasingly risky for energy storage resources to provide balancing services in the real-time market prior to delivery of their day-ahead awards. It also becomes increasingly expensive for them to discharge energy to serve load during real-time price spikes at any time outside of their day-ahead awards. This is an important cost that the current formulation of DEBs fails to capture.

In early examples of DEBs we have also noted seemingly sub-optimal awards, e.g., discharging at prices that are both far from the highest in the day and outside of resource bid curves. We would appreciate additional transparency on the performance of DEBs in action.

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

Ancillary Services

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

Exceptional Dispatch

REV continues to support CAISO’s proposal to allow the ISO operators to dispatch storage resources to hold a certain state of charge (MWh), in addition to the traditional (MW) exceptional dispatch. REV suggests that CAISO also ensure the current state of charge is also factored into the MW/MWh exceptional dispatch instructions to avoid unnecessary confusion and resource cycling.

Compensation for EDs to Hold State of Charge

REV supports CAISO’s revised proposal and appreciates progress on this issue. REV agrees in principle with a methodology calculating counterfactual value using realized locational marginal prices. The example compensation calculation is a helpful illustration.

While the proposed time horizon is an improvement, REV requests CAISO consider a longer time horizon than the ED period plus the duration of the storage resource. For example, if the ED is in the afternoon or evening then the time horizon could be the remainder of the day. REV also requests that CAISO evaluate the impacts of financial settlement among the day-ahead and fifteen-minute markets together with the real-time market, as storage resources with awards or potential awards in those markets that are derailed due to exceptional dispatch and through no fault of the resource should be made whole for any losses that may result.

We also request that CAISO consider compensating resources for ancillary service awards invalidated by exceptional dispatch, even if only at the day-ahead price of those awards. Lack of compensation for AS awards invalidated by ED makes it more risky (and thus expensive) for resources to provide ancillary services.

Finally, we suggest that this counterfactual calculation tool could also be useful to CAISO in assessing performance of the real-time market engine in the context of multi-interval optimization and out-of-merit energy storage dispatch from inaccurate advisory prices.

Tools for Local Areas

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

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

REV has no comment at this time.

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

 REV has no comment at this time.

6. Attachments

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

SEIA appreciates CAISO’s effort on this proposal and the opportunity to provide comments. SEIA supports the concept of the Energy Storage Resource model but has some implementation concerns. These concerns, along with other feedback, proposals, and requests for clarification, are described in greater detail below.

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

SEIA supports the concept of the Energy Storage Resource model but believes more details are needed to ensure the model supports the efficient participation of storage resources in CAISO’s markets. These details are discussed further below.

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

SEIA appreciates the reliability concerns described in the straw proposal but opposes any limitations on storage resources’ ability to provide energy and ancillary services. Such limitations could exacerbate the reserve shortage issues that CAISO is trying to resolve. SEIA believes that the proposal to support DA ancillary service awards with bids for energy is a good idea, and likely a solution that can be implemented without limiting a storage resource’s ability to provide ancillary services. SEIA would appreciate additional details on this aspect of the straw proposal including the ability to require accompanying energy bids without limiting ESR ancillary service awards.

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

SEIA appreciates CAISO’s responsiveness to stakeholder concerns regarding the ITC implications for co-located resources required to charge from the grid. For simplicity and transparency, SEIA believes that the application of this provision should be tied to the IRS ITC eligibility rules. More specifically, the duration of the provision applicability to a resource should be tied to the duration of the documented IRS limitation. 

SEIA believes limiting this provision to resources that are online at the time this policy goes live is arbitrary and introduces additional unnecessary uncertainty to projects and asks that CAISO justify this element of the proposal. A project’s COD, for example, can change, often for reasons beyond the developer’s control, and adding this level of uncertainty further complicates the process. SEIA is interested in the additional benefit to the system for implementing this timing requirement, noting that the uncertainty it creates could have material impacts on project development. 

Finally, SEIA asks that CAISO clarify or define the “contractual” implications described in the final last paragraph on page 25 of the straw proposal. SEIA understands the potential interaction of grid-charging with tax credit eligibility, but would like to know if CAISO is envisioning other forms of contractual limitations like PPA terms limiting grid-charging. SEIA believes that tying eligibility for charging limitations to PPA terms would be unduly discriminatory towards resources.

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

Support.

6. Attachments

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

As outlined below, the Six Cities support most aspects of the Revised Straw Proposal.  The Six Cities request further changes, however, to certain elements of the proposal related to co-located resources and, specifically, the proposed revisions that the CAISO has developed to assist co-located resources in management of grid charging risks.

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

The Six Cities note that the CAISO has provided additional detail on the energy storage resource (“ESR”) model, as the Six Cities requested in their earlier comments, and they acknowledge that the CAISO spent considerable time during the stakeholder meeting on the Revised Straw Proposal discussing the specifics of the ESR model.  The Six Cities continue to support adoption of this model, and they also support retention of the non-generator resource ("NGR") model.    

Additionally, the CAISO acknowledges that the proposals in this initiative are related to those under development in the Resource Adequacy Enhancements initiative.  See, e.g., Revised Straw Proposal at 27.  For this reason, the Six Cities request that the next RA Enhancements proposal include specific discussion of RA-related topics for the ESR model so that stakeholders can evaluate this model in relation to the NGR model. 

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

The Six Cities continue to find that the proposed reliability enhancements described in the Revised Straw Proposal are reasonable, including the application of market power mitigation to storage resources.  At this time, the Six Cities do not oppose the concepts that the CAISO has advanced regarding the development of default energy bids for resources using the ESR model. 

The Six Cities also do not oppose the proposals to (i) require ancillary services bids from storage resources to be accompanied by a bid for energy; (ii) implement exceptional dispatch authority for storage resources to hold their state of charge; (iii) use an opportunity cost-based compensation approach for storage exceptional dispatch; or (iv) enhance the modeling of constraints in CAISO market processes to improve use of storage, including to manage local reliability.

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

The Six Cities generally support the CAISO’s proposed enhancements for co-located resources, including the electable limitation on grid charging for co-located storage (hereinafter referred to as the “discharge limit option”).  The CAISO’s proposed treatment of co-located resources that are subject to grid charging restrictions resulting from application of the Investment Tax Credit (“ITC”) under the discharge limit option is very similar to the Six Cities’ phase-in or grandfathering proposal suggested to the CAISO in their comments in the Resource Adequacy Enhancements initiative.  See, e.g., Six Cities Comments on Resource Adequacy Enhancements Sixth Revised Straw Proposal – Response to Quest. 7 (Jan. 29, 2021) (requesting that the CAISO adopt an ITC-based transition period for co-located storage that would provide an exemption from the then-proposed formulation of the must-offer obligation to bid the full charging capabilities of the resource).  In particular, the Six Cities support the CAISO’s proposal to make the discharge limit option electable, rather than mandatory, and they support applying it for a five year period, to conform to duration of ITC eligibility, unless the resource owner opts to terminate participation earlier.  The Six Cities also agree with the structuring of this option such that the storage charging would conform to the forecast and production of the associated variable resource. 

However, the Six Cities request that the CAISO clarify or, if necessary, revise its suggested timing and eligibility for the discharge limit option.  The Six Cities understand that the CAISO is recognizing and accommodating resources that are being developed pursuant to agreements that were entered into prior to the CAISO’s adoption of the co-located resource model and the formulation of this policy, and they generally agree that discharge limit option should not apply to new resources, including those that “strike contracts prohibiting grid charging” after this policy is implemented.  See Revised Straw Proposal at 25.  However, the CAISO should recognize that there are resources currently under development pursuant to pre-policy contracts containing prohibitions on grid charging that may not yet be online at the time this policy is implemented, but may come online soon thereafter.  For this reason, the Six Cities request that the CAISO remove from its eligibility requirements for the discharge limit option the requirement that the resource actually be online at the time this policy is implemented.  Instead, the Six Cities request that the eligibility criteria include resources under development pursuant to power purchase or other development agreements that were executed prior to implementation of this policy.  The requirement that the resource actually be online at the time this policy is implemented should be removed.

Additionally, the Six Cities urge the CAISO revise its proposal that co-located storage resources be permitted to deviate in the downward direction from dispatch schedules when the adjacent renewable resource is producing less than its forecast.  According to the CAISO, the ability to “deviate down” is available except when the CAISO curtails the associated renewable resource.  While the Six Cities understand that the CAISO is concerned about reductions in charging at times when the CAISO is in a curtailment situation, a scenario when the CAISO curtails solar resources (for example) but does not allow the co-located storage to reduce its charging to the level of curtailed output for the adjacent renewable resource will likely cause the storage resource to charge from the grid.  The Six Cities are concerned that this loophole in the discharge limit option creates risks that storage resources will violate contract restrictions on grid charging or will otherwise render these resources ineligible for their full ITC credit amounts and limit the benefits of the discharge limit option. 

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

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

6. Attachments

None.  

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

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

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

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

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

6. Attachments

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

Vistra believes the CAISO plan for this initiative is too aggressive and does not allow for robust stakeholder development of a new storage participation model. At this point, the CAISO has released a straw proposal and a revised straw proposal and anticipates releasing a draft final proposal as the next iteration. The CAISO has yet to provide wide array of operating energy storage resource model has not provided sufficient examples or simplified excel models illustrating the design and expected outcomes of the new energy storage resource participation model. Nor, has the CAISO provided these simplified models of how participating in the new model versus the old model would have impacts on price formation. Further, we believe that these scenarios being modeled must include when a storage resource is mitigated.

To be clear, we are not asking for a complex simulation at this time but instead for the policy proposal to have examples and conceptual modeling provided to enhance stakeholder understanding. Vistra can recall several times policy proposals have supported this and provide Generator Contingency and Remedial Action Scheme Modeling Revised Straw Proposal Section 6.3 and 6.4[1] as examples of the expected level of detail that we are asking for prior to the CAISO progressing to a draft final proposal stage. We need the formulation and examples at this level before we can sufficiently evaluate the merits of the new energy storage resource model. Vistra requests the CAISO release at a minimum a second revised straw proposal, but likely we anticipate there may be a need for a third. The second revised straw proposal should contain the additional level of detail described above. We will provide detailed comments on the formulation and examples once they are provided.

Vistra requests the CAISO review its comments on the remaining elements of the proposal that it submitted in its Straw Proposal comments. We respectfully request the CAISO provide a stakeholder comment matrix and responses to the comments on the revised straw proposal. Given the breadth of this initiative, it would be prudent for the CAISO to use the stakeholder comment matrix and responses to ensure stakeholders receive the clarity they need to provide meaningful feedback and hopefully be able to support the CAISO’s direction in this initiative. We believe the CAISO can better develop a proposal that has the change to gain broad support if it proactively responds to individual stakeholder comments using the matrix.

[1] Please provide examples and detail on the level provided in Section 6.3, Proposal Formulation, and Section 6.4, Examples, of the GCARM Revised Straw Proposal, http://www.caiso.com/Documents/RevisedStrawProposal-GeneratorContingencyRemedialActionSchemeModeling.pdf.

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

Please see the above for our high-level feedback. We also respectfully request the CAISO provide written stakeholder responses to our stakeholder comments in the next iteration responding to questions we posed on the straw proposal. Vistra requests the CAISO provide responses to:

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

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

Vistra continues to request the CAISO expand this scope to include the challenges Vistra communicated to the CAISO at its July workshop and in stakeholder comments on earlier iterations of this paper. We again urge the CAISO to include reliability enhancements for storage operations that:

• Specify exceptional dispatch rules that ensure operators are sending viable ED instructions: Exceptional dispatch rules specific to out-of-market dispatches for batteries should be included in the Tariff recognizing unique characteristics of storage.
  • Note, while the CAISO is proposing improvements to include treatment for ED to hold SOC and its compensation, we still strongly believe more clarity on mitigating risks of infeasible ED being issued is critical to improve storage operations and will help CAISO grid operations ensure its tool best inform them on what is feasible.
• Allow for overlapping outage cards for storage to better reflect outages: Outage Management System should allow Scheduling Coordinators to better reflect conditions limiting battery operations. This is low hanging fruit and will have a meaningful improvement to operations both at the plants and for CAISO grid operators.
• Commit to issuing a market notice prior to enforcing the Minimum State of Charge constraint: Minimum State of Charge enforcement should be communicated widely to the market prior day. There is de minimis cost to adding a notification requirement through market notifications and this is a missed opportunity to address this need if not taken up here.

We continue to believe these are reasonable and practical requests and struggle to understand how the CAISO arrived at a decision to not make these practical changes. Please provide written stakeholder response to our stakeholder comments in the next iteration explaining your rationale for not including these three items in scope.

Vistra also respectfully request the CAISO provide written stakeholder responses to the questions we posed on its proposals in this section in the next iteration. Vistra requests the CAISO provide responses to:

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

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

Vistra provided our comments on these proposals in the last iteration. To be concise, Vistra opposes the proposed co-located enhancements, regardless of whether it is limited to resources currently online for five years or less.

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

The energy storage enhancements project should be under Western Energy Imbalance Market Governing Body’s joint authority. Please see our previous comments for explanation.

6. Attachments

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

 WPTF appreciates the CAISO’s intent behind this initiative, its willingness to engage stakeholders in a working group process prior to the issue paper, and its decision to prioritize storage and hybrid enhancements generally. At this point, the plan is for the next draft of this initiative to be the Draft Final Proposal and WPTF is concerned that this initiative will not provide the meaningful enhancements needed to integrate the large amounts of storage on the system. We understand the CAISO’s difficult position; many stakeholders have expressed concerns with different aspects of the storage market, and it is unclear exactly what fixes stakeholders need to be prioritized. This is natural as storage participation as an arbitrage resource has only started to occur at any scale in the last few months. WPTF is concerned; however, that even this limited experience has not informed the CAISO’s policy direction. Our members that have tried to operate storage in the real-time energy market have encountered a plethora of issues, most of which are not addressed within this initiative or even described as an issue that needs to be solved.

Because storage market participation is still so new, WPTF has asked in our comments, multiple times, for the CAISO to demonstrate the challenges with operating storage in the real-time market and show how the initiative proposal addresses these issues. One such issue that has been observed by multiple WPTF members is the impact of the flexible ramping product on battery storage schedules and this is particular is important to understand prior to new model development. While it sounds like perhaps the CAISO has discussed this internally in meetings, stakeholders have not had the same opportunity. For example, it is unclear how the energy storage resource model will improve energy arbitrage in real-time. Again, WPTF requests that prior to the next draft the CAISO create realistic examples showing inefficient arbitrage under the NGR model and then how it will be resolved by the new model.

As we see it, the CAISO has two main options; it can maintain one storage participation model (NGR) and enhance it and add as much flexibility in it as possible; or it can split its resources and maintain two less enhanced participations models each with their own pros and cons depending on the resource type. These options should be explored more fully before the CAISO simply moves forward with a new model. How can the NGR model be enhanced? What are stakeholders giving up in possible NGR model enhancements by the CAISO moving forward with a new model? How will the CAISO prioritize enhancements over time? These are all important questions that WPTF urges the CAISO to address before the Draft Final Proposal. 

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

WPTF does appreciate the CAISO’s willingness to consider different approaches to energy storage modeling but does not understand how the new model resolves the major issues scheduling coordinators face when bidding storage in the real-time market. The CAISO seems to imply that because the energy storage resource model will allow storage resources to better reflect their marginal cost that this will help with efficient real-time market energy arbitrage. This is confusing because the main problems with storage optimization have nothing to do with reflecting a storage resource’s marginal cost. It is not a generating unit. It is solely used to shift energy and provide ancillary services. It is storage resource’s opportunity costs given its energy and cycle limitations – across multiple time horizons – that needs to be better accounted for in the market, not how its marginal costs vary across its state-of-charge. This means improving price formation so that advisory prices better match binding prices and rationalizing the fifteen minute and five-minute price differences, it means better understanding the interaction of the flexible ramping product and energy co-optimization and its impact on storage schedules, and it means allowing additional characteristics and physical constraints to be reflected in the optimization. And maybe switching to the energy storage resource model will more efficiently dispatch the resource when it is most energy limited, but without an example, it is really hard to understand whether these benefits exist and to what extent.

There are many urgent fixes needed across the real-time market and it is worrying to split enhancements across multiple, radically different, participation models. Many of the features of the energy storage model are needed to integrate new storage technologies – allowing transition times and costs, and varying ramp rates are vital to the success of emerging technologies. We believe these constraints could also be incorporated into the existing NGR model, but this is not in the CAISO’s proposal. WPTF asks why not? Is it because there is something in the model that prevents it or is it because the CAISO is resource-constrained and so already is only able to support key features in one model? Why doesn’t the energy storage model allow an end of hour state-of-charge range like the NGR model? Again, is it incompatible with the model or simply just left off?

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

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

WPTF notes that slide 24 of the Revised Straw Proposal Presentation states that the 15-minute market reoptimizes ancillary services (AS). Perhaps this is an enhancement the CAISO plans to make, but at this time the real-time market does not re-optimize AS.

Generally, WPTF is concerned the AS aspect of this proposal is discriminatory and inefficient. Forcing uneconomic energy market participation to preserve an AS award for storage resources only is not technology neutral. Additionally, it seems like this would inefficiently increase the AS price because scheduling coordinators would need to price the risk of uneconomic energy dispatches into their regulation offers.   

As noted in our prior comments, we support estimating regulation conversion to energy (also called “depletion”) and limiting day-ahead AS awards using the estimated impact of conversion. The CAISO already forecasts depletion in a roundabout way within the regulation mileage formulation, so could dust that formula off again and enhance the regulation structure holistically.

Finally, WPTF supports including opportunity costs into the exceptional dispatch payment logic, but believes this must be done for all resources with similar opportunity costs and cannot be isolated to a particular technology as this would be discriminatory.

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

WPTF expects that many stakeholders will push back against the CAISO’s co-located proposal and as stated in our prior comments, we also do not support forcing co-located resources to charge when they have bid a charging schedule less than or equal to their renewable forecast. Forecasts are sometimes wrong and there has been no analysis demonstrating reliability risk for less load to be on the grid on the occasion. Prior to moving forward, WPTF asks the CAISO to estimate the impact of allowing deviations and provide a reliability or market efficiency reason for the proposal. The ITC lowers the cost of renewable integration and so there should be a compelling reason for the CAISO to compel grid charging in the event of forecast error. 

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

 WPTF supports the WEIM classification.

6. Attachments