California Adopts Rules for Evaluating Multiple-Use Energy Storage Resources : Clean Energy Law Report : Renewable Energy Lawyer and Environmental Law Attorney : Latham & Watkins Law Firm

Go to Source January 24, 2018

By Michael Gergen, David Pettit and Christopher Randall

The CPUC’s market-shaping decision provides guidance regarding the “stacking” of multiple electricity system services.

A new decision from the Public Utilities Commission of the State of California (CPUC) has set the stage for improved economic viability for California’s energy storage industry. The January 17 decision — Decision 18-01-003 in Rulemaking 15-03-011 (the Decision) — establishes a set of rules to guide utilities on how to “promote the ability of storage resources to realize their full economic value when they are capable of providing multiple [or ‘stacked’] benefits and services to the electricity system.”

To advance this objective, the CPUC has adopted 11 stacking rules to govern the evaluation of multiple-use energy storage applications, as well as associated definitions of services and service “domains.” The agency also established a working group to develop certain issues further and directed the CPUC’s Energy Division to prepare a report in 2018 on the state of the energy storage industry.

Definitions of Services

The CPUC identified the many “reliability” and “non-reliability” services that energy storage resources can provide, as well as five domains in which those services can be provided. The CPUC’s table below outlines these respective domains and services:

⁷ For distribution-level services, the rules, procurement procedures and the services themselves are currently in development in a separate Commission R.14-10-003, the Integrated Distributed Energy Resources (IDER). Ordering Paragraph 2 of D.16-12-036 in R.14-10-003 defines these four product types. Should the product types be modified in R.14-10-003 or a subsequent proceeding, the product types on the distribution system available to storage device/resources will automatically update.

Source: http://docs.cpuc.ca.gov/PublishedDocs/Published/G000/M206/K462/206462341.PDF

Stacking Rules

The 11 stacking rules included in the Decision reflect the CPUC’s revisions to a set of 12 rules initially prepared by the Energy Division and the California Independent System Operator (CAISO). These 11 rules will apply to the 2018 energy storage resource procurement applications, standard contracts, and evaluation protocols of California’s three investor-owned utilities that are due on March 1, 2018.

Under these rules, energy storage resources can now provide services to either the domain in which they are interconnected or “higher” domains (but not “lower” domains). For example, an energy storage resource interconnected at the distribution level could also provide services at the higher transmission, wholesale market, and resource adequacy levels, but not at the lower customer level. The rules prioritize reliability services over non-reliability services and seek to ensure that multiple reliability service obligations do not conflict with one another. The rules also aim to enhance transparency and avoid double compensation.

The CPUC’s 11 rules are:

1. Resources interconnected in the customer domain may provide services in any domain.
2. Resources interconnected in the distribution domain may provide services in all domains except the customer domain, with the possible exception of community storage resources, per Ordering Paragraph 11 of D.17-04-039.
3. Resources interconnected in the transmission domain may provide services in all domains except the customer or distribution domains.
4. Resources interconnected in any grid domain may provide resource adequacy, transmission and wholesale market services.
5. If one of the services provided by a storage resource is a reliability service, then that service must have priority.
6. Priority means that a single storage resource must not enter into two or more reliability service obligation(s) such that the performance of one obligation renders the resource from being unable to perform the other obligation(s). New agreements for such obligations, including contracts and tariffs, must specify terms to ensure resource availability, which may include, but should not be limited to, financial penalties.
7. If using different portions of capacity to perform services, storage providers must clearly demonstrate, when contracting for services, the total capacity of the resource, with a guarantee that a certain, distinct capacity be dedicated and available to the capacity-differentiated reliability services.
8. For each service, the program rules, contract or tariff relevant to the domain in which the service is provided, must specify enforcement of these rules, including any penalties for non-performance.
9. In response to a utility request for offer, the storage provider is required to list any additional services it currently provides outside of the solicitation. In the event that a storage resource is enlisted to provide additional services at a later date, the storage provider is required to provide an updated list of all services provided by that resource to the entities that receive service from that resource. The intent of this Rule is to provide transparency in the energy storage market.
10. For all services, the storage resource must comply with availability and performance requirements specified in its contract with the relevant authority.
11. In paying for performance of services, compensation and credit may only be permitted for those services which are incremental and distinct. Services provided must be measurable, and the same service only counted and compensated once to avoid double compensation.

The CPUC determined that several issues required further discussion, and to that end directed the Energy Division and CAISO to establish a working group to develop clear, actionable recommendations and submit them to the CPUC in a compliance report.

The focus group will focus on the following issues:

• Appropriate metering, measurement, and accounting methodologies for multiple-use applications
• Enforcement of multiple-use application rules
• Service and compensation incrementality
• Modifications to CPUC-jurisdictional rules or tariffs
• Enabling a subset of aggregated distributed energy resources to provide distribution-level services

The CPUC further stated that the working group may, at its discretion, determine whether the issue of compensation for CPUC-jurisdictional services requires additional development beyond the discussion of service and compensation incrementality.

Station Power Measures

The CPUC also addressed two station power issues that had been deferred to this decision: (1) appropriate metering arrangements for in-front-of-the-meter systems; and (2) station power treatment for energy storage resources located behind the utility meter and participating in the wholesale market as a demand response resource.

Regarding the first issue, the CPUC determined that two meters are not required, and that Load Serving Entities and energy storage providers should determine and establish their desired metering configuration up-front. In addressing the second issue, the CPUC declined to adopt a methodology for separating the treatment of wholesale and retail activity behind the retail meter, and instead determined that all charging energy used entirely for on-site purposes, including support of a demand response program dispatch in the wholesale market, should be treated as a retail sale.

Forthcoming Report

With the Decision, the CPUC closed the proceeding and decided against opening a new energy storage rulemaking. However, the CPUC did direct its Energy Division to prepare and present a report — separate from the working group’s compliance report — to include the state of utility energy storage procurement, a survey of the market, a recommendation on whether additional refinements to the energy storage procurement framework or policies are required, and procedural options for accomplishing any needed refinements or recommendations by the working group.

Implications

The CPUC’s ruling marks a significant step toward facilitating multiple uses of energy storage resources in California. In particular, the decision provides guidance on how energy storage resources can stack multiple services to better realize their full economic value to the electricity system. The CPUC has also set immediate action steps that ensure additional changes will be forthcoming as the capabilities of energy storage resources continue to evolve.