On October 26, 2021, FERC issued an order accepting a California Independent System Operator Corporation (“CAISO”) tariff filing designed to improve CAISO’s markets by optimizing the performance of storage and demand response resources. CAISO proposed three distinct tariff revisions: (1) creating biddable state of charge parameters for energy storage; (2) applying market power mitigation to energy storage; and (3) enabling demand response resources to specify maximum daily run times.

CAISO’s filing was the final set of tariff revisions under the fourth phase of CAISO’s energy storage and distributed energy resources (“ESDER”) stakeholder initiative, which began in 2015 to solicit suggestions from stakeholders on issues related to energy storage, distributed resources, demand response, and behind-the-meter resources (see June 21, 2017 edition of the WER). CAISO described the state-of-charge parameters as a tool to help storage resources manage their state of charge in real-time. As CAISO explained, dispatching storage resources based only on short-term market signals can be uneconomic over the longer term or affect the resource’s ability to meet its day-ahead schedule if it is fully or significantly discharged. With respect to the application of mitigation measures, CAISO explained that because storage resources increasingly dispatch during peak demand, the current exemption from market power mitigation may not be prudent going forward. CAISO proposed a new default energy bid option for energy storage resources, including a calculation for an opportunity cost component, to help mitigate the potential exercise of market power from these resources. Finally, the option for demand resources to submit a maximum daily run time parameter seeks to allow these resources to better represent their operating characteristics.

FERC found each of the proposed tariff revisions to be just and reasonable measures that will enhance participation of energy storage and demand response in the CAISO markets. FERC acknowledged some of the concerns expressed in comments and encouraged CAISO to monitor the effects related to the state of charge parameters and consider possible refinements if warranted. Likewise, FERC described the mitigation measures as in initial step in complex modeling that may also merit additional study or refinements.

A copy of the order is available here.