In recent months, the Federal Energy Regulatory Commission (FERC) has taken several steps toward fully incorporating energy storage in U.S. wholesale energy markets -- which, if successful, could be a major boon for the energy storage industry.
These actions reflect the fact that there’s an exponential amount of energy storage slated to come on-line, as well as its “unique abilities to help in different ways,” said Acting FERC Chairman Cheryl LaFleur, speaking this week at the National Association of Regulatory Utility Commissioners’ winter meeting.
“Sometimes it [benefits] transmission, sometimes it’s generation, sometimes it can help with ancillary services, and we’re proposing to require changes in the wholesale market to reflect that,” said the commissioner, who is a Democrat.
In November, FERC issued a proposed rulemaking that would require each regional transmission organization and independent system operator to remove any barriers in their tariff structure that are inhibiting the market participation of storage resources.
“We wanted them to be able to participate to the full extent of their capabilities,” said LaFleur.
The same proposal would also allow distributed energy resources, including but not limited to energy storage, to be aggregated and bid directly into organized wholesale markets. The proposal specifies that resources looking to participate at the wholesale level cannot already be receiving payments through the distribution system, such as net metering.
Commissioner LaFleur has expressed some concerns over opening up market competition and is viewed by some as more friendly to traditional market players. And with three seats currently unfilled on the five-member FERC panel, there’s uncertainty around how, and how quickly, energy storage and other advanced energy technologies will be recognized at the national level.
Several clean energy stakeholders filed comments on Monday urging FERC to allow advanced energy technologies to compete on providing energy and reliability services.
The proposed rule was just the first step in opening up energy markets. FERC commissioners still have to decide whether to finalize it -- which will have to wait until the open seats are filled. Regional markets will then have 18 months to change their tariffs, which is a process that goes through FERC review and is also judicially challengeable.
“These technologies aren’t new,” said Arvin Ganesan, vice president of federal affairs at Advanced Energy Economy. “So it’s not a matter of whether they can technically provide [grid] services, but it becomes a question of whether RTOs will change their tariffs to allow these technologies to compete to provide that service.”
AEE praised FERC's broader initiative to include energy storage and DERs in the wholesale market, but also requested several changes to the proposed rule in comments filed this week. Among them, AEE wrote that FERC should not restrict aggregated DERs participating in retail compensation programs (i.e., net metering) from also participating in wholesale markets. FERC's proposed solution to the double-payment issue is "overly broad," the advanced energy business association wrote.
The Edison Electric Institute (EEI), which represents the electric power industry, also filed comments on the proposed rulemaking this week, expressing support for allowing energy storage resources to participate in wholesale energy markets. But the organization was less enthusiastic about the second part of the proposal. EEI wrote that allowing for DER aggregation to participate in wholesale markets should be addressed at the regional level, and not mandated by FERC, because of the potential impacts on distribution system reliability.
LaFleur expressed a similar set of concerns in a statement issued at the time of the proposal.
“I was very interested in particular on comments on the distributed energy resource proposal, particularly the operational coordination among the RTO and ISO control centers, the distribution control centers, the distributed aggregators and the distribution companies,” she said yesterday.
“I understand we got a lot of comments,” she said. “We’ll be looking at those very closely to see whether this is ready to go to a final rule or not.”
“The other thing we’ll be closely watching is California, which now has five distributed energy resource aggregators signed up,” LaFleur added, referring to California’s decision to open up DERs to wholesale market competition. “We are figuring out how they integrate them into their market and can probably learn from that in order to decide how far to go.”
As DER aggregation stirs debate, the inclusion of energy storage in wholesale markets has not gone unchallenged. In a January policy statement, FERC clarified that energy storage may recover costs through both cost-based and market-based rates -- a move that could make energy storage more competitive. But LaFleur submitted a dissent.
“I dissented on that order, not because I’m not open to specific situations where a specific resource might get two payment streams; I think on a case-by-case basis, I would consider making exceptions,” said LaFleur. “But I was concerned with some of the broader language and policy statements about the potential impacts on wholesale markets of having other payment streams.”
“I thought it came awfully close to implicating some of the questions we have pending before us now with respect to state policy initiatives and how they’ll be valued in wholesale markets, which I know we will be looking at going forward,” she said. While she didn’t elaborate, LaFleur was likely referring to the November proposed rulemaking and the restrictions on double payments placed on DERs.
Despite LaFleur’s concerns, FERC has signaled that it is taking the removal of discriminatory barriers to participation in the wholesale markets very seriously.
For instance, FERC is currently accepting comments on a December 2016 proposal rulemaking that could make the interconnection of energy storage resources more efficient, according to LaFleur. FERC also ruled favorably last week on an energy storage complaint between the Midcontinent Independent System Operator (MISO) and Indianapolis Power & Light (IPL), ordering MISO to allow for a battery storage project owned by IPL to participate in wholesale markets -- even though the broader energy storage proposal has yet to be finalized.
While FERC is gridlocked waiting for new presidential appointees, Ganesan said he has a positive outlook on wholesale market reform going forward based on LaFleur's record and recent comments. “We’ve met with Chairman LaFleur, and she’s pro-technology. She is [in favor of] getting an implementation process down that makes sense," he said.
For LaFleur, the regulatory structure for energy storage that may ultimately make the most sense is to treat it independently of other electricity categories, not as a part of each of them.
“Almost everyone believes we’ll have more storage and distributed energy resources in the future than we do now, but I at least think we don’t fully understand yet in the long run how it will be treated,” said LaFleur. “If [energy storage] develops to the extent that we think it might be developing, it will just be its own thing -- electricity is generation, transmission, distribution and storage, rather than fitting it into the others, but that will play itself out as we move forward technologically.”