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FERC Proposal to Better Integrate Energy Storage and Distribution into Markets

December 7, 2016

The Federal Energy Regulatory Commission (FERC) recently issued a Notice of Proposed Rulemaking (NOPR) that would require Regional Transmission Organizations (RTOs) to allow 100 kW of energy storage and distributed energy resources. In addition to breaking down barriers to both energy storage and distributed energy resources, the notice would permit RTOs to participate in capacity, energy, and ancillary service markets. It would also allow storage to provide services not procured through markets, like black start, primary frequency response, and reactive power. The FERC also proposed to require newly interconnecting generating facilities to install and enable primary frequency response, a new requirement for renewable generators.

The proposal hopes to remove the above barriers by requiring RTOs to develop new “participation models” to do several things: ensure that storage resources can provide all services of which they are capable; develop bidding parameters accurately reflect the physical and operational characteristics of storage resources; demonstrate that storage resources can be dispatched and set the wholesale market clearing price both as buyers and sellers; establish a minimum size requirement (100 kW) for participation; and specify that sales of energy between wholesale electric markets and electric storage resources that are back and forth (from one to the other and then vice-versa) occur at the wholesale locational marginal price.

Each RTO must also revise its market rules to define distributed energy resource aggregators as eligible market participants under the above participation model according to the characteristics of those distributed energy resources. The FERC does not want distributed energy resources to face barriers to entry, whether physical and/or financial.

The FERC’s 139-page proposal came shortly after a daylong technical conference in which RTOs, utilities, and technology companies debated the uses of energy storage. The depth of the proposal and short turn in response around suggests the FERC had already made up its mind before the conference. The FERC indicated that archaic and inflexible market rules have impeded innovation. Comments on the FERC’s proposal are due in late-January 2017, 60 days after publication of the NOPR in the Federal Register.