In April, the Federal Energy Regulatory Commission asked for comments regarding any changes that should be considered for energy storage participation in wholesale energy markets.
The timing is right, as more vendors of energy storage capacity, and batteries in particular, are looking to earn money through various market mechanisms. Among the many stakeholders that filed comments is the Energy Storage Association, which submitted a lengthy list of suggestions that ranged from seemingly straightforward fixes to more wishful thinking.
“This is certainly a major docket,” said Jason Burwen, policy director for the Energy Storage Association, adding that it is not the only docket ongoing at FERC pertaining to storage and distributed energy assets. “FERC is ensuring policy catches up with technology.”
There is a lot of catching up to do. “Even in instances when rules were written for storage in the beginning of this decade, the technology has advanced significantly in the last five years,” said Ravi Manghani, director of energy storage at GTM Research. “So essentially, storage is contending against rules not just for traditional generators, but also storage of the last decade.”
While both California ISO and PJM have implemented some rules to clarify how today’s storage assets can play in wholesale markets, most markets are woefully behind. The Energy Storage Association (ESA) argues that FERC should take swift action on at least some of these issues so that some slow-moving market operators don’t drag their feet for years to come.
“There are nearly 300 megawatts of advanced electric storage currently operating in PJM,” ESA states in its filing, “while there is 0 megawatts of advanced electric storage operating in ISO-NE, MISO, and SPP,” referring to the power markets in New England, the Midwest and the Southwest.
To see storage put on more equal footing, ESA put forth the following suggestions, asking FERC to explicitly direct wholesale market operators to address them.
Adjust tariff language: One of ESA’s top requests is for there to be explicit language allowing storage to participate in all market services, something that is lacking or ambiguous in most territories today. Both CAISO and PJM have taken steps in this domain, but clear language is needed in all regions. “Simply stated, storage providers cannot rely on language in a FERC report or a statement made by an ISO staff member at a stakeholder meeting to determine whether the provider is eligible to participate in a market,” ESA argues.
Non-discriminatory bid parameters: In essence, ESA is looking for the markets to set bid parameters and have resource modeling that is appropriate for electric storage, since these assets can both inject and withdraw electricity from the grid. ESA notes that CAISO has already done so with its non-generator resource parameter and other grid operators could so as well. In particular, ESA calls for the state of charge being an important parameter to have for storage, as that determines the services the battery is capable of providing at any given time.
Open up qualification criteria: Many of the qualification rules were built around generators and need to be updated. Because storage doesn’t have the ramp-rate issues of traditional generation, the requirement that a battery should also provide energy in ancillary service markets is not needed. “This requires a shift of market design from one based on entrance criteria to one based on performance requirements,” the filing states.
Overhauling capacity markets: Again, ESA points to the work being done in CAISO to value fast, flexible resources such as storage in the capacity market. But rather than tweak existing capacity markets, ESA asks FERC to consider new markets for flexibility that would more easily overcome the barriers built into existing capacity markets. If it has to happen within existing capacity requirements, ESA asks for more stick than carrot when it comes to performance, requesting that incentives be offered for performance rather than penalties being levied for non-performance (PJM has instituted the latter for next year’s auction).
Pairing up: One way to ensure storage can participate more widely in capacity markets is to allow it to pair with other generation, such as intermittent renewable resources like solar and wind. That is something PJM has said is possible, but more work is needed. ESA would like to see explicit rules for how storage and generators can bid in as single capacity resources.
Aggregation: Separate from rules about how multiple assets could bid in as single capacity resources, there is also the issue of aggregating behind-the-meter resources. At the very least, participation should be defined by the aggregated set of resources, and not each individual site. Minimum size rules are also variable and outdated, argues the ESA. Some markets define the smallest assets as 0.1 megawatt, while in others they must be at least 1 megawatt to participate.
The great beyond: Many of ESA’s suggestions shouldn’t be impossible to implement, since in most cases at least one market is doing what the association is calling for (or in some cases, at least California is trying to). But beyond the major issues outlined above, there are also calls for storage to provide not only generation services but also transmission services. ESA would also like to see resources, including storage, compensated for some services that currently are done through an out-of-market settlement.
While every item on ESA’s list may not be granted, most of them are possible -- and necessary, as California is already demonstrating with the changes it has made.
“The filing makes comprehensive and commonsense requests needed to actualize key storage attributes of fast and accurate response and flexibility in all three markets: energy, capacity and ancillary services,” said Manghani. Even without the changes to the wholesale energy markets, GTM Research is forecasting the U.S. will add a cumulative 5.86 gigawatts of energy storage to the grid between now and 2021.