FERC on Tuesday approved the second round of CAISO’s tariff changes for co-located and hybrid resources, the result of a two-year stakeholder initiative meant to accelerate the pairing of renewable generation with storage to ensure California has adequate resources during its clean energy transition. (ER21-2853).

The changes include a contested provision exempting hybrid resources from CAISO’s resource adequacy availability incentive mechanism (RAAIM), which CAISO said would reduce the risk of double penalizing the resources by assessing their performance based on historical output.

FERC agreed with the change, saying it had approved CAISO’s RAAIM exemption in October 2015 for variable energy resources under the same rationale.

“The use of a qualifying capacity methodology that discounts qualifying capacity by taking into account historical performance could lead to effectively penalizing a variable energy resource for a second time under the RAAIM framework,” FERC said. “We find that CAISO has adequately explained why hybrid resources, if subject to RAAIM, would face a similar risk of a double penalty here, and therefore that an exemption is also warranted for them.”

Middle River Power, a private equity firm that manages six natural gas plants and other generating assets in California, argued it was unreasonable to exempt hybrid resources from RAAIM. Hybrids combining solar or wind and battery storage represent “a significant portion of future resources that will be providing resource adequacy capacity to the CAISO” and should be subject to the same market rules as other RA resources, it said.

“Middle River argues that CAISO’s characterization that resource adequacy values for variable energy resources are determined by their historical performance is inapt,” FERC said. “Middle River explains that ELCC [effective load carrying capability] studies apply aggregate variable energy resource generation profiles, based on historical output (determined by historical weather), to a forecast of weather in future years. Middle River states that asserting that a variable energy resource’s qualifying capacity value is affected by its historical performance overstates the role an individual resource’s performance plays in setting its ELCC-based qualifying capacity value.”

FERC said it was unpersuaded by Middle River’s argument “that the Commission should re-examine the premise underlying the proposed exemption for hybrid resources given that variable energy resources’ qualifying capacity values are no longer based on the historical performance of an individual resource.”

‘Bleeding to Death’

Commissioner James Danly concurred with Chair Richard Glick and commissioners Allison Clements and Mark Christie in the decision.

“I agree that [CAISO] proposed a just and reasonable method by which hybrid and co-located resources can participate in the markets [it] administers,” Danly said. “Enhanced participation of these resources is critical because CAISO faces serious reliability and resource adequacy problems.”

The ISO has encountered strained grid conditions during the last two summers, including the rolling blackouts of August 2020, and expects another difficult summer in 2022. Extreme weather, wildfires and the switch from fossil fuels to clean energy without sufficient storage have been partly to blame.

Danly said he wondered whether exempting hybrid resources from RAAIM made sense in such circumstances.

“RAAIM is designed to improve resource performance, so exempting another entire class of resources from it appears to be problematic on its face, especially in a region suffering an ongoing reliability crisis,” he wrote. “But our Federal Power Act standard of review is whether a proposal is just and reasonable, not whether there is a better idea.”

He said he was persuaded that there was a risk of double penalties under RAAIM for hybrid resources if historical outage data was included in the capacity-factor calculation.

“So, while I agree with approving this proposal, I remain concerned that CAISO continues to use Band-Aids to address its ongoing reliability challenges rather than the emergency surgery that is actually required,” Danly said. “Each Band-Aid may mark a modest incremental improvement, but the patient is still bleeding to death.

“Today’s order is a perfect example,” he said. “CAISO almost certainly can find ways to incorporate hybrids and variable resources into its markets without RAAIM exemptions or other potentially discriminatory measures.”

Reporting Requirements

Danly said he supported FERC’s decision to require CAISO to provide an update next year on whether the RAIMM exemption is discriminatory.

Additional tariff changes accepted Tuesday included CAISO’s requirement that hybrid and co-located resources provide additional data on weather and state-of-charge, as well as a requirement that each hybrid resource and co-located intermittent resource provide its “high sustainable limit” via telemetry every 12 seconds.

“CAISO explains that this parameter is a real-time estimate of the instantaneous maximum output capability of a variable energy resource or the variable component of a hybrid resource, based on the resource’s physical properties and weather conditions,” FERC said.

FERC approved CAISO’s first set of tariff changes dealing primarily with co-located resources in November 2020. (See FERC Accepts CAISO Co-located Resources Plan.)

CAISO intends to begin a stakeholder initiative on the evolution of hybrid resources starting next year.