Impact of FERC Orders 841 and 841-A on Energy Storage Participation
In recent years, the electric industry landscape has changed due to the proliferation of Distributed Energy Resources (DERs) and active demand-side participation, which have had operational and financial impacts on both distribution and bulk power/market operations, and these trends are blurring the traditional transmission-distribution interface. However, with proper regulatory provisions, these potentially adverse impacts can be turned into cost-effective solutions that mutually benefit DER owners and power system operators.
Traditionally, consumer-side supply/demand is under the purview of state and local regulatory entities but the recent FERC Orders have pertained to the participation of demand-side resources in bulk power markets. Although the first quarter of 2019 saw the U.S. energy storage market establish a new growth record with expectations to grow further in the coming years, the participation of energy storage as a DER and active demand-side asset in the market, as established in FERC Orders 841 and 841-A, is still a contending issue.
FERC Order 841, issued on February 15, 2018, requires Independent System Operators (ISOs) and Regional Transmission Organizations (RTOs) to revise their market rules to facilitate the participation of storage in the provision of energy, capacity, and ancillary services in their respective markets. As a result of a FERC Technical Conference on Order 841 that was held on April 10-11, 2018, a new FERC docket was initiated extending the Order to all DERs. Check out our previous blog from our Smart Grid expert, Dr. Ali Ipakchi, where he discusses the potential effects of DERs on the bulk power system and highlights takeaways from the April FERC conference.
The ISOs/RTOs submitted compliance filings on December 3, 2018, and will have one year to implement the changes into their tariffs thereafter. Several ISOs/RTOs requested for clarification on some elements of the FERC Order, including the requirements to reduce the minimum size for participation to 100 kW, provision of capacity from storage assets for a duration of two hours, and pricing of storage charge and discharge at the wholesale Locational Marginal Pricing (LMP). Some ISOs/RTOs requested an extension for implementation (e.g., NYISO requested an extension for implementation until May 1, 2020). California Independent System Operator (CAISO) filed the fewest revisions among the grid operators, including reducing the current 500 kW minimum size to 100 kW in its tariff.
Not all ISOs/RTOs have formal capacity markets, but those who do, responded differently to the two-hour capacity requirement. For example, storage offering capacity would have to continuously supply energy for two hours in ISO New England (ISO-NE), four hours in New York Independent System Operator, Inc. (NYISO), and 10 hours in PJM Interconnection LLC. On May 15, 2019, PJM indicated it sees the FERC Order as a threat to demand resource penetration in markets. PJM also stated they would not be lowering its 10-hour discharge requirement to two hours as part of its compliance with FERC Order 841 to avoid displacement of demand response resources.
Some intervenors challenged FERC’s authority on demand-side asset participation as these have traditionally been under state and local regulatory jurisdictions and requested that individual states within an ISO/RTO footprint should be given the right to opt out of Order 841 for Behind-the-Meter (BTM) storage facilities.
FERC issued Order 841-A on May 16, 2019, which clarified some questions asked in ISO/RTO compliance filings and denied the request by some intervenors to give the individual states within an ISO/RTO footprint the right to opt out of Order 841 for Behind-the-Meter (BTM) storage facilities. Whether this jurisdictional issue goes away with FERC Order 841-A or finds its way to Supreme Court, similar to FERC Order 845, remains to be seen.
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To see how our comprehensive DERMS solution can help your utility capitalize on the benefits from distributed resources, reap profits in grid operations, and ensure customer satisfaction, request the OATI webSmartEnergy brochure here or contact our Smart Grid experts at Sales@oati.net.