On February 15, 2018, the Federal Energy Regulatory Commission (FERC) issued Order No. 841, Electric Storage Participation in Markets Operated by Regional Transmission Organizations and Independent System Operators (Final Rule). The Final Rule is designed to better integrate electric storage resources into the wholesale energy markets operated by Regional Transmission Organizations (RTOs) and Independent System Operators (ISOs) through the implementation of participation models with standardized minimum requirements.
The Final Rule represents another step in FERC’s efforts to meaningfully increase the potential for a growing class of electric storage providers, ranging from flywheels, batteries, and compressed air to pumped-storage hydroelectric facilities, to expand their participation in wholesale energy markets, and by extension promote additional investment in energy storage technology.
With one exception, the Final Rule generally follows FERC’s Notice of Proposed Rulemaking (NOPR) issued November 17, 2016, discussed in our prior client alert, available here. Specifically, the Final Rule provides that RTOs/ISOs must develop participation models that:
- ensure that electric storage resources are eligible to provide all capacity, energy, and ancillary services that they are technically capable of providing;
- ensure that electric storage resources can be dispatched and can set the wholesale market clearing price as both a wholesale seller and wholesale buyer;
- account for the physical and operational characteristics of electric storage resources through bidding parameters or other means;
- establish a minimum size requirement for market participation that does not exceed 100 kW; and
- establish that the sale of electric energy from an RTO/ISO market to an electric storage resource that the resource then resells back to those markets must be at the wholesale locational marginal price.
Citing a lack of sufficient information, FERC elected not to adopt aspects of the NOPR which would have required RTOs/ISOs to revise their tariffs to allow distributed energy resource aggregators to participate directly in organized wholesale energy markets. Instead, FERC staff will convene a technical conference on April 10 and 11, 2018 in Docket No. RM18-9-000. The technical conference will discuss not only potential distributed energy aggregation reforms, but also broader technical issues associated with distributed generation’s role in the bulk power system.
Commenting on the technical conference, Commissioner Robert F. Powelson expressed his interest in exploring the “nexus between wholesale and retail rate structures, operational characteristics and system reliability, and cost allocation.” Commissioner Cheryl A. LaFleur also weighed in on the scope of the technical conference, stating her interest in “ensuring just and reasonable payment for distributed services” including developing a “crisp understanding of who pays what to whom for what,” along with examining the issue of “operational coordination” between transmission and distribution functions.
RTOs/ISOs will be required to submit any tariff changes needed to implement the Final Rule within 270 days of its publication in the Federal Register. The Final Rule provides RTOs/ISOs a further 365 days to implement any such new tariff provisions.
FERC’s Final Rule is available here. As energy storage technologies continue to advance, FERC’s rules and policies also will evolve to facilitate greater entry of storage resources into the market in a manner that recognizes and values their unique operational attributes. We also anticipate that energy storage resources will play a significant role in FERC’s ongoing evaluation of the resilience of the bulk power system.
Please contact one of the authors below or your Baker Botts relationship attorney with any questions.
# # #About Baker Botts L.L.P.
Baker Botts is an international law firm of approximately 725 lawyers practicing throughout a network of 14 offices around the globe. Based on our experience and knowledge of our clients’ industries, we are recognized as a leading firm in the energy and technology sectors. Throughout our 179-year history, we have provided creative and effective legal solutions for our clients while demonstrating an unrelenting commitment to excellence. For more information, please visit BakerBotts.com.