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'Uncertainties ahead': Energy industry grapples with FERC storage order

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Six trends shaping the industries and sectors we cover in 2021

Six trends shaping the industries and sectors we cover in 2021

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Essential Energy Insights - January 2021


'Uncertainties ahead': Energy industry grapples with FERC storage order

When the Federal Energy Regulatory Commission in February issued its much-anticipated order aimed at creating opportunities for electric storage resources to participate more fully in markets run by regional transmission operators and independent system operators, some envisioned the dawning of a new era for batteries and other storage technologies. Economists at The Brattle Group, for instance, estimated the order could help to unlock as much as 50,000 MW of new storage over the next decade.

While much excitement remains for the potential of energy storage to compete in wholesale markets, implementation of FERC's multifaceted Order 841 is mired in uncertainty, industry representatives said during a March 28 webinar hosted by the Energy Storage Association.

"Order 841 is a big deal," Jason Burwen, the trade group's vice president of policy, said. The rule creates "a clear legal framework" for energy storage in regional wholesale markets, "expands the universe of solutions" that can meet the power systems needs, including small-scale distributed storage, and is a necessary step to create a more flexible electric system, Burwen said. "But, yes," he added, "there are uncertainties ahead."

Chief among them: Several industry groups, including the Edison Electric Institute and the American Public Power Association, have asked FERC to rehear its decision over concerns that the federal agency overstepped its bounds by pre-empting state authority on how and whether distributed storage resources can participate in wholesale markets. Others, such as Xcel Energy Inc., have requested more time to implement the order. FERC set a December 2018 deadline for regional market operators to file compliance reports ahead of actual implementation one year later.

Worst-case scenario

In a worst-case scenario, the motions for rehearing "could end up with a completely different outcome than the actual Order 841," Burwen cautioned. Such an outcome, however, seems unlikely given the regulatory agency's unanimous passage of the rule, he added. The trade group expects FERC to act on the rehearing requests in April.

Even as written, though, the storage industry is not entirely satisfied with the order. On the good side, it directs regional market operators to amend their tariffs to establish a "participation model" for electric storage, which would become eligible for all capacity, energy and ancillary services the technologies are capable of providing. That could open up markets with no participation model for energy storage, such as the Southwest Power Pool, Michael Berlinski, director of emerging technologies at Customized Energy Solutions, which manages 120 MW of energy storage, said on the webinar. It can also help clean up "fragmented" markets, such as the New York ISO, he said.

The order, nevertheless, falls short in other areas. Some design elements "remain stuck" on the "traditional generator model," Berlinski said, while the order gives system operators so much flexibility that they could make changes that "do not really help storage." Additionally, the rule does not go far enough to support distributed storage, for instance, by not explicitly requiring grid operators to allow net injections from behind-the-meter resources.