- FERC Gets Another Round on Energy Storage
- April 26, 2017 | Authors: Samina M. Bharmal; Paul F. Forshay; Dorothy Black Franzoni; Jonathan W. Gottlieb; Kyle E. Wamstad
- Law Firms: Eversheds Sutherland (US) LLP - Washington Office; Eversheds Sutherland (US) LLP - Atlanta Office; Eversheds Sutherland (US) LLP - Washington Office; Eversheds Sutherland (US) LLP - Atlanta Office
- On April 13, the Energy Storage Association filed a complaint at the Federal Energy Regulatory Commission against PJM Interconnection, arguing that PJM’s recent changes to how it determines the benefit of a limited-energy frequency regulation resource should be subject to filed rate requirements under the Federal Power Act. Specifically, ESA’s complaint alleges that PJM is dispatching RegD resources, which are typically energy storage sources such as batteries or flywheels, in a single, sustained direction for up to an hour at a time, rather than in energy-neutral intervals of fifteen minutes that the resources were designed to accommodate, to address PJM’s over-commitment of generation. ESA alleges that as a result of PJM’s unapproved changes, energy storage sources are unable to meet their dispatch obligations, may lose revenue, and may experience reductions of up to half of their useful life.
ESA focuses on three mechanisms through which PJM has modified its frequency regulation market—changes to the benefits factor it uses to compare traditional and RegD resources, a cap on the use of limited-energy sources, and the abandonment of energy-neutrality in the dispatch signal for limited-energy sources. These mechanisms comprise the PJM practices that ESA alleges discriminate against energy storage sources. According to ESA, because these mechanisms “significantly affect the rates, terms and conditions of jurisdictional services” under the Federal Power Act and are capable of being described clearly in PJM’s tariff, PJM must file with the Commission a revised tariff to implement these changes; it cannot implement them through its business practices manual.
ESA argues that by ignoring the energy-neutrality component of the RegD dispatch signal, PJM is ignoring the operational parameters of limited-energy sources. Energy storage sources designed for fifteen minutes of single-direction charge or discharge are degraded by PJM’s hour-long RegUp (injecting power) or RegDown (drawing power) dispatch orders. If a resource cannot meet its performance obligations, the owners of the resource suffer a penalty or reduced compensation. The only option left for these sources, according to ESA, is to derate or undergo fundamental redesign.
ESA seeks relief from the Commission in three specific areas:
- Direct PJM to file with the Commission tariff revisions explaining its “benefits factor”;
- Direct PJM to eliminate a cap for energy storage sources used in frequency regulation; and
- Direct PJM to file with the Commission tariff revisions that set forth the parameters governing the design of its dispatch signal to energy storage sources.
The Commission has expressed increasing interest in removing barriers to entry for energy storage sources. Previously, the Commission rejected an effort by ISO New England to use a single dispatch system because it would impermissibly disregard “the operational characteristics of storage sources—namely, limited energy.” More recently, the Commission issued a policy statement declaring its support for removing barriers to entry for energy storage and distributed energy sources and initiated a rulemaking to address removal of barriers to entry for energy storage sources in wholesale electric markets.
While we anticipate interested stakeholders to respond to ESA’s complaint and for FERC staff members to evaluate the arguments made, we do not foresee any action being taken by the Commission in the near future. The Commission continues to lack a quorum, and without a quorum, the Commission cannot act on ESA’s requests. As a result, energy storage sources participating in PJM’s frequency regulation market remain subject to the unilateral revisions to PJM’s dispatch signals, and the reliability of revenues in PJM’s frequency regulation market remains uncertain for prospective energy storage sources.