Wholesale Market Changes Will Reflect the ‘Unique Abilities’ of Energy Storage, Says FERC’s LaFleur
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 there’s an exponential amount of energy storage slated to come online, and 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 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 goes through FERC review and is also judicially challengeable.
“These technologies aren’t new technologies,” 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 RTOs ISOs control centers, the distribution control centers, the distributed aggregators and the distribution companies,” she said yesterday.
“I understand we got a lot 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 California, which now has five distributed energy resource aggregators signed up,” LaFleur added, referring to California’s decision to open 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.”