Energy and Natural Resources

FERC Orders Removal of Market Barriers to Energy Storage

15 February 2018

The Federal Energy Regulatory Commission (FERC) voted 5-0 to remove what it said were barriers to the participation of electric storage resources in the capacity, energy and ancillary services markets operated by Regional Transmission Organizations and Independent System Operators.

In a November 2016 Notice of Proposed Rulemaking (NOPR), the Obama-era commission said that market rules designed for traditional generation resources can create barriers to entry for emerging technologies such as electric storage resources.

Credit: Energy Information AdministrationCredit: Energy Information AdministrationThe FERC's February 15 final rule helps remove these barriers. It does so by requiring each regional grid operator to revise its tariff to establish a participation model for electric storage resources that consist of market rules that "properly recognize the physical and operational characteristics of electric storage resources."

Kelly Speakes-Backman, CEO of the Energy Storage Association, said that electric storage technologies "already fulfill crucial functions in the bulk power system to provide reliable power and a more resilient grid." With its action, the FERC "signaled both a recognition of the value provided by storage today, and more importantly, a clear vision of the role electric storage can play, given a clear pathway to wholesale market participation."

Market Growth

The electric power industry has installed about 700 megawatts (MW) of utility-scale batteries on the U.S. electric grid, according to the Energy Department's Energy Information Administration.

As of October 2017, these batteries made up about 0.06 percent of U.S. utility-scale generating capacity. Another 22 MW of batteries were planned for the last two months of 2017, with 69 MW more planned for 2018.

EIA says that batteries, like other energy storage technologies, can serve as both energy suppliers and consumers at different times, creating an unusual combination of cost and revenue streams and making direct comparisons to other generation technologies challenging.

Long considered the holy grail of electric power, energy storage increasingly is seen as a viable option for multiple utilities, including Caribbean island electric grids buffeted by hurricanes in 2017.

Credit: Energy Information AdministrationCredit: Energy Information AdministrationA defining event for the storage sector can be traced to California and its response to the 2015 accident at the Aliso Canyon natural gas storage site. The accident shut the facility for months and threatened gas supplies to electric power generating facilities providing 10,000 megawatts of capacity to the region. Also at risk were dozens of industrial facilities and public buildings like schools and hospitals.

State regulators in May 2016 approved deployment of more than 100 MW of battery-based energy storage systems to help. Among the systems was the 20-MW/80 megawatt-hour (MWh) Mira Loma Battery Storage Facility, installed by Tesla in less than three months.

And at a utility substation in Escondido, a 30-MW, four-hour-duration lithium-ion Advancion battery array was installed by AES Energy Storage. At the time, it was one of the world’s largest such deployments.

The Aliso Canyon response showed that developers could design, build and commission significant amounts of energy storage in a short amount of time. Installing an equal amount of natural gas-fired generation likely would have required years rather than months.

FERC Mandate

The participation model mandated by FERC must ensure that a resource using the model is eligible to provide all capacity, energy and ancillary services that it is technically capable of providing, can be dispatched and can set the wholesale market clearing price as both a seller and buyer consistent with existing market rules.

The model also must account for the physical and operational characteristics of electric storage resources through bidding parameters or other means. It also must set a minimum size requirement that does not exceed 100 kilowatts.

The final rule also requires that the sale of electric energy from the wholesale electricity market to an electric storage resource that the resource then resells back to those markets must be at the "wholesale locational marginal price."

The NOPR also proposed reforms related to distributed energy resource aggregations. FERC said that although it continues to believe that removing unnecessary barriers to market participation by these resources is important, the new rule concludes that more information is needed.

In light of that, the FERC issued a Notice of Technical Conference (RM18-9-000), that identifies questions to help gather additional information to determine what action to take on the distributed energy resource aggregation reforms proposed in the NOPR. Commission staff also will use the technical conference as an opportunity to discuss other technical considerations for the bulk power system related to distributed energy resources.

The final rule takes effect 90 days after publication in the Federal Register. Compliance filings by the RTOs and ISOs are due 270 days after the effective date, with an additional 365 days to implement the tariff revisions.

To contact the author of this article, email david.wagman@ieeeglobalspec.com


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