FERC approves California ISO framework for distributed energy

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FERC’s recent decision approving, subject to condition, the California ISO’s (California ISO) framework that aims to drive distributed energy resources (DERs) into the electric grid “is a step toward the re-design of the power grid,” California ISO President and CEO Steve Berberich said in a June 7 statement.

The California ISO said that its proposal allows individual energy resources that are too small to participate in the wholesale market to be grouped together to meet the minimum 0.5 MW threshold. DERs, the California ISO noted, are defined as the resources on the customer, or distribution, side of the electric meter, and include rooftop solar systems, plug-in electric vehicles, energy storage and demand response technology.

“We are seeing a shift from a one-way centralized system to a two- way decentralized system,” Berberich said. “This will open new market opportunities for distributed energy resource products and services, which will be instrumental to grid reliability in an emerging era of renewable power.”

According to FERC’s June 2 order, the California ISO in March filed proposed revisions to its open access transmission tariff to facilitate participation of aggregations of distribution-connected or DERs in California ISO’s energy and ancillary services markets.

FERC noted that the California ISO’s proposed revisions address five topics:

·      Provisions that recognize a DER provider as a market participant; a DER provider is the owner or operator of a DER aggregation for purposes of wholesale market participation

·      Provisions that recognize a DER aggregation as a market resource

·      Rules governing participation of those resources in the California ISO markets

·      Distinctions between the requirements for scheduling coordinators representing demand response providers and the requirements for scheduling coordinators representing DER providers

·      A new pro forma DER Provider Agreement that sets forth the terms and conditions under which the California ISO and DER providers will discharge their respective duties and responsibilities under the California ISO tariff

FERC noted that the California ISO emphasized that it does not propose to change the way distribution-connected resources already participate in the California ISO markets.

The California ISO proposed that resources that are participating in retail programs, such as net metering with storage or virtual net metering, cannot participate in a wholesale market aggregation. The California ISO explained that, under California’s current net energy metering program, a participating resource already receives benefits from netting its excess energy against subsequent electricity bills, and therefore, there is no energy available to offer into the California ISO markets because excess energy is banked for later withdrawal.

FERC also noted that the California ISO said that it will treat the aggregation, instead of the individual DERs, as the market resource, and explained that that new resource will accommodate smaller distribution-connected generation and emerging resource types that may need a different model for wholesale market participation.

To ensure accurate modeling of the congestion impacts of these market resources, the California ISO proposed that aggregations may consist of DERs at one pricing node or may span multiple pricing nodes; each aggregation may be no smaller than 0.5 MW; and each aggregation that includes DERs located at different pricing nodes may be no larger than 20 MW.

FERC further noted that the California ISO proposed that the scheduling coordinator will submit schedules and bids for an aggregation across multiple nodes based on the aggregation’s generation distribution factors. The California ISO stated that the market awards and dispatch instructions will then reflect those distribution factors and that the DER provider must provide a net response at the pricing node level that is consistent with the California ISO’s dispatch instructions to capture the value that the aggregation provides at the transmission-distribution interface.

Among other things, FERC added that for aggregations across multiple pricing nodes, the California ISO proposed to settle the DER provider’s response based on a weighted locational marginal price associated with each pricing node.

“We accept, subject to condition, [the California ISO’s] proposed tariff revisions establishing a DER provider as a new type of market participant,” FERC said. “We find that these proposed tariff revisions create a reasonable framework that will serve to increase participation and competition in [the California ISO’s] wholesale markets.”

FERC said that it finds that the California ISO’s proposal includes sufficient measurement and verification protocols because each DER will be directly metered pursuant to the applicable utility distribution company tariff. Additionally, scheduling coordinators will submit settlement-quality meter data for the aggregation for each operating interval, and scheduling coordinators will maintain records of meter data for an aggregation’s individual resources for up to three years.

FERC added that the California ISO commits to sample meter data from an aggregation to validate whether the aggregation is responding to the California ISO dispatch instructions consistent with its generator distribution factors, to make its findings available to the public, and to propose any necessary market rule enhancements or refinements.

While it finds it unnecessary to hold a technical conference at this time to examine, scope and prioritize implementation issues, FERC said that as proposed by the California ISO, it directs the California ISO to submit an informational report on implementation efforts six months after the effective date of the proposed tariff revisions, which will include information regarding the number of DER aggregations that have requested to participate in the California ISO markets.

FERC also directed the California ISO to submit a compliance filing within 30 days of the order’s date; to conduct market performance reviews of DERs on at least an annual basis for three years after the effective date of the proposed tariff revisions; and to submit an informational report on implementation efforts six months after the effective date of the proposed tariff revisions.

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