On July 16, 2015, the California Independent System Operator Corporation’s (“CAISO”) Board of Governors approved a new proposal (the “Proposal”) that will allow aggregated distributed energy resources to participate in the California wholesale energy market.  Under the approved framework, distributed energy resources, such as rooftop solar, energy storage, and plug-in electric vehicles, will be allowed to aggregate together to meet CAISO’s 500 kW minimum participation requirement.  CAISO stated that it will continue to develop supporting tariff language for the framework; it intends to submit such language to FERC for approval later this year.

The Proposal would create a new type of CAISO market participant, a “distributed energy resources provider,” that would own and operate one or more aggregations of distributed energy resources.  A distributed energy resources provider would have multiple responsibilities, including the responsibility to provide CAISO with accurate information about the aggregated resources, to operate and maintain the resources consistent with the CAISO tariff, and to comply with other regulatory requirements.  CAISO intends to create a pro forma distributed energy resource provider agreement to establish the terms and conditions under which aggregated distributed resources and CAISO would operate.  Each provider, regardless of how many aggregations it has, would execute only a single agreement.

Under the Proposal, aggregations of distributed resources will be scheduling coordinator metered entities.  A distributed energy resources provider may serve as its own scheduling coordinator or use another scheduling coordinator’s services.  The metering arrangement would be between the scheduling coordinator and the aggregated resources, rather than between the CAISO and the resources, to mitigate CAISO metering burdens on individual resources.

The Proposal states that aggregated resources can be located at a single pricing node or spread across multiple pricing nodes.  Aggregations tied to a single pricing node will not have a maximum MW size limit; however, aggregations across multiple pricing nodes cannot exceed 20 MW and will be subject to other restrictions.

Finally, the framework recommends that CAISO utilize existing market models and tariff rules to the extent possible while implementing the changes, to ensure the changes can be implemented quickly.  As a result of this construct, the Proposal posits that CAISO will have the ability to select a broader array of resources when balancing supply with demand, while integrating more renewable sources of energy to the grid.

In a press release announcing the Proposal, CAISO President and CEO Steve Berberich hailed the proposal as “a significant step in re-designing our energy future with lower carbon emissions and helping California meet its clean energy goals.”

A copy of the Proposal is available here.  A copy of the press release is available here.