January 25, 2022

Volume XII, Number 25

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January 24, 2022

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FERC Proposes Rules to Remove Barriers to Electric Storage and Other Distributed Resources

Electricity storage resources are shaping the grid of the future.  Large-scale batteries and flywheels are now able to provide services to grid operators to help keep the bulk power system in balance.  Electric storage resources’ ability to absorb and discharge electricity provides them with significant operational flexibility, and they can be designed to provide a variety of grid services.  FERC has jurisdiction over the terms and conditions of services on the U.S. interstate transmission grid, and, as described recently on this blog, the Commission has been addressing issues to facilitate the integration of storage resources into grid operations.

At its public meeting on November 17, the Commission approved a Notice of Proposed Rulemaking (NOPR) to remove barriers to the participation of storage resources and distributed energy resource aggregations in the organized wholesale electricity markets administered by Regional Transmission Organizations (RTOs).  The Energy Storage Association calls FERC’s proposal a  “pivotal opportunity” that “opens a pathway for accelerating energy storage deployment” and accelerates the “transition to a more resilient, flexible, and sustainable grid.”

Under the NOPR, each RTO must revise its tariff in two ways to address the inclusion of storage resources in their markets.

Market rules for storage resource participation

First, each RTO tariff would be required to establish market rules that recognize the physical and operational characteristics of electric storage resources and accommodate their participation in the organized wholesale electric markets.  Without such tailored rules, storage resources are forced to participate in RTO markets under market rules designed for other types of resources.  Establishing market rules that acknowledge the unique attributes of storage resources will enable their effective participation in the organized markets.

While each RTO is able to adopt its own set of rules, those rules must:

Ensure that electric storage resources are eligible to provide all services that they are technically capable of providing.  Some organized wholesale markets limit the services that electric storage resources may provide.  For example, smaller electric storage resources are  generally restricted to participating in the markets as demand response, which can limit their ability to employ their full operational range and prohibit them from injecting power onto the grid.

Include bidding parameters that reflect the physical and operational characteristics of storage resources.  Bidding parameters allow a resource to identify its physical and operational characteristics so that the RTO can model and dispatch the resource consistent with its operational constraints.  Current rules that require electric storage resources to use bidding parameters developed for traditional electric generators or other supply resources may fail to effectively utilize storage resources.

Ensure that storage resources can be dispatched and can set the wholesale market clearing price as both a wholesale seller and wholesale buyer.  The ability of electric storage resources both to receive and provide electricity positions them to be both buyers and sellers.    Improving electric storage resources’ opportunity to participate as both sellers of services and  buyers of energy could improve market efficiency by allowing the RTO to dispatch them in accordance with their most efficient use (i.e., as supply when the market clearing price for energy is higher than their offer to sell and as demand when that price is lower than their bid to buy).

Set a minimum size requirement for participation in the organized wholesale markets that does not exceed 100 kW.  Electric storage resources range in size from 1 kW to 1 GW, and most of them tend to be under 1 MW.  Current market rules may exclude the smaller resources by restricting storage resources from participating based on minimum size requirements designed for different types of resources.  FERC’s proposal would allow storage resources to participate in the markets, either on their own or, for those under 100 MW, as part of an aggregation of  resources.

Specify that the sale of energy from the market to a storage resource must be at the wholesale market clearing price.  According to the NOPR, there is some uncertainty and disagreement in the industry regarding the price a storage resource should pay for energy from the market that is used to charge the resource for eventual resale back to the market.  The NOPR says that FERC previously found that the sale of energy from the grid that is used to charge electric storage resources, for later resale into the market, constitutes a jurisdictional sale for resale.  Accordingly, the NOPR requires each RTO’s tariff to provide that such sales must be at the wholesale market clearing price for energy.  Sales in the other direction, from the resource to the market, also receive the market price at the time of the sale.

Market rules for distributed energy resource aggregators

Second, the NOPR requires RTOs to allow distributed energy resource aggregators to participate in their markets.  Some individual distributed energy resources [1] may be too small to participate directly in the organized wholesale electric markets on a stand-alone basis. They may not meet the minimum size requirements to participate and may have difficulty satisfying all of the operational performance requirements.  According to the NOPR, allowing these resources to participate in markets through distributed energy resource aggregations can help to remove these barriers to their participation by providing a means for them, in the aggregate, to satisfy minimum size and performance requirements that they could not meet on a stand-alone basis.

The NOPR would require each RTO tariff to allow distributed energy resource aggregations, including electric storage resources, to participate directly in the organized wholesale electric markets.  Specifically, each RTO must recognize distributed energy resource aggregators as a type of market participant and allow them to register distributed energy resource aggregations under the set of resource market rules that best accommodates the physical and operational characteristics of the aggregation.  For example, a distributed energy resource aggregation would register as a generation asset if the set of market rules for generation assets best reflects the aggregation’s physical characteristics.

To accommodate the participation of distributed energy resource aggregations in organized wholesale electric markets, the NOPR would require each RTO to establish market rules regarding certain topics.  In addition to rules addressing information, metering and telemetry issues, the NOPR requires market rules to address the following:

Eligibility to participate in the market through an aggregator. To accommodate the participation of new distributed energy resources as technology continues to evolve,  the NOPR  proposes that no RTO tariff may prohibit market participation of any particular type of technology through a distributed energy resource aggregator.

Locational requirements for distributed energy resource aggregations.  Some RTO/ISO market rules permit aggregation only for those resources that are located behind the same point of interconnection or at a single pricing node. While there may be legitimate reasons for limits, such as a concern that dispatching geographically dispersed resources as a single resource may exacerbate a transmission constraint or otherwise cause a reliability concern, FERC is concerned that some of these limits may be too stringent.  Accordingly, the NOPR proposes that each RTO tariff set locational requirements for distributed resources to participate in a distributed energy resource aggregation that are as geographically broad as technically feasible.

Coordination.  Because distributed resources such as storage are connected to the grid at the distribution level, not the transmission level, their successful large scale deployment will require close coordination between the RTOs, distribution control centers and the resource aggregators.  Accordingly, the NOPR requires each RTO tariff to include provisions for such coordination, specifically in such areas as registration of new resources and operations.

Comments on the proposed rule are due 60 days after publication in the Federal Register.


[1] FERC defines a distributed energy resource as a source or sink of power that is located on the distribution system, any subsystem thereof, or behind a customer meter.

© 2022 Covington & Burling LLPNational Law Review, Volume VI, Number 327
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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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