Montauk Energy Comments on
CAISO Deliverability for Distributed Generation Issue Paper
Montauk Energy has a 20-year record of proven success in the development,
operation and management of landfill methane to renewable energy projects.
With 13 renewable energy projects across the country, and with additional
projects in development, the company is the largest U.S. producer of landfill
methane derived biogas and a significant U.S. producer of renewable electricity
from landfill methane. We are pleased to have the opportunity to comment on
this CAISO issue paper.
Introduction
Montauk Energy supports the CAISO’s plan to develop a straightforward method
for allocating available resource adequacy (RA) deliverability to generation
resources connected to the distribution system behind CAISO-operated
transmission resources. Montauk is concerned, however, that some of the
proposed approaches appear to be inconsistent with the CAISO’s RA policies
and market design, could require substantial effort to implement, and could have
unintended deleterious consequences.
Preferred Approach
Montauk prefers a straightforward approach that is consistent with FERC’s FirstCome First-Served (FCFS) test and does not create different requirements of
characteristics of deliverability for DG than for other resources. Given the three
Approaches identified, Montauk believes that Approach 2 best meets those
requirements.
Approach 1 would establish deliverability for resources based on some kind of
FCFS mechanism (potentially the same mechanism used in Approach 2) but limit
LSEs’ ability to count the deliverable capacity to its share of the load served,
starting at the delivery node and expanding to overall system load ratio share.
While superficially consistent with FERC’s order to allocate the deliverability to
LSEs rather than LRAs, this approach is inconsistent with the CAISO’s current
RA program and adds an unnecessary and potentially discriminatory step. The
ISO currently places no restriction on the location of any LSE’s RA capacity other
than requiring that sufficient levels of local capacity be committed to meet the
ISO’s Local Capacity Requirement (LCR). This allows LSEs and resource
owners to negotiate PPAs knowing that any RA capacity available from any
resource within the CAISO could be counted by any LSE, subject only to the
Path 26 transfer limit, which is a deliverability limitation. Limiting a DG resource
to providing RA capacity for only specific LSEs that happen to serve load in the
resource’s location, or limiting LSEs to their overall load share of DG limits both
parties’ ability to enter into RA capacity transactions. It could also strand
otherwise deliverable DG if it were under contract to LSEs that have exceeded
their load share, penalizing LSEs that are aggressively supporting DG. The
limitation is unnecessary because Approach 1 would allocate potential RA
capacity to resources using criteria that are independent of the LSE contracting
for the capacity. There is nothing from that allocation that would limit any LSE
from contracting for capacity up to or beyond its load share if that generation is
deliverable. If they have deliverable DG under contract they would be able to
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January 25, 2013
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count it toward their RAR regardless of the ISO node at which it is interconnected
or their total load share. Approach 1 would reward LSEs that have underprocured DG, effectively forcing resource owners to contract with them or lose
the ability to become fully deliverable.
Approach 3 creates a potentially troubling change to the current RA rules,
increases the possibility of LSEs exercising market power, and eliminates a
primary benefit of the DGD process. By allocating shares of DGD to LSEs on an
annual basis, this approach breaches the “once deliverable always deliverable”
tenet of the RA program as it applies to DG resources, unless the resource opts
to obtain deliverability through the ISO’s GIP. As such, it does not appear to
meet the original objectives of the DGD proposal. Contrary to objective #3, it
would require further deliverability assessment for a DG resource to maintain
deliverability. By making deliverability ephemeral and not assignable to
resources, Approach 3 violates objective #6 in that it provides no meaningful
information to developers, who would have to depend on LSEs to create their
deliverability. By doing so, it puts the DG owner at the mercy of the LSE, which
could demand economic concessions for the DG to continue to be deliverable.
As pointed out in the Issue Paper, this would require any DG owner that wanted
to have real deliverability to enter the ISO GIP in order to obtain it – the very
process the DGD proposal was intended to preclude. That reason alone should
be sufficient to rule out Approach 3.
An additional consideration is that Approaches 1 and 3 would be more likely to
require changes to the CPUC RA program, which could entail a time-consuming
process. Approach 2, on the other hand, simply provides a mechanism for DG to
obtain deliverability, widening the pool of potential RA resources without requiring
any changes to the CPUC-approved allocation mechanism. Based on these
considerations, Montauk Energy believes that Approach 2 creates a level playing
field and presents the most straightforward mechanism for making existing
deliverability capacity available to DGs without reconfiguring the existing RA
program.
Suggestions for other possible approaches
During the January 18 call, SCE proposed a mechanism that would allocate
deliverability to DG resources as they come on line. This approach was justified
based on SCE’s concern that too many non-viable projects remain in the
interconnection queue and that the surplus deliverability being allocated should
benefit the ratepayers who are paying for it. The concern about non-viable
projects in the queue is a valid one, and later in these comments we describe
how it can be effectively dealt with in the deliverability allocation process. Once
deliverability is allocated to generation that is actually in service, the ratepayers
are receiving the benefit of the excess transmission capacity, mitigating that
concern. What SCE’s proposal does, however, is to eliminate any ability for DGs
to offer fully deliverable capacity to LSEs through PPAs. By allocating the
deliverability to resources only as they come on line, a developer will have no
way to know whether it can provide deliverability and the potential buyer could
not factor deliverability into its evaluation of the resource’s overall value.
Because new resources (DG or otherwise) are generally not built until after they
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January 25, 2013
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have found a buyer, this proposal would not allow developers to offer full
deliverability to purchasing LSEs without perfect knowledge of the status of other
projects that may interconnect nearby. Like Approach 3, it would also provide no
help in obtaining project financing, since projects would not be assured of being
assigned deliverability until after they have begun construction.
Additional Issues to be Addressed
Montauk understands that reform of the RA program is currently under
consideration and that such reform could impact deliverability considerations for
all resources. It is therefore important that the deliverability assessment
mechanism for DG resources be comparable to the one used for other resources
within the CAISO. This way, all deliverable resources would be on a level
playing surface should reforms be implemented. Both Approaches 1 and 3 add
conditions to counting DG that are not consistent with other components of the
current RA program and would, at the very least, complicate any potential
reforms.
Suggestions for Addressing Open Issues
The primary issue to be considered in allocation under Approach 2 is the criteria
for establishing FCFS. Using existing queue position (assuming that WDAT and
Rule 21 export queues can be easily integrated) would appear to be the most
straightforward approach. As has been pointed out, however, older “Serial
Group” projects have the ability to remain in queue almost indefinitely.
Therefore, allocating deliverability based solely on queue position could assign it
to projects that are much less likely to come on line, and leave the available
capacity unused. Instead, the ISO should consider using the potential
assignment of deliverability as a mechanism to encourage moribund projects to
“put up or shut up” by establishing clear development milestones and requiring
any queued project that wants to be eligible for DGD assignment to agree to
completely withdraw from the queue if it does not meet the required milestones
after it has been assigned potential deliverability. Under this proposal, the
developer would receive something it does not have in its current interconnection
process – deliverability – in exchange for giving up its ability to continue to clog
the queue if it is not actively moving forward.
The treatment of existing DG resources was also raised. When generator
deliverability was first determined, existing DG resources under contract to IOUs
were assigned deliverability based on their historic performance, consistent with
the RA rules. Therefore, the only existing resources that need to be considered
in this process are those that came on line since the initial deliverability
assessment that have interconnected as energy only resources. It is not clear
how much existing qualifying DG capacity remains to be considered for potential
deliverability. However, projects that have recently come on line that would be
eligible for assignment of deliverability should generally have the opportunity to
accept that assignment if they so choose.
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January 25, 2013
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Comments Regarding Proposed Timetable and Process
The CAISO’s proposed timetable for developing a final proposal is very
aggressive, but may be necessary to facilitate approval for the 2014 RA
allocation. This is an admirable goal provided that there is sufficient new
qualifying DG expected to be in service in 2014. Given the challenge of getting it
right while meeting a very tight schedule, it would be helpful to know
approximately how many MW of new and existing generation potentially eligible
for DGD is expected to be in service by 2014. If this turns out to be a relatively
small amount, delay to work out the details and obtain FERC approval is less
likely to be a problem. If it were determined that there is a significant impact for
the 2014 implementation year, it might also be possible for the ISO to submit a
Compliance filing implementing Approach 1 concurrent with a §205 filing revising
the mechanism to eliminate the LSE allocation component. Other than that,
Approaches 1 and 2 are virtually identical, and the assignment of potential
deliverability could move forward while the ISO awaits FERC approval.
Furthermore, it may be necessary for the CPUC to revise its policies to
implement Approaches 1 or 3, a process that could also delay implementation
beyond 2014. The need for these policy changes should also be considered.
Submitted by Phillip Muller on behalf of Montauk Energy.
Montauk Energy DGD Comments
January 25, 2013
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Favorite pie recipe.
As requested by Lorenzo, we are pleased to comply. While there are many
excellent pie recipes available, there is no question that Aunt Agnes’ Strawberry
Rhubarb Pie is one of the very best. It can also be implemented without further
CPUC action.
Ingredients
Crust:
• 2 cups all-purpose flour, plus additional flour as needed, up to 1/4 cup
• ½ cup cake flour (recommended: Soft As Silk)
• 3 teaspoons sifted powdered sugar
• ½ cup butter-flavored shortening (recommended: Crisco)
• ¼ cup salted butter
• Pinch salt
• 1 egg
• 2 teaspoons vinegar
• ¼ cup ice cold water
•
Filling:
 2 ½ cups chopped red rhubarb, fresh
 2 ½ cups de-stemmed, washed and cut strawberries (in larger pieces)
 1 ½ cups sugar
 2 tablespoons minute tapioca
 1 tablespoon all-purpose flour
 ½ teaspoon lemon zest
 ½ teaspoon lemon juice
 ½ teaspoon ground cinnamon
 1 teaspoon vanilla extract
 3 tablespoons butter, cubed small
 1 egg white beaten with 1 teaspoon water
 Large granule sugar
Crust Preparation:
Blend the flours, sugar, shortening, butter and salt. Whisk the egg, vinegar and
water in a 2-cup measure and pour over the dry ingredients incorporating all the
liquid without overworking the dough. Toss the additional flour over the ball of
dough and chill if possible. Divide the dough into 2 disks. Roll out 1 piece of
dough to make a bottom crust. Place into a pie dish. Put dish in refrigerator to
chill.
Preheat oven to 425° F.
Filling Preparation:
Mix the rhubarb, strawberries, sugar, tapioca, flour, zest and juice of lemon, dash
of cinnamon, and vanilla and pour out into chilled crust. Dot the top of the filling
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January 25, 2013
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with the butter. Brush edges of pie crust with egg white wash. Roll out the other
piece of dough and place over filling. Crimp to seal edges. Brush with egg white
wash and garnish with large granule sugar. Collar with foil and bake at 425° F for
15 minutes. Decrease temperature to 375° F and bake for an additional 45 to 50
minutes, or until the filling starts bubbling. Let cool before serving topped with
vanilla ice cream.