FERC's Order 755 'pay-for-performance' market directive helped created the US market for frequency regulation in regions including the service area of RTO PJM Interconnection. Image: Greensmith.
Operators of transmission infrastructure and wholesale markets in the US have supplied their views on energy storage to the Federal Energy Regulatory Commission (FERC), with industry and other stakeholders expected to follow.
FERC launched a drive last month to seek input from Regional Transmission Organisations (RTOs) and Independent System Operators (ISOs) on the role energy storage could play in wholesale markets. This includes market design and the potential role of behind-the-meter, customer-sited solar-plus-storage where it could play into wholesale markets as well as providing distributed benefits such as back-up or peak shifting.
Energy-Storage.News’ Andy Colthorpe spoke with Energy Storage Association policy expert Jason Burwen on what he describes as a “systematic review” that could have a transformative effect on the market and drivers for storage.
FERC is the national regulator in the US and responsible for recent developments like Order 755, the pay-for-performance standard that lets fast-responding batteries, capacitors and flywheels act in frequency regulation markets. What do you think the significance of this latest move is?
First of all, FERC’s duties include overseeing wholesale electricity markets, covered nationally by six RTO and ISO groups.
Those six wholesale markets cover something like two-thirds of demand in the US and they all have their own rules for how resources can participate in their markets and how their markets are designed. Those all draw from the basic parameters that are set out by FERC. The thing is, all these markets were created before energy storage was really in the mind of grid operators and folks participating in or creating these markets.
A lot of what happens today, like Order 755, has been [representative of] FERC’s narrower approach to figuring out how storage can meaningfully participate in these markets, but they’ve been fairly narrow and I think part of the reason for this is that storage just wasn’t that big. Obviously in the past couple of years that has changed significantly, in part because things like Order 755 have been effective at underpinning the creation of for example the frequency regulation market in the PJM service area.
Why I think this is important is because it’s a systematic review. FERC has said: “all ISO and RTOs, we’re going to give you the rules and ask how storage fits into them”. Ultimately, it’s really a large-scale systematic review.
The reason for doing this…I think…FERC is now convinced that there’s a very good chance that barriers to the participation of storage in the wholesale market could be leading to higher than necessary system costs, or the words they would use are unjust and unreasonable wholesale rates.
Basically FERC seems to be suggesting that they think there’s a very good chance storage will be a part of ensuring least cost solutions for reliability, for making sure markets are efficient and the like.
The role of aggregated behind-the-meter solar-plus-storage in wholesale markets is within the scope of FERC's undertaking. Image: SolarCity.
I guess as an industry, we are always lobbying to show what the technology can do and that’s started to become recognised. But if it wasn’t also seriously considered that ultimately energy storage can lower costs for ratepayers, FERC wouldn’t be considering this at all, would it?
Well, you could still argue there’s a discriminatory… FERC has three things that it looks at: to ensure reliability, to ensure just and reasonable rates and the third, is to ensure no unduly discriminatory practises. No inappropriate discrimination amongst resources participation. But really the focus on least cost to electric system participants and customers is something that has an animating public interest that’s most widely spread, in some respects.
So if this is itself a reaction to the growth of storage, how much further can this process help storage as we move forward?
This is what we’re going to see. It will be incumbent upon the storage industry and other electric system stakeholders to respond to those [submissions from ISOs and RTOs to FERC] and create the sort of evidentiary record before FERC considers what they do. There is no timeline or discussion of what comes after the evidence is due on the 23 May, so it’s fairly open what FERC decides to do here.
They could go in any direction really. Certainly from a storage industry perspective my hope is that FERC uses the information that comes out of these reports and responses to determine the most significant barriers to access and address those. To not only ensure that energy storage can participate in energy, ancillary services and capacity markets but also that we’re allowing the full value of energy storage to be captured by the system.
It’s one thing to say “energy storage you’re really good at doing frequency regulation so make sure you do that” and another to say “energy storage can provide peaking capacity and the ability to provide other services, basically in alternating succession – can we ensure you’re able to do that?”
Basically to not only get energy storage on the table but to allow it to offer the full range of services it can provide.
This is something we hear in many markets. Markets weren’t designed with this technology even conceived of in some ways, it’s seen as a barrier in the UK, Europe and elsewhere.
Yes, sometimes it [storage] looks like supply, sometimes it looks like load, sometimes it looks like infrastructure. It’s a very unique set of attributes.
Would this FERC undertaking be treated separately to renewable energy targets and its impact on decarbonisation efforts? What’s the relationship there, if any?
This is focused on storage as a part of least cost electric systems. So I don’t think that from FERC’s standpoint this [renewable energy] has anything to do with that. Certainly we know that at least part of FERC’s interest in energy storage comes from its role in regions that decide to move towards a higher penetration of variable renewable energy sources. But you know, energy storage does more than that and FERC is not really interested in it specifically as a renewables integration so much as a resources that assists the utilisation of all assets on the grid.
It’s not really FERC’s job to think about renewables policy. They think about it insofar as renewables are market participants and similarly there’s consideration of rules and policies around renewables but it’s not because they’re low carbon it’s because of where they fit with respect to FERC’s remit of ensuring just and reasonable rates and so on.
FERC is now convinced that there’s a very good chance that barriers to the participation of storage in the wholesale market could be leading to higher than necessary system costs...Basically FERC seems to be suggesting that they think there’s a very good chance storage will be a part of ensuring least cost solutions for reliability, for making sure markets are efficient and the like."