Originally posted on Troutman Sanders’ Washington Energy Report

On June 8, 2017, the California Independent System Operator (“CAISO”) released the draft final proposal of Phase 2 of its energy storage and distributed energy resources (“ESDER”) initiative.  The aim of the proposal is to lower the barrier to entry and market participation for various transmission grid-connected energy storage and distribution-connected resources. “Integrating these resources,” the proposal states, “will help lower carbon emissions and add operational flexibility.”

CAISO started the ESDER initiative to respond to the increasing mix of resources integrating into California’s transmission and distribution systems, including rooftop solar, energy storage, plug-in electric vehicles, and demand response.  Phase 1 of the ESDER initiative sought specific changes to the CAISO tariff to better allow market participation from storage and distributed energy resources, which FERC approved in October 2016.  Earlier that year, CAISO began Phase 2 of the initiative to address other topics raised by stakeholders—three of which form the basis of the Phase 2 draft final proposal.

The draft final proposal presents three recommendations for consideration and approval from CAISO’s Board of Governors.  First, the proposal recommends additional methodology options for more accurately gauging system and load impacts from demand response resources.  Second, the proposal recommends tariff modifications to distinguish between wholesale “charging energy,” which is sold into CAISO’s markets, and retail station power, which is regulated by the California Public Utility Commission (“CPUC”).  Without coordination and collaboration between CAISO and the CPUC, the same energy could be subject to regulation as a wholesale and retail service—which, as CAISO notes, risks “resuscitating the years of litigation that preceded the current station power framework.”  Third, the proposal recommends including additional natural gas price indices as part of CAISO’s “net benefits test,” which is used to establish a price threshold above which demand response resources’ bids are deemed cost effective.  The goal of expanding the list of gas indices available for the net benefits test is to accommodate Energy Imbalance Market (“EIM”) entities that are outside of California but desire to participate as demand response resources in CAISO’s market.

CAISO will present the ESDER initiative Phase 2 draft final proposal on July 13, 2017 to the EIM governing body, and then to the CAISO Board of Governors for approval on July 26-27, 2017.

A copy of the draft final proposal can be found here.