RE: Comments of the Large-Scale Solar Association on Proposed Revision Request 897

April 22, 2016

Submitted to the CAISO through the CAISO BPM Change Management application by Rachel Gold (Policy Director) and Susan Schneider (Consultant)

RE: Comments of the Large-scale Solar Association on Proposed Revision Request 897

The Large-scale Solar Association (LSA) hereby submits these comments on “Proposed Revision Request (PRR) 897- Variable energy resources dispatch operating target,” issued by the CAISO on April 8th. PRR 897 would modify the BPM for Market Operations to clarify the obligations of solar and wind projects to follow CAISO Dispatch Instructions on a regular basis. The CAISO proposes to implement PRR 897 on May 14th, on an “emergency” basis.

LSA’s comments on PRR 897 concern both:

Continuing confusion between the the terms “Variable Energy Resource” (VER) and “Eligible Intermittent Resource” (EIR), as noted in LSA’s comments on PRR 888 and earlier, when the former was added to the tariff. LSA continues to recommend elimination of the VER term as unnecessary and confusing.

The substance of the proposed language, which seems to assume contractual and operational arrangements inconsistent with the commercial terms of most Power Purchase Agreements (PPAs). Specifically, the CAISO should look first to the Scheduling Coordinators (SCs) for EIRs/VERs for any non-compliance with CAISO Dispatch Instructions where compliance is required, and not to the resources themselves.

LSA’s suggested changes are explained below, and its recommended revisions to PRR 897(in mark-up and clean versions) are shown in the attachment to these comments.

Relevant tariff definitions (CAISO Tariff, Appendix A)

Eligible Intermittent Resource (EIR)

A Variable Energy Resource that is a Generating Unit or Dynamic System Resource subject to a Participating Generator Agreement, Net Scheduled PGA, Dynamic Scheduling Agreement for Scheduling Coordinators, or Pseudo-Tie Participating Generator Agreement

Variable Energy Resource (VER)

A device for the production of electricity that is characterized by an Energy source that: (1) is renewable; (2) cannot be stored by the facility owner or operator; and (3) has variability that is beyond the control of the facility owner or operator.

Summary of PRR 897

The text of PRR 897 starts out by referring to “EIR” obligations for:

Forecasting – using the CAISO Forecast Service Provider five-minute forecast or submitting its own (each of which must be updated every 5 minutes);

Scheduling – either self-scheduling or submitting economic bids; and

Following CAISO Dispatch Instructions “when curtailments are incurred,” regardless of whether they self-schedule or submit economic bids. [The term “curtailments” is not a defined term here.]

The text further states that “all EIRs receive a Dispatch Instruction as defined in section 7.2.3.4 of BPM Market Operation.”

The text then switches terminology from EIRs to VERs, and then maintains the VER term for the remainder of the new language. This section states that VER obligation to follow CAISO Dispatch Instructions depends on whether the instruction specifies an output level at or below the aforementioned forecast, and not whether they are self-scheduled or have economic bids:

A Dispatch Instruction to an output level below the resource forecast is a CAISO “signal” to VERs of a “curtailment,”and VERs must follow such instructions whether or not they have submitted economic bids. “Repeated” failure to do so could trigger CAISO “investigations” of VER actions.

A Dispatch Instruction to an output level equal to the resource forecast is not a curtailment signal to VERs, so they need not comply, regardless of whether they have submitted economic bids – they can produce “as [they] are able.”

(No Dispatch Instructions would be issued to an output level exceeding the forecast.)

LSA concerns with PRR 897

LSA has three main concerns with PRR 897, related to: (1) Confusion of the “VER” and “EIR” tariff definitions; (2) SC responsibility for generator non-compliance with CAISO Dispatch Instructions; and (3) use of the term “curtailment” in a manner that could cause problems under most PPAs.

VERs vs. EIRs

As with PRR 888, the PRR 897 terminology seems to indicate confusion between the VER and EIR tariff definitions. The “VER” definition was added to the tariff in early 2014 as a result of CAISO tariff changes to accommodate FERC Order 764. LSA commented at the time that this definition (along with problematic associated additions to the pro forma Large Generator Interconnection Agreement (LGIA)) was confusing, since it seemed to overlap and perhaps contradict other elements of the tariff related to EIRs.

As noted above, the proposed PRR 897 language refers to EIRs in the beginning and then switches to VERs, seemingly using the terms interchangeably. However, the tariff definitions of these two terms are not the same; for example:

Most solar and wind generating facilities have “variability” in the downward direction that is partly or wholly within “the control of the facility owner or operator,” assuming sufficient sun or wind. Does this mean that they are not VERs?

Under the respective tariff definitions, an EIR must be a VER, but the reverse is not necessarily true. If a resource is a VER but not an EIR, would only the second portion of the PRR 897 language apply, i.e., they have forecasting obligations but their obligations to follow Dispatch Instructions are not as described in PRR 897?

PRR 897 illustrates how these terms are duplicative and cause confusion, and LSA suggests (as it did in 2014) that the VER term is not needed. The CAISO should therefore consider removing it from the tariff and using only the EIR definition (here in this proposed BPM change and in the tariff).

SC responsibility for generator non-compliance

Second, the substance of the PRR 897 language does not reflect the operating and contractual realities of most solar and wind PPAs today. Most of those PPAs assign the off-taker/Buyer the role of Scheduling Coordinator (SC), with the freedom and responsibility to submit forecasts, or schedule/bid the resource, as the Buyers wish.

Thus, generators do not submit or access forecasts for their resources. In fact,CAISO Tariff Section 4.8.2 provides that “all [SCs] for [EIRs] are subject to the forecasting requirements and the Forecast Fee as described below;” in other words, the SCs (not the resources) have the forecasting responsibility for these resources.

Similarly, generators do not usually know whether their resources are self-scheduled or economically bid. In many cases, they may not even have direct access to CAISO Dispatch Instructions (contrary to the assertion in PRR 897).

Generally, under most PPAs, generators simply produce all they can unless instructed to do otherwise by their SCs. They do not have the real-time capability to compare forecasts with CAISO Dispatch Instructions to determine whether a “curtailment” is instructed, as suggested in PRR 897.

Instead, the SC is the entity with that capability. Thus, the CAISO should look first to the SC for comparison of the resource forecast with the CAISO Dispatch Instruction, and compliance with Dispatch Instructions where required.

In other words, the SC should be the one the CAISO looks to first in cases of persistent non-compliance with Dispatch Instructions, where such compliance is required. If SCs issue instructions to their generators that do not reflect obligations to comply with CAISO Dispatch Instructions, the SC and not the generator is responsible for the non-compliance.

PPAs impose (usually substantial) penalties on generators for not complying with SC operating instructions, and the agreements also pass on any resulting CAISO penalties incurred due to such non-compliance. If SCs issue instructions to their generators that do reflect obligations to comply with CAISO Dispatch Instructions and the generator does not comply, generally CAISO penalties will be borne by the generator.

Use of the term “curtailment”

The PRR 897 language states that generators “are required to follow the ISO Dispatch Instructions when curtailments are incurred.” However, the use of the term “curtailments” could cause problems under most PPAs for solar and wind projects when applied to output reductions pursuant to both: (1) dispatch of economic bids; and (2) self-schedules when all effective economic bids have been dispatched.

Most PPAs provide some compensation for output reductions when the CAISO dispatches a unit down pursuant to an economic bid submitted by the SC. As noted above, those PPAs permit off-takers/SCs to schedule or bid those generators as they wish, and the compensation to generators for these output reductions is warranted because the generators have no control over this activity.

However, most PPAs do not provide compensation for “CAISO-directed curtailments.” This term generally refers, not to the routine market dispatch of economic bids, but to output reductions that are not related to such bids – mainly, reductions related to cuts in self-schedules made when the CAISO runs out of effective economic bids. These curtailments are considered to be unrelated to the SC’s bidding behavior and, therefore, no compensation is usually provided to the generator.

In the attachments, LSA suggests more neutral language for these respective output reductions that is less likely to cause confusion and disputes under common PPAs. LSA requests that the CAISO make these changes to avoid such problems.

ATTACHMENT 1

PRR 897 –Variable energyEligible IntermittentrResources dispatch operating target – Redline

(CAISO-proposed changes accepted – changes shown here are LSA edits)

A.13.1Self-Schedules, Economic Bids, and Dispatch

Scheduling Coordinators for EIRs must either submit a forecast of output with five-minute granularity and update it every five minutes, or else use the forecast provided by CAISO’s fForecast sService pProvider, which is also produced at a five-minute granularity and updated every five minutes.

The Scheduling Coordinator for Aan EIR may choose to either self-schedule or submit economic bids on behalf of those EIRs. If self-scheduling, the self-schedule for each 15-minute interval in the FMM and for each 5-minute interval in RTD is derived from the forecast values. If the Scheduling Coordinator for the unit chooses to submit economic bids, the upper Dispatch Operating Target will never exceed limit will be based on the forecast values.

All EIRs receive a Dispatch Instruction, as defined in sSection 7.2.3.4 of the BPM for Market Operation. All EIRs, whether their Scheduling Coordinators have submittedy self-schedules or submit economic bids on their behalf, are required to follow the ISO Dispatch Instructions when curtailments are incurredas described in this section.

Generally, the CAISO expects all EIRs to follow CAISO Dispatch Instructions when the Dispatch Operating Target differs from the forecast values described above. If EIRs do not do so, the Scheduling Coordinators for such resources will be faced with economic consequences, and the CAISO may investigate repeated deviations.

There are two possible relationships between the forecast submitted by the Scheduling Coordinator and the CAISO Dispatch Instruction – the Dispatch Instruction is either equal to or below the forecast.

When the Dispatch Instruction is below the forecast value, the Dispatch Instruction is signaling the VEREIRs are required to comply with the Dispatch Instruction, i.e., to curtail its output below the forecasted amountvalue, regardless of whether the EIR is self-scheduled or economically bid. The amount of curtailment is indicated by the SUPP component of the Dispatch Instruction Breakdown in negative quantity, as described in BPM for mMarket oOperation Section 7.8.3.1.3. The CAISO expects all VER resources to follow their Dispatch Instructions when they differ from the forecast values. If they do not, resources will be faced with economic consequences, and the CAISO may investigate repeated deviations.

When the Dispatch Instruction is equal to the forecast value, i.e., represented by the SUPP component in zero quantity, the VEIR is not required to comply with the Dispatch Instruction and can instead produce as it is able, regardless of whether the EIR is self-scheduled or economically bid.

More specifically the CAISO expects the following actions from VERs[SS1]:

A VER must follow the Dispatch Instruction if it submits an economic bid, which is adjusted by the forecast and cleared in the CAISO Markets, and the Dispatch Instruction is below the forecast value.

A VER must follow the Dispatch Instruction if it elects to self-schedule, which is adjusted by the forecast and curtailed by the CAISO Markets, and the Dispatch Instruction is below the forecast value.

A VER does not need to follow the Dispatch Instruction if it elects to self-schedule, which is adjusted by the forecast, and its Dispatch Instruction is equal to the forecast value. The VER can produce as it is able.

A VER does not need to follow the Dispatch Instruction if it submits an economic bid, which is adjusted by the forecast, and its Dispatch Instruction is equal to the forecast value. The VER can produce as it is able.

ATTACHMENT 2

PRR 897 –Eligible Intermittent Resource dispatch operating target – Clean

(Proposed changes accepted – changes shown here are LSA edits)

A.13.1Self-Schedules, Economic Bids, and Dispatch

Scheduling Coordinators for EIRs must either submit a forecast of output with five-minute granularity and update it every five minutes, or else use the forecast provided by CAISO’s Forecast Service Provider, which is also produced at a five-minute granularity and updated every five minutes.

The Scheduling Coordinator for an EIR may choose to either self-schedule or submit economic bids on behalf of those EIRs. If self-scheduling, the self-schedule for each 15-minute interval in the FMM and for each 5-minute interval in RTD is derived from the forecast values. If the Scheduling Coordinator for the unit chooses to submit economic bids, the Dispatch Operating Target will never exceed the forecast values.

All EIRs receive a Dispatch Instruction, as defined in Section 7.2.3.4 of the BPM for Market Operation. All EIRs, whether their Scheduling Coordinators have submitted self-schedules or economic bids on their behalf, are required to follow the ISO Dispatch Instructions as described in this section.

Generally, the CAISO expects all EIRs to follow CAISO Dispatch Instructions when the Dispatch Operating Target differs from the forecast values described above. If they do not, the Scheduling Coordinators for such resources will be faced with economic consequences, and the CAISO may investigate repeated deviations.

When the Dispatch Instruction is below the forecast value, EIRs are required to comply with the Dispatch Instruction, i.e., to curtail output below the forecasted value, regardless of whether the EIR is self-scheduled or economically bid. The amount of curtailment is indicated by the SUPP component of the Dispatch Instruction Breakdown in negative quantity, as described in BPM for Market Operation Section 7.8.3.1.3.

When the Dispatch Instruction is equal to the forecast value, i.e., represented by the SUPP component in zero quantity, the EIR is not required to comply with the Dispatch Instruction and can instead produce as it is able, regardless of whether the EIR is self-scheduled or economically bid.

[SS1]The simplified explanation above already reflects this detail.