CAISO Methodology

Modo Energy generates benchmark data for battery energy storage systems across different geographical energy markets. The Benchmark is produced using a standardized set of procedures that is mathematical, consistent, and fully transparent.

1. Introduction

The California Independent System Operator (CAISO) manages the flow of electricity across most of California and parts of Nevada. The Modo CAISO Methodology Framework outlines the calculation and construction of Modo Energy’s battery energy storage benchmark in CAISO-controlled regions. This framework provides detailed insights into:

• the inclusion criteria for assets;
• the components that make up published revenues; and
• the methodology employed.

These elements ensure accurate and reliable benchmarking for the CAISO battery energy storage sector.

1.1 Representation

Modo Energy’s benchmarks are designed to track the performance of grid-scale lithium-ion battery energy storage systems in CAISO. The Modo Energy CAISO Benchmark tracks the performance of all individually metered battery assets, including sites co-located with other resource types.

2. Benchmark Construction

2.1 CAISO BESS BenchmarkME BESS CAISO

Modo Energy currently produces one Benchmark that tracks the performance of battery energy storage systems in CAISO: the CAISO BESS BenchmarkME BESS CAISO.

2.2 Inclusion Criteria

CAISO anonymizes all generation resource participation in the market, providing only system-wide data for battery energy storage assets. This data is aggregated and does not disclose details about individual resources.

An asset is considered operational and contributing to this system-wide data based on its commercial operation date (COD) disclosed in CAISO’s generator capability list. All resources classified as 'LESR' (Limited Energy Storage Resource) in CAISO’s capability reports are included in Benchmark calculations. This includes co-located sites where battery resources are metered separately from other resources but excludes co-located sites sharing a meter, defined as “HYD” (Hybrid).

3. Revenue Components

This section describes the revenue streams included in the Benchmark, each essential for calculating the overall performance value of battery energy storage systems in CAISO.

3.1. Energy Components

• Integrated Forward Market (IFM): Allows participants to submit bids and offers one day in advance to secure supply and demand commitments for the next day.
• Fifteen Minute Market (FMM): The FMM operates in 15-minute intervals, issuing binding dispatch instructions to resources for each upcoming quarter-hour. The FMM primarily focuses on balancing supply and demand and assists in ensuring ramping capabilities are in place for anticipated changes in demand.
• Real-Time Dispatch (RTD): The RTD issues dispatch instructions every 5 minutes, focusing on immediate, short-term grid balancing. It manages real-time supply and demand adjustments, optimizing generation to meet short-term load forecasts and transmission constraints.

3.2. Ancillary Services

Ancillary services in CAISO are critical for maintaining grid stability and reliability and are procured primarily through the Integrated Forward Market, with further incremental amounts acquired through the Fifteen Minute Market. These services include:

• Regulation Up and Regulation Down: Real-time adjustments to generation to maintain system frequency within safe limits.
• Non-Spinning Reserve (NSR): Reserve capacity from offline generators that can start within 10-30 minutes to address supply shortfalls or demand surges, ensuring additional power when needed.
• Spinning Reserve (SR): Synchronized, standby reserves from partially loaded generators that respond within seconds to stabilize frequency and mitigate impacts from sudden supply interruptions, maintaining a stable grid frequency of 60 Hz.

Benchmarks and components are reported as net revenues per interval period.

4. Divisor

The divisor plays a critical role in calculating the CAISO BESS BenchmarkME BESS CAISO benchmark, representing the normalization factor used to determine the average revenues for the group of assets included in the Benchmark.

To calculate this, the total revenue generated by all active assets in the Benchmark is taken and divided by the total rated power or energy capacity of these assets (see section 2.2). Rated power is derived from an asset’s nameplate capacity, not its grid connection.

5. Data Sources and Methodology

5.1 Data Inputs and Visibility

To represent utility-scale battery energy storage system performance in CAISO accurately, only data classified under storage operations from CAISO’s daily battery energy storage reports is used. Data from the EIA is used to provide additional context, such as energy capacity and clarification of nameplate capacity.

5.2 Revenue Calculation Methodology

5.2.1 Energy Volume Calculation

Energy volumes for battery resources in CAISO are calculated by taking the difference between successive market awards on the Total Energy Awards data provided in the daily benchmark reports. The method to determine volume for each market is as follows:

• IFM Volume: The MW value directly from the Integrated Forward Market (IFM) volumes.
• FMM Volume:Calculated as the difference between the FMM and RUC volumes, representing the volume procured in the Fifteen Minute Market (FMM).
• RTD Volume: Calculated as the difference between the RTD and FMM volumes, representing the volume procured in the Real-Time Dispatch (RTD) market.

These volume values are calculated for each 5-minute interval across the day.

5.2.2 Ancillary Services Volume Calculation

For ancillary services, the volumes are primarily derived from the Integrated Forward Market (IFM). Any differences observed in the ancillary service awards between the Fifteen Minute Market (FMM) and IFM are attributed to the total volume providing ancillary services during each 15-minute period.

5.2.3 Energy Prices

Energy prices for RTD, IFM, and FMM are collected from CAISO OASIS. The node DGAP_CISO-APND is used from these datasets, which represents a volume-weighted average price of all CAISO nodes.

5.2.4 Ancillary Services Prices

Ancillary services prices for both the IFM and the FMM are sourced from CAISO OASIS. The ancillary region AS_CAISO_EXP is used to gather the average prices across CAISO.

5.2.5 Revenue Calculation

Revenues for both energy and ancillary services are calculated by multiplying the respective price dataset by the corresponding volume dataset for each market and service, for every 5-minute interval of the day.

• Energy Revenue: For each 5-minute period, energy revenues are calculated as the product of energy volumes from IFM, RUC, FMM, and RTD, and their corresponding prices in USD per MWh.
• Ancillary Services Revenue: Similarly, ancillary services revenues are calculated by multiplying the volumes of Regulation Up, Regulation Down, Non-Spinning Reserve, and Spinning Reserve with the ancillary services prices in USD per MW per hour.

5.3 Updates and Revisions

The Benchmark is updated daily to reflect the most current data. In cases, where data available after a settlement period provides more accuracy, Benchmark calculations are backdated to include this.

6. Governance and Compliance

6.1 Transparency

Detailed explanations of calculation methodologies and revenue components are provided to ensure transparency.

6.2 Stakeholder Engagement

Feedback from stakeholders is actively sought - and incorporated into methodology updates. This includes the use of real financial and operational data for internal benchmarking purposes to validate our estimations. Reviews are conducted by a team of experts to maintain accuracy and relevance.

7. Methodology Changes

7.1 Review and Update Process

The methodology is overseen by a dedicated team of analysts to ensure compliance and best practices.

The methodology is reviewed periodically to ensure it remains up-to-date with market conditions and regulatory changes. With the introduction of new products (e.g. markets or services in which battery energy storage systems can earn revenues) and the retirement of old ones, the methodology is revised and updated to encompass all market opportunities for battery energy storage assets, provided data is available for assessment.

7.2 Notification of Changes

Significant changes to the methodology are communicated to stakeholders in advance, with detailed explanations provided to ensure understanding and transparency.

8. Consistency and Continuity

8.1 Quality Assurance

Rigorous quality assurance processes are in place to ensure the accuracy and reliability of benchmark calculations. This includes regular audits and validation of data sources and calculation methods.

8.2 Data Integrity

Data integrity is maintained through strict data management protocols, including secure data storage, regular backups, and robust data validation procedures.

8.3 Continuity Planning

Business continuity planning ensures that benchmark calculations can continue uninterrupted in the event of unexpected disruptions. This includes backup systems and contingency plans for data and operational processes.

Disclaimer

This document, including the methodologies and indices described herein, is the proprietary work of MODO ENERGY LIMITED ("Modo Energy") and is provided solely for informational purposes. These indices are designed for use in financial analysis, benchmarking, and decision-making. However, they do not constitute investment advice or a recommendation regarding any specific financial instrument, asset, or strategy.

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