The Energy Storage Enhancements (ESE) initiative approved by FERC on June 5, 2023 contained a revision to the day-ahead market state-of-charge (SOC) constraint. The approved policy allowed the market to optimally schedule both energy and regulation by considering their impacts on the SOC.

During the market simulation and prior to the implementation of this revised constraint, stakeholders observed that the inclusion of regulation in the SOC formulation resulted in the market procuring additional regulation down awards at negative marginal prices. This negative pricing result was the SOC in the day-ahead market temporally linking MWh of “energy” charging resulting from a regulation down award with the potential and future discharge of those same MWh’s; functionally the market determined it was efficient to pay for regulation down awards that could be discharged later in the day at a profit.

The ISO delayed implementation of this feature, published a workshop paper, and held a stakeholder meeting to discuss this result with market participants while collectively workshopping next steps. During that workshop Pacific Gas and Electric (PG&E) presented on a proposed modification to the implementation of the SOC constraint that included also retaining the existing SOC constraint that considers energy awards only.  When implemented concurrently in the market the two constraints decouple the dispatch of energy and regulation awards. While the SOC constraint that considers regulation awards will continue to ensure that regulation awards are supported in conjunction with energy awards through the day-ahead market optimization, the need to also satisfy the SOC constraint that only considers energy awards will ensure that energy discharge awards are supported absent the potential energy created by regulation. This revision removes the direct pricing linkage between regulation and energy, and the potential for negative priced regulation down awards due to modeling all commodities within a single constraint.

In response to stakeholder comments supporting the exploration of the solution put forward by PG&E, the ISO developed code to test the revised implementation. Testing indicated the revised formulation eliminated regulation awards clearing at negative prices. The ISO plans to expand the testing of this constraint with stakeholders through market simulation starting Oct. 3, 2023, through October 13. Pending successful market simulation, the ISO plans to implement the ESE SOC constraint consistent with existing regulatory timelines. The ISO would like to thank stakeholders, specifically PG&E, for working towards a successful implementation of this element of the ESE initiative. Additional information, including results of ISO analysis to date, is available on the Energy Storage Enhancements initiative webpage.