December 6, 2016

FERC Proposes Market Changes for Electricity Storage, Distributed Energy Resources

Holland & Knight Alert
Stephen J. Humes

The Federal Energy Regulatory Commission (FERC) issued on Nov. 17, 2016, a notice of proposed rulemaking (NOPR)1 aimed at more effectively integrating electric storage resources into organized wholesale markets to encourage competition, as well as just and reasonable rates in organized markets. The NOPR would require each regional transmission organization (RTO) and independent system operator (ISO) to revise its tariff to:

  1. establish a "participation model" for storage facilities that, recognizing the physical and operational characteristics of such resources (batteries, flywheels, compressed air, pumped hydro, etc.), would accommodate its participation in the organized wholesale electric markets
  2. define distributed energy resource aggregators (source or sink of power located on a distribution system or behind the customer meter such as distributed generation, batteries, thermal storage and electric vehicles) as a type of market participant that can participate in the organized wholesale electric markets

The NOPR arises in part from answers to six data requests FERC sent in April 2016 to organized market providers about barriers to energy storage device providers. In addition, FERC accepted in June an ISO’s market rules allowing for distributed energy resource aggregators to participate in the ISO’s market. The NOPR only addresses organized markets. Comments are due on Jan. 30, 2017.

Also on Nov. 17, 2016, FERC filed another NOPR that partially overlaps the first NOPR. Arising out of an earlier notice of inquiry, this NOPR2 would require all newly interconnecting large and small generating facilities, both synchronous and nonsynchronous, in both organized and regular markets, to install and enable primary frequency response capability as a condition of interconnection. The requirement would come in the generation interconnection contracts. It does not include nuclear generation. Importantly, the new generating facilities would receive no compensation for complying with the proposed frequency response requirements. Comments will be due on Jan. 24, 2017.

Electricity storage and distributed energy resources have been largely blocked from entering electricity markets by barriers at the interconnection, auction market eligibility and compensation stages. In particular, battery storage resources, which are well-suited for supplying primary frequency response service, have been blocked by compensation issues. Indeed, lack of compensation is the basis for a recent complaint filed against an ISO vis-a-vis battery-supplied frequency response service. At the same time, FERC has been concerned with generators depending on other generators to provide unprofitable frequency control services.



1 Electric Storage Participation in Markets Operated by Regional Transmission Organizations and Independent System Operators, 157 FERC ¶ 61,121 (2016) (Docket Nos. RM16-23-000 & AD16-20-000)

2 Essential Reliability Services and the Evolving Bulk-Power System – Primary Frequency Response, 157 FERC ¶ 61,122 (2016) (Docket No. RM16-6-000)

Information contained in this alert is for the general education and knowledge of our readers. It is not designed to be, and should not be used as, the sole source of information when analyzing and resolving a legal problem. Moreover, the laws of each jurisdiction are different and are constantly changing. If you have specific questions regarding a particular fact situation, we urge you to consult competent legal counsel.

Related Insights