California Independent System Operator (ISO) received approval from the Federal Energy Regulatory Commission in June to launch a program that allows people with small-scale electricity technology to aggregate together and sell energy and services on the state’s wholesale market. Under the rules, people with technology such as batteries, rooftop solar panels and smart thermostats can enter into agreements with aggregators to form units representing at least half a megawatt’s worth of assets.
But early looks at the idea suggest that it won’t be much of an option for most rooftop solar customers — rather, California ISO’s aggregation concept appears more likely to act as a means of giving people with other emerging technologies a way to make money off their assets. That could be important from a system standpoint because those things offer flexibility to the grid and could, in fact, offer an answer to the lingering question of how to address the variability of renewables.
The idea of aggregation is not technically new — several organizations have put together demand response programs that involve placing controls on power-sucking systems like hot water heaters and air conditioners. By enrolling, or aggregating, those resources, power managers can curb demand during peak hours. That can mean protecting the grid from strain, or it might mean using less power from expensive, polluting peak-demand plants.
What’s different about the CAISO program is its scale and flexibility. The aggregation of distributed energy resources, or DERs, provides a potential path for people with certain technology to enter into the wholesale market. Under certain circumstances, aggregations could even be mixed and matched — rooftop solar systems, electric vehicle batteries, demand response and more. Aggregating entities who managed those arrangements might be utilities, solar power companies or companies that provide services to the grid.
“It’s anything that could give energy back to the grid, so storage could definitely be part of that,” said Steven Greenlee, a senior public information officer for CAISO. “And that could be … a home battery-type of setup and it could even be something such as the aggregation of electric vehicles.”
Though CAISO has set up the aggregation program to allow for rooftop solar, Severin Borenstein, a research professor in the Haas School of Business’ Energy Institute at the University of California, Berkeley, said that it likely won’t be attractive for customers with panels on their roofs. That’s because net metering, a program where customers sell electricity from rooftop systems to a utility at the same rate as they would buy it for on the retail market, simply pays more. Whereas a net metering customer might get 20 cents for selling one kilowatt-hour of electricity back to the grid, the average price for that same KwH on the wholesale market would be more like 5 cents, Borenstein said.
“It’s not obvious to me, if somebody is eligible for net metering, why they would choose to do this instead,” he said.
CAISO’s program explicitly disallows net metering customers from aggregating and selling to the wholesale market because double participation would mean double payment, Greenlee explained.
Still, Greenlee said, the program is relatively unique in the U.S. And the fact that it’s received regulatory approval from a federal agency means it could become a model for other states.
And net metering is not intact in all states. It’s been weakened in Nevada and Arizona, both of which are prime targets for the solar market because of the comparatively high levels of sunshine they receive.
Sonia Aggarwal, director of the electricity research project America’s Power Plan, said that aggregation could serve as a possible alternative to net metering in states that either don’t have it or have already rejected the concept.
“I definitely think it could [become a net metering alternative],” she said.
In California, she said, there are other uses. Aggregation could open up a new market for people who are currently just using assets for their own benefits — people with electric vehicles and home batteries, for example.
“I think at this point it’s pretty much about saving money, from an individual perspective,” she said.
Aggregation could allow them to move from saving money to selling services. Exactly where the details of such setups will fall remains to be seen — according to Greenlee, CAISO hasn’t processed any applications yet.
But there are many possible uses for aggregation. A smart thermostat company might enroll customers who would agree to let the company turn the temperature in their houses down one degree in the winter or up one degree in the summer — not a big deal to any individual house, but it would add up if the company was able to do it in hundreds of buildings in a given area.
Or, Greenlee posited, businesses that have nothing to do with electric power might find ways to sell services to the grid.
“For instance, you take a company such as United Parcel Service [that] has a big fleet,” Greenlee said. “If all that fleet was electric, they may be able to bid into our market with what energy they have.”
Batteries, whether they are in a car or on a wall, also present the opportunity to sell more than just electricity to the grid. The Rocky Mountain Institute explored some of those uses in a report last year — among them, voltage and frequency regulation, helping meet peak demand and bringing power generators back online after a blackout.
In addition to helping stabilize the grid and creating new pathways to help adopt cleaner energy, the move also positions CAISO to glean further insights into what the grid actually looks like. The aggregation rules subject participants to most of the same data reporting rules that large-scale power generators already have to follow — real-time, or near-real-time submission of data.
“Today, most DERs and pretty much everything behind the meter is invisible to the ISO," said Sean Gallagher, vice president of state affairs for the Solar Energy Industries Association, "and they have to sort of react to it.”
