5 Key Takeaways from FERC's Recent Energy Storage Order

The Federal Energy Regulatory Commission’s (FERC’s) recent Order 841, “Electric Storage Participation in Markets Operated by Regional Transmission Organizations [RTOs] and Independent System Operators [ISOs]” (the “Order”), has the potential to create major new opportunities for storage resources in the RTO/ISO markets.

The Order requires RTOs and ISOs to create new market rules to allow for the participation of storage resources and sets forth minimal requirements that each RTO/ISO must meet when proposing market rules, while leaving some flexibility in implementation.

Sarah Kozal
Sarah Kozal

Brian Orion
Brian Orion

A number of ISOs/RTOs submitted motions for clarification and requests for rehearing in March, though their comments were otherwise generally supportive of the Order. FERC has since issued a tolling order to allow for more time to consider these motions and requests. As we await FERC’s response, here are our five key takeaways from the Order as it currently stands.

New Revenue Opportunities for Storage. With the Order, there is now a pathway for energy storage to be able to participate in wholesale markets on something like a level playing field with other resources. Market rules, for example, will now need to include storage-specific bidding parameters such as state of charge and allow for market participation of storage assets as both supply and demand resources. For the storage industry, this can open up new opportunities for multiple revenue streams in the capacity, energy, and ancillary services markets. At the same time, storage resources will not be precluded from participating in existing programs, such as demand response.

Market Access Does Not Always Lead to More Storage Projects. Opening the door for storage participation is not the same as saying more storage will be built. Like any energy project, it can be hard to finance storage in the absence of fixed revenue contracts. Today, state procurement mandates are largely driving the storage market and how much more storage will be built on the basis of wholesale market access is hard to predict. This will depend in part on how energy storage companies choose to compete in wholesale markets. This will especially be true if wholesale energy prices alone do not make a project cost-effective and the project needs access to multiple revenue streams.

ISOs/RTOs Are Generally Supportive of the Order but Have Sought Further Guidance. A number of the ISOs/RTOs submitted motions for clarification on certain implementation issues, asking for clarifications related to applicability in their specific markets and their role in implementation when there could be overlap with state authority. This suggests that while the ISOs/RTOs have already begun to consider these issues in the context of their unique regions, the interaction with state jurisdiction at the distribution level and the opportunity to participate at both the wholesale and distribution level will be key to driving more storage procurement. Following the Order, we can also expect new voices in ISO/RTO stakeholder proceedings that will address the technical capabilities of new technologies.

Compliance Filings Are Due in December but Expect Some Delays. While FERC stated that the Order’s allowance for as much regional flexibility as possible is intended to assist in meeting the compliance and implementation deadlines, it is unclear whether RTOs/ISOs will have enough time to initiate robust stakeholder initiatives. Especially in markets with no existing programs, unforeseen stakeholder issues could slow the process. The Midcontinent ISO has already requested a six-month extension of the December 3 compliance deadline in consideration of this time crunch as it relates to the distributed energy resource technical conference held in April.

Individual ISO/RTO Stakeholder Processes Will Be More Important to Track. Once FERC responds to the motions for clarification, the ISOs/RTOs will work on implementation details. It will be important to follow each one to see how unique details play out in each ISO/RTO region. For example, in light of MISO’s motion, we anticipate new storage market participation rules that go beyond FERC’s Order to address issues specific to distributed energy resources. The California ISO will be another to watch, though its filings have stated that it already largely complies with the requirements of the Order, because of recently identified operational issues associated with high levels of renewable integration and the opportunities storage can provide to solve them.

As the Order stands now, we can expect compliance filings on December 3 of this year with implementation due 365 days after that. FERC’s tolling order provides for additional time for consideration of motions for clarification and requests for rehearing, and thus the 30-day timeframe in which FERC has to respond has been extended without deadline. In the meantime, storage companies and policy makers will continue to digest the new Order and plan for what comes next. ■

Brian Orion is of counsel and Sarah Kozal is an associate in the Energy Development Group of Stoel Rives LLP, where they assist clients in the wind, solar, energy storage, electric vehicle, and similar industries.

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