DERP Proposal Takes Step to Ease Market Access Challenges

When the CAISO Board of Governor’s approved the DER Provider Proposal earlier this month, it took a critical enabling step to support market access for aggregated Distributed Energy Resources (DERs).  Next, the CAISO will draft tariff language and other supporting materials for FERC approval which may be complete by the end of the year.

Throughout the development of the proposal, questions have been raised about the details of the proposal as well as expectations for impact once executed.  Having followed these efforts closely, Olivine’s subject matter experts provide answers to some key questions below.

Why is the DER Provider Proposal important?

The establishment of DER Providers (DERPs) addresses one of the challenges we have faced on DER aggregation and entry into the market, noting that currently the DER Provider is relevant only for aggregation of Non-Generator Resources (NGR) and not for individual NGR resources nor those that operate under the CAISO Proxy Demand Resource (PDR) resource type.

It does pave the way for the CAISO Energy Storage/DER (ESDER) Stakeholder Process and likely future CPUC involvement on critical topics for storage to provide multiple value streams – to truly deliver on the promise and value of distribution-sited energy storage.

What’s the history regarding its development?

This DERP proposal was part of the Expanding Metering and Telemetry Options stakeholder process at the CAISO that was started in fall of 2012.  Olivine has been involved with the process from the beginning due to its importance to facilitate third party market access, with CTO Robert Anderson leading the Business Scenarios Stakeholder Working Group from October 2012 through early 2013. One scenario that came out of that working group effort identified the need to enable metering and telemetry scenarios for aggregations that would allow a third party to provide data consolidation services for resource owners.

A critical element in this effort was the potential for parties to collect and submit metering data – with appropriate audit control – instead of the standard requirement that the CAISO collects all meter data.  This point becomes crucial for resources made up of many small sub-resources.  The standard requirement is expensive for a variety of reasons and would ultimately require the CAISO to manage meter data collection for a much larger set of assets than it does today.  In fact, enabling parties to collect and submit this data is a major part of the DERP Proposal, allowing aggregated Non-Generator Resources (NGRs) to avoid the high costs of CAISO metering under the current requirement.

What are the other important provisions in the DERP Proposal?

Two other items worthy of mention are included in the DERP Proposal but fall outside of the notion of metering and telemetry:

1. CAISO requires resource owners to execute either a Participating Generator Agreement (PGA) or Participating Load Agreement (PLA). Bi-directional NGR resources would presumably need to execute both such agreements, but the DER Provider Agreement (DERPA) will replace the need for such agreements.

2. Outside of the Proxy Demand Resource, the CAISO did not have clear rules in place defining what types of aggregation are acceptable for resource makeup. The DERP Proposal defined specific limits for aggregations depending on their area over which they are distributed as well as requirements for how they respond to dispatch instructions.  In general, the CAISO has been conservative on these limits with the intention to revisit them once there is operational experience.

If this paves the way for critical topics, what are they?

While that is a deep topic, it is helpful to look at a key objective: to maximize the grid value for energy storage. To do so, we need to enable aggregations of customer-sited (behind the meter) assets that can provide services for customer bill mitigation, utility distribution value, and wholesale ancillary services, with access to the full range of such ancillary services.  To do this, we need:

• A CAISO resource type that can be installed behind the customer meter and provide frequency regulation service. This could be the so-called PDR/NGR Hybrid.
• That resource type ought to be able to support wholesale market operations part time (e.g., to provide demand charge mitigation or distribution support during certain hours and wholesale energy and ancillary services – including resource adequacy – during other hours).
• That resource type should be able to support wholesale market operations with part of the asset or allow for the assignment of part of the asset to the resource (e.g., allow excess capacity to be bid into the wholesale market).
• In non-exporting situations, a resource deemed as demand response – even when “negative” and therefore not require a WDAT agreement with the utility.
• In exporting situations, the CPUC and utilities need to work out a scenario where a WDAT agreement and all the issues around that can be navigated in a straightforward manner.
• Finally, the metering requirement for this resource type would likely need to be a sub-meter. Utilities and the CPUC will need to weigh in on whether or not they have an interest in the requirements for that meter or, in fact, any responsibility for such metering at all.

Stay tuned as several of these issues are going to be taken up in the Energy Storage / DER Stakeholder Process in 2015 and 2016.

What is Olivine’s role?

Based in San Ramon, Calif., Olivine, Inc. is one of the businesses rising from the changes in the energy marketplace. The company provides Distributed Energy Resources (DERs) owners a variety of market access services, As a certified scheduling coordinator, Olivine is authorized to participate in the CAISO’s market and works with smaller aggregators acting as a ‘super aggregator’ of sorts where pooling distributed resources provides cost-effective market access.