By Robert Mullin

CAISO last week provided an explanation of its decision to increase regulation requirements in response to the growing variability on its system.

The ISO's Department of Market Monitoring last month called attention to the sharp rise in costs from the requirements, prompting the California Energy Commission to ask the ISO to justify the move. (See CAISO Regulation Costs Quadruple as Price, Procurement Jump.)

During a Market Performance and Planning Forum last week, CAISO said it doubled its frequency regulation service requirement from late February to mid-June in response to recurring short-term generation forecasting errors stemming from variable wind and solar resources during late winter and spring.

The forecasting problem is mostly isolated to spring, when high renewable output often coincides with periods of low loads in California. At the same time, weather patterns tend to be more erratic, often making it especially difficult to predict renewable output on a moment-to-moment basis.

Regulation prices more than doubled shortly after the ISO increased its daily regulation procurement from 400 MW or less to as much as 800 MW in late February. Daily payments to regulation service providers surged from $100,000 to more than $400,000, the ISO's Monitor found last month.

The ISO rolled back regulation requirements to previous levels for summer because of more predictable weather patterns.

Further compounding the spring forecasting issue is the increasing adoption of residential rooftop solar, which is subject to the same variability as utility-scale projects. The ISO estimates it has nearly 5,000 MW in rooftop solar in its balancing area, with new installations added daily. Variability in behind-the-meter rooftop output complicates matters by causing loads to skew from forecasts depending on whether the sun is shining.

The problem "happens more in the off-season — with more of the clouds coming in," said Amber Motley, CAISO short-term forecasting manager. "Timing and forecasting of [generation] ramps are very difficult. Forecasting cloud coverage is difficult."

Variable wind production can also be a factor, with cold fronts making it difficult to predict the timing of wind ramps and changes in wind direction causing intermittency.

Clyde Loutan, ISO senior advisor for renewable energy integration, said weather changes can occur too quickly to incorporate revised forecasts into the real-time market run. He also pointed out that forecasting errors are not covered under the ISO's real-time contingency dispatch process, which sets aside generation to allow the system to recover from major disturbances.

"So you have to rely on regulation," Loutan said.

"Seems like it's more a failure of the forecast," said Dan Williams, CAISO markets analyst at Portland General Electric. "And that should be changed by changing the market rather than rolling it into regulation."

Loutan countered that he didn't know of any forecaster that could reflect the intermittency in the five-minute market.

"When you think about how these markets were designed, they were really designed for conventional units," he said.

Loutan also pointed to a clear financial incentive driving the ISO's increased requirement.

"Back in January we had some pretty bad days when we didn't control the frequency well enough," he said. "For 11 hours, we had a hard time controlling the system. We found out that we were running out of regulation."

If the condition had persisted longer than 30 consecutive minutes, the ISO would have been subject to as much as $1 million in NERC penalties, he said.

Carolyn Kehrein, principal consultant for the Energy Users Forum, suggested that increased regulation costs should be allocated to intermittent resources if the forecasting problem continued and the ISO didn't develop new tools to deal with it. She said increased costs for intermittency should encourage the "right kind" of renewable development, such as geothermal.

Wei Zhou, senior project manager with Southern California Edison, agreed with applying the cost-causation principle to the problem.

"This is something that we're looking at long-term," said Loutan, referring to the forecasting issue at large. "But for now we just wanted to explain why we increased our regulation procurement."