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CAISO proposes tariff changes to boost demand response participation in markets

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CAISO proposes tariff changes to boost demand response participation in markets

The California ISO is seeking federal regulators' approval of tariff changes aimed at making participating in its markets easier for demand response resources, including by providing longer dispatch options and allowing an aggregated resource to be located in multiple load-serving entities.

The plan is significant because it addresses a hurdle that has emerged amid the growth of community choice aggregations in California while reducing the chance that demand response participants will become stranded.

Demand response providers have said the five-minute intervals of CAISO's real-time market do not provide enough notice because demand response resources generally are made up of retail customers such as air conditioner cycling programs, manufacturing and process management, CAISO told the Federal Energy Regulatory Commission in a Sept. 3 filing. Those resources often cannot respond as quickly as a conventional generator, the grid operator said.

That timing issue has come up before because imports from other balancing authority areas also often require additional time, for instance, to secure transmission rights, CAISO said. So the grid operator sought to extend to demand response resources the longer notification and scheduling options that are available for imports.

CAISO proposed to allow so-called proxy demand resources to specify whether the resource will be bid and dispatched in the real-time market in hourly, 15-minute or 5-minute intervals, according to the grid operator's filing.

A demand response resource electing hourly block bids will have 45-60 minutes of notice before it is dispatched, and it will not be dispatched up and down repetitively within the hour, the grid operator said. Demand response providers have voiced concern that the average customer is unlikely to tolerate multiple demand response events in an hour if its comfort or processes are impacted, CAISO said.

"These revisions will help demand response resources participate more effectively in the CAISO's real-time markets, which will mitigate the extent to which many struggle today and thereby improve dispatch efficacy," the grid operator said.

CAISO currently requires demand response aggregations to be located within a single load-serving entity, or LSE, and each demand response resource must have at least 100 kW of capacity. But load increasingly is migrating from investor-owned utilities to community choice aggregations, which has made satisfying those requirements extremely challenging, according to the filing.

In the services territories of the three main IOUs in the state, community choice aggregations now are serving about 25% of load, the California Community Choice Association said in its most recent quarterly update. Amid that load migration, demand response providers are having a harder time coming up with 100 kW of demand response within a single LSE, CAISO said. "As a result, many willing demand response participants have been stranded."

So CAISO proposed to eliminate the requirement that demand response resources be located within a single LSE while also tweaking the way the grid operator complies with FERC's net-benefits test.

"Demand response providers see the single-LSE requirement as a hurdle that grows higher every day and already impedes demand response participation," CAISO said. "Removing this hurdle will enable greater participation in the CAISO markets while ensuring that demand response participation is market efficient."

CAISO asked that the proposal become effective Nov. 13. (FERC docket ER19-2733)

Kate Winston is a reporter for S&P Global Platts. S&P Global Platts and S&P Global Market Intelligence are owned by S&P Global Inc.