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FERC Adopts Rules on Energy Storage Participation in Wholesale Markets, Frequency Response; Calls for Technical Conference on Distributed Energy Resource Aggregation

On February 15, 2018, the Federal Energy Regulatory Commission (Commission) voted to amend its regulations under the Federal Power Act (FPA) to remove what it perceives as barriers to the participation of electric storage resources in the wholesale capacity, energy, and ancillary service markets managed by Independent System Operators (ISOs) and Regional Transmission Organizations (RTOs). The Chairman of the Commission emphasized that the final electric storage rule is meant to be consistent with the Commission’s “all of the above” philosophy for the U.S. energy source mix, and to help address and improve grid resiliency. The Commission will require each RTO and ISO to establish a participation model for energy storage resources, which is to consist of market rules that facilitate the participation of electric storage resources in the ISO/RTO market in a manner consistent with the physical and operational characteristics of such resources.

While allowing each ISO/RTO flexibility to satisfy the requirements in its own way, the Commission requires that each participation model:

  1. ensure the eligibility to provide all capacity, energy, and ancillary services that each resource using the participation model is technically capable of providing in the ISO/RTO market;
  2. ensure that each resource using the participation model can be dispatched and set the wholesale market clearing price as both a wholesale seller and wholesale buyer, consistent with existing market rules that govern when a resource can set the wholesale price;
  3. account for the physical and operational characteristics of electric storage resources through bidding parameters or other means; and
  4. adopt a minimum size requirement for participation in ISO/RTO markets.

Each ISO/RTO also must specify that sales of electric energy from the ISO/RTO market to an electric storage resource that resells back to the same market must be at the wholesale locational marginal price.  The final rule will take effect ninety (90) days from the date of its publication in the Federal Register. The Commission ordered ISOs and RTOs to submit tariff revisions necessary to implement the new rules for energy storage resources within 270 days of publication of the rule in the Federal Register, and directed implementation of the tariff revisions after a further 365 days. 

The final rule reiterated the Commission’s commitment to removing barriers to the participation in ISO and RTO markets by distributed energy resource aggregations, but the Commission said it needs more information before it can adopt regulations in that area. Therefore, rather than taking final action on the proposed distributed energy resource aggregation reforms proposed in 2016, the Commission announced it will continue to explore the proposed distributed energy resource aggregation reforms and established a technical conference for that purpose in a new docket, Docket No. RM18-9. The Commission issued a Notice of Technical Conference in Docket No. RM18-9-000, to take place at the Commission on April 10-11, 2018, and posed questions related to the participation of distributed energy resource aggregations in the ISO/RTO markets. Requests to speak at the technical conference are due March 15, 2018.

Also on February 15, 2018, the Commission adopted a final rule in Docket No. RM16-6 that will require all new generation resources interconnecting with the grid to provide frequency response service. That final rule will apply to energy storage resources, although the Commission adopted some special provisions for those resources. The frequency response final rule will take effect seventy (70) days from the date of its publication in the Federal Register.

If you have any questions about these final rules, the technical conference on distributed energy resource aggregations, or energy storage more generally, please contact us at (202) 393-1200.