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Calif. ISO explores path for certain storage resources to access market revenues

The California ISO is considering a plan to allow energy storage resources providing cost-based transmission services to also participate in its markets and get revenue for that participation.

The idea behind the straw proposal discussed at a May 24 meeting is that the additional revenue from providing market-based services can reduce the cost of the storage resource recovered under a cost-of-service contract and save ratepayers money.

The proposal said state and federal developments are "driving a more comprehensive and integrated view of storage as a resource that can provide both transmission and market services." For its part, the grid operator has considered more than two dozen proposals in which storage provides cost-of-service based transmission services, but has only approved two. The better known is PG&E Corp. subsidiary Pacific Gas and Electric Co.'s Oakland Clean Energy Initiative, which includes selecting batteries to be procured as transmission assets to meet grid reliability needs.

"Enabling storage facilities to provide transmission service under a cost-of-service framework, while also participating in the energy and ancillary services markets, can generate additional ratepayer benefits relative to a solely regulated asset," the straw proposal said.

According to the proposal, storage as a transmission asset resources that can access market revenues do not fit precisely into any of CAISO'S current contract structures. Therefore, the grid operator wants to come up with a new agreement to combine transmission control agreement provisions, if the owner is not already a participating transmission owner, and provisions that cover how CAISO will compensate a storage resource and when that resource can participate in the market.

Eligibility to access market revenues will be based on the predictability of the transmission need, the proposal said.

CAISO will identify the need and the opportunities for market participation in the second phase of its transmission planning process. If the transmission need is unpredictable, market participation would be precluded, the proposal said. If the need is "reasonably predictable," then market participation would be allowed, although terms of that participation may be subject to changes in system needs, the proposal said.

CAISO proposed two cost recovery mechanisms. The first is full cost-of-service based cost recovery and energy market crediting, and the second is partial cost-of-service based cost recovery and no energy market crediting.

Under the full cost-of-service option, market revenues earned by the resource would reduce the costs recovered through the transmission access charge. Under the partial cost-of-service mechanism, the resource would only have some portion of its transmission revenue requirement guaranteed, with the remainder recovered through market revenues, according to the proposal.

Comments on the straw proposal are due June 7. CAISO expects to release a draft final proposal in late September and plans to take a final proposal to its board of governors for approval in mid-November.