Neil Chatterjee, chairman of the Federal Energy Regulatory Commission, believes there are five trends that will be critical in shaping the future of energy storage over the next decade.
The first trend highlighted by Chatterjee is how FERC addresses FERC Order No. 841 compliance filings submitted by grid operators. “This will have a major impact on opportunities for storage participation,” Chatterjee said in remarks made at the Energy Storage Association’s fifth annual Energy Storage Policy Forum in Washington, D.C.
Regional transmission organizations and independent system operators were required to submit compliance filings in response to Order No. 841, which was issued in 2018 and is aimed at removing barriers to electric storage resources participating in the capacity, energy and ancillary services markets operated by Regional Transmission Organizations and Independent System Operators. Grid operators submitted those filings on Dec. 3. The Energy Storage Association and many other parties filed comments on the 841 compliance filings last week.
“Though it will take some time, we are hard at work evaluating these complex filings,” Chatterjee told the ESA forum audience. “If the Commission finds that an RTO’s filing is not up to snuff, sending it back for further revisions could result in several more months of delay before the changes are implemented.”
Moreover, because Order No. 841 “provided high level requirements, the way in which each RTO and ISO interprets those requirements could play a significant role in shaping the opportunities for storage in various regions.”
Chatterjee said that the second trend that will be critical in shaping the future of storage is whether and how RTOs and ISOs develop new products that are particularly suited to storage.
With the exception of a PJM product (Regulation D), “most RTOs have not expanded beyond the traditional set of ancillary services,” the FERC chairman said.
PJM generates two different types of automated signals that regulation market resources can follow. The Regulation D signal is a fast, dynamic signal that requires resources to respond almost instantaneously, while Regulation A is a slower signal that is meant to recover larger, longer fluctuations in system conditions.
“Some RTOs are considering reforms to their current suite of ancillary services, but it’s unclear whether this is likely to take hold across the country,” Chatterjee said.
“For example, MISO is currently developing a fast frequency regulation product. In addition, CAISO continues to study the need for a market-based primary frequency response product, which storage would be well suited to provide,” Chatterjee said.
While some RTOs and ISOs are “slowly moving towards an expanded set of market products, other regions have shown little appetite for major reforms,” he said. “For example, several years ago, the ERCOT board chose not to move forward with a major overhaul of its ancillary services.”
Chatterjee said that “the impetus for action across regions seems to vary. However, the increasing penetration of renewables might provide additional momentum for the development of such products. But in any event, whether and how these products come to fruition could have a significant effect on opportunities for storage.”
Meanwhile, the FERC Chairman said that the third trend that will be critical to watch is the issue of co-locating storage with renewables. Co-locating storage with renewables “certainly has benefits, but will it actually become standard practice? The answer to that question could have major implications for storage.”
He said that there is evidence that the cost-benefit ratio of co-locating storage “is tipping in favor of adding storage. For example, in 2017 Xcel held an open solicitation for new resources and received more than 250 offers for wind and solar resources, with median offers of $18 and $29 per megawatt-hour, respectively. Those are amazing numbers in their own right but there were also bids for wind and solar co-located with battery storage.”
Wind and solar co-located with battery storage had a median offer of $21 and $36 per MWh, respectively, which Chatterjee pointed out is only a $3 megawatt per hour and $7 megawatt per hour premium over conventional wind and solar.
“When you consider market incentives like pay for performance capacity constructs in PJM and ISO New England, co-location could be extremely beneficial in allowing renewables to avoid performance penalties and take advantage of high prices,” Chatterjee went on to say.
Turning to the fourth trend, he said the use of storage to defer or replace investments in transmission could have a major impact on opportunities for storage.
“It’s been often noted that the use of storage could reduce thermal loading on transmission lines, thereby replacing or deferring expensive transmission upgrades,” Chatterjee said. “While this use of storage is a technically sound option, to date the RTOs and ISOs have not selected such projects in the regional planning process. In fact, the Commission has not received a single request for rate recovery from a storage project that was actually built to provide transmission services.”
He noted that in 2011, FERC approved a request from Western Grid to recover the costs of a storage facility through CAISO’s transmission rates. However, that project was never built.
“If storage as transmission were to gain more traction in the regional planning processes, that could really open up big opportunities for storage projects,” Chatterjee said.
“Finally, while I think the future of utility-scale storage is fairly clear, I think uncertainty will continue to hang over the future of distribution-connected storage until the legal process plays out,” Chatterjee said.
“A number of parties have requested rehearing of Order 841, raising concerns about the scope of the Commission’s jurisdiction for storage that is connected at the distribution level. Once the Commission rules on those requests, parties can seek review in the courts of appeals.”
The American Public Power Association, the National Rural Electric Cooperative Association and American Municipal Power are among the parties that have asked FERC to reconsider aspects of Order 841, saying in a 2018 joint request for rehearing that storage resources located on the distribution system or behind a retail customer meter should not be permitted to participate in organized wholesale electric markets without the consent of state and local regulators.
While Order 841, as well as FERC Order No. 845, “did a lot to level the playing field for storage, I don’t think that means our work is done,” the FERC chairman said.
FERC’s Order 845 amended the agency’s pro forma generator interconnection agreements and procedures to implement a number of reforms aimed at enhancing certainty, transparency, and efficiency in the generator interconnection process.
“I genuinely believe in the transformative potential of storage and think we should continue looking for ways to bring its capabilities to bear in our transforming grid,” Chatterjee concluded.