New FERC Rule Creates New Opportunities for Energy Storage

A final rule issued last week by the Federal Energy Regulatory Commission (FERC) to foster competition and transparency in ancillary services markets creates new opportunities for energy storage technologies to help transmission customers self-supply their own Regulation and Frequency Response service requirements while opening up certain ancillary services markets to all generators selling at market-based rates.

Order No. 784 issued on July 18 (" Third-Party Provision of Ancillary Services; Accounting and Financial Reporting for New Electric Storage Technologies") revises Part 35 of ancillary services requirements under the pro forma Open-Access Transmission Tariff (OATT) and other accounting and reporting requirements. Specifically, the rule reflects reforms to its "Avista" policy, which restricted third parties from selling ancillary services at market-based rates to public utility transmission providers.

As attorneys at law firm Stoel Rives LLP explained on Tuesday, before the new rule a transmission customer could self-supply—as an alternative to purchasing—regulation and frequency response services only from resources that are comparable to those used by the public utility transmission provider. But that self-supply option lacked "material financial benefits" because, even though resources for self-supply could be procured, the customer was still required to purchase a volume of regulation and frequency response service that was based on the mix of regulation resources used by the transmission provider. "As a result, there was little benefit to the customer in choosing resources that were faster and/or more accurate than the transmission provider’s resources. This sometimes led the customer to either over- or under-purchase its own regulation resources," the law firm says.

Effective this November, the new rule requires each public utility transmission provider to add to its OATT Schedule 3 a statement that declares "it will take into account the speed and accuracy of regulation resources in its determination of reserve requirements for Regulation and Frequency Response service."

This may allow self-supplying customers to buy a smaller volume of regulation resources (compared to purchasing all reserves through OATT service) by using energy storage resources that are faster and/or more accurate than the transmission provider’s resources, the attorneys said. "For self-supplying customers, the real impact of this opportunity will come down to a clear comparison between a self-supplying customer’s regulation resources and those of the transmission provider, and the balance between the cost of the customer’s resources and the savings that result from having to carry a smaller volume of reserves."

By reforming FERC’s “Avista” policy, the new rule also lifts many restrictions that have prevented third parties from selling ancillary services at market-based rates to a transmission provider that is purchasing ancillary services to satisfy its own OATT requirements. "Specifically, under Order No. 784, generators with market-based rate authority for sales of energy and capacity will be permitted to sell Energy and Generator Imbalance services and Operating Reserves services to transmission providers in the same balancing authority area, or a different balancing authority area, provided those areas have adopted intra-hour scheduling for transmission service," the law firm explains.

A generator seeking to sell Operating Reserves services at market-based rates must first explain to FERC how scheduling practices in its region support Operating Reserves, the rule mandates, however. Generators may also sell Reactive Supply and Voltage Control service and Regulation and Frequency Response service to a public utility at rates that do not exceed the utility’s OATT rate, or at market-based rates acquired through competitive solicitation.

Finally, FERC revised accounting and reporting requirements under its "Uniform System of Accounts" for public utilities and licensees and its forms (Form No. 1, No.1-F, and No. 3-Q), statements, and reports to "better account" for and report transactions associated with the use of energy storage devices in public utility operations.

Order No. 784 "addresses energy storage by creating reporting mechanisms to track the installation, operations and maintenance costs for energy storage," said the Electricity Storage Association (ESA) last week. "Enabling this information to be available to regulators will ensure transparency as more projects are deployed."

The ESA Advocacy Council had backed the rule in responses to the Notice of Inquiry and Notice of Proposed Rulemaking. “We applaud FERC for its proactive approach to ensuring that markets are open to the characteristics and services that energy storage technologies can provide the electric grid,” said Brad Roberts, executive director of ESA. “The expansion of [FERC’s October 2011-issued] order 755 principles to the non [independent system operator] regions recognizes the value of storage’s speed and accuracy for frequency regulation and will help accelerate the deployment of storage resources in these regions.”


Sources: POWERnews, FERC, Stoel Rives, ESA

Sonal Patel, Senior Writer (@POWERmagazine, @sonalcpatel)

NOTE: This story was originally published on July 23