CAISO Storage Operations: The Complexity of Doing it Well

Operating a storage asset in CAISO may look straightforward at first glance — prices follow the duck curve, so just buy low and sell high, right? In reality, revenue-maximizing operations are far more nuanced. Market rules, project-specific constraints, and Ancillary Services (AS) requirements all layer complexity onto both day-ahead planning and real-time management.

A well planned, thoroughly tested operating strategy is key for energy storage operators that hope to maximize returns.

To consistently capture value, operators need to account for more than just the daily shape of prices. A few key considerations:

[1] Understand the Market Structure

• 75-min lockout: Requires that you forecast accurately, place tiered big legs to ensure you are offering the right amount of capacity at the clearing price, and manage SOC more effectively and across a longer time horizon.
• Three unique procurement periods: CAISO procures capacity in the Day-Ahead Market, the Fifteen Minute Market (FMM), which clears capacity for the subsequent hour in 15-minute increments, and the Real-Time Dispatch, which adjusts cleared capacity every 5 minutes throughout the operating hour. This leads to immense complexity that needs to be carefully and consistently managed. 

[2] Incorporate Project Constraints

• Resource Adequacy (RA): Must-offer obligations must be incorporated into bid and operating plans – and executed on to avoid penalties or possible loss of contract. 
• Co-location: Charging and discharging flexibility may be constrained by on-site generation or interconnection limits.

[3] State of Charge Management

• Ancillary Service State of Charge (ASSOC): rules in CAISO require that storage assets with AS obligations have 60 minutes of SOC in the DAM and 30 in the RTM to deliver on their award. DA bid plans and RT optimization must account for this to avoid forced charge actions, which can be financially disadvantageous. 
• Real-Time Optimization: Proactive SOC management is also required during live operations to react to current conditions, maximize revenue capture each day, and ensure deliverability throughout and coming out of each 75-minute lockout. 
  

[4] Deep dive into node specific pricing dynamics

• Node-level dynamics: Pricing dynamics vary from node-to-node, and don’t always look like system-wide averages. A strategy that ignores localized congestion risks or location-specific trends will miss opportunities.

What happened?

On September 2nd, CAISO’s NP15 experienced a rare Real-Time (RT) energy price spike with prices clearing over $400/MWh starting at 7pm – just as the solar ramp down was wrapping up. 

Capturing the elevated prices

To maximize performance on this high revenue opportunity day, preparation began in the day-ahead. 

Our price forecasts pointed to elevated RT energy prices during the evening ramp down. To position the asset to capture the high prices, we limited Day-Ahead Market (DAM) awards by submitting bids/offers only at price levels that would make the tradeoff worthwhile — above the P90 of our RT price forecasts — or not clear. This way, we reserved capacity for RT without reneging on must-offer obligations mandated via RA.

On the morning of September 2nd, the asset charged at the lowest prices of the day thanks to our Price Quantity (PQ) bidding structure, which allowed us to have opportunistic bids in. By the time the evening ramp down arrived, the battery was at a nearly full state of charge. Offers were submitted ahead of the 75-minute lockout, and PQ bidding ensured that additional capacity was dispatched incrementally as prices climbed. The strategy ultimately delivered $0.72/kW in revenue for the day. 

This kind of disciplined approach — grounded in CAISO’s rules, project-specific constraints, and price dynamics — separates operators who consistently capture value from those who leave money on the table.