Federal Energy Regulatory Commission (FERC) electric regulation has traditionally put resources into defined categories (generation, transmission, distribution), but energy storage devices defy easy categorization. They can increase the capacity factors of intermittent generation resources, support the reliability of the transmission and distribution grids, permit load-shifting, and/or provide for price arbitrage opportunities. And a single device can serve multiple functions.
Deciding the correct federal regulatory paradigm for energy storage has been challenging and, in some instances, controversial. In this post we provide an update on recent regulatory activity associated with use of energy storage devices to effectively integrate energy storage into the FERC-regulated electric markets and electric grid, and highlight efforts of the North American Electric Reliability Corporation (NERC) to evaluate the reliability implications of the increasing use of energy storage.
Comments on MISO Storage as a Transmission-Only Asset (SATOA) Proposal
On June 1, 2020, post-technical conference comments were filed on the Midcontinent Independent System Operator's (MISO) proposal for incorporating storage devices owned by transmission owners as transmission-only assets.1
MISO's original proposal was to make energy storage projects eligible, under certain circumstances, for selection in its regional planning process (MTEP) and to provide cost-based recovery for such projects on the same basis as other MTEP projects. The MISO proposal follows practices in other regions where storage projects are evaluated as transmission assets in regional planning processes.
The filing was protested by a number of MISO stakeholders, including certain storage developers. Those stakeholders argued that MISO's proposal unduly favored projects submitted by incumbent MISO transmission owners, and that it would discriminate against storage projects interconnecting to MISO that follow a more traditional generation model.
The comments on the technical conference largely mirrored the debate on MISO's original filing. MISO emphasized that its SATOA proposal was only the first step in its approach to implementing storage as transmission, and that significant changes to its proposal would delay action for months or years. In particular, MISO stated that it would consider the potential dual functionality of a storage facility as both a transmission asset and a market resource in future proceedings.
MISO transmission owners continued to support the proposal on the basis that the proposal simply adds another option for MISO to employ competitive technology to address transmission system needs. The transmission owners also opposed a suggestion made at the conference that they should be required to contract with a third party for storage asset services.
The stakeholder coalition that protested the filing reiterated their position that the MISO proposal has significant shortcomings. The group requested that FERC reject the proposal and issue findings to assist the next round of MISO stakeholder discussions, including that storage owned by market participants combined with generation can address the same transmission issues as SATOAs, and that all market participants must be given the same opportunities as MISO transmission owners to implement storage as a solution to MTEP needs.2
None of these issues or arguments seems to presage any fundamental shift in FERC's general policy that storage can be treated as a transmission asset, but they do raise significant questions about the appropriate selection and cost recovery mechanisms for deploying storage as a solution to transmission system needs.
Jurisdictional Disputes – NARUC v. FERC
In Order No. 841 (issued February 2018), FERC established rules to remove barriers to the participation of storage resources in wholesale electric markets. In particular, FERC required each regional transmission organization (RTO) and independent system operator (ISO) to revise its tariff to establish rules to ensure that storage resources are eligible to provide all capacity, energy, and ancillary services they are technically capable of providing to the ISO/RTO markets. FERC applied Order No. 841 to electric storage resources interconnected to the distribution grid, including storage resources located "behind the meter," if these resources are used to participate in a wholesale market that is subject to FERC's jurisdiction.
The National Association of Regulatory Utility Commissioners (NARUC) and several utility trade associations petitioned the D.C. Circuit for review of Order No. 841, challenging FERC's decision not to leave states an "opt-out" that would prevent FERC from asserting jurisdiction over distribution-level storage resources.3
The petitioners support the majority of Order No. 841, but they argue that FERC's assertion of jurisdiction over distribution-level storage resources improperly infringes on the states' jurisdiction over distribution facilities. FERC argues that regardless of where a storage resource is located on the electric grid, if it makes sales of electricity at wholesale, it falls within FERC's jurisdiction to regulate. Oral argument was held in early May 2020, and a decision can be expected this summer.
Notably, the current appeal challenges only the portion of Order No. 841 related to storage located on the distribution system. Even if the petitioners win their court challenge, many states are likely to continue to allow distribution-sited storage resources to participate in wholesale markets, and the core of FERC's efforts to open wholesale electricity markets to increased storage participation will remain in place.
NERC Continues to Assess Impact of Storage on Bulk Electric System
NERC has recognized the evolving transformation of the country's electric grid with large amounts of energy storage facilities (connected to the Bulk Electric System (BES) and to distribution systems) in operation and in development. NERC forecasts that 8 GW of energy storage will be connected to the BES by 2024, and that a total of 35 GW of distributed solar PV (much of that with storage) is expected by 2024.4
With respect to energy storage facilities connected to the BES, NERC and regional entities generally have the ability to assess directly the impact of the energy storage facility on BES reliability and security, because the owners and operators of these facilities will be required to register and accept compliance obligations under the Reliability Standards.5
Regarding energy storage facilities interconnected at the distribution system, NERC has acknowledged that increasing levels of penetration "issues may develop in transmission line loading, grid voltage, and system frequency during normal or disturbed operation" that can present reliability challenges to the BES.6
To address the increased penetration of energy storage resources and related implications for the BES, NERC created a distributed energy resources task force (DERTF). Among its recommendations, the DERTF has urged enhanced coordination between the BES planning function and energy storage penetration levels, with NERC and the DERTF noting that reliability risks concerning the large penetration of energy storage can be summarized into three major aspects:
- Difficulty in obtaining and managing the amount of data concerning energy storage facilities, including their size, location, and operational characteristics;
- A current inability to observe and control most energy storage facilities at distribution level in real time; and
- A need to better understand the impacts on system operations of the increasing amounts of energy storage facilities, including ramping, reserve, frequency response, and regulation requirements.
To address these risks of energy storage penetration, the DERTF has urged BES system operators and planners to gather data as early as possible about the aggregate technical specifications of energy storage (and other DERs) connected to local distribution grids to ensure accurate and valid system planning device and simulation models, load forecasting, coordinated system protection, and real-time situation awareness.
To collect and model energy storage facility data, NERC and the DERTF are considering a modification to the requirements pertinent to NERC Reliability Standard MOD-032-1, the purpose of which is to "establish consistent modeling data requirements and reporting procedures for development of planning horizon cases necessary to support analysis of the reliability of the interconnected transmission system."7 The modifications would ensure that data reported to Transmission Planners and Planning Coordinators include specific requirements for aggregating energy storage facility data from "appropriate entities" with access to this data.8
NERC recognizes the benefits to reliability that BES-connected energy storage can provide, and has concluded that no modifications to the Reliability Standards are required to address BES-connected energy storage. With regard to distribution level energy storage facilities (and other DERs), NERC has recognized that the potential impacts on BES reliability presented by higher penetration of these resources must be examined carefully.
While NERC has initiated a process to collect more data and to model these resources through a modification of the Reliability Standards, it remains to be seen whether NERC will receive the requisite cooperation from the "appropriate entities" without engendering a new jurisdictional struggle with owners and operators of distribution systems to which energy storage facilities are connected.
Conference to Be Held on Hybrid Resources
FERC's analysis of issues raised by the development of electric storage resources and their use in electricity markets also extends to consideration of hybrid resources, namely, projects that are comprised of more than one resource type at the same plant location, such as a renewable generator paired with electric storage.
On July 23, 2020, FERC will host a technical conference to discuss technical and market issues prompted by growing interest in hybrid resources. The conference will focus on a generation resource and an electric storage resource paired together as a hybrid resource. FERC's consideration of generation plus storage of hybrid resources appears to be a natural progression from its recent energy storage initiatives, including FERC Order No. 841, which addressed participation of energy storage resources in U.S. wholesale power markets.
FERC will issue a supplemental notice closer to the technical conference date with additional details, including whether it will be held in-person or via teleconference due to COVID-19 concerns.
FOOTNOTES
1 FERC Docket No. ER20-588, comments filed June 1, 2020.
2 A future blog post will explore more fully the issues relating to the treatment of storage as a transmission asset.
3 NARUC, et. al. v. FERC, D.C. Circuit Nos. 19-1142 et al. (pet. filed July 11, 2019).
4 See "NERC 2019 Long-Term Reliability Assessment" ("2019 LTRA") at 7.
5 We will address in a future blog the issue of how energy storage owners and operators select the appropriate functional description (e.g., generation owner or transmission owner) for purposes of compliance registration. Given the myriad qualities that energy storage facilities present, including the ability to inject power into the grid and to provide ancillary services (e.g., regulation), proper registration will continue to pose a challenge for energy storage owners and operators and will require further guidance from NERC.
6 NERC "Distributed Energy Resources, Connection Modeling and Reliability Considerations" (February 2017) at 25.
7 NERC "Reliability Guideline, DER Data Collection for Modeling In Transmission Planning Studies" (March 2020) at chapter 1 page 2. The proposed modifications to the MOD-032-1 requirements will be presented to NERC's "Reliability and Security Technical Committee" for approval in the Fall of 2020.
8 Id.
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