FERC Final Rule Boosts Electric Storage Participation in Organized Wholesale Electric Markets

By Marcia Stanford and Jonathan Trotta

On February 15, 2018, the Federal Energy Regulatory Commission (FERC) issued Order No. 841, a final rule designed to facilitate greater participation by electric storage resources (including batteries, flywheels, compressed air, pumped-hydro, etc.) in organized wholesale electric markets operated by Regional Transmission Organizations (RTOs) and Independent System Operators (ISOs). The final rule signals FERC's view that electric storage is quickly gaining commercial viability, and is poised to play a vital role in the grid of the future by helping to accommodate increased demand for clean, renewable resources, and by providing numerous system reliability and consumer benefits.

Electric Storage Resource-Related Tariff Changes

Order No. 841 requires RTOs/ISOs to revise their tariffs to develop a new participation model for electric storage resources, which FERC defines as resources "capable of receiving electric energy from the grid and storing it for later injection of electric energy back to the grid," regardless of storage medium, whether located on the interstate transmission grid, the distribution system, or behind the meter. A "participation model" refers to distinct tariff provisions created by RTOs/ISOs for a particular type of resource.

The new electric storage participation model to be developed by the RTOs/ISOs must:

  • Ensure that a resource using the electric storage participation model is eligible to provide all capacity, energy, and ancillary services that it is technically capable of providing
  • Ensure that a resource using the participation model can be dispatched and can set the wholesale market clearing price as both a wholesale seller and buyer (consistent with rules governing the conditions under which a resource can set the wholesale price);
  • Account for the physical and operational characteristics of electric storage resources through bidding parameters or other means
  • Establish a minimum size requirement for participation in RTO/ISO markets that doesn't exceed 100 kW
  • Require that the sale of power from an RTO/ISO market to an electric storage resource that the resource resells back to that market be at the wholesale LMP

By participating in RTO/ISO-operated wholesale markets, energy storage resources will become regulated by FERC under the Federal Power Act.

RTOs/ISOs must file their proposed tariff revisions with FERC within 270 days of Order No. 841's publication in the Federal Register and they will have an additional 365 days from that date to implement these changes.

Distributed Energy Resource Aggregations Technical Conference

FERC ultimately declined to adopt the distributed energy resource aggregation-related reforms contained in its November 2016 Notice of Proposed Rulemaking, in which it proposed to allow distributed energy resource aggregators to participate in RTO/ISO markets. In the final rule, FERC concludes that more information is needed before it can finalize those proposals, and it therefore announced that it will hold a technical conference on April 10–11, 2018, in a new Docket No. RM18-9, to gather more information to help FERC determine what action to take on its distributed energy resource aggregation proposals. The conference will also cover technical considerations for the bulk power system related to distributed energy resources.

Order No. 841 was unanimously approved by all five FERC Commissioners, four of whom released separate supportive statements available here: Commissioner Cheryl LaFleur, Commissioner Neil Chatterjee, Commissioner Robert Powelson, Commissioner Richard Glick.

For more information on Order No. 841, or the Commission's policies affecting electric storage resources, please contact Jim Bertrand, Tom Burman, Tammie Ptacek, Jonathan Schneider, Guy Smith, Marcia Stanford, Jonathan Trotta, or the Stinson Leonard Street contact with whom you regularly work.

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