Market Intel

CAISO

CAISO

Market Overview

California’s energy storage sector has rapidly evolved to become the largest, and one of the most attractive markets in the U.S. With ambitious clean energy goals – targeting 100% clean electricity by 2045, and a wealth of renewable generation assets, CAISO relies on energy storage for grid reliability. 

CAISO is proof-positive that batteries are critical to grid reliability – they have already been providing a majority of capacity in peak load hours.

  • 100%

    Renewable energy target by 2045
  • ~11GW

    Capacity online as of late 2024
  • ~52GW

    Storage expected by 2045

CAISO offers a complex but profitable landscape for storage operators, where batteries can generate revenue through multiple channels, including energy arbitrage, capacity markets, and ancillary services. These revenue streams, coupled with ambitious clean energy targets, position CAISO as one of the most promising markets for energy storage – especially for operators able to optimize across all markets, accounting for the real-time price fluctuations, and within project or regulatory constraints.

Market structure

CAISO plays a central role in managing the California power grid, integrating diverse energy resources, and facilitating energy transactions across California and states in the western U.S. 

The ISO also operates a Western Energy Imbalance Market (WEIM), an energy-only wholesale market that allows participants to buy and sell power close to the time electricity is consumed, and gives system operators real-time visibility across neighboring grids (WEIM). This helps improve reliability, and allows CAISO to source the least-cost energy to meet real-time demand.

Key Players

  • Maintains reliability and manages the market to balance energy demand with supply.

  • Intermediary between electricity generators and CAISO; submit bids on behalf of generators and handle financial settlements.

  • Privately-owned utilities regulated by the state that provide electricity to customers in specific service areas.

  • Publicly-owned, non-profit utilities operated by local governments to serve their communities with electricity.

  • Local government-run programs that purchase electricity on behalf of residents to meet community needs, while relying on utilities for transmission and distribution.

  • Your market navigator; a platform leveraging real-time data and predictive insights to help maximize revenue, ensure optimal performance and grid stability.

Market Products

CAISO’s market structure is designed to reward the flexibility of energy storage assets, and their ability to support grid stability.

  • Energy

    Bidding into energy products can see high returns from energy arbitrage, and provides flexibility to lock in returns, or capture sudden price spikes.

  • Ancillary Service (AS)

    This almost acts as offering insurance to the grid. You will get a payment for holding capacity, or offering to scale down generation, in moments where there is a mismatch between supply and demand. Bidding into AS can yield consistent returns, and can deliver outsized revenue during scarcity events.

  • Day-Ahead Energy (DA)

    Priced based on predicted market conditions, operators can bid into DA to lock in returns for specific hours.

    Energy

  • Real-Time Energy (RT)

    Updating every five minutes, RT energy prices respond to live grid conditions – spiking when demand for energy outshines supply. 

    Energy

  • Regulation Up (Reg Up)

    A promise to reduce load by decreasing energy generation within seconds, to help balance the grid when demand suddenly rises.

    Ancillary Service

  • Regulation Down (Reg Down)

    A promise to reduce load by charging from the grid within seconds, to help balance the grid when demand suddenly rises.

    Ancillary Service

  • Spinning Reserves

    Backup power that must already online and ready to deliver energy within 10 minutes of being called.

    Ancillary Service

  • Non-Spinning Reserves

    Backup power able to respond within 10 minutes of being called, regardless of whether the asset is online or not.

    Ancillary Service

CAISO does not operate a formal capacity market; instead it has a mandatory Resource Adequacy (RA) requirement, which requires Load Serving Entities (LSEs) to procure capacity equal to its peak load forecast plus a reserve margin (usually ~15-20%).

  • LSEs enter into contracts with energy generators and storage operators, paying them for their commitment to deliver capacity when it is needed. This often looks like committing a specific number of MWs in specific time periods. 
  • Each asset is only able to offer a specific number of MWs – their “net qualifying capacity” (NQC), which is determined based on a test of the resource’s sustained output over the course of four hours. 
  • Resources with RA capacity are required to economically bid or self-schedule both Energy and AS for each hour for which it is obligated under its Must Offer Obligation (MOO).

Market Opportunities

While CAISO has the largest storage capacity online today, total active battery capacity only accounts for ~12% of CAISO’s nameplate capacity.

  • ~11GW

    Active storage in CAISO
  • 12%

    CAISO’s nameplate capacity
  • 43GW+

    Gap between generation asset capacity

If operated effectively, storage assets can generate revenue from:

  • Load Shifting

    With high renewable generation contribution, CAISO has a fairly pronounced duck curve. When solar production drops off in the evening, prices go up. Batteries are uniquely positioned to discharge in these hours and capture the higher prices.

  • Resource Adequacy

    Storage assets can enter into RA agreements to get revenue from the LSE for the period they are committed to have their capacity available. Savvy operators can supplement this with merchant revenue for uncommitted capacity or time periods. 

  • Price Volatility

    Though it varies by node, there are clusters of high volatility nodes across CAISO, providing an opportunity for batteries with accurate forecasting tools and proactive state of charge management.

  • Supplementing Generation

    Capturing curtailed energy from renewable generation assets, and shifting the energy into higher priced hours.

  • Policy-Driven Incentives

    California’s ambitious clean energy targets and policies like SB 100, which mandates 100% carbon-free electricity by 2045, further bolster the role of energy storage as a grid resource.

Path to go-live

Getting a storage asset operational within CAISO requires several key steps:

  • Market Registration

    Register with CAISO, set up bidding accounts, system interfaces, and ensure your project meets all compliance requirements. Battery storage typically registers as a Limited Energy Storage Resource (LESR) within Non-generator Resource (NGR) category.

  • Testing and Commissioning

    Before going live, assets must be tested to ensure they meet CAISO’s performance standards, which confirm that assets can respond to dispatch signals and market needs.

  • Hone bidding strategy

    Test your optimizer to ensure it is hitting peak pricing, accounting for co-located generation assets or offtake agreements, and exceeding market hedges (i.e. TB4).

Day-in-the-Life

Overview of a sample operating day:

  • Receive Day-Ahead Forecasts

    Node-level, AI-powered price forecasts (complete with confidence intervals)
    for every product in the day-ahead and real-time markets.

    6:00 AM

  • Craft bid plan

    Identify optimal bidding strategy based on risk parameters and
    price forecasts.

    09:30 AM

  • Automate operations

    Direct market integration and dynamic asset management enables
    automatic execution the DA bid plan, optimization based on rolling,
    sub-hourly reforcasts, and programmatic state of charge management.

    Ongoing

  • Make strategic adjustments

    Make adjustments directly in the platform, as desired.

    Ongoing

Case Studies

Explore our case studies

Evaluating performance

Review asset performance across operating days, hours,
and products.

Savvy operators consistently assess asset performance to ensure they are maximizing the value.

Check for:

  • Forecasts vs. actual prices by product
  • Understand where revenue was generated
  • Ensure prior commitments are met (outside contracts, etc.) and understanding their impacts
  • Performance Overview

    Evaluate where revenue is coming from, and at what hours.