FERC adapts rules to deal with electric storage

Recognizing the way technology is changing energy markets, the Federal Energy Regulatory Commission today took action to open the wholesale competitive markets it regulates to electric energy storage. By a unanimous vote, the five-member commission adopted a final rule to open the competitive energy, capacity and ancillary services markets to storage as both seller and buyer.

In November 2016, FERC issued a proposed rulemaking, observing the current market rules could create barriers to emerging storage technologies. The final rule requires each regional grid operator to revise its tariffs by creating a “participation model for electric storage resources that consist of market rules that properly recognize the physical and operational characteristics of electric storage resources.”

The 2016 proposal included changes to the market rules for aggregations of distributed energy resources, but the order today concluded that this issue is particularly complex and the commission needs more information. So FERC also issued a notice that it will hold a technical conference in April to gather more information.

Commissioner Cheryl LaFleur, in a written statement, said, “Electric storage is like a ‘Swiss army knife’ that can serve customers in multiple ways, including that it can (1) provide energy, particularly in conjunction with variable renewable generation, (2) provide frequency regulation and other ancillary services, and (3) help defer distribution and transmission needs. Of course, some storage technologies such as pumped hydroelectric storage already play an important role in serving customers. Many new technologies including batteries, flywheels, compressed air, thermal storage and others are rapidly gaining commercial viability and scale.”

Commissioner Robert Powelson said in a written statement, “I also strongly support further record development regarding the participation of aggregated distributed energy resources (DERs) in the wholesale markets. The participation of these resources raise questions that merit further exploration. Topics that I believe are of particular importance are the nexus between wholesale and retail rate structures, operational characteristics and system reliability, and cost allocation.”

FERC’s action drew quick approval from Advanced Energy Economy, a Washington-based energy policy advocacy group representing many businesses in the industry. Malcolm Woolf, senior vice president for policy, said, “Through today’s order, FERC has taken a significant step toward removing barriers that keep advanced energy technologies from competing in wholesale electricity markets on the basis of their ability to improve the reliability, resilience, and affordability of our energy system. Energy storage can help reduce costs to consumers and ensure that the lights stay on.

“We firmly believe that aggregated DERs deserve the same opportunity to compete on the basis of price and performance, and  look forward to engaging in a formal process to ensure barriers are removed for these critical energy resources as well.”

In other action this morning, FERC adopted a final rule that expands the role of new and emerging technologies, primarily non-synchronous generation such as wind and solar, in providing primary frequency response. The rule changes FERC’s “large generator and small generator interconnection agreements” so that “all new generating facilities install, maintain and operate a functioning governor or equivalent controls as a precondition of interconnection.”

— Kennedy Maize

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