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Electricity Storage Resource Issues Coming to the Fore at FERC

Electricity storage technologies are playing a big part in the growth of renewable resources and the shape of the grid of the future. For example, batteries are a well-known back-up to renewables when the sun isn’t shining or the wind isn’t blowing.  But large-scale batteries, as well as flywheels, are entering the field to provide additional services as clean and fast-response resources for grid operators to help keep the bulk power system in balance.

The introduction of storage resources as grid service providers is raising important issues, such as how their services should be classified (i.e., as transmission or generation) how they should be compensated and whether they raise operational concerns. How these nuts-and-bolts questions are resolved will affect the extent of their penetration in grid services markets.

FERC has jurisdiction over the terms and conditions of services on the U.S. interstate transmission grid, and the Commission is poised to address some of these storage issues in two upcoming proceedings.  One of them is a staff technical conference scheduled for November 8, 2016, part of a generic proceeding to address operational and other issues regarding how storage resources are used in the organized wholesale electricity markets (i.e., Regional Transmission Organizations).  The second proceeding is a pending complaint by a utility-owner of a large battery resource alleging that the RTO tariff does not properly compensate its resource or provide for appropriate operational practices.

The technical conference

Storage resources may be used to provide what are classified as transmission services and other types of grid-support and standard wholesale electricity services. Theagenda for FERC’s November 8 technical conference focuses on distinguishing between these services and on a number of operational and compensation issues. The agenda provides for panel discussions on three major topics.

Using storage resources for transmission services. Under FERC policy, transmission services are compensated through cost-based rates, which place a ceiling on compensation but also guarantee reasonable cost recovery because the service is provided by the monopoly transmission operator.  Thus, defining what storage-provided services may be classified as transmission is important.  FERC has recognized two storage-provided services that may be classified as transmission — voltage support and thermal overload protection.  FERC is interested in how to define storage-provided transmission services and then identify any additional services consistent with that definition.  FERC also wants to discuss the operational implications of using storage resources as both transmission assets and as providers of other wholesale electricity services, such as power sales.

Using storage resources for grid-support services. Unexpected changes in load or generation supply (such as the unexpected retirement of a generator) can cause reliability  problems on the grid that require an immediate stop-gap solution until a permanent one can be put in place.  For example, the grid operator will sometimes need to enter a cost-of-service based contract with a retiring generator to require it to remain on line a bit longer, even though the unit is uneconomic and the contract price is above market levels.  Due to their modularity and mobility, storage resources may be quickly deployable and thus compete to provide a least-cost solution to this short-term problem.  FERC wants to discuss this potential and the associated issues that need to be addressed.

Using storage resources for multiple services. As mentioned earlier, a storage resource may be capable of providing more than one type of service, and perhaps may do so simultaneously.  FERC wants panelists to discuss, among other things, the types of services that may be provided at the same time, the types of resources that can provide simultaneous services, how services should be priced in such instances and how resources that simultaneously provide different services should be considered in grid planning models.

Holding a technical conference on these issues is an indication that FERC is considering  addressing them in future policy determinations.  The conference will be transcribed and webcast.

The complaint

Indianapolis Power & Light (IPL) owns a grid-scale lithium ion battery-based energy storage system that is capable of providing nearly instantaneous Primary Frequency Response service to the Midcontinent ISO (MISO), the region’s RTO.  This critical service helps to maintain the standard system frequency by injecting energy into the grid when the frequency gets too low and withdrawing energy when it gets too high.  IPL’s facility is capable of providing other grid services, too.

In a recent complaint, IPL raises the following issues:

  • The MISO tariff does not adequately compensate providers of Primary Frequency Response service because the service is bundled with another service, but is in fact distinct from such other service. The complaint argues MISO should pay for the service under a separate schedule at the real-time market price for energy, with a multiplier to reflect fast performance and a penalty to reflect non-performance.
  • The MISO tariff does not contain appropriate dispatch protocols for lithium ion batteries and other fast resources. The current protocol was developed for flywheels only and would actually degrade the useful life of lithium batteries, interfere with their charging management, and degrade the benefits they provide.
  • Batteries should be paid, and not required to pay, the market price when withdrawing energy in response to a frequency deviation. Withdrawing energy provides a service by increasing system frequency when it is too low.
  • The MISO tariff limits the services that storage resources may provide. The limitations should be removed and instead the tariff should allow any resource to provide the services it is technically capable of providing.

Comments on the complaint are due November 10, 2016.   FERC is under no time limit to act on the complaint but IPL requested expedited action.

© 2022 Covington & Burling LLPNational Law Review, Volume VI, Number 309
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About this Author

Wilbur C. Earley, Energy attorney, Covington Burling
Energy Policy Advisor

Drawing on has over 39 years of experience in the energy industry, Bud Earley, a non-lawyer senior advisor, provides analysis and advice on a wide range of federal and state energy regulatory issues, including transaction and rate issues, regional transmission organization (RTO) tariffs and rules, interconnection, retail choice and demand response for electricity customers, a natural gas pipelines and hydroelectric facility licenses, and LNG export authorizations.

202-662-5434
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