July 27, 2023
Andrew Cole, Lead Market Revenue Associate
The demand flexibility landscape is constantly evolving as energy markets continue to open up new pathways to incentivize flexible resources to support the grid. This is especially true in California, where rising demand for electricity - coupled with the state’s robust targets to transition to carbon-free power - makes demand-side solutions to balance the grid increasingly appealing. As extreme, grid-straining heat waves become more frequent, California has an urgent need to expand its grid services offerings.
We’re starting to see the fruits of these efforts. In 2022, the California state legislature allocated funding to the California Energy Commission (CEC) to develop and implement a new solution that would incentivize demand-side resources to provide flexible support to the grid during periods of high demand for electricity. Leap leveraged our expertise in monetizing flexible loads to provide guidance to the CEC on structuring a program that would remove barriers to DER participation in energy markets.
Today, the final approval of the new, state-wide Demand Side Grid Support (DSGS) program will enable California to more effectively tap into its networks of existing DERs to support the grid during peak periods, especially its underutilized networks of battery storage systems.
Behind-the-meter storage wins big with DSGS
Behind-the-meter (BTM) battery storage is growing rapidly in California. According to a Lawrence Berkeley National Lab report from 2021, about 30% of all storage capacity installed nationwide is BTM. To date in California there has not been a great mechanism for those installed resources to provide grid services and get paid for the full suite of benefits they provide. Much of California’s demand response (DR) landscape is built for the DR resources of the past.
The CEC’s new DSGS program is the first program that is broadly accessible across the state that is tailored specifically for BTM storage assets. For battery storage developers, operators and owners, there are a lot of things to like about the new DSGS program:
Compensating exports
While most capacity programs in California primarily compensate BTM storage systems for load reduction, DSGS also compensates those systems for exporting energy back to the grid. Crediting energy exports facilitates stronger grid revenue opportunities for battery storage - and more robust support for the grid during peak periods.
Simplified customer enrollment
In DSGS, Leap can use data directly from the batteries to enroll the devices in the program, instead of the utility meter data authorization process required for many other types of grid services programs. This reduces enrollment friction by enabling technology providers to automatically activate assets in the program, unlocking participation for many more batteries.
Structured to optimize battery usage
DSGS has a pay-for-performance model that measures performance using a static baseline that is calculated using battery capacity. This is in contrast to most grid services programs which use a day-matching style baseline. A day-matching baseline looks backward to similar days to predict what load would have been in the absence of a grid event. Meaning, there is an incentive to not dispatch the battery frequently so that a high baseline can be maintained.
Under the CEC’s new static baseline, that perverse incentive goes out the window. How the battery was operated yesterday has no effect on how performance will be measured during a DSGS event today. This incentivizes more frequent participation and alleviates some of the thorny trade-offs between participation in grid services and other battery uses, such as demand charge management, time-of-use arbitrage, or backup power.
State-wide availability
DSGS is a widely-accessible program, available to all commercial and residential batteries across California. The CEC-run program covers the entire state, not just the territory under CAISO management. As a result, unlike many grid services opportunities in California, DSGS is available in the 20% of California territory outside of CAISO.
Tapping the full potential of storage in California
The launch of a truly DER-driven grid services program is significant; it demonstrates that California recognizes the crucial role that flexible loads can play in meeting the state’s energy needs. At Leap, we were excited to have the opportunity to help shape program design for DSGS to ensure that it’s easy - and lucrative - for battery storage systems to participate in this new revenue stream.
And now, we’re even more excited to start dispatching. DSGS is fully integrated with the Leap platform, and starting August 1st we will be facilitating participation in the program’s inaugural season for our residential and commercial battery storage partners. Get in touch to learn more about enrolling your battery storage systems in the DSGS program.
