On November 19, 2015, the Federal Energy Regulatory Commission (FERC or the Commission) hosted an Energy Storage Panel discussion as part of its regular monthly Commission Meeting (Docket No. AD16-12-000). The Commission invited interested organizations involved in the energy storage industry to make presentations to the Commission. The presenters included Dr. Imre Gyuk, Program Manager of the Office of Energy Storage Research of the Department of Energy (DOE), Lorenzo Kristov from the Market & Infrastructure Policy Department of the California ISO (CAISO), Kiran Kumaraswamy of AES Energy Storage (AES), Mark Irwin of Southern California Edison (SCE), and Jason Burwen of the Energy Storage Association (ESA).
This FERC-initiated panel discussion is both very significant and somewhat unusual. The Commission sought industry input on the importance of energy storage. The speakers, drawn from different sectors of the industry, provided insights on the opportunities and challenges presented by energy storage. The Commission invited representatives who could provide differing perspectives – a government research unit, an independent system operator, a developer, an investor-owned utility, and a trade association. Thus, DOE provided an overview of the various energy storage technologiesalong with their benefits and shortcomings; CAISO provided the challenges and opportunities of incorporating energy storage into the grid; AES, an energy storage developer, provided the significant value proposition of energy storage; SCE provided the perspective of a utility that had to incorporate energy storage in its business; and; finally, the ESA provided the trade association’s view on the benefits of energy storage.
The following discussion summarizes the presentations.
DOE Office of Energy Storage Research
The first presentation was made by DOE’s Office of Energy Storage Research.
The Office of Energy Storage Research has been studying energy storage technologies for several years and currently is studying multiple types of energy storage. The Office is led by Dr. Imre Gyuk, a leader in the energy storage industry. Dr. Gyuk discussed the various battery technologies studied by DOE, and reviewed their benefits and challenges. According to DOE, lithium-ion batteries are compact and closely tied to the development of electric vehicles (EVs), but they also have several drawbacks. Lithium-ion batteries, mostly available from the other side of the Pacific Rim, have safety issues and are not recyclable. By contrast, lead acid/lead carbon batteries, which are the most common energy storage application, are 98% recyclable. Another battery technology, a flow battery, is a true energy battery; it differs from a lithium-ion battery, which is just a power battery. In its studies and research, DOE has managed to reduce the cost of these batteries by 50%, but Dr. Gyuk observed that the prices of these flow batteries are still tied to commodity markets. Importantly, vanadium and vanadium redox (V/V) flow batteries have had a steady decrease in cost over the past five years, such that the projected cost of V/V batteries is about $300 per kWh for four-hour systems. At the same time, they have increased in efficiency. The V/V technology has been licensed by DOE to five different companies, and it is now in the market. DOE is continuing to identify drivers to reduce the cost and increase the efficiency of the technology, and intends to develop aqueous soluble organics to find the next decrease in costs. DOE recounted the benefits of proven energy storage technologies and the reason for their absorption into the market. It cited Beacon Power’s successful flywheel technology; the importance of the mandate by the California Public Utilities Commission to incorporate energy storage in Renewable Portfolio Standards; the benefits of using energy storage for peaking service; the significance of incorporating energy storage in behind-the-meter energy service; the importance of microgrids; and the use of energy storage for solar integration. DOE also provided examples of state commission involvement and state actions that are looking to encourage the deployment of energy storage, citing the states of Vermont and Washington, in particular.
The California Independent System Operator (CAISO)
The next presenter was Lorenzo Kristov from the Market & Infrastructure Policy Department of CAISO.
CAISO discussed high-volume solar photovoltaic (PV) challenges and energy storage as a solution. It outlined the challenges to an ISO (in this case, CAISO) of renewable resource integration. According toCAISO, while solar PV is a scalable, clean energy source and keeps getting less expensive and more efficient, the addition of significant PV has created many challenges for operators. CAISO cited system over-generation, especially during mid-day, which can actually cause negative prices, displace flexible generation, create back-flow on distribution feeders and begin to fade, just as the late afternoon demand starts to peak. Energy storage can answer these challenges. Energy storage systems, placed on high-volume PV, can make good use of the mid-day excess supply by smoothing output to the grid. In this way, co-locating energy storage systems with PV and wind can mitigate steep ramp and late afternoon peak by making energy available when it is needed, thus managing local variability and flattening load profiles. CAISO also suggested that energy storage could decentralize reliability, and improve physical and cyber security and resiliency.
CAISO also outlined its energy storage initiatives designed to incorporate energy storage into its grid. These initiatives included aggregation, transmission, dispatch and regulation. CAISO highlighted the significance of distribution-level services and multiple-use applications of energy storage, including locating energy storage behind-the-meter, providing distribution and wholesale services, and encouraging utility participation in the distribution and wholesale markets.
CAISO’s presentation highlighted some of its regulatory issues to FERC:
- When do wholesale and retail rates apply?
- Which entity (transmission or distribution customer) has operational priority?
- How can double payments for the same performance be sorted?
- How can energy storage be operated and compensated as a transmission/distribution asset, and also participate in the wholesale market?
- How can energy storage be compensated for providing grid resiliency?
AES Energy Storage
The next presentation came from Kiran Kumaraswamy of AES Energy Storage, who outlined market opportunities for energy storage. AES Energy Storage is a major supplier of power currently working on applying advanced battery technology to the electric sector, with several such energy projects around the world. AES sees many pathways to the market for energy storage. For example, grid-level storage can interconnect as a generator with positive and negative output. In fact, energy storage can interconnect at either the transmission or the distribution level. Further, energy storage systems can provide energy, reserves and frequency regulation, which would not be considered generation. In addition, energy storage systems also can provide demand response under a proxy demand resource model. AES noted that additional opportunities for energy storage are beginning to emerge regarding the deferral of infrastructure, at both the transmission and distribution levels. AES noted, however, that the rules for market participation in capacity markets are not entirely clear.
Southern California Edison
The next presentation was given by Mark Irwin of Southern California Edison (SCE).
SCE, whose direct experience with energy storage comes from compliance with the California Public Utilities Commission’s mandate to incorporate energy storage into its Renewable Portfolio Standards, discussed the benefits and challenges of energy storage. SCE’s review of energy storage was less positive than other participants. According to SCE, under current circumstances, viable energy storage solutions must have several identifiable benefits. In that regard, the best-known value for energy storage would be deferring a distribution upgrade. SCE also identified other benefits, but was not encouraging with respect to the value of energy storage’s ability to extend the life of equipment. While SCE thought that additional values of energy storage were currently unknown, it still expects that energy storage can help to improve power quality, enhance distributed energy resource integration, compensate reactive power, and improve reliability. In SCE’s view, the ideal framework would allow energy storage systems to simultaneously operate as a grid asset, participate in the wholesale energy market, and act as load.
Energy Storage Association (ESA)
The final presentation was made by ESA’s Jason Burwen.
The ESA – a trade association representing the energy storage industry – has been a strong advocate for the value proposition of energy storage, and thus for its market penetration. The ESA presentation addressed the importance of removing barriers to energy storage in organized markets.
The ESA observed that FERC has assisted the energy storage industry by issuing orders that have been important for the industry because they were designed to remove barriers to energy storage growth.
- FERC Order No. 890 enabled non-generating resources to participate in the frequency regulation market.
- FERC Order No. 755 aligned payment for frequency regulation with the value provided by fast-responding resources.
- FERC Order No. 792 reduced uncertainty for storage interconnection by assigning it the rules for generators.
Nevertheless, the ESA noted that the most significant remaining barrier to energy storage stems from the lack of clarity in organized market rules. According to the ESA, there is little regulatory guidance for market participants, for interconnection and metering, and for station power for storage resources in some markets. The ESA observed that, while capacity markets do not specifically preclude energy storage at this time, uncertainty in existing rate design choices and market rules makes market participation by energy storage untenable. As such, the ESA has been advocating that regional transmission organizations and independent system operators clarify their tariffs to ensure that energy storage can participate in markets on a comparable basis with other resources.
In sum, this unique proceeding provided FERC with diverse perspectives from market participants on the opportunities and challenges to full deployment of energy storage. The information obtained through this process, in turn, may lead to a rulemaking proceeding, a policy statement, or further FERC action to address the importance of energy storage.