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FERC gives nod to California ISO plan to aggregate small distributed resources

June 13, 2016 By Molly White in

Federal energy regulators early this month gave a green light to tariff changes requested by the California Independent System Operator that will allow individual energy resources that are too small to participate in the wholesale electricity market to be grouped together to meet a minimum of 0.5 megawatts. This will include rooftop solar systems, plug-in electric vehicles and energy storage devices. While the aggregation of distributed resources can cover single or multiple pricing nodes, aggregations over different nodes are limited to 20 megawatts.

“This is a step toward the re-design of the power grid,” Steve Berberich, president and CEO of the California ISO, said on June 7. “We are seeing a shift from a one-way centralized system to a two-way decentralized system.”

Promoting distributed energy resources, or DERs, “is significant because they represent the ability for consumers to not only draw energy from the grid, but to inject electricity back on the system,” the ISO said in a June 7 news release.

In a June 2 order, the Federal Energy Regulatory Commission accepted the California ISO’s proposed tariff revisions, effective on June 3, subject to several conditions imposed by FERC (Docket No. ER16-1085-000).

“We find that these proposed tariff revisions create a reasonable framework that will serve to increase participation and competition in CAISO’s wholesale markets,” FERC said.

The commission directed the ISO to submit a report in six months giving an update on how the revised tariff is working; and to conduct market performance reviews of distributed energy resources “on at least an annual basis” for the next three years. FERC also directed the ISO to submit a compliance filing within 30 days, revising the proposed tariff changes to specify that DER providers that do not follow dispatch instructions will be subject to financial penalties and establish a pricing methodology for single and multiple node aggregations.

The new tariff “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,” said Berberich in the ISO’s news release.

While some distributed resources have been able to enter the market in limited ways,
the California ISO said it is “the first grid operator in the U.S. to spell out a process for providers to group various distributed energy resources to reach the threshold for market participation.”

“DERs are becoming an increasingly important part of our system because of lower costs and customer preference,” Berberich said. “It’s critical that the ISO collaborate with distribution system operators, regulators and market participants to harness these valuable resources.”

FERC rejects requirements sought by SoCal Ed, PG&E

Southern California Edison argued that entities aggregating DERs under the new tariff should be required to do so under a wholesale distribution access tariff, or WDAT.

FERC disagreed.

“We agree with CAISO and SolarCity that it would be unduly discriminatory to require all distributed energy resources to interconnect through a WDAT when the WDAT interconnection rules do not apply to some distributed energy resources, such as dispatchable demand response resources,” the commission said.

On another point, “We find it unnecessary to direct CAISO to include in its tariff a requirement that utility distribution companies or metered subsystems affirmatively certify that their aggregation meets the relevant tariff requirements for participation and does not pose a threat to the safe and reliable operation of the distribution system,” as had been suggested by Pacific Gas & Electric.

FERC also disagreed with a request by PG&E to require the local regulatory authorities to certify that their rules had been satisfactorily modified to accommodate the ISO’s proposal.

“As CAISO states, no local regulatory authority has sought or supported PG&E’s approach,” FERC said. We find that requiring a local regulatory authority to make such a certification is outside of our jurisdiction.”

In its June 2 order approving the tariff revisions, with conditions, FERC noted that under the proposal, “like all other market participants, a DER provider may only participate in the CAISO markets through a scheduling coordinator or by becoming a scheduling coordinator itself.”

The commission also noted that individual generating units of 1 MW or more that are located in the grid operator’s balancing authority area “will still be required to become participating generators and will not be eligible to aggregate their capacity through a DER provider.” In addition, as the ISO had explained in its proposal, participating generators that are between 0.5 MW and 1 MW will not be eligible to be part of a DER aggregation unless their owners/operators decide to terminate their participating generator agreements, FERC said.

As the market for distributed energy resources expands, the U.S. electric utility industry and its regulators will have to pay careful attention to pricing issues, according to a recent report by the Lawrence Berkeley National Laboratory.

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