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FERC Addresses Electric Storage Complaint

previous post on this blog reported a complaint by an electric storage resource owner that FERC must reform a Regional Transmission Organization’s (RTO’s) tariff with respect to the treatment of storage batteries.  In response, FERC issued an Order that requires the RTO to adopt rules that allow storage resources to participate in all of its markets and that account for those resources’ physical and operational characteristics.  The Order is significant because it breaks down barriers to the participation of storage resources in energy, capacity and ancillary services markets in an RTO whose rules are shown to violate the policies proposed in FERC’s Storage NOPR.

The value of storage resources to the grid

The reliable operation of the North American alternating current (AC)  grid depends on maintaining a frequency near 60 Hertz (Hz).  If frequency deviates too far from  60 Hz, the grid can become unreliable.  Batteries’ and flywheels’ unique ability to quickly absorb and discharge electricity provides them with significant operational flexibility to help keep the bulk power system in balance.  Importantly, these electric storage devices can also provide a variety of additional services in bulk power markets.

The complaint and the Order

Indianapolis Power & Light (IPL) owns a grid-scale lithium ion battery-based energy storage system that, it claims, is capable of providing a variety of grid support services to the Midcontinent ISO (MISO).  In its complaint, IPL argued that the MISO tariff limits storage resources to providing only one type of service (regulation service) but subject to a dispatch protocol developed for flywheels that is not appropriate for lithium ion batteries and other fast resources.  More importantly, IPL’s battery facility is technically capable of providing services in addition to regulation.  For example, the facility can act like a demand response resource and supply energy and other services in MISO’s markets.  IPL asserted the tariff should allow any resource to provide the services it is technically capable of providing.

FERC agreed with IPL, finding that MISO’s tariff unnecessarily restricts competition by preventing storage resources from providing all the services they are technically capable of providing, which could lead to unjust and unreasonable rates.  The Order says that “electric storage resources…should not be required to participate in MISO’s markets by using rules that were designed for other types of resources….because those participation models do not accommodate the unique features of electric storage technologies” and that “failure to recognize the unique physical and operational characteristics of electric storage resources could unnecessarily restrict competition by preventing electric storage resources from providing all the services that they are technically capable of providing, which could lead to unjust and unreasonable rates.”

The Order finds that IPL has met its burden to show that the MISO Tariff is unjust, unreasonable, and unduly discriminatory or preferential.  Accordingly, FERC orders MISO “to remedy its unjust and unreasonable Tariff to provide Indianapolis Power with relief” and make a compliance filing within 60 days.  The Order notes, however, that the Commission has not made any final determinations in its Storage NOPR proceeding, which proposes to require the RTOs to establish rules that recognize the physical and operational characteristics of storage resources and accommodate their participation in all markets in which they are technically capable of participating.

FERC rejected several parts of the complaint in which IPL alleged that certain MISO tariff provisions regarding compensation and dispatch protocols adversely affect storage resources.  These issues are likely to be addressed again in the context of the tariff provisions MISO files in compliance with the Order.

spokesperson for IPL said that “(t)echnological advances in this field happen rapidly [and] understanding benefits and the regulatory changes needed to realize all these benefits can take years.”

© 2019 Covington & Burling LLP

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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