Regulatory Framework Governing Battery Energy Storage Projects

Battery energy storage projects are subject to a layered regulatory framework that governs how facilities interconnect, participate in wholesale markets, and comply with reliability and siting requirements. While market developments, contract structures, and performance provisions shape project economics, regulatory compliance ultimately determines whether a storage project can operate as intended and monetize its capabilities over time.

This final article in the four-part series examines the principal federal, regional, and state regulatory regimes applicable to battery energy storage projects, with a focus on market participation, reliability obligations, and siting and permitting considerations that commonly affect project development and operations.

This article builds on the prior installments, which examined the market and policy forces driving storage deployment, the contractual structures used to procure storage services, and the performance provisions that allocate operational risk over the life of a project.

FERC

In 2018, the Federal Energy Regulatory Commission (FERC or the Commission) issued Order No. 841, a landmark rule aimed at removing barriers to electric storage resource participation in Regional Transmission Organizations and Independent System Operators (RTOs/ISOs). The order directed RTOs/ISOs to set up rules to open their wholesale energy, capacity, and ancillary services markets to electric storage resources. Currently, all six RTOs/ISOs—CAISO, MISO, SPP, PJM, NYISO, and ISO-NE—have market rules in place to allow electric storage resource owners to participate in their markets. Implementation details such as minimum size, telemetry, metering, and state of charge parameters vary across regions.

In addition to the specific rules that must be met for an electric storage resource to participate in a particular RTO/ISO, electric storage resources looking to sell electricity for resale in the energy, capacity, and ancillary services markets must first seek authorization from FERC. To obtain such authorization, the electric storage resource must make a filing under Section 205 of the Federal Power Act, which includes a proposed market-based rate tariff and demonstrations that certain Commission-approved market power analyses are satisfied. The application will require electric storage resource owners to identify and report all market-based rate assets and ownership affiliations upstream and downstream of its individual company. Additionally, that resource owner will be required to maintain compliance with FERC's market-based rate program through regular filings and submissions.

To participate in the wholesale electricity markets and avoid certain bookkeeping and recordkeeping requirements under the Public Utility Holding Company Act of 2005 (PUHCA 2005), electric storage resource owners should also be aware that they may be eligible to self-certify with the Commission as an Exempt Wholesale Generator so long as they are exclusively engaged in the wholesale markets. This self-certification generally becomes effective upon the conclusion of a 60-day period from the date the company makes its filing with the Commission.

NERC

The North American Electric Reliability Corporation (NERC) requires certain electric generation resources to register with NERC if they are connected to the Bulk Electric System (BES). However, certain inverter-based generators not connected to the BES may also be required to register with NERC if they meet two criteria, as approved by FERC: (1) the generator(s) individually or collectively have an aggregate nameplate capacity of greater than or equal to 20 MVA; and (2) the generator(s) is connected through a system designed primarily for delivering such capacity to a common point of connection at a voltage greater than or equal to 60 kV.

Under these new requirements, certain electric storage resources may be subject to NERC registration even if they are non-BES resources and are within the same connection point as enough similarly situated resources to meet the 20 MVA threshold in the aggregate. Electric storage resources that fall under this requirement should note that NERC reliability obligations may vary, but mostly consist of planning and interconnection requirements, modeling and data reporting, voltage and reactive power requirements, and system protection and ride-through obligations. Electric storage resource owners and operators should ensure that NERC compliance roles are clearly identified within their offtake, construction, and operation agreements.

State and Local

At the state level, there are varied regulatory considerations for electric storage resources. Most states regulate interconnection of generators to the distribution system via their respective state utility commission tariffs (in addition to any possible FERC requirements). In some cases, the state's interconnection rules may incorporate certain requirements from the Institute of Electrical and Electronics Engineers (IEEE), which have specific requirements for storage resources. For siting and permitting, some states require conditional use permits or special use permits, while other states add environmental review. Many states have independent siting authorities or boards. Depending on the jurisdiction, fire safety measures may be required by the state, county, or local jurisdiction.

Below are a few notable updates across the country that address electric storage resources:

• California: On June 27, 2025, the California Public Utilities Commission (CPUC) released a decision that addresses resource adequacy issues, setting near-term obligations for Load-Serving Entities to procure annual resource adequacy capacity. The CPUC's reforms increase the Planning Reserve Margin and update certain capacity requirements, affecting how electric storage resources participate in resource adequacy obligations.
• New York: The New York State Public Service Commission (NYPSC) accepted an energy storage implementation plan submitted by the New York State Energy Research and Development Authority (NYSERDA). Under this plan, the state has a goal of implementing 6 GW of energy storage by 2030, doubling its previous 2030 goal of 3 GW. The implementation plan envisions 1.7 GW of new retail and residential storage and 3 GW of utility-scale storage, to be added on top of 1.3 GW of existing storage assets.
• New Jersey: The New Jersey Board of Public Utilities (NJBPU) launched the Garden State Energy Storage Program, promising deployment of 2 GW of energy storage by 2030.
• Massachusetts: The Massachusetts Department of Energy Resources expanded SMART 3.0, making it easier to pair electric storage with solar resources, expanding low-income access, and updating incentives to accommodate certain siting situations.

These state-level developments illustrate the evolving regulatory landscape and underscore the importance of jurisdiction-specific analysis for storage projects.

Conclusion

Regulatory requirements play a decisive role in determining whether battery energy storage projects can be developed, interconnected, and operated in a manner that supports long-term commercial objectives. Federal market participation rules, reliability obligations, and state and local interconnection and permitting requirements can materially affect project design, timelines, and risk allocation if not addressed early and comprehensively.

Taken together, the four articles in this series provide a framework for evaluating battery energy storage projects from initial market context through commercial structuring, performance risk management, and regulatory compliance. Early review and coordination of commercial, technical, and regulatory considerations can help developers and off-takers reduce uncertainty, align expectations, properly allocate risk, and support the successful deployment and operation of battery energy storage facilities.

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If you have questions about regulatory requirements applicable to battery energy storage projects or how these issues may affect specific developments, please contact the authors of this series or sign up for our alerts.