Tag: Electric Storage

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Event: Blockchain in Energy Forum 2018
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FERC Issues Policy Statement on Cost Recovery for Electric Storage Resources, But the Devil Will Be in the “Implementation Details”
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FERC Proposes New Rules to Make Room for Storage in Wholesale Electricity Markets
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FERC Issues Order Extending Deadlines for Energy Storage Comments
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FERC Staff Seeks Comments on Participation of Electric Storage Resources in Wholesale Electricity Markets

Event: Blockchain in Energy Forum 2018

We invite you to join us for GTM Squared’s Blockchain in Energy Forum on March 7, 2018 live in New York City and available to stream online. Washington, D.C. associate and co-author of The Blockchain Energizer, Benjamin Tejblum, will be presenting on the implementation of blockchain and how to best navigate regulations and new business models. Additional topics to be covered will include a discussion on distributed ledger technologies, re-envisioning the future, enabling a transactive grid, and optimizing operations and identifying new opportunities.

Please note you must be a member of GTM Squared to participate.

FERC Issues Policy Statement on Cost Recovery for Electric Storage Resources, But the Devil Will Be in the “Implementation Details”

By Molly K. Suda, William H. Holmes, and Buck B. Endemann

Last week, the Federal Energy Regulatory Commission (“FERC” or the “Commission”) issued a Policy Statement to provide guidance for electric storage resource owners and operators that may seek to receive cost-based rate recovery for certain services, as well as market-based revenues for other services.[1]  The Policy Statement explains that an electric storage resource may provide transmission or grid support services at a cost-based rate, while also participating in the wholesale energy markets administered by a regional transmission organization (“RTO”) or independent system operator (“ISO”) and earning market-based revenues.  As described below, the Policy Statement eliminates some uncertainty created by prior FERC precedent, which limited electric storage resources’ ability simultaneously to provide transmission or grid support services at cost-based rates and also participate in the wholesale markets.

However, the path forward for electric storage resources to “stack” payment streams and recover costs through both cost-based and market-based rates will not be without obstacles.  The Policy Statement acknowledges that “implementation details” will need to be addressed.  Additionally, FERC Commissioner Cheryl LaFleur dissented, disagreeing with the Policy Statement’s broad statements that electric storage resources’ ability to recovery costs through both cost-based and market-based rates will not adversely impact other market competitors.  Commissioner LaFleur also disagreed with the decision to address the issue of electric storage resources’ ability to recover costs through both cost-based and market-based rates in a proceeding separate from the pending Notice of Proposed Rulemaking on electric storage’s participation in RTO/ISO markets (“Electric Storage NOPR”).[2]  Thus, while the Policy Statement removes some uncertainty, electric storage resources will likely still have to grapple with cost recovery, competition, and other issues on a case-by-case basis.

This alert provides background on the Commission’s prior precedent related to electric storage resources and cost-based recovery, as well as the Commission’s recent efforts in several open proceedings to address potential barriers to the further development of electric storage resources.  Provided below is a summary of the Commission’s Policy Statement, as well as an overview of open questions and unresolved issues that are intertwined with issues presented in the Commission’s Electric Storage NOPR and other recent orders.

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FERC Proposes New Rules to Make Room for Storage in Wholesale Electricity Markets

By Molly Suda and Elizabeth Trinkle

On November 17, 2016, the Federal Energy Regulatory Commission (“FERC”) issued a Notice of Proposed Rulemaking (“NOPR”) to amend Section 35.28 of its regulations.  The proposed amendment would remove barriers to the participation by electric storage resources and distributed energy resource aggregations in the capacity, energy, and ancillary service markets operated by regional transmission organizations (“RTOs”) and independent system operators (“ISOs”).  FERC defines “electric storages resources” as resources capable of receiving electric energy from the from the grid and storing it for later injection back to the grid regardless of where the resource is located on the electrical system.  Electric storage resources include all types of electric storage technologies, such as batteries, flywheel, compressed air and hydro-pump.  “Distributed energy resource aggregators” are defined as entities that aggregate one or more distributed energy resources (including electric storage resources, distributed generation, thermal storage and electric vehicles) for participation in the RTO/ISO wholesale markets.

Specifically, FERC proposes in the NOPR that each RTO and ISO revise its tariff to (1) establish market rules that accommodate the participation of electric storage resources in the organized wholesale electric markets and (2) define distributed energy resource aggregators as a type of market participant that can transact in the organized wholesale electric markets.

The NOPR includes a number of high-level proposals, and FERC requests comment from interested stakeholders on specific issues related to development and implementation of these proposals.  An overview of the NOPR and FERC’s key areas of interest for comment are summarized below.

Comments on the NOPR will be due 60 days from publication in the Federal Register.  A copy of the NOPR is available here.

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FERC Issues Order Extending Deadlines for Energy Storage Comments

As an update to our earlier post on FERC’s latest proceeding related to electric storage resources, on April 27, 2016, FERC issued an order extending the deadline for RTOs and ISOs to submit their responses to FERC’s data requests.  The RTOs’ and ISOs’ responses are now due on May 16, 2016.  FERC also granted an extension to June 6, 2016 for other comments.

FERC Staff Seeks Comments on Participation of Electric Storage Resources in Wholesale Electricity Markets

Last week, the Federal Energy Regulatory Commission (“FERC”) opened a proceeding in Docket No. AD16-20 for FERC Staff to consider a wide range of issues related to electric storage resources, including whether barriers exist in the United States’ organized wholesale energy markets that are frustrating the participation of electric storage resources in those markets and leading to unjust and unreasonable wholesale electricity prices.  The new proceeding was also a topic of discussion during FERC’s monthly meeting on Thursday, April 21, 2016, with each Commissioner expressing significant interest in the energy storage issues to be considered and studied by FERC Staff.  For purposes of the proceeding, FERC Staff has taken a broad view of electric storage resources, defining such resources to include all facilities “that can receive electric energy from the grid and store it for later injection of electricity back to the grid . . . regardless of their size and storage medium, or whether they are interconnected to the transmission system, distribution system, or behind a customer meter.”

To kick-off the proceeding, FERC Staff sent letters to California Independent System Operator Corp., ISO New England, Inc., Midcontinent Independent System Operator, Inc., New York Independent System Operator , PJM Interconnection L.L.C., and Southwest Power Pool, Inc. (collectively, the “RTOs and ISOs”), requesting that by May 2, 2016, they submit information about current market rules and procedures applicable to electric storage resources’ participation in each respective market.  In a concurrent notice issued in the same docket, FERC Staff also invited other comments on whether current market rules are blocking the participation of electric storage resources in the organized markets and whether there are specific rule changes that could facilitate the participation of such resources.  FERC Staff is asking other commenters to specifically address the RTOs’ and ISOs’ May 2, 2016 responses, and  set May 23, 2016 as the deadline for such other comments.  The types of data requested from the RTOs and ISOs and the related topics on which FERC Staff is seeking comment are outlined below.

  • Eligibility to participate in the organized wholesale electric markets. FERC Staff has asked each of the RTOs and ISOs to explain whether electric storage resources are currently eligible to participate in capacity, energy, and/or ancillary services markets, and if not, what justifies their ineligibility.  FERC Staff is also seeking comments on whether clarification of particular market rules or tariff provisions would remove undue barriers to the participation of electric storage resources.
  • Minimum technical criteria and performance requirements to participate in the organized wholesale electric markets. In addition to requesting information from the RTOs and ISOs on the current technical criteria and performance requirements (e.g., minimum capacity sizes, bid sizes, or run times) that must be met to participate in the wholesale markets, FERC Staff is seeking input on whether certain technical criteria or performance requirements are unjustified and unfairly prevent market participation by electric storage resources.   FERC Staff has also requested input on alternative minimum criteria or eligibility requirements and the potential effect of such alternatives on system reliability and market operations.
  • Bid parameters applicable to electric storage resources. The operational capabilities of electric storage resources to receive, store, and later sell electricity distinguish electric storage resources from conventional generation.  Thus, FERC Staff is seeking input on whether current market rules for bid parameters could and should be revised to better reflect electric storage resources’ operational capabilities, and whether making such revisions would improve RTOs’ and ISOs’ ability to model and dispatch electric storage resources.  Given the broad array of technologies encompassed by FERC Staff’s definition of electric storage resources, FERC Staff also asks that commenters address whether specific technologies warrant different bid parameters or whether a general set of rules could apply to all types of electric storage resources.
  • Electric storage resources interconnected at the distribution level and aggregation of electric storage resources. FERC Staff recognized that electric storage resources may be able to participate in the wholesale markets despite being interconnected at the distribution level.  Therefore, FERC Staff is seeking input on what market opportunities are or should be available for distribution-connected electric storage resources and the impact of electric storage resources participating in the wholesale markets while simultaneously providing distribution-level services.  FERC Staff has also asked the RTOs, ISOs, and other commenters to address opportunities and means to aggregate multiple electric storage resources into a single resource that serves as the wholesale market participant.
  • Energy purchases by electric storage resources and pricing of energy purchases by electric storage resources. FERC Staff asked the RTOs and ISOs to explain the current bid requirements for electric storage resources that are purchasing energy and whether they must pay the locational marginal price for their energy purchases or instead pay a different rate for their receipt of energy from the grid.  FERC Staff is also interested in understanding whether the appropriate pricing of energy purchases may be affected by what services the electric storage resources are providing or whether the electric storage resources is interconnected to the transmission system, distribution system, or behind the meter.

This proceeding is yet another signal that energy storage issues are at the forefront of FERC’s regulatory initiatives.  As noted in a prior blog post, FERC is already scheduled, in a technical conference on May 13, 2016, to address issues and potential impediments to the interconnection of electric storage resources.  Parties interested in the development and deployment of electric storage resources will want to be involved in these proceedings and keep a close eye on the issues raised by commenters.  These proceedings and the issues spotlighted for FERC could be precursors to new rulemakings and regulatory changes with the potential to affect the development and direction of new or expanded markets and revenues streams for electric storage resources.   We will certainly be monitoring these proceedings and will keep you posted.

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