FERC Opens US Wholesale Energy Markets To Battery and Electric Storage Systems

by | Feb 20, 2018

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FERC wholesale energy market battery electric storage

(Photo: FERC headquarters. Credit: Elvert Barnes, Flickr)

The Federal Energy Regulatory Commission has issued an order allowing the participation of electric storage resources in the capacity, energy, and ancillary services markets operated by regional transmission organizations and independent system operators.

FERC’s vote to open US wholesale energy markets to batteries and other electric storage systems is intended to “enhance competition and promote greater efficiency in the nation’s electric wholesale markets, and will help support the resilience of the bulk power system,” the federal agency announced on February 15.

Under the new rule:

  • Participating storage must be eligible to provide all capacity, energy, and ancillary services that it is technically capable of providing.
  • The participation model must ensure that storage systems in it can be dispatched, and can set the wholesale market clearing price as both a seller and buyer consistent with existing market rules.
  • The rules must account for the physical and operational characteristics of electric storage resources through bidding parameters or other means.
  • The minimum size for participating energy storage cannot be larger than 100 kilowatts.
  • 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.

Energy storage groups, clean energy advocates, and environmentalists lauded FERC’s decision. Michael Panfil, director of federal energy policy for the Environmental Defense Fund, said publicly, “Giving energy storage the same opportunity to compete in the marketplace as other resources like gas and coal will help make electricity more affordable, clean, and reliable for Americans.”

But Joshua Rhodes, an energy fellow at the Energy Institute and the Webber Energy Group at the University of Texas at Austin, urged caution in an op-ed for Forbes. “For energy storage to make a big play, costs still needs to come down by about half, and the market itself might have to change,” he wrote, laying out the complexities of the economic case.

Although FERC has issued a final rule on energy storage participation in regional markets, Greentech Media’s Jeff St. John pointed out that the agency needs more information before figuring out how to address the same challenge for distributed energy resources.

“The original proposed rule on energy storage included a section on how to address aggregated distributed energy resources,” he wrote. “But Thursday’s rule postponed a decision on this even more complicated issue, setting up a technical conference for April 10 – 11 to discuss ‘several concerns’ raised by stakeholders.”

The same day FERC issued the battery storage order, the agency also revised its regulations for the provision of primary frequency response.

PV Magazine’s Christian Roselund reported that, under this revision, wind, solar and battery storage projects will be required to supply frequency response services when called upon. “This has long been required of conventional generation, and means that renewable energy and storage will share the task of maintaining a critical aspect of grid reliability,” he wrote.

The agency says that their action around primary frequency response is intended to address the increasing impact of the evolving generation resource mix.

The 3rd Annual Environmental Leader & Energy Manager Conference takes place May 15 – 17, 2018 in Denver. Learn more here.

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