One of the key drivers in the push for grid modernization is the rise of distributed energy resources (DERs). DERs are generally smaller power generators, and their small size has created challenges to the integration of these resources into the grid. On June 2, 2016, the Federal Energy Regulatory Commission (FERC) issued an order accepting tariff revisions proposed by the California Independent System Operator Corporation (CAISO) that facilitate the participation of aggregations of DERs in CAISO’s energy and ancillary services markets.
Previously, CAISO required a minimum size of 0.5 MW for a resource to participate in its markets. The revisions approved of by FERC, according to CAISO, create an initial framework for small DERs to aggregate in order to overcome this threshold.
This initial framework establishes “DER Providers” as a new type of market participant in CAISO. DER Providers will aggregate small DERs, such as distributed generation, energy storage, and plug-in electric vehicle charging stations. This aggregation, rather than individual DERs, will be treated as a market resource. The proposal approved by FERC states that individual units that are 1 MW or greater cannot be aggregated through a DER Provider. In addition, each aggregation of DERs must be greater than 0.5 MW and no larger than 20 MW.
DERs that participate in retail programs, such as net metering, will not be able to also participate in a wholesale market aggregation. As CAISO explained, under California’s current net energy metering program, such resources apply excess energy against later electricity bills and thus do not have any energy left to offer into the CAISO markets.
While FERC approved the framework proposed by CAISO, it did so subject to several conditions. In addition to certain revisions that CAISO must file within thirty days, in six months CAISO must submit an information report that includes, among other things, the number of DER aggregations that have requested to participate in the CAISO market and the status of those requests. CAISO must also conduct market performance reviews of DERs on an annual basis for the next three years.