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FERC's Powelson cautions against inciting 'fuel wars' in grid resilience debate

The focus on grid resilience does not appear to be dying down, even though a contentious rulemaking on the topic was nixed in January. So the conversation must move beyond coal and nuclear to recognize the value that newer technologies bring to the grid, Federal Energy Regulatory Commission Commissioner Robert Powelson said at the Energy Storage Policy Forum on Feb. 14.

Washington energy policy circles are awash with discussions on baseload resources, but too many people have narrowed their view of that term to its 1980s definition, Powelson said.

"If we're going to talk about valuing resiliency, you are part of that conversation, … and I pledge to you that under Chairman [Kevin] McIntyre's leadership, working with my colleagues, we are not going to be picking winners and losers in this conversation," he told attendees at the Energy Storage Association's forum.

"I believe that it's important that we create that level playing field and we not get into this discussion of creating fuel wars," Powelson continued. Rather, we must "look at the technologies out there and allow you guys to all be part of that conversation."

The U.S. Department of Energy in September sent a proposal to FERC seeking market rule changes that would guarantee full cost recovery and a return on investment for certain generators that maintain 90-day onsite fuel supplies. FERC rejected that notice of proposed rulemaking (FERC docket RM18-1) in a January 8 order, and instead launched a new proceeding (FERC docket AD18-7) to examine "holistically" the resilience of the bulk power system. The agency said the results of that review would determine whether commission action on grid resilience was warranted.

As the commission moves ahead with its review, stakeholders must recognize "that there are other technology options that should be valued in discussing resiliency," Powelson said. "It's critical that we not find ourselves in a spot where the discussion becomes all about coal and nuclear, and not other resources out there in the market."

Powelson said energy storage would allow utilities and the grid to do things that were unfathomable a decade ago. Thus, "it's important to recognize that distributed energy resources and microgrids are also a valuable piece of this resiliency question," he said.

As FERC awaits comments from the grid operators on their perspectives on grid resilience, Powelson asserted that the Midcontinent ISO and California ISO are unlikely to ask for FERC intervention as he suspects they would conclude that resilience already was baked into their markets.

The ISO New England and PJM Interconnection thus are expected to be the focal points as the resilience debate continues. And while FERC considers its next steps, Powelson said, "I think for us it's going to be staying the course in terms of not doing things like supporting [reliability-must-run] payments for uneconomic resources. That would be oxymoronic."

Oil use during bomb cyclone 'not a good story'

Pointing to the recent "bomb cyclone" that battered the East Coast with prolonged periods of frigid temperatures, Powelson said New England's burning of 2 million barrels of oil to keep the lights on in major areas of the Northeast corridor was "not a good story."

But "it speaks to the work we can do together to bring some new clean tech investment into the region that addresses resiliency going forward," he contended. "I firmly believe energy storage does provide some far-reaching benefits to the grid and more importantly to consumers."

He noted that 10% of energy dispatched on the bulk power system in 2017 came from renewable resources. With no plans on the horizon to build new coal plants in the U.S. and new nuclear builds proving challenging from both engineering and cost perspectives, the reality is that dispatch from renewable resources probably will be 15% to 20% over the next decade, he added.

This "market-based decarbonization" is being led by renewable energy coupled with storage as well as combined-cycle gas plants, some of which also are being developed to accommodate battery storage onsite, he said. "That really demonstrates to me as an economic regulator where this market is headed."

Powelson commended the New York ISO for being the first grid operator to implement market rules for energy storage resources. He predicted that other grid operators would accelerate their efforts on that front, hinting at action the commission is teed up to take at its Feb. 15 open meeting.

Storage proposal teed up for FERC meeting

On the agenda for that meeting is a proposal to help integrate electric storage resources into wholesale markets and foster competition.

FERC in November 2016 issued a proposed rule (FERC dockets AD16-20, RM16-23) that would require each regional transmission organization and independent system operator to alter its tariff to create market participation rules that recognize the physical and operational characteristics of storage and accommodate its participation in the wholesale power markets. FERC also sought to lift barriers to participation in wholesale markets for distributed energy resource aggregators.

While prevented from talking more in-depth about the proposal as commissioners would not vote on it until the following day, Powelson said "it really shows how this FERC is into innovation and our commitment to markets."

Beyond the storage rule, Powelson said being respectful of state policies also will be imperative for the commission as it works to get the market rules right so there are no barriers to entry for energy storage and other resources.

Order 1000, FERC's landmark transmission planning and cost allocation rule, also will likely need some work for energy storage to really take off. Powelson said the rule is working in some regions but not in others. Where it is not working, he said FERC should consider what can be done to stimulate competitive transmission build in those areas.

Jasmin Melvin is a reporter for S&P Global Platts, which, like S&P Global Market Intelligence, is owned by S&P Global Inc.