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FERC approves CAISO ramping revisions, rejects calls for product to be biddable

FERC approveda new California ISOflexible ramping product that will help the grid operator deal with the growingamount of variable energy resources in its footprint.

Ramping capability denotes a resource's ability to quicklyincrease or decrease energy output in response to changes in forecasted netload driven by unexpected shifts in variable resource and othernon-dispatchable generation. As California and other regions becomeincreasingly dependent on renewable resources, the importance of rampingcapability grows.

CAISO first implemented a flexible ramping constraint in2011 as an interim measure to ensure that the grid operator could call ondispatchable resources with enough upward ramping capability. However, thatconstraint is lacking because it operates only in the 15-minute real-time unitcommitment process and addresses only upward ramping needs.

With the help of stakeholders, CAISO therefore developed anew flexible ramping product aimed at ensuring enough upward and downwardramping capability is available and efficiently dispatched in all of CAISO'sreal-time market processes and the energy imbalance market as opposed to justthe 15-minute real-time unit commitment process.

Acting on that complex proposal, FERC found it to be just,reasonable and an improvement over the existing flexible ramping constraint. Inaddition to allowing CAISO to procure ramping capability in both the upward anddownward directions, it also enables the grid operator to account for forecastuncertainty and net load variations in all processes of the real-time market.

The commission further found that the proposal will ensurethat flexible ramping capability is valued and compensated properly. CAISOproposed to base the price to be paid to such providers on the opportunity costof not selling energy or ancillary services in the CAISO real-time markets.

While some generators, power marketers and traders hadargued that the flexible ramping product should be a biddable product, FERCdisagreed.

The commission explained that just because flexible rampingmay meet the definition of an ancillary service and be similar to otherancillary services, such as spinning reserves or regulation, that does not meanCAISO has to procure it in the same manner as it does those other products. Thekey consideration, FERC said, is whether the compensation provided under theproposal is just and reasonable, which was found to be the case.

"Because the opportunity cost paid for uncertaintyawards is based on the real-time energy price, we find that flexible rampingproduct compensation is market-based, as opposed to an administrativelydetermined price, even though suppliers will not submit separate bids for it,"FERC said.

The commission further reasoned that opportunity costs are ajust and reasonable measure of the costs incurred by suppliers providingflexible ramping capability and that a bid-based product could create certainmarket inefficiencies.

FERC also said the inefficiencies of implementing theflexible ramping product in the day-ahead market, such as the potential forhaving to procure significant amounts of additional flexible ramping capabilityin the real-time market, outweigh the benefits of implementing a day-aheadproduct. However, it encouraged the grid operator to continue working withstakeholders to explore any further refinements "as CAISO gains experiencewith the product and evaluates the product's performance over time."(ER16-2023)