On November 17, 2016, the Federal Energy Regulatory Commission (FERC) issued a notice of proposed rulemaking (NOPR) that, if adopted, would require organized wholesale electricity markets (RTO/ISO markets) to modify their open access transmission tariffs and market rules to accommodate electric storage resources and allow participation of distributed energy resource aggregators. This NOPR is part of FERC’s ongoing efforts to remove barriers to participation in wholesale electric markets. FERC recognizes that electric storage resources and distributed energy resources are often constrained by antiquated wholesale market rules that were, as FERC puts it, “developed in an era when traditional generation resources were the only resources participating in the organized wholesale electricity markets.” This NOPR will promote far greater market participation by storage resources of all types, including batteries, flywheels, compressed air and pumped hydro, as well as distributed resources such as distributed generation, electric storage, thermal storage and electric vehicles.

For electric storage resources, which are defined as resources capable of receiving electric energy from the grid and storing it for later injection of electricity back to the grid, the NOPR would require each RTO/ISO to implement tariff provisions that will:

  • Ensure an electric storage resource is eligible to provide services it is technically capable of providing
  • Incorporate bidding parameters that reflect the physical and operational characteristics of the resources
  • Ensure that electric storage resources can set the market clearing price as a seller or buyer
  • Establish a minimum size requirement that does not exceed 100 kW
  • Specify that sales and purchases must be made at the wholesale locational marginal price

For distributed energy resources, which are defined as source or sink of power that is located on the distribution system or behind a customer meter, each RTO/ISO must establish distributed energy resource aggregators as a type of market participator and establish tariff provisions governing:

  • Eligibility to participate in the wholesale markets through a distributed energy resource aggregation
  • Locational requirements
  • Bidding parameters
  • Information and data requirements
  • Modifications to the list of resources within the aggregation
  • Metering and telemetry requirements
  • Coordination between the RTO/ISO, aggregator and distribution utility
  • Market participation agreements

Earlier this year, FERC Staff issued data requests to each of the six RTOs/ISOs seeking information about their market rules related to the participation of electric storage resources. In addition to the RTO/ISO responses, FERC received dozens of comments from stakeholders, many of which criticized current RTO/ISO rules as unduly restrictive for electric storage resources. The responses to data requests and additional comments formed the basis of FERC’s determination that in order to facilitate and enhance participation of storage resources in the wholesale markets, substantial revisions to RTO/ISO tariffs and market rules are necessary.

As an example of the current impediments to growth of electric storage projects, to be eligible to participate in the Midcontinent Independent System Operator’s (MISO) capacity market, a resource must be able to sustain output at nameplate capacity for four consecutive hours each day. This eligibility requirement was designed with traditional power plants in mind and has not been updated to account for newer technologies. Many storage resources are technically capable of providing capacity but cannot participate in MISO’s capacity market because they cannot meet the four-hour discharge requirement. As FERC recognizes in the NOPR, MISO’s current rule creates an artificial barrier to participation. The NOPR would allow RTOs/ISOs flexibility to craft their own tariff provisions, subject to FERC’s ultimate approval. Comments on the NOPR are due to FERC 60 days after publication in the Federal Register.