FERC Staff Seeks Clarification of Proposed RTO/ISO Tariff Revisions to Facilitate Participation of Energy Storage Resources in Regional Markets
Energy storage resources such as pumped storage hydroelectric generators, lithium ion batteries, and flywheels, are becoming increasingly significant in maintaining the reliability and resilience of the interstate electricity grid. However, these resources, which both inject energy into the grid and receive energy from it, have unique operating characteristics which affect their ability to participate in organized markets for the supply of capacity, energy, and ancillary services.
In February 2018, the Federal Energy Regulatory Commission issued its Order No. 841, in which it required each Regional Transmission Organization and Independent System Operator to revise its tariff to facilitate participation of energy storage resources in the capacity, energy, and ancillary services markets that it administers. Electric Storage Participation in Markets Operated by Regional Transmission Organizations and Independent System Operators, Order No. 841, 162 FERC ¶ 61,127 (2018). Among other things, the tariff revisions were required to ensure that each electric storage resource within a region served by an RTO/ISO is eligible to provide all capacity, energy, and ancillary services that it is technically capable of providing, and ensure that such resources can be dispatched and can set the wholesale market clearing price as both a wholesale seller and wholesale buyer consistent with existing market rules.
Proposed tariff revisions to comply with Order No. 841 were filed by each of the RTOs/ISOs in December 2018. After reviewing those revisions, the FERC Staff asked each RTO/ISO, by letter dated April 1, 2019, to clarify its proposed tariff language and/or otherwise explain how its proposal complies with the requirements of Order No. 841.
Each RTO/ISO has collaborated with its stakeholders to develop its own tariff governing markets for sales of capacity, energy, and ancillary services. Compliance filings made by each RTO/ISO to comply with Order No. 841 reflect to a certain extent the unique practices of such RTO/ISO, and each letter from the FERC Staff asks in part how the requirements of Order No. 841 mesh with those practices. However, taken collectively, these letters show that the FERC Staff is scrutinizing closely the proposals by each of the RTO/ISO to remove barriers to participation of electric storage resources in the RTO/ISO markets and to enhance competition in those markets, as well as identifying the characteristics of each compliance filing that are of greatest concern to the FERC Staff. The principal issues raised by the FERC Staff regarding the Order No. 841 compliance filings involve the following topics:
Definition of Electric Storage Resource
Order No. 841 defined an energy storage resource as “a resource capable of receiving electric energy from the grid and storing it for later injection of electric energy back to the grid.” Among the issues raised by the FERC Staff are whether energy storage resources that are pseudo-tied into an RTO/ISO could participate in its markets, and whether an RTO/ISO would permit aggregation of energy storage resources to participate in the RTO/ISO market.
Creation of a Participation Model for Electric Storage Resources
One goal of Order No. 841 is to ensure that rules adopted by each RTO/ISO will accommodate both existing and future technologies, regardless of the storage medium (e.g., batteries, flywheels, compressed air, and pumped hydro). In the letters, the FERC Staff asked about the ability of specific kinds of energy storage resources to participate in capacity, energy, and ancillary services markets under generally applicable market rules adopted by the various RTOs/ISOs. In addition, one RTO was asked whether an electric storage resource connected to its transmission system could pseudo-tie into different balancing authority areas.
Eligibility of Electric Storage Resources to Participate in the RTO/ISO Markets
RTOs/ISOs are required by Order No. 841 to adopt tariff provisions permitting electric storage resources to provide all capacity, energy, and ancillary services they are technically capable of providing, including services such as black start, primary frequency response, and reactive power services. RTOs/ISOs were asked by the FERC Staff to explain in detail how energy storage resources meet the tariff requirements for providing ancillary and other services that the RTO/ISO does not procure through an organized market. One RTO was asked how its “must offer” rules would apply to energy storage resources, and two RTOs were asked to explain whether – and if so, how – compensation would be provided for start-up costs or no-load costs of an electric storage resource.
Participation in the RTO/ISO Markets as Supply and Demand
Order No. 841 required that electric storage resources be capable of being dispatched and able to set the wholesale market clearing price as both a buyer and seller of electricity at wholesale. RTOs/ISOs were asked by the FERC Staff to explain in detail how energy storage resources might either be dispatched or self-schedule as both a seller and a buyer under generally-applicable tariff rules. One RTO was also asked to demonstrate how electric storage resources could set wholesale market clearing prices, and another was asked to explain the process by which energy storage devices might participate in the market as price takers.
Ability to De-Rate Capacity to Meet Minimum Run-Time Requirements
Order No. 841 requires RTOs/ISOs to permit electric storage resources to de-rate their capacity to meet minimum run-time requirements. The FERC Staff sought confirmation that certain types of energy storage resources would be permitted to de-rate their capacity under the rules proposed by certain RTOs/ISOs. In addition, one RTO was asked whether an energy storage resource that was “out of charge” would be considered to be experiencing a forced outage.
Mechanics to Prevent Conflicting Dispatch Instructions
Order No. 841 required RTOs/ISOs either to show that existing rules do not allow conflicting supply offers and demand bids from the same resource for the same market interval, or to modify market rules to prevent conflicting dispatch signals. One ISO was asked to explain how dispatch rules would resolve conflicting supply offers and demand bids in a way that was economic and respected the unit’s operating constraints, while another ISO was asked to demonstrate that certain electric storage resources would not receive conflicting dispatch signals to charge and discharge simultaneously.
Make Whole Payments
Order No. 841 required RTOs/ISOs to adopt rules under which energy storage resources available for manual dispatch as a wholesale buyer and wholesale seller are held harmless for manual dispatch through make-whole payments. RTOs/ISOs were asked by the FERC Staff whether energy storage resources would be entitled to the same make-whole payments for which conventional generation resources are eligible, and to explain the means by which an energy storage resource might receive make-whole payments when the resource is dispatched as load and the wholesale price is higher than the resource’s bid price and when it is dispatched as supply and the wholesale price is lower than the resource’s offer price.
Physical and Operational Characteristics of Electric Storage Resources
Order No. 841 required RTOs/ISOs to account for the unique physical and operational characteristics of electric storage resources through bidding parameters or other means. The RTOs/ISOs were asked by the FERC Staff to demonstrate how their proposed tariff provisions would comply with this requirement. In addition, two RTOs/ISOs were asked to demonstrate that an electric storage resource is able to submit its biddable parameters in both the day-ahead and real-time markets.
State of Charge Management
Order No. 841 requires each RTO/ISO to self-manage its State of Charge and related characteristics. RTOs/ISOs were asked to explain how their procedures account for Minimum State of Charge, Maximum State of Charge, Minimum Charge Limit, and Maximum Charge Limit, as defined in Order no. 841. In addition, one ISO was asked whether the State of Charge value it adopted is “the level of energy that an electric storage resource is anticipated to have available at the start of the market interval,” and another RTO was asked to explain how it would use the State of Charge in its day-ahead and real-time market operations.
Minimum Size Requirement
RTOs/ISOs were required by Order No. 841 to establish a minimum size requirement for energy storage resources to participate in the RTO/ISO markets that does not exceed 100 kW. The FERC Staff asked RTOs/ISOs whether their rules would permit resources smaller than 100 kW to be aggregated in order to meet the participation threshold. In addition, one ISO was asked whether an electric storage resource with a rated capacity of 100 kW or above that was connected to a distribution facility or located behind the meter could participate in the ISO market.
Price for Charging Energy
Pursuant to Order No. 841, the sale of electric energy from an RTO/ISO to an energy storage resource that the resource then resells back to the RTO/ISO markets must be at the wholesale locational marginal price of energy. RTOs/ISOs were asked by the FERC Staff to confirm that the energy storage resource’s wholesale energy purchases would be at the applicable nodal LMP, as required by Order No. 841, and not at the zonal price. In addition, one ISO was asked to confirm that an electric storage resource would not be subject to a transmission charge, either by the ISO or some other entity, when it was dispatched to provide a service to the ISO, and another RTO was asked to explain the circumstances under which an electric storage resource would be subject to charges for transmission service.
Metering and Accounting Practices for Charging Energy
Order No. 841 requires RTOs/ISOs to implement metering and accounting practices to prevent electric storage resources from paying twice for the same charging energy (i.e., they should not have to pay both the wholesale and retail price for the same charging energy). The FERC Staff asked one ISO to explain how it would ascertain from meter readings which energy should be accounted for at the wholesale LMP as opposed to the retail rate. Another RTO was asked whether procedures for protecting against duplicative (i.e., both retail and wholesale) charges would be applicable to electric storage resources connected to distribution facilities or behind the meter.
Conclusions
Tariff provisions adopted by each RTO/ISO pursuant to Order No. 841 will affect the ability of energy storage resources to participate in markets administered by those RTOs/ISOs, and the ability of customers within those markets to enjoy the benefits of reliability and economy expected to result from increased reliance on energy storage devices, for many years into the future. The FERC Staff has asked each RTO/ISO to respond to its letter within 30 days. It would be advisable for each interested stakeholder to review those responses after they have been submitted to determine whether any concerns it may have about the increased participation of energy storage resources in markets administered by the RTO/ISO in which it operates have been adequately addressed, and, if not, to submit comments to the FERC regarding any remaining concerns. Ultimately, the FERC is expected to issue orders either accepting or modifying each of the Order No. 841 compliance filings submitted by each RTO/ISO and establishing rules governing future participation of energy storage resources in RTO/ISO markets.
Letters mentioned in this article can be found below:
ISO New England Inc., Docket No. ER19-470-000, letter from Kurt Longo, Director, Division of Electric Power Regulation-East of the FERC, dated April 1, 2019.
PJM Interconnection LLC., Docket No. ER19-469-000, letter from Kurt Longo, Director, Division of Electric Power Regulation-East of the FERC, dated April 1, 2019.
New York Independent System Operator Inc., Docket No. ER19-467-000, letter from Kurt Longo, Division of Electric Power Regulation-East of the FERC, dated April 1, 2019.
Southwest Power Pool Inc., Docket No. ER19-460-000, letter from Penny Murrell, Director, Division of Electric Power Regulation-Central at the FERC, dated April 1, 2019.
Midcontinent Independent System Operator Inc., Docket No. ER19-465-000, letter from Penny Murrell, Director, Division of Electric Power Regulation-Central at the FERC, dated April 1, 2019.
California Independent System Operator Corporation, Docket No. ER19-468-000, letter from Carlos d. Clay, Acting Director, Division of Electric Power Regulation- West of the FERC, dated April 1, 2019.