FERC signs off on use of battery storage as demand response

The Federal Energy Regulatory Commission on Sept. 17 granted a petition for a declaratory order affirming that the North Carolina Eastern Municipal Power Agency's members can use battery storage to reduce customer bills.

FERC granted the petition over a protest by Duke Energy Corp. subsidiary Duke Energy Progress LLC, or DEP, which argued that its power purchase agreement with the 32-member joint agency never contemplated the use of battery storage as a demand response resource.

In a December 2019 petition, the agency, or NCEMPA, reported that a dispute had arisen over the terms of its power purchase agreement with DEP and the rights of its members to use price-responsive battery storage devices on their systems.

At issue was the question of whether the contract allowed the NCEMPA's members to use battery storage technology to reduce or manage customers' hourly demands and/or loads by charging during off-peak hours and then discharging during expected peak hours. The NCEMPA told FERC that its members only planned to use energy from batteries stored on their respective distribution systems and would not inject any energy onto DEP's transmission grid.

In a protest, DEP asserted that the NCEMPA members' planned use of battery storage represented an "end-run" around its contractual obligations "for the sole purpose of distorting or masking the accurate measurement of its metered coincident peak billing demand."

In doing so, the utility argued that the NCEMPA's interpretation of the contract terms would undermine the very purpose of its cost-based, full requirements service contract with DEP. It also argued the NCEMPA's intended use of battery storage would be inconsistent with the commission's definition of demand response in Order 745, a landmark rule later upheld by the U.S. Supreme Court. Order 745's definition of demand response requires "a reduction in consumption," Duke Energy Progress asserted.

FERC rejected that argument in its Sept. 17 order, explaining that a separate order (Order 841) confirmed that battery storages can be used to provide demand response services.

Addressing the NCEMPA's proposed use of battery storage, FERC said that from a technical perspective, "we find that this practice would be indistinguishable from other types of demand response, including demand response resources that partially or primarily shift the timing of consumption."

Turning to the terms of the agency's contract with DEP, FERC also found that nothing in the power purchase agreement precluded the NCEMPA's members from purchasing their full energy requirements from DEP, withdrawing energy from the grid during off-peak hours, and then injecting it back onto the grid in response to higher prices.

"Battery storage technology by its very nature does not generate electricity, but rather withdraws energy at one point in time and discharges energy at a later point," FERC said. "Thus, when used as NCEMPA proposes, battery storage technology is inherently a load-shape modifying device, designed not to reduce a customer's overall load but to shift the incidence of such load, i.e., to manage the customer's demands." (FERC docket EL20-15)