How Market Rules Are Holding Back Energy Storage
Wholesale market rules are organized around legacy assets, which is restricting storage from selling all of its potential services.
Energy storage is surging. The U.S. Energy Storage Monitor Q4 2018 estimates that installations totaled 338 megawatts in 2018, and will grow to 3.9 gigawatts by 2023, much of it front-of-the-meter utility-scale projects.
This exponential growth has been driven by state mandates and regulatory actions (especially in California) and limited to vertically integrated utilities outside of the organized power markets serving two-thirds of all U.S. electricity consumers. Despite storage’s value to the grid, it has not found success in wholesale markets.
This mismatch is best explained in two words: rules and revenue. Wholesale market rules are organized around legacy assets, restricting storage from selling all potential services, which in turn limit storage’s wholesale revenue streams.
Recognizing these barriers, the Federal Energy Regulatory Commission issued Order 841 to stimulate access to wholesale markets. At the end of 2018, FERC-regulated independent system operators (ISOs) responded with their implementation plans.
The Energy Storage Association’s overview of these proposals, with filtered comments by effects upon possible revenue streams, provides helpful insight.