The Federal Energy Regulatory Commission on Feb. 15 voted to remove barriers to the participation of electric storage resources in the capacity, energy and ancillary services markets operated by regional transmission organizations and independent system operators.
At the same time, the commission said it will convene a technical conference on April 10-11 that will be used to gather additional information to help determine what action to take on distributed energy resource aggregation reforms proposed in a Notice of Proposed Rulemaking issued in late 2016, as well as discuss other technical considerations for the bulk power system related to DERs.
FERC issued NOPR in November 2016
The action taken by FERC at its monthly meeting stems from a NOPR it issued in November 2016 (Docket Nos. RM16-23, AD16-20).
The NOPR proposed to require RTOs and ISOs to revise their wholesale power tariffs to remove barriers to RTO-run wholesale market participation by energy storage resources such as large battery systems.
The NOPR also proposed to require RTOs and ISOs to allow aggregators of distributed energy resources to participate directly in the organized wholesale electric markets, and similarly remove barriers to DER aggregator participation.
In comments it filed in early 2017, the American Public Power Association said it generally supports FERC's efforts to allow storage and distributed energy resources to participate in wholesale markets, but urged the commission to keep its main focus on the end result to electricity consumers, and offered a number of recommendations. The Association was joined in its comments by the National Rural Electric Cooperative Association.
The final rule adopted at FERC’s Feb. 15 meeting requires each regional grid operator to revise its tariff to establish a participation model for electric storage resources that consist of market rules that properly recognize the physical and operational characteristics of electric storage resources.
FERC said the participation model must ensure that a resource using the model is eligible to provide all capacity, energy and ancillary services that it is technically capable of providing, can be dispatched, and can set the wholesale market clearing price as both a seller and buyer consistent with existing market rules.
The model also must account for the physical and operational characteristics of electric storage resources through bidding parameters or other means, and it must set a minimum size requirement that does not exceed 100 kilowatts.
The final rule also requires that the sale of electric energy from the wholesale electricity market to an electric storage resource that the resource then resells back to those markets must be at the wholesale locational marginal price.
At the meeting, FERC Chairman Kevin McIntyre said he agreed with the commission’s “long held policy that favors an all of the above approach to securing the resources that we need to satisfy our energy needs as a nation.”
He said that diversity of resources and the inclusion of evolving technologies such as energy storage “are very important parts of that puzzle, not just enabling us to satisfy our energy needs, but enabling us as a commission to fulfill our statutory responsibility to ensure that rates are just and reasonable and I think that today’s order goes a long way toward achieving those goals.”
McIntyre asked FERC staff about how the participation of energy storage resources in markets could assist in the fostering and strengthening of the country’s grid resilience.
“Enabling the full and effective participation of electric storage resources will enhance resilience by adding another set of resources that will compete to provide all of the services that can help maintain a balanced bulk power system and also those services that allow the RTOs and ISOs to recover from any disruptions that may occur,” said Michael Herbert with FERC’s Office of Energy Policy.
He said that enhanced participation in energy markets as a buyer and seller “can reduce stress on the system by both shifting load away from peak conditions and reducing overgeneration during low load conditions.”
Electric storage resources are also well suited to provide services such as frequency regulation and ramping service, “which are the first resort in correcting system frequency and helping to avoid contingency events,” he said.
“However, in the case of a disruption,” a separate final rule approved by the Commission at the meeting (Docket No. RM16-6) on primary frequency response “will also require new electric storage resources to provide primary frequency response, which is used to mitigate significant frequency deviations,” the FERC staff member.
In addition, FERC’s final rule on storage participation in organized markets will allow electric storage resources to provide blackstart and reactive power, “which are critical to bringing the bulk power system back online.”
Commissioner Cheryl LaFleur said that it is “something of a cliche to say that electric storage is a game changer, but it’s also true. Given the ongoing changes to the nation’s resource mix, and the changing capabilities that are needed to serve customers, storage is poised to play a critically important role.”
She said that electric storage is like a “Swiss army knife” that can serve customers in multiple ways, including providing energy, particularly in conjunction with variable resources, providing frequency regulation and other ancillary services and helping to defer distribution and transmission needs.
“Of course, there’s been storage on the system forever,” LaFleur went on to say, like pumped hydro, which she said is already an “important contributor.”
But some of the newer technologies “like some of the batteries, flywheels, compressed air, new forms of thermal storage, are rapidly gaining commercial viability and scale.”
She said that the FERC order recognizes that competitive wholesale markets “were largely designed around the resources that prevailed when markets were launched. They’ve evolved over time to accommodate new resources that have come online.”
The storage participation model “will facilitate storage being able to provide all the services it’s technically capable of providing,” LaFleur said.
Commissioner Richard Glick said that according to Bloomberg New Energy Finance, the cost of a new energy storage facility using lithium-ion battery technology has declined by more than 70 percent since 2010 “and today’s action, I think, is going to accelerate that trend in a positive direction.”
“Bringing this rulemaking over the finish line has been a top priority of mine since coming on to the commission,” said Commissioner Neil Chatterjee.
“While today’s action is certainly a significant step forward, I recognize that our work is not done when it comes to addressing the issue of distributed generation,” he went on to say. “I am pleased that we are moving forward with the technical conference on this matter, and I remain committed to tackling it in a timely manner.”
He said that DERs “are becoming increasingly more integral to our resource mix, and we at the Commission should make every effort to address this issue without delay.”
Commissioner Robert Powelson said the final rule “sends a loud and clear signal about our support for innovation in our organized markets.”
He said that the action “really represents a step forward for new technologies and it’s consistent with the longstanding commitment this commission has had in fostering innovation and competition in our organized markets.”
FERC noted that the NOPR also proposed reforms related to distributed energy resource aggregations. “While the Commission continues to believe that removing unnecessary barriers to market participation by these resources is important, today’s rule concludes that more information is needed with respect to those proposed reforms,” the agency said in a news release.
In light of that, the Commission on Feb. 15 also issued a Notice of Technical Conference (Docket No. RM18-9-000), that identifies questions to help gather additional information to determine what action to take on the distributed energy resource aggregation reforms proposed in the NOPR.
Commission staff also will use the technical conference as an opportunity to discuss other technical considerations for the bulk power system related to distributed energy resources.
“In my mind, there’s two broad sets of issues we’re going to have to” examine at the technical conference, LaFleur said.
As explained in her written statement, the first issue “relates to ensuring just and reasonable payment for distributed services. Since storage and other distributed resources are technically capable of providing many different services at both the wholesale and retail level, there needs to be a crisp understanding of who pays what to whom for what, which encompasses service definition, accounting, metering, and billing. The second set of issues relates to operational coordination. I know, from experience, that distribution systems tend to be operated very dynamically. We need to figure out how the transmission and distribution control centers will coordinate so that there is appropriate visibility of the deployment of distributed resources to ensure reliability and safety at all levels.”
Timeline tied to final rule
FERC’s final rule takes effect 90 days after publication in the Federal Register.
Compliance filings by the RTOs and ISOs will be due 270 days after the effective date, with an additional 365 days to implement the tariff revisions.