By Robert Mullin

SACRAMENTO, Calif. — While regionalization occupied center stage during the first day of CAISO’s annual Stakeholder Symposium, the second day’s panels took on an issue poised to be equally transformative for California’s electricity sector: the increased adoption of distributed energy resources.

“To give you a sense of the scale, in addition to over 16,000 MW of utility-grade renewables attached to the system, we now have 4,500 MW of distributed solar,” said Ashutosh Bhagwat, a member of the CAISO Board of Governors.

Rooftop solar capacity within the ISO’s balancing authority area has increased by 43% over the past five years, Bhagwat noted. “That means we’re most certainly going to hit 10,000 MW quite soon.”

Bhagwat said the ISO considers the rise of distributed generation to be an opportunity for enhancing its system, rather than a physical liability. Distributed resources have the potential to contribute to grid management, he said, but the ISO must overcome barriers to getting there.

“We have to figure out how to dispatch [DER] in a way that works,” he said.

Ron Nichols, president of Southern California Edison, said his company “is very strongly embracing the growth of distributed energy resources on our system. We’re dealing with it in an extraordinarily large way. In scale, it’s phenomenal.”

22,000 Changes

Among the questions the company is addressing: “What’s the pace of [DER] growth going to be? What are going to be the compensation models associated with that [growth]? What kinds of transactions are we going to deal with and how are we going to allocate costs with respect to that?”

The utility has made 22,000 short- and long-term changes to its distribution system to maintain reliability while incorporating DER.

“You don’t make 22,000 changes to the ISO transmission system — or even across” the Western Electricity Coordinating Council, Nichols said.

Lorenzo Kristov, principal of market infrastructure and policy at CAISO, said he started working on DER about four years ago when he led an initiative to expand the ability of distributed resources to participate in the ISO market.

Kristov said CAISO asked to him to imagine having as many as 100,000 “tiny” resources participating in the ISO’s market optimization — the platform responsible for scheduling and dispatching resources.

“Is that really the way that it’s supposed to be?” Kristov said. “My answer at that point was ‘maybe, but maybe not.’”

Among Kristov’s conclusions: Expanded DER will require distribution utilities to reconsider how they operate — while also forcing CAISO to rethink how it interacts with those utilities, he said.

Kristov said he can envision the development of a distributed service operator (DSO) “that looks pretty much like today’s distribution company. But then you could go to the very opposite extreme, where the DSO really takes on” the functions of another balancing authority.

Pilot Program

“These consumer resources can in fact be a reliable resource that can provide reliable services into the market,” said former FERC Chairman Jon Wellinghoff, now chief policy officer at SolarCity. “I think the future is at the area of the distribution utility.”

SolarCity is participating in a pilot program with Pacific Gas and Electric in which 150 homes with rooftop solar are installing the equipment and software controls necessary for the utility to provide ancillary services to the ISO, Wellinghoff noted.

“That’s one thing we need to remember … customers are an important part of this,” said Lorraine Akiba, a member of Public Utilities Commission of Hawaii, which has mandated a 100% renewable portfolio standard by 2045. “Customers have choices. We have to enable and empower them to be part of the grid.”

Federal-State Jurisdiction

Another question is which agencies will have jurisdiction over those resources in the wholesale market. While activities at the distribution level typically fall under the control of state regulators, FERC has the final say on matters related to markets and rules affecting the transmission system.

“These technologies are not only transforming the grid, but they are starting to erode the traditional barriers — the regulatory barriers — that separate the distribution system from the transmission system, and therefore [federal and state regulators] touch on each other in ways we never have before,” said Michael Picker, president of the California Public Utilities Commission.

FERC Chairman Norman Bay said jurisdictional questions can be resolved under the Federal Power Act. “If the resources are aggregated and have submitted a [CAISO Distributed Energy Resource Provider] filing — so it’s more than half a megawatt and can follow dispatch instructions — [they] can participate in wholesale markets,” Bay said.

During one panel, CAISO CEO Steve Berberich posed to Bay a scenario in which a FERC-jurisdictional DER aggregator violated an RTO’s market rules using behind-the-meter resources subject to state regulatory oversight.

“How would you bridge that gap?” Berberich asked.

FERC’s approach to enabling demand response to participate in wholesale markets could provide “a template for the way we might think about other distributed resources,” Bay responded. He noted that there have been cases in which FERC has pursued enforcement actions against DR providers for improperly verifying load reductions.

“Under our anti-manipulation authority, we have to show the conduct has a nexus with the wholesale markets,” Bay said.

In response to a question about who should be responsible for monitoring the market activities of DER aggregators, Bay pointed out that marketing monitoring presently occurs at the federal, state and RTO/ISO levels.

“There are many sources of information, and it’s very important that we use all those sources of information to make sure the market has integrity,” he said.

Bay also offered a note of support to California’s efforts to provide DER with access to the ISO’s market.

“I actually think a lot of good work is happening in California and CAISO, and I want to commend both the CPUC and CAISO for the work that you’re doing to establish market rules that allow DER and energy storage to participate in wholesale markets,” Bay said. (See FERC OKs CAISO Energy Storage Rules.)