FERC Order 841 and electric storage markets

U.S. energy regulators have issued a final rule designed to help electric storage resources participate in the capacity, energy and ancillary services markets operated by regional grid operators. The Federal Energy Regulatory Commission said its Order No. 841 would remove barriers to the participation of electric storage resources in wholesale markets operated by regional transmission organization and independent system operators.

Electricity storage technologies have been around for some time, and some technologies like pumped hydropower storage have been deployed on a significant scale -- but new electric technologies are developing on top of these traditional technologies. New England's regional grid operator recently cited fast-responding energy storage devices as among the new technologies entering its markets. Many states have recognized the opportunities created by storage, and are enacting incentives to support its development and integration into microgrids. At the same time, regulators are grappling with how to fit energy storage resources into existing markets and incentive programs, like retail net metering.

The Federal Energy Regulatory Commission has considered electric storage for some time, including stakeholder workshops, data requests, and technical conferences. The Commission expressed concerns that barriers to electric storage resources participation in organized wholesale markets could lead to unjust and unreasonable wholesale electricity rates. In November 2016, the Commission proposed a rule to facilitate electric storage resources' participation in organized wholesale markets. In January 2017, the Commission issued a policy statement addressing how electric storage resources may provide services at a mix of cost-based and market-based rates.

In issuing Order No. 841 on February 15, 2018, the Commission adopted a final rule requiring each RTO and ISO must revise its tariff to establish a "participation model" for electric storage resources. As envisioned by the Commission, these participation models will consist of market rules that facilitate electric storage resources' participation in organized wholesale markets, while recognizing storage resources' physical and operational characteristics.

The new rule provides that each RTO and ISO must adopt its own participation model for electric storage resources, within certain guidelines. First, the participation model must ensure that storage resources using it are eligible to provide all capacity, energy, and ancillary services they are technically capable of providing. Second, the participation model must ensure that participating storage resources can be dispatched and can set the wholesale market clearing price as both a wholesale seller and wholesale buyer, consistent with rules that govern the conditions under which a resource can set the wholesale price. Third, the participation model must account for the physical and operational characteristics of electric storage resources through bidding parameters or other means Fourth, it must a minimum size requirement for participation in the RTO and ISO markets that does not exceed 100 kW.

The rule also requires that the sale of electric energy from the RTO or ISO market to an electric storage resource that the resource then resells back to those markets must be at the wholesale locational marginal price.

In an accompanying statement, Commissioner LaFleur described electric storage as "like a 'Swiss army knife' that can serve customers in multiple ways," including including providing energy, particularly in conjunction with variable renewable generation (such as proposed by Deepwater Wind in response to the pending Massachusetts offshore wind solicitation), as well as providing frequency regulation and other ancillary services, and helping defer distribution and transmission needs. Commissioner Powelson noted its consistency with the Commission's "longstanding commitment to fostering innovation and competition by reducing and eliminating barriers to entry." Commissioner Glick said Order No. 841 "will facilitate the development of a class of technologies—ranging from batteries to pumped hydro—that has the potential to play a leading role in the transition to the electricity system of the future, but that has heretofore been hindered by market rules that were designed primarily to accommodate more conventional means of electric generation."

Once it takes effect, the final rule gives RTOs and ISOs 270 days to develop and file their proposed rule changes, and a year for their implementation.