Exploring Market Opportunities Across U.S. ISO/RTO Regions

The energy storage market, driven in large part by the Inflation Reduction Act, is hot and active, with many developers and investors making new investments and growing their storage portfolios. Unfortunately, overall market growth does not mean low risk for developers and the cost of picking the wrong market, revenue stack, contracting structure, or technology could spell disappointment for investors as they watch others pass them by. Sound and informed guidance on energy storage development is absolutely critical to capitalizing on this important growth area.

At Camelot, we provide comprehensive market analyses across all U.S. Independent System Operator (ISO) and Regional Transmission Organization (RTO) regions. Our team analyzes each market’s unique characteristics, helping solar and energy storage developers identify the best opportunities for deploying Battery Energy Storage Systems (BESS) and hybrid projects. Here are some key points for each region:

• ERCOT (Electric Reliability Council of Texas) ERCOT doesn't have a firm real-time ancillary service market, relying sporadically on Supplemental Ancillary Service Market (SASM) auctions to make up for gaps in day-ahead obligations. However, by 2026, ERCOT aims to roll out a real-time co-optimization system for energy and ancillary services. Moreover, as storage saturates the market and as real-time co-optimization between energy and ancillary services gets implemented, ancillary services prices are expected to decline in the near term.

Despite the potential saturation of ancillary services in ERCOT, the ongoing deployment of non-dispatchable renewable energy there, and the potential for new load growth, is helping the Lone Star State retain center stage for energy storage developers. However, many developers that come to Camelot for guidance make the mistake of thinking any Texas ESS project is likely to be successful. In reality, identifying the optimal placement and technology mix means all the difference between a profitable ESS project and one that struggles to pencil. 

Overall, the Houston Hub faces a lower risk of ERCOT related issues, including curtailment, compared to the South hub, which is likely to experience increasing challenges.

• CAISO (California Independent System Operator) Energy price volatility in CAISO increased significantly in 2022 and is projected to remain elevated in upcoming years, driven by higher gas prices and concerns over system reliability, creates a strong opportunity for BESS.

Gas Pricing: Despite less expensive generation from solar and wind, elevated gas prices, impacted by supply constraints and global market dynamics, contribute to higher electricity prices. The availability of cheap electricity from renewables, combined with relatively expensive electricity from gas turbines during periods of low solar and wind resource, create a strong economic opportunity for energy storage. In addition to daily arbitrage, the combination of renewables generating under long-term fixed price contracts and flexible energy storage assets creates a valuable price hedge against fluctuating natural gas prices.

System Reliability: CAISO’s grid faces reliability challenges due to increasing reliance on non-dispatchable renewable energy sources like solar, coupled with aging infrastructure, severe weather, and peak demand spikes, especially during summer heatwaves. BESS can mitigate these issues by providing grid stability, fast-acting reserves, and ancillary services to maintain balance. This growing demand for reliability services, along with capacity payments, offers BESS projects multiple revenue streams and a strategic edge in this volatile market.

Moreover, California’s aggressive renewable energy targets make it a prime market for BESS projects. Our market overview highlights CAISO’s resource adequacy and ancillary services market changes, helping you understand how to optimize project returns.

• SPP (Southwest Power Pool) SPP offers significant wind energy potential and continues to expand its transmission network. The surge in renewable energy within SPP is causing a downturn in electricity prices, especially during periods of strong winds, which places intense financial stress on thermal power sources and underscores the importance of adaptable capacity and presents an opportunity for Long Duration Energy Storage (LDES). 

Our insights into SPP’s market dynamics focus on strategies to capture ancillary service revenues and enhance renewable energy integration through storage solutions. In addition, our team has demonstrated experience in deploying LDES solutions for BTM and FTM projects, putting us in a position to provide strategic insights in this space. 

• PJM (Pennsylvania-New Jersey-Maryland) Interconnection PJM is undergoing rapid data center expansion, especially in Northern Virginia which has put pressure on the grid, causing congestion and high nodal power prices in the Dominion territory. 

As one of the largest RTOs, PJM presents a strong market with various revenue streams, including capacity and ancillary services. We provide clients with analysis of PJM’s capacity market changes, ensuring projects align with this highly competitive landscape. 

• MISO (Midcontinent Independent System Operator) MISO is currently experiencing a significant transformation in its energy landscape. This shift is characterized by an accelerated adoption of renewable energy sources, alongside a concurrent phase-out of thermal generation plants. Key drivers behind this transition include elevated prices for natural gas and electricity, legislative actions at federal and state levels, demand from energy off-takers, and increasing pressure from stakeholders. 

MISO's vast geography and increasing renewable penetration create opportunities for BESS projects. Our team helps you understand the benefits of locating projects near congested nodes to optimize project returns. 

• NYISO (New York Independent System Operator) New York is pioneering ambitious climate policies that prioritize storage development. With the recent update to the Energy Storage Roadmap by the New York PSC, storage deployments are expected to increase by 2030 to achieve 6 GW of energy storage. This includes the procurement of 3 GW of bulk storage through an Index Storage Credit (ISC) mechanism, 1.5 GW of retail (Community/C&I) storage, and 200 MW of residential energy storage through the VDER structure, marking a significant shift towards expanding utility-scale storage in the NYISO market to enhance grid reliability and support renewable energy integration. 

Our NYISO market overview covers key programs, including the Value Stack and Clean Energy Standard, providing guidance to help you understand program specifics and on to provide you with accurate project revenue estimates. We provided some background on the VDER program to help developers and investors better understand this critical framework, which you can view here. 

• ISO-NE (ISO New England) ISO-NE is currently in the early stages of a major shift in market dynamics, transitioning into a period characterized by rapid renewable energy growth, concurrent retirement of thermal generation facilities, and a surge in storage deployment, all fueled by state policy objectives and incentives for clean energy. 

ISO-NE faces grid reliability challenges and peak demand concerns, making it ideal for storage solutions. We offer insights on ISO-NE’s capacity market changes and BESS opportunities in this renewable-rich region.

With Camelot’s help, developers and investors can make confident investment decisions about target markets, project economics, and navigating the latest policy and regulation challenges. We work across all the major markets and developers rely on our market expertise for everything from negotiating tolling agreements to prioritizing their portfolios of merchant market ESS projects.

If you're interested in any of the U.S. ISO/RTO market overviews, feel free to reach out to us at info@camelotenergygroup.com.