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Storage cannot be a game changer without further FERC guidance on market rules

Highlights

FERC has yet to act on ISO/RTO compliance plans

Complaints seek answers on lingering regulatory questions

Washington — The US energy storage market is expected to hit the $5 billion mark by 2024, but a significant amount of regulatory work remains to be done to ensure market growth forecasts come to fruition, industry observers said.

Order 841 (AD16-20, RM16-23), issued last year, directed each regional transmission organization and independent system operator to create market participation rules that recognize the unique physical and operational characteristics of electric storage resources.

The landmark electric storage participation rule, issued by the Federal Energy Regulatory Commission, has been touted as a game changer for the storage industry, but issues associated with the rule's implementation still have the potential to stymie storage resources' path to market.

DELAYS POSSIBLE

Grid operators' plans to comply with Order 841 (AD16-20, RM16-23) as well as complaints filed regarding those plans are still undergoing FERC review as the order's December 3 implementation date approaches.

New York Independent System Operator, Midcontinent Independent System Operator and Southwest Power Pool have requested to push back that effective date, and "it would not surprise me if those requests for delayed implementation are granted," Jason Burwen, vice president of policy at the Energy Storage Association, said Tuesday during a webinar hosted by the Clean Energy States Alliance.

Burwen added that FERC's lack of action on the compliance plans and complaints has already led PJM Interconnection to start considering contingency plans as the grid operator "does not ... have a desire to move forward without being sure that its compliance plan is in fact going to be accepted."

ISO New England faces similar uncertainty.

Dan Finn-Foley, who heads the energy storage team at energy consultancy Wood Mackenzie Power and Renewables, said during the webinar that energy storage installations in the US are poised to make "a pretty significant jump in 2020" and then "see a massive jump up" in 2021. "A big chunk of this is going to be driven by economics in wholesale markets, [but] there's a lot of uncertainty," he said, putting pressure on regulators and industry to get the market rules right.

If current forecasts hold, "we're going to hit the $5 billion mark in the US market by 2024," with storage deployments topping 4.8 GW that year, Finn-Foley said. "We're going to see a lot of those projects meeting the expectations set up by the ISOs in response to FERC Order 841, providing massive amounts of load shifting and renewables shifting in these markets."

He contended that the order, once in effect, would "clarify and codify a tremendous amount of value for the energy storage market."

COMPLIANCE CONCERNS

But to get to that point, FERC must address issues ESA and others have brought up in complaints against certain RTO/ISO compliance proposals, Burwen said.

Among those issues, he highlighted a major concern over the capacity value of storage. Specifically, PJM has proposed a 10-hour duration requirement for capacity qualification and market participation that ESA has deemed inappropriate as it assumes 20% penetration of storage, which would amount to 30 GW.

A study commissioned by the storage trade group found that "4 GW of four-hour storage and 10 GW of six-hour storage would contribute full capacity value equivalent to other resources today," Burwen said.

That finding "mirrors some of the proposed changes in NYISO to vary capacity value by duration and incremental deployment level," he said, adding that MISO and SPP put forth a four-hour qualification for 100% capacity value and ISO-NE has a two-hour test.

"I think one of the issues we're worried about here is that if FERC accepts PJM's approach, which they say is based in fact in manual language, those manuals will allow PJM to dial up or down storage participation without FERC review," Burwen said.

-- Jasmin Melvin, jasmin.melvin@spglobal.com

-- Edited by Valarie Jackson, newsdesk@spglobal.com