Energy Storage and Distributed Energy Storage (ESDER) Initiative California Independent System Operator CAISO – CPUC Energy Storage Workshop May 3, 2016 Tom Flynn, Storage and DER Policy Manager

Distribution connected resources are becoming an increasingly important part of the resource mix Installed distributed solar PV –3.1 GW (U.S. EIA – Sep. 2015) –3.5 GW (California Energy Commission – Oct. 2015) –3.9 GW (Go Solar California – April 2016) Forecasted distributed solar PV by 2026 –9.0 GW (CEC forecast) –11.6 GW (IOU forecasts) Distributed energy storage by 2024 –625 MW (CPUC procurement target) Plug-in electric vehicles: 1.5 million by 2025 (Governor’s goal) –100,000 PEVs sold in California (as of Aug. 2014) –7,687 PEV public charging outlets (as of Aug. 2015) Page 2

Integrating DER into CAISO markets will help lower carbon emissions and add operational flexibility CAISO has developed models for DER to participate in its markets today –Demand Response (Proxy Demand Resource) –Non-Generator Resource (NGR) CAISO is continuing to develop ways to enable DER –DER aggregation aka “DERP” (new structure enabling aggregated DER to participate in ISO market) –ESDER stakeholder initiative (Focus: Lower barriers and enhance ability of storage and DER to participate in CAISO markets) Page 3

ESDER Phase 1 stakeholder initiative Topic areas 1.Enhancements to NGR model 2.Enhancements to demand response performance measures and statistical sampling 3.Clarifications to rules for non-RA multiple-use applications Schedule –Launched in second quarter of 2015 –Provided forum for CAISO to follow-up on Energy Storage Roadmap –CAISO Board approved proposals on topics 1 and 2 –Stakeholder process to develop tariff amendments is underway Page 4

ESDER Phase 2 stakeholder initiative Topic areas 1.Additional NGR enhancements 2.Additional demand response enhancements (ability to increase load consumption; develop alternative baselines) 3.Multiple-use applications (joint effort with CPUC) 4.Distinction between charging energy and station power (joint effort with CPUC) 5.Allocation of TAC to load served by DER Schedule –March 22 Issue Paper –May 19 Straw Proposal (today’s workshop and May 13 comments will serve as additional input) –Targeting CAISO Board approval October 2016 Page 5

Multiple-Use Applications (MUA) in ESDER 1 ESDER1 limited its treatment of MUA to circumstances where the resource either is –Not providing resource adequacy (RA), or –Can set aside a portion of its installed capacity not providing RA capacity Addressed two broad categories: –DER providing reliability services to the distribution grid and services to the wholesale market –DER providing services such as demand management to end-use customers while participating in the wholesale market Page 6

Progress made on MUA in ESDER 1 For resources that provide distribution services and participate in wholesale market –Deviations from CAISO dispatch for distribution needs will be treated as uninstructed imbalance energy –Potential double payment will be addressed once CPUC defines specific distribution services –Sub-resources in a DER aggregation may provide distribution services as long as net Pnode-level response follows CAISO dispatch (consistent with DERP) Service to end-use customers plus wholesale market participation was initially addressed in the proposed new demand response performance evaluation methodology Page 7

MUA in ESDER2 CAISO plans to continue its efforts to address MUA through its participation in R Coordinating with R will economize staffing resources, avoid redundant efforts, and avoid conflicts Today’s workshop, parties’ forthcoming comments, and the workshop report will help inform the CAISO’s proposals Page 8