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FERC acts to help energy storage resources participate in markets

The Federal Energy Regulatory Commission on Feb. 15 issued a long-awaited final rule aimed at removing barriers that keep energy storage resources, such as batteries and flywheels, from more fully participating in markets run by the nation's regional transmission organizations and independent system operators.

That rule — Order 841 — directs each RTO and ISO to establish market rules that accommodate the participation of storage resources in their capacity, energy and ancillary services markets to the extent possible based on those resources' physical and operational characteristics.

The energy storage provisions of Order 841 (FERC dockets RM16-23 and AD16-20) largely reflect those detailed in an earlier notice of proposed rulemaking. But the commission decided to postpone final action on reforms to address another goal set out in the NOPR: facilitating market participation by distributed energy resource aggregations. Instead, the agency will hold a technical conference (FERC dockets RM18-9 and AD18-10) to address the issue April 10-11 at its headquarters in Washington, D.C.

To that end, FERC concurrently issued a notice of technical conference, which included an extensive agenda for the event, as well as a staff report entitled "Distributed Energy Resources: Technical Considerations for the Bulk Power System."

Commissioner Cheryl LaFleur during the agency's Feb. 15 regular open monthly meeting called the final rule a "game-changer," likening energy storage to a "Swiss army knife" because it can "serve customers in multiple ways, including providing energy, particularly in conjunction with variable resources, [providing] frequency regulation and other ancillary services ... and [helping] defer distribution and transmission needs."

FERC Chairman Kevin McIntyre similarly stressed the importance of the move, noting the commission's long-standing precedent of favoring an "all-of-the-above" approach with respect to securing resources to satisfy the nation's energy needs.

"With our order today, we recognize and we incorporate the official commission policy: the proposition that storage resources should be allowed to participate in our organized markets alongside all other types of resources and that the market can then decide which resources are to be called upon to serve the needs that apply," he said.

After the meeting, McIntyre acknowledged both his and fellow commissioners' "quasi-disappointment" that they were unable to address both storage and distributed energy resources in the instant final rule.

"But really, after looking at the state of the record on those two side-by-side issues, we determined that we needed to bolster our record on the distributed energy resource side of things," McIntyre said.

When asked to clarify what aspects of the record need bolstering, the chairman said that as is the case with storage resources, both the technical aspects of bringing distributed resources onto the grid and the accompanying market mechanisms "can be tricky and complex."

Commissioner Neil Chatterjee agreed, saying he initially intended to act very quickly to issue a final rule on the storage issue when he first came to the agency in August 2017 as its temporary chairman.

"Once I arrived, however, I quickly realized that the perception of FERC's processes outside the building is not always reflective of the reality within it," he said. "That certainly was the case with this rulemaking. As I began digging deeper into the intricacies of the issue, I came to understand that ... more time was needed to effectively develop the final rulemaking."

Chatterjee said that while his nomination to serve at FERC was undergoing the confirmation process on Capitol Hill, he committed to Sens. Sheldon Whitehouse, D-RI, and Edward Markey, D-Mass., that he would make finalizing the storage rulemaking a top priority. Following the commissioners' vote to approve the rule Feb. 15, those lawmakers issued a statement praising FERC for taking a step they say allows the nation to "keep building on our clean energy success" and urging the agency to now "turn to the second part of the proposal — to help mix power from small renewable energy systems, like rooftop solar, into our grid."

Final rule largely reflects NOPR on energy storage

In its earlier NOPR, FERC noted that grid operators may exclude certain types of resources from providing some services or establish technical requirements for providing a service that some resources cannot satisfy. The problem is that many existing tariffs were developed during a period when traditional generators were the only resources participating in the markets and so the rules do not fit new resource types very well, the commission explained.

FERC accordingly proposed to direct the RTOs and ISOs to revise their tariffs to facilitate market participation of both electric storage resources and distributed energy resource aggregations. Many of the commenters subsequently weighing in on that NOPR supported the effort, although some expressed concern that potential rule changes might disadvantage more traditional resources.

During the Feb. 15 FERC meeting, McIntyre said the commission's job "is not to pick winners and losers among different types of resources but rather to ensure that the market rules that we oversee allow all resources to participate and compete fairly."

"Today's order seeks that outcome with regard to these new and rapidly evolving technologies," he said. "And as we have made clear, the resilience of our bulk power system is a priority for the commission, and establishing a playing field where more resources, with different attributes, can compete in our organized markets will only help to support resilience."

As in the NOPR, the final rule requires RTOs and ISOs to establish participation models that make electric storage resources eligible to provide all capacity, energy and ancillary services that they are technically capable of providing, FERC staff said at the meeting. Those models also must ensure that a storage resource participating in the markets can be dispatched and can set the wholesale market clearing price as both a seller and a buyer, and they must account for the physical and operational characteristics of storage resources through bidding parameters or other means.

Order 841 further requires grid operators to set a minimum size participation threshold that cannot exceed 100 kW, which is a figure FERC in the NOPR said "balances the benefits of increased competition with the ability of RTO/ISO market clearing software to effectively model and dispatch smaller resources often located on the distribution system." FERC also stuck with its proposal to require that sales of energy from the market to a storage resource that the resource then resells back to the market be at the wholesale locational marginal price.

However, the final rule differs from the NOPR in some ways, such as by pushing back the proposed deadline for RTOs and ISOs to file tariff changes needed to implement the rule's requirements. Under the NOPR, the grid operators would have had six months to submit their compliance filings and another 12 months to implement their proposed reforms. But based on stakeholder feedback FERC received during the comment period, Order 841 gives RTOs and ISOs 270 days to file any necessary tariff changes and 365 days thereafter to implement those changes.